The History of Franchising and How It Has Become the Business Model It Is Today

The franchising industry as we know it only started to flourish in the 20^th century. However, franchise origins can be traced back to the Middle Ages. Today, countless companies use the franchise model to expand their operations.

So, what did early franchising arrangements look like, how did they evolve following the Industrial Revolution, and how did we get to where we are today? The franchise industry has a unique history spanning hundreds of years.

Key Takeaways

• Franchising has ancient roots dating back to the feudal systems of medieval Europe.
• The rise of mass production in the 19th and early 20th centuries laid the groundwork for modern franchising.
• The post-war period of the 1950s and 1960s is considered the franchise “boom”, during which many of the top franchise brands grew rapidly.

Middle Ages

At its core, franchising is a profit-sharing agreement in which a franchisee operates an independently owned business for a parent brand. Monarchs and nobles have used such arrangements for centuries to expand their commercial interests and even empires. 

The term “franchise” wasn’t adopted for the business model we know today until the 20th century. Still, the origins of the now widespread franchising business model can be traced back to the Middle Ages. Let’s look at the good, the bad, and the ugly of franchise roots.

Feudal Origins of Franchising

In medieval Europe, monarchs and local lords, who were landowners, granted rights to nobles to govern lands, collect taxes, and maintain order. Similar to modern franchise systems, these agreements involved individuals paying tribute in exchange for protection and authority over the land. These nobles would, in turn, sublet the land to peasants under similar arrangements. 

Colonial Franchising

In the 16th century, after the discovery of the “New World”, European monarchs began claiming newly discovered regions. 

During this time, monarchs used licenses similar to modern franchise systems to rapidly expand commercial activities and empires. These licenses allowed companies or individuals to exploit resources in newly discovered territories and granted trading rights. That said, all of this was done in the name of the monarch or government funding the operation. 

In these systems, individuals or companies essentially played the role of franchisees by paying a fee to the monarch in exchange for the exclusive rights to settle, exploit, and trade in certain regions. Famous examples include chartered companies like the Hudson’s Bay Company, the British East India Company, and the Dutch East India Company.

However, franchising-like arrangements were also created by colonial governors, companies with royal charters, and even religious organizations like the Catholic Church. The “franchisees” in such arrangements included fur traders, trapping companies, plantation owners, ferry operators, settlers, and missionaries.

Benjamin Franklin’s Printing Business

Often credited as one of America’s most innovative minds, Benjamin Franklin helped set the stage for modern franchising by establishing his printing press in 1731. This is one of the early uses of a franchise in the United States (at the time, it was still the 13 colonies). Benjamin Franklin partnered with other businesses across the colonies with business arrangements that included many of the fundamentals of franchising, such as profit sharing and intellectual property ownership. This printing business ended up becoming the official printer of Pennsylvania and New Jersey, helping print money and official government documents.

19th Century: Laying the Groundwork for Modern Franchising

The Industrial Revolution marked a major turning point for franchising, enabling more individuals and companies than ever before to utilize the franchising model to capitalize on new mass production capabilities. Businesses began to rapidly mass-produce products and expand into new markets.

During the late 1700s and early 1800s, major technological and societal changes helped rapidly expand the business world, giving birth to some of the first true franchise businesses.

Singer Sewing Machines

One of the best-known pioneers of Industrial Revolution-era franchising is Isaac Merritt Singer. The American inventor made major improvements to sewing machines and immediately began capitalizing on his innovation. Singer established the Singer Sewing Machine Company in 1851. Under his business model, sellers would obtain licenses to sell his sewing machines in specific areas. As part of this profit-sharing agreement, the company provided ongoing training and operational support, which are key characteristics of franchise business models. Singer is generally credited as the creator of the USA’s first product distribution franchise. 

Spaten Beer

Spaten Beer is a Munich-based brewery that can trace its roots all the way back to the 14^th century, but it was one of the earliest adopters of the franchising model when it started allowing taverns to sell its beer in the 1840s. Spaten still retained control of distribution but was able to leverage independent tavern owners to grow its brand and increase sales.

