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Unformatted text preview: for power. The franchisor almost always wins.
Franchising schemes have been around in one form or another since the nineteenth century. In 1898 General Motors lacked the capital to
hire salesmen for its new automobiles, so it sold franchises to prospective car dealers, giving them exclusive rights to certain territories.
Franchising was an ingenious way to grow a new company in a new industry. “Instead of the company paying the salesmen,” Stan
Luxenberg, a franchise historian, explained, “the salesmen would pay the company.” The automobile, soft drink, oil, and motel industries
later relied upon franchising for much of their initial growth. But it was the fast food industry that turned franchising into a business model
soon emulated by retail chains throughout the United States.
Franchising enabled the new fast food chains to expand rapidly by raising the hopes and using the money of small investors. Traditional
methods of raising capital were not readily available to the founders of these chains, the high sch...
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- Spring '08