Do Business Well

The concept of franchising as we know it today originated in the United States where in the 1860’s, the Singer Sewing Machine Company established a franchised network of dealers. The rationale behind this move was compelling. The emergence of mass production techniques enabled Singer to produce more sewing machines than they could ever hope to sell within their traditional markets. Suddenly, national expansion was not only a viable option, but had in fact become necessary to protect market share.

Singer’s management knew that it would not suffice to simply supply machines to anyone who wished to resell them. To protect the reputation of the brand, a network of well-managed distribution points would have to be established. These outlets would have to stock a full range of machines and spares, be equipped to undertake servicing and repairs and take care of end-user training. Alarmed at the prospect of having to finance and manage several thousand of such distribution points across the country, Singer decided to recruit and train independent operators instead and entrust them with this function for their own account.

In terms of the deal offered by Singer, these franchisees undertook to focus their efforts exclusively on Singer’s products. In return, they were to receive preferential pricing, the right to use the respected Singer trademark, territorial exclusivity, training and some advertising support. The fact that Singer continued to operate along similar lines for the next 150 years should be ample proof that this early strategy worked.

Singer’s management may not have realised it at the time, but they had just created the blueprint for what would later become known as a product franchise. Within decades, a good number of well-known companies, notably those active in the emerging automotive sector, followed Singer’s example by establishing dealer networks along similar lines. In this context, it is worth noting that currently Singer’s dealer network in the UK operates under a business format franchise, a more advanced concept that will be explained later in this chapter.

Early successes notwithstanding, it was not until the latter part of the 1940s, however, that franchising commenced its ascent towards becoming the most successful distribution concept ever known to mankind. Interestingly enough, this came about, albeit indirectly, as a result of developments following the ending of World War II. With the threat posed by Nazi Germany and its allies consigned to the history books, the United States armed forces embarked on a major demobilisation drive.

Possibly related posts: (automatically generated)
Modern-day Franchising Part 1

• Business format franchise
• Modern-day Franchising Part 2
• Some Franchise Terminology
• Modern-day Franchising Part 3
• Relationship Franchise Agreement - Operations Manual
• What does a Franchise Agreement cover?
• Selling the Franchise
• Is a franchise the optimal solution? From the prospective franchisor's viewpoint
• The parties to the franchise agreement
• Mutual Expectations (franchisees) part 1

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