Martha Matilda Harper

Martha Matilda Harper is credited with pioneering many of the modern fundamentals of franchising. In 1891, this former servant launched her company, Harper Method Shops, which sold revolutionary beauty products without the use of harmful chemicals. Soon after, she established a network of salons where owners sold her products and services. In return for a fee, the owners received training, group insurance, and global advertising. She only franchised her business to female owners and oversaw around 500 units at the business’s height. 

Harper was a trailblazer in both franchising and female empowerment, becoming one of the most successful women of the 20th century and helping innovate one of the world’s first “true” franchise businesses.

Coca-Cola

Coca-Cola’s franchising roots date back to 1888 when Asa Griggs Candler purchased the company from the pharmacist inventor Dr. John Pemberton. In 1889, Candler sold the bottling rights, which marked the beginning of the company’s franchise system. Today, Coca-Cola produces a syrup concentrate, which is then bottled by franchisees who pay a fee for the right to bottle and sell the product in their territories. The entire network consists of over 250 independent businesses operating over 950 bottling facilities worldwide.

Early 20th Century

The increase in mass production capabilities and the increasing accessibility of prices helped further spur the growth of the franchising industry in the early 20^th century. From the 1920s to the 50s, the U.S. Highway System also underwent rapid expansion, giving demand a significant boost as the automobile industry revolutionized the world.

Invention of the Automobile and the Birth of the Car Dealership

The automobile was invented in 1886 but didn’t hit mainstream markets until 1908 with the Ford Model T. Henry Ford was one of the first pioneers to develop assembly line techniques that significantly reduced the cost of cars for ordinary consumers. Demand was so high for the Model T that Ford was forced to innovate new production methods to keep up. 

As it became increasingly efficient to mass-produce cars using assembly lines and standardized parts, the franchise model became the best way for manufacturers to expand their networks of car dealerships. Car manufacturers would sell their vehicles to dealerships at a wholesale price and allow the dealerships to sell the automobiles to consumers at a markup. 

A&W Root Beer

Surprisingly, A&W Root Beer holds the title of America’s first fast food franchise. From its humble roots as a roadside root beer stand in 1919, the brand began franchising in 1926 and had 170 branches in operation by 1933. 

Its products have been available in grocery stores and supermarkets since 1971. 

1950s and 1960s: The Franchising Boom

Following World War II, the franchising industry experienced a significant boom that coincided with high birth rates, the rise of automobile usage, huge advancements in industrial and technological capabilities, and a surge in demand for consumer goods. The U.S. Highway System was also expanded as car culture took hold. New advertising methods and finance systems encouraged a culture of consumerism, which helped feed the franchise system.

In 1950, fewer than 100 franchise brands were operating in the US. By 1960, that figure had risen to over 900. From food industry franchise giants to hotels, here are some of the key players who experienced rapid growth during the post-WWII franchising boom. 

McDonald’s 

The first drive-in McDonald’s restaurant was established by the McDonald brothers, Richard and Maurice (Mac), in 1940. While the brothers saw moderate success in Southern California, the company didn’t explode until they partnered with Ray Kroc in 1954. Kroc saw great promise in their speedy service and business model and played a big role in the rapid expansion of the business.

Kroc bought the brothers out in 1961 and developed strict operational standards and guidelines for each McDonald’s franchise. He even established what became known as the Hamburger University to train franchisees in line with his exacting standards. Kroc was a major innovator who helped develop a business model designed for rapid growth. Over the years, many franchisors have taken inspiration from him. 

Today, McDonald’s is the world’s largest franchise restaurant chain by revenue, with over 41,800 restaurants worldwide and over two million employees at its franchised locations.

