Franchise – yesterday, today, tomorrow
Even if the franchise roots go back to feudalism, we consider a first commercial franchise to be the one of Singer Sewing center developed by Isaac Singer in 1858. Singer sold the rights to sell his sewing machines and train people, on how to use them, to the local businessman and his company grew. The franchise income helped him in financing the production and because each franchise was paying for itself, Singer was also saving because he did not have to invest money in hiring managers for the sales and training centers.
Singer’s model was copied by several industries at the turn of the century. One of them was Coca Cola who managed to expand on a national level by transferring the production, warehouse and distribution costs to the local businessmen who got the rights to fill the bottles. In return for the risk taken on the local level and the capital needed for expansion of Coca Cola, the franchisees got the exclusive marketing and distributors rights for their territories.
When we look into first 100 years of commercial franchise activities there are some interesting elements to be noted. Maybe the most important element to emphasize is that most of early franchisors did not control the look or the atmosphere of the franchisees business. Even if they could all be identified with the same brand name they all had a freedom to create their own business styles. Gas stations did not have the same look, the same was the fact for motels, car dealerships and retail stores. Even the services that were offered were different from one franchise office to the other of the same brand.
But all of that have changed in 1950’s when Ray Krock recognized the potential of cloning the franchise in order to replicate the successful formula and that was the beginning of the franchise model as we know it today. Ray Krock in his late 40’s was relatively successful salesman of the milkshake blenders. One of his buyers was the successful salesman of hamburgers from San Bernandino, California. His name was McDonalds and he sold large amounts of hamburgers, milkshakes and pomes frites. Very excited about the success of that restaurant whose personnel were mainly students, Krock thought he could replicate its business model and it’s success throughout the US.
The McDonalds success became a legend and Ray Krock is being compared to Henry Ford for the introduction of the production line for the fast food industry. But Krock has done so much more than bringing the speed to the fast food industry. He established the concept what we call “brand outfit” to incorporate not just the look and the atmosphere of the business decor but also all the details of doing business. For Ray Krock all aspects of running McDonalds franchise became a part of the system that insured that the customer experience would always be the same and in every McDonalds restaurant.
Krock’s theory proved itself so successful that was soon spread throughout franchise industry. In 60’s the gas stations started to accept the „brand outfit“ model and also standardized the way of providing service. The retail outlets, motels and flower shops all started to standardize not just the store looks but also the way of providing services. Every car dealership, hotel and restaurant chain started to take advantage of the business-cloning model.