The concept of franchising emerged in the 1930s and truly began to grow at the end of the 20th century. Today, it is a development strategy that is increasingly popular in France and across Europe. Would you like to learn more about franchising and understand why it could be the right choice for your business growth? In this article, discover the history of franchising and its key advantages.
What is franchising?
Franchising, as we know it today, is a type of collaboration between two legally independent entities, yet connected by a contract that defines the relationship between the franchisee and the franchisor. This model allows an entrepreneur to open their own business as an independent operator while limiting risks. For the franchisor, this approach helps strengthen commercial growth through a network of business owners who are actively involved in their local markets.
There are three fundamental principles that define franchising and are essential to remember: brand identification, know-how, and technical and commercial support.
The franchisor is obliged to :
1 – Share the brand’s identifying symbols
The franchisor guarantees the franchisee access to key network elements such as the brand, the trade name, the overall concept, and the visual identity system. It is the franchisor’s responsibility to maintain and enhance the brand image. The franchisor must ensure that the franchisee complies with the various guidelines regarding the use of the brand and other identifying signs provided under the contract. When the agreement ends, the franchisor must also ensure that the former franchisee no longer uses any of the brand’s identifying symbols or customer recognition elements.
2 – Share the network’s know-how
Know-how refers to a set of technical, logistical, commercial, IT, and management methods that are exclusive to the brand. The Doubin Law regulates it within franchising and specifies that it must be secret, substantial, and clearly defined. The know-how is documented in an operations manual—often called “the bible”—and is transmitted to the franchisee during initial training as well as on a daily basis through dedicated materials. Since it is confidential, the franchisee agrees not to disclose the know-how (especially to competing networks), as doing so could harm the franchise network.
3 – Provide commercial and technical support to franchisees
Commercial and technical support is mandatory in franchising. It begins at the project’s creation, continues through the opening of the business, and lasts throughout the entire duration of the contract. This support is one of the key strengths of franchising compared to independent entrepreneurship. Each unit in the network is regularly visited by a field consultant who provides guidance, shares expertise, and ensures that the concept is properly applied according to established standards.
Who invented franchising? The history of franchising and its evolution!
The franchise system truly originated in the 1930s, although it would only develop formally several years later.
In the United States, the first company to use the franchise system for its expansion was General Motors. Following the 1929 economic crisis, General Motors aimed to surpass its long-time competitor, Ford. The company then granted licenses to independent entrepreneurs, allowing them to open retail outlets almost everywhere across the United States.
In France, the first company to adopt the franchise concept was the Prouvost Group. This company, specialized in wool manufacturing, owned several spinning mills, and at that time, its wool was distributed in large bags to shops. Through one of its brands, Pingouin, the group decided to sell wool in the form of balls of yarn, making transport and retail sales easier. This innovation required the creation of new store formats, training merchants on the new products, and supporting them throughout the project. It was at that point, in the 1930s, that franchising was born in France.
It was not until the 1970s that franchising truly became widespread. In the United States, right after World War II, the number of franchises grew significantly — as was the case with the McDonald’s brand. Around the same time, the system also expanded rapidly in France. Franchising gained popularity thanks to Charles Géraud Seroude, who brought the concept back from the United States after studying franchising methods at the Alfred P. Sloan School of Management. Charles Géraud Seroude then convinced major industrial players such as La Redoute, Yoplait, and DMC (Dollfus-Mieg et Compagnie) to adopt this model for their business development.
Since then, major corporations have chosen franchising as their preferred growth strategy. In a few figures, franchising in France in 2020 represented:
- 2,049 franchise networks
- 78,218 outlets
- 757,852 direct and indirect jobs
- €67.8 billion in revenue
Why are more and more companies choosing the franchise model?
Franchising offers many advantages when it comes to growing your business. Here are the main reasons why:
1 – Franchising enables rapid network expansion
In franchising, each new outlet is financed by the franchisee, which limits the overall cost of network expansion. This makes it possible to open several locations without having to wait for additional funding. Since costs are reduced, the brand can grow much faster.
2 – It facilitates expansion across a wide geographical area
The denser the network, the closer the brand is to its customers — and the higher its revenue potential. Franchising therefore allows brands to increase proximity and visibility by multiplying their points of sale.
3 – Start your business, yes — but never alone!
Each outlet is managed by a business owner rather than a salaried manager, as is the case with company-owned stores. As an entrepreneur, the franchisee is more personally invested in the project and contributes directly to its success.
4 – A certain freedom in choosing the franchisee’s business location
Franchisees generally choose the location of their outlet and are often native to the area they select. They therefore know the local market well, understand where the greatest potential lies, and are aware of customer expectations.
5 – A model that applies to most business sectors
Franchising can be applied to almost every industry. This development model is particularly popular in the retail sector (fashion, food, beauty, etc.) as well as in personal and business services (home care, hairdressing, catering, real estate, hospitality, recruitment, and more). It is a model that adapts to virtually all sectors of activity.
rca supports you in setting up your franchise — from recruiting your future franchisees to managing and animating your network. Cerca will make your franchise development easier and guide you toward success! Choose a management tool specifically designed for the franchise model — like Cerca — to launch your business with confidence!
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