The landscape of commercial franchising in the United States has a rich and storied history that spans centuries. This unique business model has evolved from its humble beginnings in the 18th century to become an integral part of the American economy. For Franchise Appreciation Day, let’s delve into the origins and journey of commercial franchising, tracing its roots from its inception to today’s dynamic landscape.
While most laud Benjamin Franklin for his multifaceted contributions to our country — Founding Father, international statesman, inventor — it’s his venture into the world of printing that solidifies his spot as a pioneering franchisor. In fact, Franklin appears to have inked the first franchise-like agreement in American history.
According to the International Franchise Association (IFA) the origins of franchising can be traced back to Sept. 13, 1731, when Franklin, a multi-faceted figure of his time, entered into a partnership for a printing business with Thomas Whitmarsh in Charleston, South Carolina. This agreement exhibited several elements which were similar to modern franchising practices, such as fixed terms, hands-on management obligations, and exclusive business arrangements.
This agreement exhibited several elements which were similar to modern franchising practices, such as fixed terms, hands-on management obligations, and exclusive business arrangements.
Comprehensive and meticulously detailed, the contract specified Franklin’s obligations to Whitmarsh, from providing equipment to managing repairs. On the other side, Whitmarsh had stringent rules to adhere to. However, following Whitmarsh’s sudden death from Yellow Fever in 1733, Franklin began an agreement with Lewis Timothy. Another twist occurred with Timothée’s death, leading to Elizabeth Timothy, his wife, stepping in, possibly making her the first female publisher in North America.
Over time, Franklin continued to replicate this model by forming similar partnerships for printing businesses across different locations.
Pioneering Modern Franchising: The Harper Method
Martha Matilda Harper is credited with pioneering the modern franchising model in 1891 with the launch of the Harper Method Shops, hair care salons that embraced elements now standard in franchising. According to the IFA, this innovative approach included comprehensive training, branded products, and advertising support.
As the 20th century approached, franchising gained momentum, particularly during the Industrial Revolution, as industries — manufacturing, automotive, and beverages — embraced this model. Franchising soon played a central role in America’s socioeconomic fabric. With the Industrial Revolution underway, the nation’s transition from an agricultural to a merchant-driven economy necessitated efficient distribution networks. This gave birth to new franchises
20th Century: Iconic brands and ubiquitous franchises
The Western Auto franchise (today part of Advance Auto Parts) in 1909 revolutionized franchising and soon, historic franchises like Coca-Cola, General Motors, and the Rexall Drug Store chain emerged to cater to the burgeoning consumer demands, according to the IFA. This set the stage for major players like Kentucky Fried Chicken, McDonald’s, and Dunkin Donuts to enter the arena in subsequent decades.
Franchising boomed in the 1960s with the expansion of branded goods and service chains. This era saw the swift proliferation of recognizable brands such as McDonald’s, which had 500 restaurants operating in 1963. Within the same decade, the rapid expansion of household names like Holiday Inn, Budget Rent A Car, and Dairy Queen signaled the undeniable power of the franchise model.
It wasn’t just restaurants and hotels that thrived. Brands across different sectors, from automotive — such as Midas Muffler — to professional services such as Dunhill Personnel and H&R Block, showed the versatility of franchising.
As the world became more interconnected in the 1980s, franchising began to go global. Brands that had been successful in their home countries started to look abroad for growth opportunities. McDonald’s, for instance, expanded its global footprint rapidly during this decade.
Technology also began to play a pivotal role. The 1980s saw brands employing computer systems to manage inventory, sales, and logistics, paving the way for a more streamlined and efficient franchising operation.
Moreover, the 1980s were marked by the evolution of franchisee-franchisor relations. With better support systems and training programs in place, franchises now offered more than just a brand name – they offered a complete business model.
By the end of the 1990s, franchising had solidified its place not just as a business model but as a global phenomenon, and international brands dominated cityscapes around the world.
With the dawn of the internet, the way franchises operated and marketed themselves underwent a massive transformation in the 1990s, as online marketing and sales became crucial aspects of a franchise’s strategy. Additionally, the 1990s saw a surge in female and minority franchise ownership, diversifying the entrepreneurial landscape. By the end of the century, franchising had solidified its place not just as a business model but as a global phenomenon, and international brands dominated cityscapes around the world.
A dynamic present and future
The evolution of commercial franchising in the United States is a testament to the enduring power of innovation and entrepreneurship. From Benjamin Franklin’s pioneering partnerships to Harper’s modern franchising model and from iconic brand beginnings to the present-day landscape, franchising continues to shape the business world.
Today, franchising continues to evolve with new concepts and opportunities, including AI, robotics, and other innovations. Its flexible structures, collaborative benefits, and proven success make franchising an essential part of the American economy and the dream of business ownership.