The Semi-Independent Businessman

“AND SO—TO THE FIRST STEP,” instructed a businessman’s handbook in 1966. “You don’t write a letter or call the bank, or even add up your financial assets. The first step is reflective…. are you cut out for independent enterprise?” Just as the corporation offered new ways of owning the enormous machinery of production, and the millions of citizen-stockholders in America made European clichés of capitalism and socialism obsolete, so, too, there emerged a newly flourishing American institution—in a new way of “owning” the smaller units of business. This was the “franchise.”

The franchise offered an opportunity to own, and yet not to own, to risk and yet to be cautious. It democratized business enterprise by offering a man with small capital and no experience access to the benefits of large capital, large-scale experiment, national advertising, and established reputations. It also democratized and leveled consumption by offering the same foods and drinks and services in all sorts of neighborhoods, across the country. It created new forms of dependence and new kinds of independence. It lessened the differences between times and places, between ways of selling and buying anything and anything else. It added new ambiguities to the relations among buyer and seller and maker. It attenuated the experience of things, and created another frontier of vagueness.

IN THE NINETEENTH CENTURY the spread of enterprises had generally required the risking of large capital by some organization at the center. The great retailing chains (for example, A & P and Woolworth) had owned their networks of stores. But in the twentieth century an American standard of living, which depended on national advertising, on national distribution, and on unending streams of novelty, also required new techniques of distribution and new modes of ownership.

The “franchise” was admirably suited to these needs. A franchise was the right granted by a manufacturer to a dealer to sell his product, or by the owner of a brand name, trademark, or business technique to someone to use it in his business. It covered a vast range of activities. It was the right of a Ford dealer to sell Fords, of a Pepsi-Cola bottler to make Pepsi, of a corner stand to make Dunkin’ Donuts, or Colonel Sanders’ Kentucky Fried Chicken, of a Midas Muffler Shop to install Midas mufflers. It included special techniques for washing cars, for providing secretaries, for collecting charge accounts, for rustproofing machinery, or for installing saunas. It covered almost all the products and services in the American Standard of Living, and in the 1970’s it was reaching into more and more areas of life. By 1965 there were some 1,200 different companies granting franchise, with about 350,000 franchised outlets, totaling (among other items) more than one third of all retail sales in the United States.

While the franchise would be given a new, expansive form in the United States, it was, of course, an old idea. “Franchise” came from a Middle English word derived from the Old French word meaning “free,” for the franchise gave freedom to do what would not otherwise have been permitted. In the Middle Ages a franchise usually was some monopoly or special privilege, such as the right to hold a fair or freedom from a tax or from the jurisdiction of a particular court, but in early modern times it came to mean “the suffrage,” or the right to vote. The notion of granting a commercial benefit in return for a fee was ancient; and then, the patent granted to an inventor came to imply his right to grant franchises.

In twentieth-century America, “franchise” acquired a new meaning. Like so many other distinctively American institutions of mid-century, this, too, had come with the automobile. In order to market a mass-produced consumer item as expensive as the automobile, there had to be numerous far-flung outlets. Each dealer had to make a large investment; there had to be close cooperation between dealer and manufacturer. The automobile dealer’s franchise, although created by a contract, was not merely a contract but was the framework for a continuing relationship. For example, the Chrysler Corporation would agree to supply a dealer with automobiles and gave him the exclusive right to sell new Chryslers in his area. In return the dealer agreed to market these automobiles, to service old and new Chryslers, and to keep a stock of parts. While the agreement could be canceled after due notice on either side, there were strong incentives on both sides to preserve the relationship. If the dealer was successful he had a large and increasing investment in good will, in the brand name, and in the know-how of selling and servicing a particular make. The manufacturer on his side had a desire to keep uninterrupted the flow of his cars to buyers in that area.

As the institution of the annual model developed, the need for the franchise became greater than ever. This year’s cars were best sold by dealers well acquainted with last year’s model; the make was not likely to be bought unless a buyer could continue to count on a local dealer for parts, even for older models. The enormous sale of trade-in used cars (a by-product of the annual model) made a stable dealer arrangement more than ever desired by both manufacturer and dealer. Better than any other known arrangement, the franchise could provide and maintain a national network of qualified, well-stocked, and profitable sales outlets for automobiles.

