November 8, 2024 1:45 AM
Read

What is franchising as a Business Concept?

What is franchising as a Business Concept
Credit: pexels

Franchising is a new marketing concept adopted by an organization to expand business in multiple places with multiple entrepreneurs. A   franchiser gives license of its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell the same branded products and services to a franchisee.  The franchisee pays an initial fee and takes consent to comply with certain obligations set out transparently in a Franchise Agreement.

The word “franchise” is of Anglo-French derivation—from the franc, meaning free.

Franchising is not a 50-50 percent partnership, especially due to its legal advantages over the franchisee. But under specific circumstances like transparency, favorable legal conditions, financial means, and proper market research, franchising can be a driver of success for both franchisor and franchisee.

  • HISTORY OF FRANCHISING:

John S. Pemberton was the first successful American franchising operator, was started in 1886 by concocting a beverage mixing sugar, molasses, spices, and cocaine. Pemberton had distributed very selected people to bottle and sell the drink, an early version of what is now known as Coca-Cola. He was one of the earliest and successful—franchising operators in the United States.

The father of modern franchising is Louis K. Liggett; in 1902, he accumulated 40 druggists and pooled $4,000 to start a drug manufacturing company in the name of “Rexall.In the 1960s and 1970s that people began to take a close look at franchising attractiveness. The concept intrigued people with an entrepreneurial spirit. However, investors had serious pitfalls, which almost ended the practice before it became truly popular.

FRANCHISES IN DIFFERENT COUNTRIES:

  • CHINA :

China has the most number of franchises in the world.  China has an average of 43 outlets;  altogether, there are 2600 brands in around  200,000 retail markets. KFC was the most significant foreign in 1987 and is widespread.

  • INDIA :

The franchising of foreign goods and services in India is at its infancy stage.  The first International Exhibition was held in 2009. However, India is one of the biggest markets for franchising because of its huge number of middle-class, almost around  300 million, who are not reticent about spending and because the population is entrepreneurial. McDonald’s is a success story in a highly diversified society, despite its menu is different from other places in the world.

  • EUROPE :

Franchising has grown rapidly in Europe, but the industry is not regulated. The European Union has not maintained a uniform franchise law.

When adopting a European strategy, a franchisor must take expert legal advice. One of Europe’s principal tasks is to find retail space, which is not so significant a factor in the USA.

  • United States :

Isaac Singer, who improvised the existing model of a sewing machine in the 1850s, began one of the first franchising businesses in the United States, followed by Coca-Cola, Western Union, and agreements between automobiles manufacturers and dealers.

Modern franchising focused on the rise of franchise-based food service establishments, Massachusetts Howard Johnson’s restaurant was founded in the late 1920s. The franchising growth accelerated in the 1930s when Howard Johnson’s started to franchise motels. 1950 saw a boom in franchise chains simultaneously with the set up of the U.S. Interstate Highway System and the spiking popularity of fast food.

SHARE THIS ARTICLE

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe Newsletter

Small business owners