The Franchise King® | Learn How To Become A Franchisee

A New Business System Is Born: The Franchise Model Of Business

franchise model and the history of franchising
(Courtesy of Marc Falardeau, Flickr)

The Franchise Model And Issac Singer

Most of us in the franchise industry agree that Isaac Singer’s technique to produce and sell sewing machines was the spark that created the franchise model… franchising, as we know it today.
As a matter of fact, most of us feel that Singer created the first franchise.

(This post may contain affiliate links. Please read my disclosure policy).


In the 1800’s, there was nothing “automatic” about manufacturing clothes. Everything was stitched together by hand, in not-very-ideal working conditions. Not a good business model.

In truth, the hardworking women who did the sewing worked incredibly long hours – and of course, everyday housewives had to do a lot of sewing, too. It was a tedious process. It was clearly a process in dire need of modernization.

old garment factory with sewing machine

Isaac Singer was the founder of I. M. Singer & Company. He was also the first person to patent a practical, widely-used sewing machine. Though these machines started to appear on the scene in the mid 1800’s – and worked pretty well – Singer came up with an idea that made them work even better. A lot better. So he started selling them.

His sewing machines were fairly expensive (about $120 each), but he was able to establish a system that would make them far less cost-prohibitive for the people who needed to buy them the most. One of his partners came up with what was at the time, a risky idea. This idea would turn out to be the first-ever installment plan.

The Franchise Model According To The FTC

Here’s what the Federal Trade Commission (FTC) says about the franchise model:

A franchise enables you, the investor or franchisee, to operate a business. You pay a franchise fee and you get a format or system developed by the company (franchisor), the right to use the franchisor’s name for a specific number of years and assistance. For example, the franchisor may provide you with help in finding a location for your outlet; initial training and an operating manual; and advice on management, marketing or personnel. The franchisor may provide support through periodic newsletters, a toll-free telephone number, a website or scheduled workshops or seminars.”

In addition, owning a franchise comes with defined costs, franchisor controls and contractual obligations.

business model of franchising

The Issac Singer Payment Plan

This was a brilliant idea.

Customers had to pay $1.15 per day over the course of a month for a brand-new sewing machine. This pay-per-day method allowed people who couldn’t afford the somewhat hefty price tag all at once to purchase the product within their means – and at the same time, it initiated the system that is still widely used today. That system was the first franchise business system.

The License

The other technique that Isaac Singer and his business partners utilized to speed up distribution was something called a licensing arrangement. They would find business-savvy people who were interested in owning the rights to sell these amazing machines in certain geographical areas, and get them to pay an up-front license fee.

Free Franchise Quiz
Find Out If You Should Own A Franchise Before You Write the Check
Invalid email address

Not only that, Isaac and his partners required licensees to teach consumers how to use the machines that they had just purchased. This arrangement allowed the partners to use money garnered from the licensing fees to fund more manufacturing. They now had a new distribution network…a new business model involving licensees.

Sound Familiar?

It should.

Issac Singer’s business system was the first licensing system. When you buy a franchise you’re buying a license.

Now, normally you, as the licensee, would get a protected geographical area. Unless you were one of Henry Ford’s first franchisees.

And, you receive training.

Etc. Etc.

Thanks, Issac. Thanks for creating the franchise business model for us.

Now, who want to start a franchise business?

Please Share This Article!
Note: When you buy through links on our site, we may earn an affiliate commission. In addition, I've started to use AI to help me craft better article titles and headings.
joel libava

I'm The Franchise King®, Joel Libava. I help prospective franchise owners avoid bank account emptying mistakes.
For 23 years, I’ve been showing people how to make smart, informed decisions on franchises to buy, and I can help you, too!
P.S. I'm not a franchise consultant/broker.

Straightforward Advice
Joel, thank you for taking the time to speak with me yesterday. It was refreshing to finally speak with someone in franchising who dishes out straightforward, candid advice. You provided me with some insightful ideas that I'm giving a good deal of thought and consideration to. I look forward to speaking with you on our next consultation call."
- John Timmins, Columbia, South Carolina
Free Franchise Tools Franchise Compatibility Quiz Net Worth Calculator
VIP Franchise Newsletter

Recommended Reading
How Franchises Work
How Much Is A Franchise?
Pros And Cons Of A Franchise What Is The Franchise Fee? How To Buy A Franchise
Best Franchises To Own

Top 33 Business Ideas
6-Figure Home Businesses Starbucks Franchise Facts
Featured Franchises!
10 Best Franchise Websites
About Franchise Consultants
How To Read A FDD
Questions To Ask Franchisors
Questions To Ask Franchisees Franchise Discovery Day Franchise Reviews
Top 10 Franchise Buying Tips