By 1911 the franchise had become the industry’s standard system of distribution. And within a decade the automobile franchise had become a novel network of shared management and semi-management. In mid-century the leading automobile manufacturers were requiring their dealers to start with a capital of about $100,000. Both manufacturer and dealer depended on the realities and images of national advertising, both depended on the continuous flow of the product off the assembly lines. And the community of their relationship became so intimate, so complicated, and so subtle that by the 1960’s General Motors, influenced by the Automobile Dealers Day in Court Act (1956), had established a special administrative board of review to insure full and fair consideration of issues arising out of franchise contracts. The automobile had created a whole new world of semi-independent businessmen.

Automobiles needed “filling stations” (an Americanism first recorded about 1921) and oil companies wanted to sell their product to the millions of car owners. To provide numerous outlets on the highways for their brand of gasoline, the oil companies used the franchise.

The filling station quickly became an American institution. Buying a franchise for a station to sell Standard Oil, Gulf, Shell, Mobil, or some other brand required only a small capital, yet instantly provided the benefits of national advertising, at the same time that it put a man “in business for himself.” By 1970 there were more than two hundred thousand gasoline service stations in the nation (more than the total number of motor vehicles in 1910), and they averaged fewer than three paid employees in each. When a young man asked Sinclair Lewis how he could gather the experience to become a great American novelist, Lewis advised him to run a filling station.

THE FRANCHISING INSTITUTION soon reached out to all kinds of activities everywhere, spawning endless novelties, speedy innovations, and ambiguous proprietorships. The multiplication of cosmetics, patent medicines, and countless new national-brand health needs brought into being the Rexall-franchised stores. The rise of national-brand soft drinks—Coca-Cola, Seven Up, and others—produced hundreds of local bottling franchises.

A classic success story was the franchising career of “Mister Donut.” When Harry Winokur, an accountant, suffered an eye accident which forced him to seek a new occupation, he opened a little doughnut store in Revere, Massachusetts. In addition to the old standard doughnut, he offered forty other varieties of every conceivable flavor. When that store flourished, within a year he added four more stores, and then he set out to build a chain. Not having the needed capital, he turned to franchising, hoping to make his money by selling the ingredients and the know-how to franchisees. Winokur would bring a prospective franchisee to one of his original stores in Massachusetts where he trained him in doughnut making and store management. He then went to great lengths to find a good location for each franchised store, arranged the lease, and supervised the building of a Mister Donut shop of standard design. He aimed to make it possible for the franchisee to pay off Winokur’s own investment from the operating profits within three years, and that became the pattern. By 1968 there were over two hundred franchised Mister Donut shops in forty States, and the company was planning for fifty new franchises each year. Franchisees included a miscellany of mobile Americans—a former scrap-metal dealer, a bakery-route salesman, a coffee grower who had lived in Guatemala, a retired Marine Corps Air Force officer who had suffered a heart attack which prevented him from flying.

The range of the franchising business was an index to the explosive novelty of American life. When an unemployed paperhanger in Hammond, Indiana, invented a continuous intermittent freezer (a machine that could both freeze and dispense ice cream), he sold the rights in 1939 to a manufacturer of ice-cream mixes who opened a drive-in in Moline, Illinois, called “Dairy Queen”; a Moline businessman bought franchising rights for five states, and by 1969 the nation was sprinkled with 3,750 “Dairy Queens.” In 1949 a New Yorker who was annoyed by dry-cleaning delays developed a process by which clothes could be dry-cleaned in an hour; within twenty years there were 2,500 “One Hour Martinizing” shops in forty-eight states.

