The Citizen, 1986-02-26, Page 5THE CITIZEN, WEDNESDAY, FEBRUARY 26, 1986. PAGE 5.
Book review
The franchise system is changing North America
The coming of McDonald's to Goderich last year caused traffic jams,
testimony to the Hollywood glamour created by high-powe<. d
advertising more than to the food itself.
ROADSIDE EMPIRES: HOW
THE CHAINS FRANCHISED
AMERICA, by Stan Luxemberg,
Viking Penguin Inc.
REVIEWED BY
KEITH ROULSTON
In the summer of 1985 police had
to be called in to direct traffic that
was backing up on Highway 21 at
the south end of Goderich. The
cause wasn't a visit of royalty or a
parade for a local baseball team
that had won a championship. It
was the opening of a hamburger
stand. Not an ordinary hamburger
stand, of course but a McDonald's.
For the people of Goderich, the
coming of McDonald's was an
event to be remembered. Like
many smaller centres, the coming
of the famous burger chain seemed
to put the stamp of approval by the
glamourous big-time of the fast-
food business. Goderich certainly
did not need another hamburger
stand particularly. It had several,
including some that had impecc-
able cleanliness, pleasant decor
and food far superior to the
programmed mediocrity of the
national burger chains. But in this
book Stan Luxemberg explains the
appeal of the big chain. "For many
customers the outlets seemed to
possess a certain Hollywood mag-
ic. Bombarded with television ads,
children and adults learned that
fast food represents a special
experience, superior to eating at
home....Part of what the fast-food
dispensers sell is entertainment."
While Luxemberg disapproves
of the chain movement that has
destroyed local businesses to
replace them with corporate
branch plants administered from
far-off cities, even he can't help
being drawn in to the fun of the men
who pioneered the chain move-
ment: men like Col. Sanders who
had built a prosperous career
selling Kentucky Fried Chicken at
his motel in Kentucky on the direct
route to Florida only to see it all go
down the drain when the new
Interstate Highway 75 moved
traffic several miles away. He
received his first old age pension
cheque the day he held the
bankruptcy auction.
But the Colonel set off with his
special recipe and some pressure
cookers in the back of a station
wagon stopping in at restaurants to
teach them how to cook chicken his
way and selling them a franchise to
his special recipe to cook chicken.
Slowly through the 1960's he built
up his chain talking to small
businesses: "You couldn't even
talk to a big operator", he recalled
later. It was like that for many of the
pioneers in the field. Ray K -roc
heard of a little hamburger stand
run by the McDonald brothers in
southern California and flew out to
see it from his home in Chicago.
He'd already been a salesman for
30 years and was doing quite well
but he wanted to be rich and when
he saw how people were lining up
"like ants at a picnic" for
hamburgers and french fries at the
little hamburger stand, he figured
he'd come onto the secret of
becoming wealthy. He persuaded
the brothers to sell him the right to
franchise their idea of a place
selling only hamburgers and
french fries at cheap prices. When
Kroc's wife found out he was
quitting his job to take a flyer at the
franchise game, she was furious.
He opened a prototype restaurant
and worked out every detail of
making mass produced hambur-
gers, even down to the amount of
wax that should be on the
waxed -paper between the meat
patties before they were cooked.
He turned a restaurant into a fast
food factory.
That kind of research still goes
on today in other ways. Seats in fast
food chains are deliberately made
hard so that after 11 or 12 minutes
people won't be comfortable sitt-
ing and will get up and leave,
giving seats tothe nextbunch of
customers. When some of the
chains started moving into down-
town locations in big cities, they
started trying to be more appealing
including making seats more
comfortable and a Burger King in
Providence, Rhode Island got into
financial trouble because the seats
were so comfortable, people
weren't leaving quickly enough
and brisk lunch-time business was
lost.
The chains no longer depend on
the small entrepreneur though, at
least not the big chains. Today it's
people who have already made a lot
of money who get a chance to
increase that through owning a
valuable franchise. Newer chains,
wanting fast growth, sell the rights
to whole regions to wealthy people.
Even for an individual who does
have the $300,000 or so needed to
start up a restaurant in a major
chain (including cost of the fran-
chise, the land and building and
equipment) the chances are that
some big operator will get the
franchise instead. There's also the
chance the small operator will take
a fringe territory, make good
money on it and then see the parent
company take over the franchise.
The franchise chains themselves
have been taken over. Col. Sanders
sold to John Brown and Jack
Massey, two individuals who later
sold to Heublein, a marketing
company who in turn sold to the
tobacco giant R. J. Reynolds.
Pillsbury acquired Burger King
and General Foods, Burger Chef.
Pepsico bought Pizza Hut and Taco
Bell. TWA, the airline bought
Century 21 Real Estate.
There are worrisome problems
brought about by the franchising of
the country. While people talk
about research and development,
the real developments from Col.
Sanders' secret recipe to the
McDonald brothers' idea for a
limited menu burger restaurant,
were the ideas of individuals, small
time operators. All the chains have
done is package and market the
idea, give it the sheen of glamour.
It is indeed not in the interest of the
big company to promote change
even if one of the franchisees came
up with a different idea such as Col.
Sanders did. It would cost too much
to change over the restaurants.
In addition, franchises take
money out of the local community
and pipe it out to corporate
headquarters whether in Chicago
or Miami or Houston. Control of
the local community is lost because
decisions can't be made by the
local store manager unless they are
approved by headquarters.
