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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.