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A document from 741 proves for the first time the existence of the town, then called Uuinidesheim. The name changed to "Windsheim" by linguistic development, meaning "the home of the wind".
In the late stage of World War II, a Volkssturm battalion took control of the town and refused to surrender to the approaching American troops, declaring Windsheim a "fortess". American troops eventually captured the town after have deployed fire bombs through aerial bombing. The civilian population was forced to flee from Windsheim under enemy fire. The town was rebuilt after the war.
The town is known for its waters and spa, Franken-Therme, and an open-air museum, the Freilandmuseum, which brings together old farms and farmhouses from the area. On the first weekend in August every year Bad Windsheim is the location for an event called Weinturm Open Air, a concert on the top of a hill in the town. The town also features a war memorial in the form of a large statue of Roland.