Have you ever wondered about the history of franchising? Or what about what impact it has on the economy? This business model has been around for quite some time and is gaining enormous traction. However, there are some interesting and little-known franchise facts that you may not know about. In this article, we explore 13 fascinating franchise industry facts to help you better understand the industry and why it’s worth considering for aspiring business owners. Let’s get started.
1. Franchising has a rich and storied history
If you think of franchising as McDonald’s, KFC, Marriott hotels or something similar, you’d be right. These franchise giants today all started out with a humble history. In fact, although they may have their roots in the mid-20th century, franchising’s origins began around the Middle Ages.
This is when the Crown would let the church use and manage its land, which the church would then lease out to peasants who would pay a royalty for its use or its quantities of production (be they agricultural products or livestock). With the expansion into America, franchising took on a new turn with licences being granted to carry out business in different locations under a provided and structured business model.
However, it was in the mid-20th century after World War II that franchising really got a boost. In the US, the International Franchise Association was founded in the 1960s while in the UK, although unregulated by formal laws, the British Franchise Association was established to help provide quality assurance to prospective franchisees related to their new franchise business.
2. The franchising business model is used in many industries
One of the most interesting questions and facts about franchising is which industries does it mainly cover? Although we may be tempted to answer that this lies in quick-service restaurants (QSRs), the answer is a lot more diverse.
In fact, apart from QSRs, there are full-service restaurants, hotels and motels, car dealerships, real estate agents and brokers, beauty salons, snacks and non-alcoholic beverage franchises, petrol stations with convenience stores, electronics stores and fitness centres and gyms.
3. The impact of franchising on the economy is enormous
Franchising also plays a pivotal role in economic growth and development. In the UK, most of the 900+ franchise brands are local (80%) with over 44,000 franchises operating across the country. In addition, the sector provides employment to around 621,000 people.
As for its contribution to the national gross domestic product (GDP), a recent bfa NatWest Franchise Survey reported a UK franchise industry turnover of £17.2 billion in 2018, which indicates a £2 billion increase on the £15.2 billion reported in 2015.
4. Some franchises have shown recession resistance
Many of the franchise opportunities in the UK are recession-resistant. We all know that when a recession hits, some goods and services are immediately cut back on.
However, franchising offers a solid and proven business model and some of the sectors where many franchises succeed during a recession include home care, deliveries, grocery retail, technology, healthcare, child care, cleaning, repair shops and other essential services.
5. Franchising offers opportunities for diverse ownership
As part of our facts about franchises, we can’t ignore the role of franchising in broadening the perspective for diversity in business ownership. Diversity and inclusion are critical for business growth, better revenue generation, improved recruiting and better community relations. And because franchising offers individuals of all creeds a solid path to business ownership, diversity is strengthened.
In fact, in the US, around 30% of franchise businesses are minority-owned compared to just 18% of traditional business structures. This means franchising offers the opportunity to broaden diversity in business because it encourages all people to embark on the journey to business ownership irrespective of their status or previous skills, experience or education levels.
6. Real estate and franchising
Many franchise businesses operate brick-and-mortar locations. Often, these premises are purchased either by the franchisor who requires a lease payment from the franchisee or they are owned and operated by the franchisee.
With this in mind, franchising is as much about the franchise business as it is about acquiring real estate. In fact, one of the world’s biggest real estate owners in the world is McDonald’s with around 36,000 worldwide stores.
It’s often been said that this franchisor earns more from its lease payments on its real estate space than from its burgers sold.
7. The franchising industry is constantly evolving
Although franchises operate under a proven business model and this could lead to the assumption that they are quite fixed in their operations, the opposite is actually true. The franchise industry isn’t static and changes just like any other business industry.
There are numerous trends that have emerged in franchising, which need to be carefully followed. For example, technology and artificial intelligence (AI) are both playing a major role in the restaurant business now more than ever.
Furthermore, franchises are always looking for ways to enhance the customer experience and this is also driving changes in the industry.
