The History of Franchising

Most people who hear the word “franchise” think of McDonald's. 

But franchising was alive and well decades before McDonald’s opened their doors in San Bernadino, California in 1940. 

In fact, not only did McDonald’s not invent franchising, they also didn’t invent fast-food! Below is a summary of how we got to where we are today in franchising.

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The First Franchise

Martha Matilda Harper is largely credited with founding the first franchise back in 1891.

Despite being born into a working class family (and being a woman in an era of incredibly unequal gender rights), Harper was able to develop the first franchise ever - a hair salon franchise - which eventually scaled to 500 locations. 

Harper Hair Salon’s began to suffer after Martha’s death in 1950, and were eventually sold off.

While you can't find a Harper Beauty Parlor or hair salon, her work is the genesis of franchising today.

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White Castle Invents Fast-Food

Before their restaurant was at the center of a stony comedy film, White Castle first invented the standard for all fast food chains and franchises.

Founded in 1921, locations had a small square footage, and incentivized a carry-out model with their slogan “buy em’ buy the sack”. Carry-out meals were a new concept at this time. Billy Ingram, White Castle co-founder, is also credited with inventing the modern day spatula. He created a stainless steel spatula to make squishing beef patties easier, and sold it to thousands of restaurateurs around the country. 

Beyond spatulas, White Castle is credited with using paper hats as part of employee uniforms, which became a mainstay of 1900’s fast food uniforms. White Castle became so efficient in producing them that they actually formed a subsidiary to supply hats to the rest of the country. 

While today White Castle has just ~380 locations in 13 states,, they grew to 200 stores by 1954, 1 year before McDonald’s opened their first franchise.

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Howard Johnson’s Validates the Franchise Growth Model

While today, Howard Johnson’s is known as the small hotel brand with ~200 locations, it originally started as a restaurant chain back in 1925.

Known for their iconic orange roof, and ‘28’ flavors of ice cream, the restaurant brand took off when they began franchising in 1935. Less than 15 years later, Howard Johnson was at the helm of a franchise network of over 10,000 employees and 170 restaurant locations. 

While the last location officially closed in 2022, the impact this brand had on modern franchising can’t be understated. 

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Franchise Giants are Born

Seeing the success of Howard Johnson’s was validation of the franchise model as a way to grow a brick and mortar business.

It’s no surprise that others followed suit as a way to grow their brand.

Between the 1940’s through the 1970’s, dozens of successful franchises that we all know today were founded. The 1940’s through 1970’s in particular is when a lot of the multi-billion dollar franchises we know today were founded. 

In the 1940s, Dairy Queen, Carvel, and Baskin Robbins all started franchising. McDonald’s, Dunkin’, Pizza Hut, and KFC joined later in the 1950’s, Chick-Fil-A, Taco Bell, Dominos, IHOP, and Little Caesar's kicked off franchising in the 60’s, while Wendy’s, Subway, and Popeye’s began in the 1970’s.

This time period also saw the beginning of large non-food franchises such as Meineke, Century 21, Jiffy Lube, Super Cuts, and RE/Max. 

At this point, franchising as an expansion method is validated well beyond the fast-food roots that it started with.

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1980 - 2000

With franchising off and running, the ensuing decades are full of war stories within the franchising world…

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Casual Dining Wars

In the 1980s, many casual dining franchises were founded, putting them on a roller coaster trajectory of incredible popularity and success in the 1990’s-2000s, followed by struggles ever since.

Applebee’s, TGI Friday’s, Chili’s, and Hooters were all founded in the 1980’s.

Blockbuster also began in franchising in the 80’s…but that story requires it’s own separate post 😆.

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The Sandwich Wars

The 1990s saw sub sandwich franchises battle for market share and in spectacular fashion.

While Jersey Mike’s had began franchising in the 1980s, their slower and steady approach would prove dividends down the road.

But In the 1990s, Subway grew by an incredibly aggressive ~10,000 locations. Quiznos took off rapidly and hit 1,000 locations, going public on the Nasdaq at $5 per share.

Jimmy John’s and Firehouse Subs were also founded in this decade.

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2000 - Present Day

The Dessert Bubble - 2000s

Franchise concepts and categories can go through “hype cycles”, such as what has recently happened within the cookie category.

Desserts in particular went through a hype cycle of their own that started forming in the 2000s. Cupcake brands, and frozen yogurt concepts like Pinkberry, Menchie’s, 16 Handles, and others were popping up everywhere.

Unfortunately, hundreds of these locations have closed down, hurting many franchisees in the process.

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Fitness Concepts Explode - 2010s

Starting in the early 2010s, boutique fitness concepts began exploding. Franchises that now have thousands of locations began franchising only a little over 10 years ago.

OrangeTheory, F45, and Club Pilates are some of the most prominent examples.

Planet Fitness also went public in 2015, and is now arguably the most successful non-food franchisor in the world, with a market capt of $8.5 billion.

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2020 - Today

Covid put a temporary scare into the franchising ecosystem, as it did to just about every other sector of business.

While it’s unclear what the story of the decade will be, there have been numerous headline worthy occurrences already.

New franchises like Crumbl Cookies hit $1 billion in systemwide sale in 2022, just 5 years after their founding. Koala Insulation, a home services brand sold for $90-$100 million in 2023, just 3 years after they began franchising!

On the flip side of these hyper growth brands was Jersey Mike’s led by Peter Cancro, who after a 37+ year run of franchising, sold the business for $8 billion dollars to Blackstone. 

To us, the Jersey Mike’s story is a true example of franchising done right. 

It wasn’t fast paced early growth that led to their success, it was a measured growth approach that put franchisee satisfaction and profitability high on their priority list (as well as customer satisfaction), and decades of doing the right things before the brand became an “overnight success”.

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