KFC

KFC was founded by Harland Sanders, later known as the iconic ‘Colonel Sanders’, who is still prominently featured in the company’s branding. Sanders founded the company in the 1930s after serving fried chicken at a roadside motel and restaurant. Sanders perfected his secret recipe of 11 herbs and spices. He then started selling his secret blend during the 1950s, with franchisees paying him 4 cents for every chicken they sold. 

Today, KFC is one of the largest fast-food franchises in the world. The massive fast food company generated around 3.1 billion US dollars in revenue in 2024 alone.

Holiday Inn

Holiday Inn became the world’s first franchise hotel company in 1956, four years after being established in Atlanta. The company established creative new processes such as a centralized reservation system, call centers with toll-free numbers, and training centers for franchised employees, as well as innovative ways to reduce costs and streamline other essential services. Holiday Inn grew into a brand that put significant financial pressure on other hotel companies to keep up.

In 2023, there were over 1,249 Holiday Inns worldwide, with around 375,000 employees. It’s one of the biggest brands in the IHG group, generating over six billion US dollars in gross revenue in 2024.

7-Eleven

One of the first major convenience store franchises that flourished in the franchise boom is 7-Eleven. Even though 7-Eleven was first established in Dallas in 1927, it didn’t become a franchise until 1961. It had expanded beyond Texas during the 50s, but it experienced rapid expansion after franchising its stores in the decade following. 

In 1973, 7-Eleven partnered with Japanese supermarket chain Ito-Yokido and quickly grew to become Japan’s largest chain of convenience stores in terms of sales and number of locations. Today, the company operates over 85,000 stores in 20 countries, including China, Australia, and Thailand. 

Other Franchise Brands From the “Boom” Era

While the above franchises were some of the “star players” in the franchise boom, the post-WWII era saw a huge number of franchise brands grow to national and international prominence. Some other household names that date back to this period include:

• Dairy Queen
• H&R Block
• Midas Muffler
• Budget Rent A Car
• Dunkin Donuts

As the economy and population soared, prices became more accessible, and communities became more interconnected, the franchising model was one of the most intuitive ways to meet consumer demand. And its growth has remained impressive since then.

Late 20th Century 

I could easily argue that the franchising boom never stopped. The 1960s saw fast-food, automotive, and hospitality giants boom, but diversification of the franchise industry through the 80s and 90s brought new sectors such as education, healthcare, and home services to the stage. Plus, as new markets across Asia and Latin America emerged, franchising increased internationally, with American brands leading the way. 

Nowadays, particularly since the digital revolution and the rise of the service sector, you’ll find successful franchises in just about every industry. 

What Does the Future Hold for Franchising?

The future of franchising looks bright. The global franchise market surpassed $890 billion in revenue in 2024, and franchising’s impact on the global economy is only set to grow.

The global franchising industry is set to grow at a rate of 9.58% per year until at least 2027, representing a total of $1.63 trillion USD. In the USA alone, the number of franchised establishments is increasing at an average rate of 2% per year. 

While early business format franchises were primarily in the restaurant industry, the current makeup of franchises is much different. Over half of current franchises are in the retail, real estate, residential, healthcare, automotive, and business services industries. These industries are all experiencing growth, as are niche emerging sectors that include autism treatment services, outdoor space construction, and hydraulic hose services.

It’s not just the USA’s franchising industry that’s growing. Many emerging markets are outpacing America’s growth. For example, India’s franchising sector is expected to grow by 35% per year until 2028. 

In terms of operational trends to watch out for, you can expect to see more and more franchises adopting AI technology. 40% of franchises are expected to adopt AI-powered solutions in 2025 alone. 

The Ever-Evolving Franchise Model

From medieval lords and colonial charters to fast-food giants and AI-powered innovators, franchises have been around the historical block. What began as a simple profit-sharing system hundreds of years ago has transformed into a $1.63 trillion industry. As franchising expands, staying informed is crucial for prospective franchisees looking to make the right investment. If you are looking for the ultimate resource for navigating the franchise world, search for franchises or schedule a call with us at Franzy today!