Seldom does the chain create
new business in a community. It
just knocks off a local business that
can't create the glamour of the big
chain because it can't afford
network advertising.
There are now three major
burger chains in the U.S.: McDon-
ald's, Burger King and Wendy's.
It is unlikely there willbe any new-
comers to this select group because
there is only so much advertising
time available on network televi-
sion in the U.S. The top 100
advertisers in the U.S. advertising
business get 76 per cent of all
advertising time, Luxemberg says.
Without knocking off one of the
established chains there's unlikely
to be time available for a newcomer
and the newcomer is unlikely to get
that well off without network
advertising.
Many argue that the franchise
system gives small business a
better chance of competing in an
increasingly competitive world yet
others say that the success rate for
local franchisees isn't any higher
than the success rate for new
business of any kind: it's just that
you don't see the franchise close
often because new owners are
found to keep it going. Indeed,
some people claim, the cost of
buying a franchise is the straw that
can break the camel's back.
Most of all the franchise chains
prove the power of advertising. As
the current "Where's Herb" vs.
"McDonald's Mc DLT" cam-
paigns show, advertising is even
more important than the food in the
competition for the fast food dollar.
Those who want to compete
against the chains have to find
some imaginative way to fight back
or disappear.
14
The youngsters weren't the only ones to show off their skating prowess Friday night when the Blyth Figure
Skating Club held its achievement night. This group of mothers brought their own humour [some
intentional, some not] to the proceedings.
Seaforth looks at trying
'Main Street' program
Some time ago, The Citizen
presented a review of a book on the
Main Street Canada program.
Recently Seaforth has been con-
sidering the program. The follow-
ing report is reprinted from the
Huron Expositor.
Seaforth town council has a-
greed to consider a request from its
Business Improvement Associa-
tion (BIA) for a maximum of
$27,500 a year for the next three
years to help fund a "Main Street
Canada" program in Seaforth.
The program, a project of
Heritage Canada, is set up to help
communities revitalize their Main
Street by taking advantage of their
unique resources through com-
munity involvement and self-help.
Seaforth was one of three towns
this size in Canada to be considered
for the program.
Following a presentation by the
BIA, council voted to pass a
resolution to refer participation in
the Main Street Canada Program
to the town's 1986 budget process.
It also voted to transfer back to the
BIA $2,000 budgeted for it and not
used in 1985.
Bob Fisher, speaking for the
BIA, told council the businessmen
of Seaforth feel the town is at a
crossroads and a decision to help
fund the Main Street project and
thus ensure its go-ahead, may be
"the single most important deci-
sion that council can make to affect
the future of Seaforth."
The BIA estimates the annual
operating budget for the project
will run approximately $45 to
$50 -thousand dollars. They intend
to pay for 45 to 50 per cent of the
cost, and are asking the town to
fund 50 to 55 per cent of the cost.
The merchants have already,a-
greed to double the tax on
themselves from $10,000 to
$20,000 annually for three years. It
is the consensus of the downtown
merchants that for the next few
years the BIA put less emphasis on
numerous promotions and more
emphasis on downtown improve-
ment policies, marketing, tourism,
attracting new shoppers, keeping
current shoppers and one or two
timely promotions.
"The proposal could be particu-
larly beneficial to Seaforth," said
A. Y. McLean, who was present at
the meeting of council.
"Already Seaforth has a rela-
tively buoyant industrial base and
outstanding Main Street partici-
pation. And with what it provides
to the area by the way of hospital
facilities, the town is comparable to
any other in the county. The total
picture seems to be: necessarily
that anything that might encour-
age greater vitality to the Main
Street is good," he said.
Mr. McLean commented on the
historical significance of a lot of the
town's buildings, buildings which
have been the subject of numerous
organized heritage tours, and said
it was an honour that Seaforth had
been singled out from all the towns
its size in Canada, to be eligible for
such a program.
"1 think this is a fitting area for
this program to be carried out," he
said. "It is a unique opportunity we
shouldn't lose."
Based on seven demonstration
projects throughout Canada from
1981 to 1985, the key elements of
Heritage Canada's approach in-
clude a comprehensive attack, and
community involvement. The ap-
proach consists of four areas -
organization, marketing, packag-
ing, individual businesses and
business and community develop-
ment.
A full time coordinator is hired to
open an office on Main Street, and
to work closely with local leaders,
merchants and business people on
the outline approach. The prog-
ram, as stated, generally spans a
three year period during which
time the town is responsible for the
funding of the program, including
the costs of a full time coordinator,
office space and other costs of the
office. Funding is to be generated
from the community, either in
terms of cash or in kind, and from
government or other funding
projects. Heritage Canada also
provides a wide variety of services
free of charge during the three
years, including cost of training for
the coordinator, advisory and
consultant services, analysis and
review and some materials and
supplies.
A similar program to that
proposed for Seaforth was recent iy
completed in the town of Perth and
proved beneficial to the town.
The publisher of the Perth
Courier Express endorses the
beneficial effects that have flowed
to the town of Perth," said Mr.
McLean.
"Certainly it is a bigger town
than Seaforth, but the conclusions
that have been drawn are it was
well worth the effort. There were
much greater renovations to the
Main Street plan, introduction of
new businesses to the community
and new jobs created. Unless there
is a viable Main Street there might
not be vitality within other aspects
in the community. Such a program
can only result in an improved
economic base for the commun-
ity," he added.