It is a time-tested way to build a big company. First come up with a good product or service and give it a catchy name. Then recruit an army of entrepreneurs to carry that name into cities and towns all across the U.S., or even the world. The phenomenon is known as franchising, and it has created millionaires galore and made empires of McDonald's, Holiday Inn and Baskin- Robbins.
Franchising may be a century-old idea, but it has never seemed fresher or hotter than in the U.S. of 1987. The business strategy that peppered the land with Golden Arches is in the midst of an unprecedented boom. Never have so many would-be tycoons turned to franchising, and never have they found so many would-be store owners lined up to buy a franchise. No longer limited mainly to fast-food outlets, auto dealerships and motels, the chain-store concept is spreading to an amazing array of goods and services. Consumers in a growing number of cities can get a haircut at Hair Performers, buy hearing aids at Miracle-Ear, do their laundry at Duds 'N Suds, have their homes cleaned by Maids International and get an auto "engine shampoo" at Tidy Car, seek business advice at Priority Management Systems or lose weight at Suddenly Slender and Designer Body spas.
As new franchise operations have popped up, many established chains have been enjoying explosive expansion. The number of Meineke muffler shops has jumped from 390 to 541 since the end of 1985, while Domino's Pizza has increased the size of its chain by 38%, from 2,839 to 3,921 restaurants. The Super 8 Motel network has grown from 323 locations to 446 during the same period.
Commerce Department figures show that franchising is growing at an extraordinarily fast pace. Franchises will do $591 billion in business this year, a 77% increase over their sales volume in 1980. Employment in franchising, which was an estimated 4.7 million in 1980, will top 7 million this year, or 6.3% of the U.S. work force. The trend is fueled by legions of workers who see myriad opportunities to start their own business and be their own boss. Says Robert Kushell, a Glen Cove, N.Y., franchising consultant: "The accountant who doesn't want to work with numbers all day, the businessman who's tired of traveling three weeks out of the month, the woman who has stayed home and raised a family and now wants a career -- all these people can find that franchising offers them a process for learning a new career."
Prominent among the ranks of the franchisees are hundreds who have lost their jobs in the recent wave of retrenchment in American corporations. Says John Campbell, chief executive of Franchise Masters, a consulting firm with offices in San Francisco, Los Angeles and Tampa: "Some people want to buy a job. A lot of middle-management people are being displaced, and they've often got a good bit of money from severance pay."
The phenomenon is accelerating so rapidly, says Andrew Kostecka, a Commerce Department analyst, that "franchising will be the leading method of doing business in the 21st century." John Naisbitt, author of the best-selling Megatrends, has estimated that franchising, which now accounts for just over a third of retail sales, will generate $1 trillion annually, or half of all sales, within 20 years.