Sports franchising is a form of organization of sports competitions as a commercial enterprise. The core of the model is the licensing of brands along with participation in a sports league by a dominant company through a franchising agreement.
Sports franchising occurs primarily in the North American sports leagues . Participants in the league are the licensees, who are themselves commercial companies. There are neither promoters nor relegators. The license holder teams are called franchises in English and can be bought and sold along with the licenses so that the teams can change ownership, location, name, logo, mascot and all other properties.
Professional leagues in North America are closed associations that are limited to a certain number of teams. The teams are called franchises . New teams can only join the league if all existing teams in a league agree to include one or more new teams. If the teams agree to an increase in the league, interested investors can apply to set up a new franchise . With a few exceptions, the new franchise will be located in such a way that it represents a geographical monopoly in a region. The franchises belong to private individuals, some also to companies. The owners of the teams can sell the franchise or relocate to another city. This is mostly the case when the team or the location turns out to be unprofitable. The National League introduced this system in 1876 because of the instability of the previous organization.
Although the teams are independent organizations, they are mostly League creations. For example, only a few teams in the National Hockey League existed before they became part of the NHL or the former competitive league World Hockey Association . The remaining teams were founded as expansion teams exclusively for operations in the NHL or were taken over by the 1979 merger between the NHL and WHA.
Since the North American professional teams are closely tied to their league, they almost never play games against teams from other leagues. The best teams of a season qualify for the playoffs and the winner of the playoffs is the champion. The leagues have their own set of rules and determine the conditions under which players can join a team and how they can switch to another team.
Major league baseball has a "minor league system" whereby the teams can train young talent. The players should gain experience in a lower division. Although most minor league baseball teams are independent teams, each team has a contract with a top division team to allow young players paid by the major league teams to play in the lower division. However, a minor league baseball team cannot advance to major league baseball. The system in North American ice hockey works in a similar way. The NHL teams cooperate with teams from the lower class American Hockey League and ECHL . There they can “drop off” young or injured players who are supposed to collect match practice. The National Basketball Association , on the other hand, has its own league that plays under the umbrella of the top league, the NBA Development League , in which the NBA teams can also assign young players to gain experience. The National Football League and Major League Soccer do not have a “minor league system” . However, there are also bilateral agreements between the franchises and teams in lower-class leagues in these sports .
The league system described was introduced in baseball in the 19th century and adopted by other North American sports leagues.
Teams in a franchise-based league can never be relegated. Accordingly, the same teams always play in the league, unless the league is increased by one or more teams. To ensure that a certain balance remains in the league and that one team does not dominate for a long time, there are rules that favor worse teams. For example, the worst team of a season in the NFL receives the right in the talent draw, the NFL draft , to select the first player and thus possibly the greatest talent. In addition, the NHL tries to support financially disadvantaged teams through certain rules. This also includes the NHL Collective Bargaining Agreement .
Establishment of a franchise
The four major sports leagues in North America, the National Football League (NFL), National Basketball Association (NBA), National Hockey League (NHL), and Major League Baseball (MLB) tend to locate their franchises almost entirely in heavily populated regions and the largest cities . The same applies to Major League Soccer (MLS). Almost all franchises are located in metropolitan areas with a population of at least one million people. In areas with more than two million people, such as New York City , Los Angeles and Chicago , there are at least one, sometimes two franchises per sport in the city and the surrounding area .
There have been two major exceptions in the NFL lately. No top division American football team was based in Los Angeles or the surrounding area from 1995 to 2016, which only changed with the return of the Rams for the 2016 season. In return, the Green Bay Packers have managed to establish themselves in a region with less than 300,000 inhabitants.
Once a team is based in a city or region, it enjoys exclusive rights from its league. For example, it has the right not to have any competition in a large regional television market. As a result, a new league franchise cannot easily be opened in the vicinity. Most of the time, the new franchise has to pay compensation to the established team. The NHL team Anaheim Ducks had to pay about 25 million US dollars to the Los Angeles Kings when it was founded in 1992 because it was settled in their territory.
The franchise system developed in North America predominantly from the end of the 19th century to the middle of the 20th century, when the railroad was the main means of transport on longer routes. For this reason, all teams from the major sports leagues were based in the northeastern quarter of the USA , so that the travel time to an away game on the railroad was no longer than a day. There was no MLB team west of St. Louis . The NFL focused on the Great Lakes area and the northeastern United States. The NBA, which wasn't founded until 1946, stretched from the Quad Cities to Boston . The NHL had its six teams based on the Great Lakes, in the northeastern United States and in eastern Canada.
