Buying a Franchise - What Every Entrepreneur Needs to Know

by Howard Schwartz

Published on this site: August 16th, 2005 - See more articles from this month

The concept of franchising is a couple of centuries old. The franchising business and world economies have developed simultaneously. The term `franchise' comes from old French where it meant freedom, or privilege. Franchising goes back to the feudal times when the feudal lords granted permission to their slaves and common men to hold fairs, markets, ferries, and even allowed hunting on their lands.

In the middle ages, kings used the concept of franchising when they gave contracts, or franchises for most of the commercial activities like developing roads, wells, and brewing ale.

As the concept of franchising developed further, it was seen as the right to monopoly that a person got to perform any kind of a commercial activity. As time passed, several franchises became a part of the European Common Law.

Singer Sewing Machine Company is considered to be the father figure of franchising as most of the concepts of franchising developed by them, form a part of modern day franchising contracts.

The way in which Singer made its sales and provided services is considered to be modern retailing that is a part of franchising. In the 1850s, Singer brought together teams of salesmen and dealers who were given the rights to distribute sewing machines in different regions. They made written contracts for franchising, which are the basis of modern-day franchise agreements.

At this point in time franchising was seen as the right granted by the manufacturer to sell and distribute products and service to the franchisee. Big oil refineries, automobile manufacturers, and many others also started following the concept of signing written agreements for franchisee distribution.

Proper business format franchising came into being, in the United States and other countries of the world, after World War II. This was the time when soldiers returned from the war to be back with their families and the baby boom took place because of which different and newer products and services became essential.

This was when the concept of franchising developed the most. It made its presence felt in the U.S. economy. This was also the time when most of the hotels and motels developed. With the increase in the number of franchises, the 60s and 70s saw a time when every second person was into the franchising business.

The decades of 60s and 70s also brought about a number of frauds in the franchising business. There were people who duped many others by taking money from them in return for a franchisee that did not exist and escaped with the money. On the other hand there were also many franchise businesses that went bankrupt. This was when the need for strict regulations for franchising business was given a thought.

In the year 1978, the Federal Trade Commission ordered that all the franchisers/manufacturers were supposed to submit the Uniform Offering Circular or UFOC before receiving money from the prospective franchisers. The UFOC provides the details of the franchise company, gives their history, audited financial statements, information of the officers, and the contract, or the franchise agreement.

At present, the franchising is seen as the most lucrative business option for many people who aspire to own a business.

Learn more about owning your own franchise business:
http://www.franchise-business.biz

Howard Schwartz is a partner in several business strategy groups, including HJ Ventures International, Inc. Howard has worked with hundreds of entrepreneurs worldwide with a focus on writing business plans for companies interested in raising capital from Venture Funds and Angel Investors. Howard's business plans have secured several million dollars in funding. For more information visit: http://www.franchise-business.biz