The initial systems of franchising came to prominence in Great Britain during the
18th century and they were used in the brewing field. It refers to the methods of
practicing and using another person's philosophy of business, products and trademarks.
The franchising system, is regarded as a strategic alliance that encourages a
business in which both partners have benefits on condition that they sign a franchising
agreement. In America, the franchising systems continued, especially after the Second World
War, when most of those who had returned from the war were finding new ways to
attain financial success. Even though, the greatest disadvantage of this business model was,
at that time, the lack of experience of both the partners, especially in the distribution
field, traders with a certain economic power started distributing their products and
know-how, and thus, they started franchising.
Due to favorable economic conditions for the development of this system and the
high degree of congruency with the enterpriser and the small and medium size enterprise, at
the beginning of the 1990s the franchising system generated in the US, 10% of the gross
domestic product. While in the year 2010, the estimates provided by the International
Franchise Association reveal that the sales of companies that use this business model, will
amount to approximately $250 bn.
Over the time, the term `franchising' has been defined in various ways, according to
the point of view and the field it was used in (Costea, 2002). The easiest definition is
that franchising is a business system in which
the franchiser grants the independent
operator, called the beneficiary or the franchisee, the right to distribute its products,
services, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. |