What is the history of franchising in the United States? What role did fast food and sewing machines play in creating the demand for franchises in the United States?
Franchising actually began in the United States in the mid-1800’s with Albert Singer and the Singer sewing machine. Albert Singer used franchising as a means of distributing his sewing machines throughout the United States. He is credited as the first franchisor in the United States and the first to develop a franchise contract.
Franchising grew more fashionable in the mid-1900’s when a new type of franchise popped up in the form of the retail and fast food chains. Both the move to the suburbs at the time and the advent of the baby boom created the need for fast food and retail chains to develop in more remote areas outside of cities, thus creating the need for franchising these types of businesses.
In the 1960’s and 1970’s franchising gained a bad reputation. Many franchises sprouted up that were less than scrupulous and were under-funded. Many of these franchise systems went into Bankruptcy leaving their franchisees with large investments and no business to show for that investment. As a result of these practices, investing in a franchise was considered a speculative investment. Modern franchise law developed and the regulations governing franchising, both federal and state, were promulgated. Franchising became a highly regulated area of law requiring franchisors to provide a disclosure document (originally the Uniform Offering Circular and now the Franchise Disclosure Document) to prospective franchisees.