2021 APRIL
MORE ON FRANCHISE DURING
THE PANDEMIC
Written by Andrew Sia
It is known that there are roughly 774,000 franchised establishments in the US shared among 240,000 franchise ownerships, and they employed about 8.4 million people in according to the record of the International Franchise Association for 2019. In average each establishment hired 10.85 employees. Franchisees run 55% of American hotels¾the data from STR, and 84% of the US chain restaurants¾the data from Aaron Allen & Associates.
In this time of the pandemic, people who lost their jobs have shown interest in franchising. But the business is hit by the coronavirus pandemic that leads to the complains with the franchisers have been on the rise as well.
Their principals are asking franchisees to buy equipment and to adopt new safety protocols, and they want to assure the confidence of the customers during the pandemic. Introducing the store upgrading and offer promotional discounts would undermine the franchisees’ profit, and these are the complains that have brought to the business.
The corporations own the brand, set the standards and handle the strategy, whilst the franchisees own the stores and hire the people to operate, but in today’s situation both of them found that it is difficult to work in a harmonizing way.
Franchisees pay franchisers, which in this case are the brand owners a fee, and spend significant additional amounts for the right to open a franchised business which have to look identical for all the franchisees. There are other fees, such as the marketing fee to fund the national ads. In return, the franchisees gain access to customers who trust and frequent the brands. Franchisees receive training in how to operate the business successfully. Very often all these trainings are held in the headquarters and shirts with the names of the brands would be printed and worn, and during which people would talk about strategy and share business cases and swap experiences. The franchisees left the summits gung-ho and ready to take the business to its new level.
Very often the equipment and fixtures are coming from the principal, and the supplies and services are provided at prices it set. This can be an argument area that can be inevitable.
Anyway, it is still a business model that doesn’t require a lot of capital, education and knowhow, as everything can be mapped out accordingly.
Many franchisees are small business operators and during this pandemic time they received federal support. And there are many small business operators in the US that were successful before the pandemic. Finally, we would like to share the story of the company¾Singer, a sewing machine company who started in the early 19th century the franchise business and it took off after the World War II. It has been known to sell sewing machines under the company’s brand in exchange of loyalties and other revenue. It was a very successful case study for business.
Case Study of Singer Company
Singer is known for its domestic sewing machine and was first founded in 1851 by Isaac Merritt Singer. It was based in Tennessee near Nashville and began the mass production in 1863 in Elizabeth, New Jersey. Singer first designed the sewing machine for general domestic use and incorporated the basic eye-pointed needle lock-stitch, which was developed and patented by Elias Howe Jr. who won the patent infringement lawsuit against Singer.
Singer company started to market its machines internationally in 1855 and won the first prize at the Paris’s world fair of that year. The exhibition was a major event in France, and at the time France was under the reign of Emperor Napoleon III. It followed London’s Great Exhibition of 1851 and attempted to surpass that fair which was held in Crystal Palace. The exhibition drawn more than 5 million visitors and Singer Company won the first prize.
Singer began to consolidate patents in the market to enter into mass production, and in 1860 it was already the world’s largest manufacturer of sewing machines. And in 1910, Singer began mass-producing domestic electric sewing machines.
Singer was also a marketing innovator and pioneer in promoting the use of installment payment plan.
It was in 1867 built its first overseas factory in Scotland after realizing that the demand for the sewing machines was high enough for opening a factory there in Glasgow. In 1882, a new factory was constructed with two main factory buildings, each 800-feet long and 50-feet wide and three-storeys high. A total of 2.75 miles of railway lines were laid throughout the factory to connect the different departments such as the boiler room, foundry, shipping to the main railway station. Factory was designed to be fire-proof with water sprinklers, making it the most modern factory in Europe at that time.
With nearly a million square feet of space and almost 7,000 employees, it was prepared to produce an average of 13,000 machines per week, making it the world’s largest sewing factory.
Later the factory expanded to six floors.
In the First World War, the sewing machine production gave way to munitions. It was working on government contracts.
Singer Company emphasized the role of women at home, and emphasized their virtue, modesty, and diligence. Sewing also became a livelihood that brought the industrial revolution to its new level, although the poor wages were something because of its nature.
Furthermore, Singer introduced credit purchase of the machines, rent-to-own arrangements, and sold globally with salesmen selling door-to-door and carried the machines for demonstration.
In the Second World War, it produced for the government and worked on contracts.
Singer celebrated many firsts, world’s first zig-zag machine, the first electronic machines, the first assistant app for mobile devices, and many more.
In was in the 1960s, the company began to diversify in other industries, such as calculators and eventually ended up with multiple simulators. In 1987, corporator Paul Bilzerian raided the company and ended up without any “White Knight” rescuer appeared. Company resulted being scrapped and sold off to different other companies.
It also faced severe competition from the Japanese machine companies, and familiar names like Brother. Janome, and Juki. Singer filed for bankruptcy in 1999.