![]() ![]() If a franchise system has a proven product or service with a well-recognized brand combined with hard-working, well-financed franchisees, the chances of success are very high - but never a 100 percent given. No business method or industry sector can guarantee success, and franchising is no exception. Oil companies such as Standard Oil and Texaco also started granting franchises to convenience stores and repair mechanics across the U.S. Car manufacturers who had been spending enormous amounts of capital tooling their assembly lines found they could develop retail distribution networks using capital provided by independent dealers. For example, Coca-Cola was able to expand throughout the United States by shifting the burden of manufacturing, storing and distributing its product to local business people who acquired bottling rights. This is especially true in emerging markets such as China, India, Russia, Brazil and the Middle East among others.Įlements of the franchise model has also been woven into the fabric several other industries. It is steadily increasing its footprint in numerous other countries. While franchising is a staple of the American business landscape, the merits of franchising have not been ignored abroad. Name a product or service from ATMs to yogurt and there’s likely a franchise industry for it. However, franchising is extremely diverse. When asked, the majority of people when asked for a commonly known franchise would name a fast food franchise most often. Kroc has drawn comparisons to auto maker Henry Ford for bringing an assembly line-like concept to the fast food industry through his belief that customers of McDonald’s should have an idea of what to expect wherever in the world they may be. This restaurant chain, McDonald’s, is perhaps the most well-known example of franchising in the world. In 1954, Ray Kroc, a successful business man from Illinois, saw the potential in franchising a successful southern California hamburger stand owned by a couple of brothers. The tipping point for franchising came in the 1950s. The royalties earned from the license rights helped offset manufacturing costs and, because each franchise was self-financed, Singer Manufacturing Company was able to tap into the entrepreneurial attributes and local market knowledge of the franchisees to help Singer become more successful than he could have by himself. Once he employed this system, Singer’s enterprise expanded rapidly. In response, Singer, along with business partners, came up with the idea of selling the rights to sell the sewing machines as well as train those who bought one to local business people across the country (and eventually internationally). The second was that Singer did not have enough capital to manufacture his machine in large numbers. The first was that customers needed to be taught how to use the new invention before they would buy it. After Singer invented his sewing machine he encountered two main problems when introducing it to the marketplace. It is important for anyone deciding to start a business by becoming a franchisee to remember that in franchising the franchisee is bound to a partnership agreement with the franchisor for a defined period of time (some exceptions do exist).įranchising as we know it today is widely believed to have originated with Isaac Singer in the 1850s. About 13,000 to 20,000 prospects invest in new franchises yearly, according to Franchise Performance Group and FRANdata.įranchising is a form of marketing and distribution in which the owner of a business system (the franchisor) grants to an individual or group of individuals (the franchisee) the right to run a business selling a product or providing a service using the franchisor's business system.įranchisees are also given permission to use the franchisor's branding, trademarks, and identifying marks under specified guidelines.Franchises employ about eight million Americans directly.Over the past few years, 250 to 300 businesses annually have developed their concept into a franchise.There are approximately 3,800 franchise systems operating in the United States, as of the beginning of 2019.There are over 745,000 franchise locations in the United States.Franchising is a major force in the business world. ![]()
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