After the Second World War , the transport options and thus the map of the major professional leagues changed. The first ever franchise in the West was the Los Angeles Rams in the NFL, which moved from Cleveland to the West Coast in 1946 . With the All-America Football Conference , a new American football league was founded that same year, consisting of eight teams that were scattered across the United States. The first baseball franchise in the West was created in 1958, and the NBA followed suit in 1960 when the Minneapolis Lakers became the Los Angeles Lakers . The NHL continued to play with its six traditional teams from the Northeast until 1967, when the league was increased by six teams. With the exception of the Los Angeles Kings , all other franchises in the southern and western US were unsuccessful in the 1960s and 1970s . So the franchises from Oakland , Atlanta , Kansas City and Denver were all relocated to other regions. From 1982 to 1991 the Kings were the only US franchise of the NHL west of Minnesota and south of St. Louis.
In the NHL only three Canadian teams played until 1979, the Canadiens de Montréal , the Toronto Maple Leafs and the Vancouver Canucks . All three franchises are located in relatively heavily populated areas and therefore have a large market available. The merger with the WHA in 1979 added three more Canadian teams, the Winnipeg Jets , Nordiques de Québec and Edmonton Oilers , but their metropolitan areas had a population of less than a million people. The same was true of the Calgary Flames , who moved to Canada from Atlanta in 1980, and the Ottawa Senators , who were founded in 1992. However, five teams were able to compete with the teams that were blessed with large markets, since ice hockey is much more important in Canada than in the USA. Even so, in the mid-1990s, the teams from Winnipeg and Québec were relocated to cities in the US with larger metropolitan areas. The remaining three teams with small markets have benefited from population growth in their regions over the years, so that each team now has over a million people in their city and area. Calgary and Edmonton still have the smallest television market in the four major American sports leagues, the NHL, NBA, MLB and NFL. In 2011 the NHL returned to Winnipeg , so that there have been seven Canadian franchises in the NHL since then .
The importance of ice hockey for Canada can be seen in how the other major leagues have held their own in Canada.
The MLB's first Canadian franchise was the Montréal Expos , which began playing in 1969 and were considered one of the most unprofitable teams in North American sports history until they were relocated to Washington in 2004. The Toronto Blue Jays , who started playing in the MLB in 1977 and have been the only Canadian franchise in the MLB since the relocation of the Montréal Expos to Washington, did better .
The basketball league NBA opened its first Canadian franchise in 1946 under the name Toronto Huskies , but the team was disbanded after a year. Only in 1995 did the NBA return to Canada and set up two new franchises with the Toronto Raptors and the Vancouver Grizzlies , but the Grizzlies moved back to the USA in 2001 and became the Memphis Grizzlies .
The NFL football league, on the other hand, has never tried to enter the Canadian market. This is because there is a sport in Canada with Canadian football that differs only slightly from American football . There is a professional league in Canadian football, the CFL . It consists entirely of Canadian franchises .
Stability of franchises
The four major sports leagues in North America and the MLS can show great stability in their franchises . No franchise has had to be dissolved for decades . However, at least one franchise was relocated in each league between 1990 and 2005 .
The last franchise of the four major American sports leagues to be dissolved were the Cleveland Barons in the NHL in 1978. In the NBA, the Baltimore Bullets were the last franchise to cease playing in 1954. The NFL last had to close a franchise in 1952 , the Dallas Texans , in the MLB the last breakup of teams took place in 1899. In the MLS, which was only founded in 1996, three franchises have so far been dissolved: Miami Fusion , Tampa Bay Mutiny (both 2001) and CD Chivas USA (2014) .
It looks different in the lower-class sports leagues. In most of them, teams are disbanded or at least relocated almost every year.
Comparison between Europe and North America
Every North American sport has a top league, like the NHL in ice hockey or the NFL in American football . In Europe, the situation is similar with the football leagues. Germany’s top division is the Bundesliga , while England has the Premier League . There are sub-leagues in both North America and Europe. The crucial difference, however, is that in North America each league is its own closed organization, while in Europe the national leagues build on each other from the district class to the regional league to the Bundesliga. In North American ice hockey, the NHL teams cooperate with the American Hockey League or ECHL teams , but since all are closed organizations, a NHL team could never play in the AHL. NHL teams can never be relegated. In German football, on the other hand, a team from the district class can move up to the Bundesliga, as TSG 1899 Hoffenheim did or RB Leipzig made it through to the Bundesliga by purchasing a top division starting license.
There are also clear differences in the structures of the teams. In German football, clubs have teams in different age groups, from five-year-olds to adults. The football clubs can train players from childhood and later integrate them into the professional team as adults. This is not the case in North America. A club in the NHL ice hockey league consists exclusively of one team, the one that goes on the ice in the NHL. The NHL teams do not have junior teams. There are junior teams whose names are based on NHL clubs, such as the Detroit Junior Red Wings in the 1990s , which took their name from the professionals of the Detroit Red Wings , but both teams existed independently of one another. In the North American system there are exclusively pure professional teams and pure junior teams. The NHL teams, like all other major sports leagues in North America, receive young players through a recruiting process, the so-called Entry Draft .
- Louis P. Cain and David D. Haddock: "Similar Economic Histories, Different Industrial Structures: Transatlantic Contrasts in the Evolution of Professional Sports Leagues" In: Journal of Economic History No. 65 (4), 2005, pp. 1116–1147