The internationalization of franchising systems into industrialized economies

Dianne H.B. Welsh and Ilan Alon Franchising began in the United States in the 1850s with the Singer Sewing Machine Company. One of the most famous beginning franchisors was Henry Ford, who figured out that the value of franchise systems was to distribute cars quickly to yearning first-time car buyers, while not being encumbered with the cost of inventory. Today, franchising encompasses a system that is used around the world to sell over 1 trillion dollars’ worth of goods and services from Tokyo to New York (Reynolds, 2002). Franchising is powerful. Franchising is here to stay. This chapter summarizes the preeminent research in the field of international franchising, concentrating on North America, the Pacific Rim and other industrialized countries. These countries can be considered to have the most advanced forms of franchising with the most market penetration. It is worth noting that North America is the home of the most franchisors’ headquarters. The two other countries that are experiencing phenomenal growth in franchising that we will cover in this chapter are Israel and South Africa. North America Dianne Welsh (2002) looks at franchising from a futuristic perspective, examining where franchising has been in the 1970s, 1980s and 1990s in the United States and Canada and where it is headed. Currently, franchising is 40 percent of retail trade in the USA and 25 percent in Canada (Fenwick, 2001; Scrivener, 2001). In her article, Welsh covers the definitions of franchising, regulations, survival rates, recent developments and future trends. One trend identified is the focus on self-reliance. Young people want higher income, job security and self-satisfaction that come with owning their own business or franchise. This will affect franchising growth positively, especially for women and minorities internationally. Additionally, she defines the term, ‘transgenerational franchising’ (Welsh, 2002).