The Colony is home to the Five Star Athletic Complex, completed in 2003. The Colony was named the Sports Illustrated 50th Anniversary Sports Town of The United States in that same year. The city is home to Pizza Inn's corporate headquarters, as well as an Edward Don distribution center and a variety of small and medium-sized businesses. The Grandscape development, anchored by Nebraska Furniture Mart, is driving a new development boom in the city.

Located on the southeast side of the city, across Sam Rayburn Tollway from the larger part of the city, is Austin Ranch, a mixed-use development consisting of retail businesses, apartments and condominiums.

The Colony derives its name from the original Peters Colony. The Peters Colony headquarters was located within the current boundaries of The Colony in the historical community of Stewartsville and the site of the Hedgcoxe War. The Colony is also the site of Bridges Settlement (established during the years of the Republic of Texas and the oldest community in Denton County), Stewarts Creek, Rector, Stoverville and Camey, also known as Camey Spur.

The Colony did not exist before 1973, when home developers Fox and Jacobs (since purchased by Centex) purchased land located around State Highway 121 and Farm to Market Road 423. The name "The Colony" was chosen by Fox and Jacobs because they wanted its new development to share a sense of kinship with Texas' early history and "to create a living monument to the spirit and courage of the Peters Colonists ... those men and women who braved considerable hardships to begin new lives, in new homes, on new land." They planned the development to be a new "dream city" consisting primarily of single-family homes grouped as a "colony" and based on the city of Dallas' infrastructure specifications. In 1973, Fox and Jacobs negotiated an agreement with the city of Frisco to begin construction in its extraterritorial jurisdiction. In 1974, street construction began with many streets being named after early settlers and members of the construction crews. The first model homes were completed in August 1974 and the first families moved into their homes in October that year. The homes were served for water services by The Colony Municipal Utility District formed in 1974, electricity via Texas Power and Light, cable television via Lakeside CATV and telephone service via Southwestern Bell.

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