The concept of franchising emerged in the 1930s and really took off at the end of the 20th century. Today, it is a growth strategy that is becoming increasingly popular in France and throughout Europe. Would you like to learn a little more about franchising and why you should choose this path for your business growth? In this article, discover the history of franchising and its benefits. What is franchising? Franchising, as we know it today, is a type of partnership between two legally independent entities that are nevertheless bound by a contract governing the relationship between the franchisee and the franchisor. This allows an entrepreneur to start a business as an independent operator while limiting risks. For the franchisor, this approach enables them to build their business expansion on a network of business owners actively engaged in their local markets. There are three fundamental principles unique to franchising that are essential to understand: brand identity, know-how, and technical and commercial support. The franchisor is obligated to: 1 – Share the brand’s identifying elements The franchisor guarantees the franchisee access to key elements of the network, such as the brand, the trade name, the overall business concept, and the visual identity system. The franchisor is responsible for maintaining and developing the brand image. The franchisor must ensure that the franchisee complies with the various guidelines for using the brand and other brand identity elements made available to the franchisee under the contract. When the contract ends, the franchisor must ensure that the former franchisee does not use the brand’s customer-recognizable symbols. 2 – Transferring the Franchise Network’s Know-How Know-how is a set of technical, logistical, commercial, IT, and management methods exclusive to the brand. The Doubin Law regulates it in the context of franchising and stipulates that it must be secret, substantial, and identifiable. The know-how is documented in writing in an operations manual known as “the Bible” and is conveyed to the franchisee during initial training as well as on a day-to-day basis through dedicated materials. Since it is confidential, the franchisee agrees not to disclose the know-how (particularly to competing networks) at the risk of harming 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 inception, continues through the store’s opening, and lasts for the entire duration of the contract. This support is the franchise system’s key advantage over independent entrepreneurship. Each location in the network is regularly visited by a field manager who shares their experience and verifies that the concept is being implemented in accordance with established rules. Who invented franchising? The history of franchising and its evolution! The franchise system truly emerged in the 1930s, although it would not formally develop until several years later. In the United States, the first company to use the franchise system to expand was General Motors. In the wake of the 1929 economic crisis, General Motors sought to dethrone its longtime rival: Ford. The company then granted licenses to independent entrepreneurs so they could open retail locations almost everywhere in the United States. In France, the Prouvost Group was the first to adopt the franchise concept. This company, which specialized in wool manufacturing, primarily owned spinning mills, and at that time, its wool was distributed to stores in large bags. Through one of its brands, Pingouin, the group decided to market the wool in balls to facilitate transportation and retail sales. This required creating new store formats, training retailers on the new products, and supporting them throughout this new venture. That was when franchising was born in France in the 1930s. It wasn’t until the 1970s that franchising truly became widespread. In the United States, the number of franchises increased significantly right after World War II, as was the case with McDonald’s. It was during this same period that the franchise system expanded significantly in France. Franchising thus gained popularity thanks to Charles Géraud Seroude, who brought the concept back from the United States. He had been trained in the concept and methods of franchising at the Alfred P. Sloan School of Management. Charles Géraud Seroude then convinced major industry players such as La Redoute, Yoplait, and DMC (Dollfus-Mieg et Compagnie) to adopt this model for their growth. Since then, the largest corporate groups have chosen franchising as a means of expansion. In a few figures, franchising in France in 2020 represented: 2,049 franchise networks, 78,218 retail locations, 757,852 direct and indirect jobs, and 67.8 billion euros in revenue. Check out our study on the franchise sector! Why are more and more companies choosing the franchise model? Franchising offers numerous advantages when expanding a business. Here are the main reasons: 1 – Franchising enables rapid network expansion. In a franchise, the creation of each new retail location is financed by the franchisee, so the cost of expanding the network is limited. It’s possible to open multiple retail locations without waiting to secure the necessary financing. Since costs are reduced, the brand can grow more quickly. 2 – It facilitates expansion across a wide geographic area. The denser a brand’s network, the closer it is to customers, and the more its revenue will grow. Franchising thus allows for greater proximity and visibility through more retail locations. 3 – Start a business, yes, but never alone! Each retail location is run by an entrepreneur[…]