Franchise Factor - when did it all begin?

Franchises continue to perform consistently well despite much of the business world floundering in the perilous current economic situation. Banks are still ready to lend to franchise owners because they see the value of an established format which has an impressive history of reliable profit.  Workingmums.co.uk looks at the origins of franchising.

Where did it all begin?
The word 'franchise' derives from the Anglo-French word meaning 'liberty' - and the origins of franchising can be traced right back to the Middle Ages.
Records from the 18th century show brewers in Germany operated a type of franchise system to their tenants for access to a spring well in Apolonaris.  They awarded four franchises to horse-drawn vehicles who had the right to draw water and distribute it to the population in four areas, north, south, east and west of the well.
In the United States in the late 19th century, the Singer Sewing Machine Company was the first recorded business to offer a franchise.  The role of the franchise owner was to service and supply parts to the sewing machine company, and franchises were awarded to cover a whole state.  Today Singer still offers franchises in various countries around the world, although in the UK they are all operated by Singer UK Ltd.
The franchise world took a big step forward when car manufacturer General Motors recognised the need for uniformity in relation to servicing their vehicles - they set up a national network across America of franchise service centres and then dealers to assist with the servicing and sale of new motors.
Prof Roy Seaman, managing director of Franchise Development Services Ltd, said: ''All the other motor manufacturers saw the advantage of a total cloning of the ideal service centre and today nearly all motor manufacturers have got franchising for both their sales as well as their service centres.''

Rapid progress
The 1950's saw a big take-off in the world of franchising in the United States.  It was partly fuelled by returning servicemen - they were offered discounts for taking up franchises in recognition of putting their lives on the line for their country.  ''The servicemen returned home to the US and found they wanted to make something happen quite quickly when it came to an occupation, but didn't really know what to do,'' explains Prof Seaman. ''They tended to be around the age of 40 and didn't want to start from scratch again - they wanted a ready-made business such as fast-food outlets.  There was a psychological motivation in wanting to help ex-servicemen and they were often awarded franchises with special privileges and discounts because they'd spent the last few years of their lives defending their country.'' 
During this time, the soft drinks bottling industry began to provide many outlets into franchising as Coca-Cola, Pepsi and 7-Up used franchising as a way to expand their businesses.
In 1960, the International Franchise Association (IFA) was set up in Washington D.C. to protect and promote the interests of franchising - it's now the biggest franchising organisation in the world and represents more than 10,000 franchise owners.

How did franchising start in the UK?
The first indigenous business format franchises in the UK came from Wimpy - the burger restaurant chain - in 1954.  But the franchise which really surged ahead in Britain was the Body Shop in 1977.  ''This company was formed in 1976 and they quickly recognised that by creating a genuine business format franchise they would be able to find the right type of people who would follow their philosophy as well as invest a substantial amount of money to own, operate and follow their entire system,'' said Prof Seaman.
The British Franchise Association (bfa) was set up in the late 1970s to promote ethical franchising and provide a standard for genuine business format franchises to adhere to. In 1981 Franchise Development Services Ltd was established and now provides a comprehensive service to both established and prospective franchisors and franchise owners.  In the early eighties, just 40 brands were franchising in Britain, but there was a steady, slow growth during the Eighties.  The 1990s up to 2000 saw a significant growth in franchising with rates of increase by 10%-15% per annum.
However, the upsurge slowed when the recession hit in 2006.

The future?
The future of franchising remains rosy despite the economic downturn.  Prof Seaman said: ''In the last 25 years more and more owners of successful businesses are considering the idea that their business could be expanded by franchising.''  British companies such as Mothercare and Laura Ashley don't franchise in the UK, but they do franchise their business in the rest of the world.  ''There will be an ever-growing number of companies which decide to expand by franchising - there is no reason for franchising to decline,'' said Prof Seaman. 
 
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