Other developments we are seeing include increased partnerships between franchise restaurants and hotels. In addition to all this, there are numerous industries on the rise which weren’t prominent before such as services, pet care and even home restoration, which are adapting to the rise in natural disasters.
8. Franchises have often been integrated into pop culture
Franchises have often been integrated into pop culture. Movies, TV shows and even songs have centred around or mentioned famous franchise brands, further cementing their place in society.
Whether it’s outright advertising or more discreet product placement, we see many franchise brands appearing on our screens in subtle ways. One example is one of Netflix’s Stranger Things episodes (S02E01), featuring a KFC bucket of fried chicken.
However, there are plenty of other examples of product placements and ads in our favourite shows, including those of Pizza Hut, Gatorade, McDonald’s and others.
9. The average franchise owner is 44 years old
Did you know that the average franchise owner is 44 years old? However, there’s space not only for Millennials but also for Gen Z and the Baby Boomers in franchising. That’s because franchising doesn’t discriminate based on age, skill levels or experience. It welcomes people from diverse walks of life and diverse ages.
Although the average age of franchise ownership may be 44 to 54 years of age where there is greater financial maturity, franchising is also paving the way for Gen Z just entering the workforce and for Baby Boomers who may be considering retiring and are looking for interesting and profitable ways to spend their free time.
10. The US has the biggest franchise market
With around 792,000 franchise establishments, the United States leads the way as the world’s largest franchise market. Franchising has a major economic output of around $827 billion. Meanwhile, the sector employs around 8.5 million people as of 2022, accounting for around 3% of the national GDP.
11. Many franchises offer veteran programs
Franchising is also a great opportunity for veterans. Here are some interesting franchising statistics: in the US, approximately 14% of all franchisees are veterans. As of 2021, these individuals owned 66,000 franchises. In addition, their business efforts generate $41 billion in GDP.
To encourage greater veteran franchise ownership, many franchisors offer special incentives, discounts and support for veterans who want to start a franchise. That’s partly because veterans come with a special skill set and their experience makes them among the perfect candidates for franchise ownership.
12. Many countries have national franchise associations that advocate for the industry
Many countries have national franchise associations that advocate for the industry, provide resources and set ethical standards.
In the US, these associations include:
- the International Franchise Association (IFA)
- Coalition of Franchisee Associations (CFA)
- the American Association of Franchisees and Dealers (AAFD)
- the American Franchisee Association (AFA).
In the UK, the equivalent is the British Franchise Association (bfa). Meanwhile, in Canada, the responsibility for advancing and supporting the franchise community is carried by the Canadian Franchise Association, which has been in existence since 1967.
A bit further from home, in Asia, we have the Philippine Franchise Association while in India, there is the Franchising Association of India.
13. Famous franchise brands have fascinating beginnings
Looking at the history of some of the world’s largest names in franchising can be inspiring. For example, Ray Kroc of McDonald’s took the franchise concept to a whole new level in April 1955 after he became intrigued by the McDonald brothers’ fast-food concept and their need for eight milkshake machines.
The story of Dunkin’ is equally fascinating and inspiring. It all happened after World War II, when William Rosenberg’s entrepreneurial spirit and drive led him to realise that workers in Quincy Shipyards didn’t have many options when it came to lunch. He started offering sandwiches, coffee and donuts and after realising that his customers dunked their donuts in their coffee, Dunkin’ Donuts, and now subsequently Dunkin’ was born.
As for Marriott, the brand started as a nine-seater root beer stand in Washington. KFC’s founder Harland Sanders started serving his famous fried chicken in a hotel he purchased when he turned 40.
And of course, there is the story of Toru Kumon, who was a high school maths teacher who began providing education based on the concept of self-learning to his second-grader son, Takeshi. He started writing numerous calculation problems on loose-leaf paper for Takeshi in 1954 and that’s how the Kumon Method was established.
While there are numerous other stories of great and interesting origins, these are just a hint of what can be achieved when you put your mind to something.
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