An American Icon

Some things just say "America," like baseball, apple pie and . . . franchises. Here are 5 big ways franchising has affected our nation.

Chances are, most people don't realize how much franchises have become an integral part of their lives. They could easily get goods and services from franchises on a daily basis without knowing it-the proliferation of concepts and models is so great, consumers often don't distinguish or discriminate between franchise or nonfranchise businesses.

Though franchising as a concept has existed for centuries, it became a prevalent force in American business just a few generations ago. And as anyone who has watched TV, listened to the radio or read ads can attest, franchising has become an icon of American life. Robert A. Robicheaux, chair of the Department of Management, Marketing and Industrial Distribution at the University of Alabama, Birmingham, says the "explosion of entrepreneurship made possible by franchising" began in the 1950s, punctuated resoundingly by Ray Kroc, founder of McDonald's. By using franchising, which Robicheaux points out is nothing more than a particular legal form of business, franchisees could be, as he puts it, "quasi-independent" business owners who basically assisted the franchisor in expanding the brand. Now, in addition to the vast hamburger empires, automobile dealerships, janitorial services and just about any other type of business imaginable can use franchising as a way to build and expand. In doing so, franchising has irrevocably shaped the nation. On a broad scale, here are five areas that have been significantly affected by franchising: the economy, jobs, entrepreneurship, uniformity and culture.

Economy

Money makes the world go 'round, and franchises have lent a hand in the rotation. In our 2005 Franchise 500®, there were over 387,000 franchise and company-owned establishments in 2004. And companies in the Franchise 500® generated $135.7 billion in their most recent fiscal year.

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Don DeBolt, president of the International Franchise Association (IFA), says franchising accounts for almost half of all U.S. retail sales. "Franchising has had a $1.5 trillion impact on our economy. It's bigger than the gross domestic product of China," DeBolt says. What could I say other than "wow," to which DeBolt countered, "'Wow' is the right word. We knew it had a terrific impact, but that kind of impact is overwhelming. [Franchising] is one of the more dependable generators of economic activity because small business tends to grow incrementally."

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This article was originally published in the January 2005 print edition of Entrepreneur with the headline: An American Icon.

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