During the postwar automobile boom a bright young Chicagoan observed in 1950 that there was no pleasant or convenient way of replacing auto parts: repair garages were grimy, slow, and unreliable. He designed and organized franchised shops where a car owner could sit in an attractively decorated interior and watch his children play in a playpen while the parts of his car were promptly replaced. He started with the muffler, and within twelve years there were 460 franchised shops for Midas Mufflers. The new gold-colored mufflers were installed while-you-wait in fifteen minutes. “We took this lowly being, the muffler,” Gordon Sherman explained, “and elevated it with romantic flair into an almost religious object.” “Can a Nice Guy Succeed in Business?” read his advertisement in the Saturday Review of Literature. “Or How to Overcome the Inverse Relationship between Amount of Education and Yearly Income.” Soon Midas Muffler franchises were being operated by ex-rabbis, former teachers, retired Army officers, and many ex-academics.

A spectacular franchising success was McDonald’s Hamburgers, which by 1972 ranked second of all food-service operations in the United States, with more than one thousand franchisees and a gross annual business of over $300 million. McDonald’s exploited the appeal of the large consumption community at each outlet by advertising how many billions of hamburgers they had sold. The gargantuan enterprise had begun only in 1954 when Ray Kroc, who was selling milk-shake mixers to a chain of seven drive-ins owned by the McDonald brothers, bought their franchise rights.

The franchise provided the speediest means ever devised for the inventor, the manufacturer, the promoter, the man with know-how to diffuse his product or his service over a continent-nation. The Go-Getter at the center needed a good idea and considerable organizing ability, but he required relatively little capital. After the introduction of the business corporation, the franchise was the most important invention for collecting the resources of many small investors into a large enterprise. In the mid-twentieth century this newly democratized form of nationwide business widened and hastened the stream of novelty pouring into daily life.

For the citizen with little or no capital who wanted to be his own boss it offered a new opportunity for quasi-independence. “The franchisee is his own boss,” a handbook explained, “but he looks to the parent company, the franchisor, for every form of assistance imaginable, from cash loans or credit to designing, building, staffing, promoting, and publicizing the business. He looks for research and new-product ideas or new ways to make old products more profitable. Most of all, he looks for training to learn the business and to operate profitably after the business is established.” A man with little education and no business experience could quickly secure specialized training along with the benefits of national advertising and the fruits of the experience of thousands. Franchising was promoted by the United States Department of Commerce (1966) as a ladder of opportunity and a means for “equal opportunity in business.”

In a world of franchisees, the American consumer’s buying opportunities and buying experience were transformed. Neighborhood shops, “Mom and Pop” enterprises (in the jargon of the trade), were displaced by outlets of national franchises. The distinctive local hangout was displaced by an Orange Julius or McDonald’s Hamburgers; where the corner garage had stood, there was now a Western Auto Supply or a Midas Muffler Parlor. Instead of haphazard personal enterprise, the American consumer found standardized, market-tested, nationally advertised brands of all products and services. He became the beneficiary, as he was the target, of the most sophisticated market research, product research, and sales know-how. His neighborhood world was flattened into the national consuming landscape. He patronized the highway outlet of a Dunkin’ Donut or Colonel Sanders’ Kentucky Fried Chicken because he could be sure of what he would get. Wherever he traveled across the continent, he felt a new assurance that he would be at home, and somehow in the same place. By using the guide to a chain of franchised motels—the Holiday Inns, Quality Courts, Howard Johnsons, Ramada Inns, or any of a dozen others—when he stopped for the night he would know where to find the ice maker, the luggage rack, the TV set, he would recognize the cellophane wrapping on the drinking glass, the paper festoon on the toilet seat, whether he was in Bangor, Maine, in Peoria, Illinois, or in Corvallis, Oregon. Nationwide franchises made consuming, anywhere in the U.S.A., into a new kind of repeatable experience.

The American landscape became a world of product clichés. Consuming itself began to have some of the handy but unsurprising quality of the cliché in language. Everything sold for a purpose served its purpose well, and sometimes in a surprising new way. But when the surprise itself became standardized that, too, lost much of its charm. Consuming, like the common discourse of package words, became a perfunctory, flavorless act and lost its nuances.

The slogan of franchise-filled America could have been: Does he or doesn’t he? Is he or isn’t he? More and more products and services were offered by semi-independent businessmen. While consumers could be more confident than ever of the standard quality of what they bought, they were haunted by a new puzzlement about whose product it was. Who, if anyone, was really responsible in case what they bought wasn’t what it was supposed to be? “Are you the owner or the manager?”

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