What is Franchising?
Today, there are many definitions that describe the business system known as franchising. Put simply, franchising is a method of distributing goods or services whereby one person or organisation (the franchisor) grants the right to a person or persons (the franchisee) to sell or use its developed product, service or brand name. In the United States, the Singer Sewing Machine Company, established in 1863, is generally cited as the first commercial franchise. In the 1900s, Ford and others in the automotive industry quickly joined the race, followed by the petroleum distributors in the 1930s.
The modern franchise boom, as we know it today, began after the Second World War. The greatest benefit franchising offered was that it could command the same market recognition and economies of scale as the large competitors simply by uniting many small operations within one chain. Coca-Cola, McDonald’s, KFC and BP are some of the better known examples of long-established franchise chains. McDonald’s itself is probably one of the greatest demonstrations of how a simple product, the hamburger, can be developed into an enormous business empire. Today, you can buy a McDonald’s hamburger almost anywhere in the world. That success has been achieved through franchising.
The concept itself is simple. The franchisee has the opportunity to sell proven products or services while enjoying the benefits offered by experienced management whose income is, in turn, dependent upon the success of individual operators. Although the franchisor supplies the franchisee with know-how and brand identification on a continuing basis, the franchisee also enjoys the right to profit. In this way, franchising offers the franchisor an opportunity to expand his or her market through motivated people.