When Henry Ford’s assembly line started cranking out automobiles in 1914, an efficient distribution system had to be put in place to move all of this new metal. Henry Ford, (and to some extent, General Motors) introduced franchises/dealerships to courageous entrepreneurs in cities and towns all over America.
In the early days, there were no up-front franchise fees; the first automobile franchise owners were able to lower their up-front capital costs. It took some of the risk away.
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Van Ness Auto Row in the 1920’s
The excitement created by Henry Ford’s automobiles, and the mass-production of them must have been incredible. Trips that used to take an entire day, could all of a sudden be done in hours. The Model T changed everything. Soon, other manufactures like General Motors appeared on the scene with their own automobiles.
Our country’s first automobile dealers…the franchisees, must have been a fearless bunch. As promising as this new mode of transportation was, there were no guarantees that they would sell. Just like in any business, a buyer had to show up, and a seller had to have the product. A transaction had to take place. Cash had to change hands. Being one of the first franchisees must have been scary.
The earliest franchisees had a franchise contract that was only a couple of pages long. It was written in fairly uncomplicated terms. The franchisee had a defined territory in which he could sell automobiles.
Except For One Little Thing
I wrote that the franchisee’s territory was defined. But, it was not exclusive. Riots could have ensued!
Manufacturer could grant other franchises in this, “defined territory.” Not only could other franchises be granted, the manufactures could sell automobiles anywhere they wanted to, because they also had the right to open up sales outlets that were not franchises; they were, “company stores.”
So, while the earliest franchisees didn’t have to pay an up-front franchise fee, they had to have a lot of faith. The faith that I’m talking about isn’t the religious type. They had to have enough faith in the product.