Franchise

The Historical origin of franchising

The first beginnings of modern franchising date back to medieval France, when the feudal lords made agreements with tax collectors who were allowed to retain a percentage of their revenues. Subsequently, franchising meant the exemption from customs duties and taxes and the partial renunciation by the feudal lords of the vassal services of their subjects. Later, craftsmen and merchants acquired the authority to organise markets or fairs on the feudal lords’ soil by means of franchises.

In the 17th and 18th centuries, the concept of franchise changed again and referred to the granting of privileges to individuals by the state.

From the middle of the 19th century it was understood to mean the right to use trademark rights and distribution concepts for commercial purposes. World War II was followed by the Business Format Franchising, which comprised the provision and transfer of the entire corporate format by the franchisor to his partners.

The first franchise systems

At the time of the beginning industrialization, the first companies were established, which expanded through franchising. In 1860, for example, the American Singer Sewing Machine Company equipped mobile dealers with the right to sell their sewing machines on their own account and in their own name, which can be regarded as an early form of franchising.

Although the franchise pioneer failed to establish a cost-covering distribution network due to the high discounts, which eventually led to the repurchase of the exclusive regional distribution rights, this did not mean the end of franchising. Experimental companies took this approach and developed it further.

The distribution system used by some automobile and beverage manufacturers until the middle of the 20th century is today known as “Product Distribution Franchising” or “Product and Tradename Franchising”.

The best-known example of this form of franchising is the licensing of the American beverage manufacturer Coca-Cola, which comprises the bottling and distribution of a caffeine-containing lemonade under a uniform brand name.

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