History of Franchising

The origin of the word “franchise” goes back to Anglo-French, meaning freedom and liberty. In the Middle Ages, local landowners would grant rights to the peasants for a consideration and subject to certain rules to hunt, hold markets, or otherwise conduct business on the owner’s domain. The rules became part of European Common Law.

Isaac M. Singer (1811-1875) is credited with starting the modern use of franchising in the U.S. Singer had improved upon an existing sewing machine model and wanted to find a wider distribution for his product but did not have the money to increase manufacturing. Singer also faced a problem with retailers who were unable to provide the training buyers wanted. As a result, Singer began charging licensing fees to people who would own the rights to sell his machines in specified geographical areas. The licensees were responsible for teaching people how to use his machines, which created opportunities to bring the first commercially successful sewing machine to the public.

Ray Kroc (1902-1984) is credited with optimizing the business format franchising model, which is the licensing of the brand name/trademarks and of the entire business concept as a way to quickly grow businesses. Kroc, a milk shake mixer salesman who discovered the McDonald brothers’ small California hamburger stand, became a licensing agent for the brothers and recruited franchisees before buying out the brothers’ interest in the business. McDonald’s has since become the most successful fast food operation in the world.

The International Franchise Association (IFA) was founded in 1960 as a membership organization of franchisors, franchises and suppliers to establish a structure for implementing the best practices in the franchise relationships of IFA members and in expanding franchising around the world. The IFA works closely with Congress and the Federal Trade Commission on improving the entire industry.