The rise of franchises, the homogenizing of America

Consider the plight of a modern-day Rip Van Winkle who, after bedding down in a motel in 1950, awakens in 1985. Rubbing the sleep from his eyes, he peers out across the parking lot at an endless row of outlets -- Mister Donut, Wendy's, Long John Silver's, Pizza Hut, McDonald's, Century 21. They give no clue about what city, state, or even nation Rip is in.

From Abilene, Texas, to Roanoke, Va., from Cheyenne, Wyo., to Columbus, Ohio, this scenario is more nearly reality than fairy tale, says writer Stan Luxenberg. And not only have franchises changed the physical landscape of America, they have changed the face of the economy as well.

In 1984, the United States Commerce Department estimated total yearly sales by franchise companies at $456 billion, up 270 percent from 1968. At present, franchises represent one-third of all retail sales in the country and 15 percent of the gross national product. By the year 2000 their sales will account for half of all retail income, says the Commerce Department.

Something like that Rip Van Winkle scenario convinced Mr. Luxenberg it was time to chronicle this growth -- a much-noticed but little-studied phenomenon.

A free-lance writer living in New York, he returned in 1980 to a Pennsylvania town of 12,000 where he had lived in the late 1960s. Franchise outlets lined the highways leading into town where fields and homes had stood 20 years ago. On the once-prosperous main street, where commercial activity had been focused and where the majority of businesses were locally owned, most had closed or moved to one of the three malls in outlying areas.

Luxenberg set out with notebook and tape recorder in hand. ``I wanted to not only document the rise of franchises,'' he told the Monitor in a recent interview, ``but to ask the question seemingly ignored by academics, sociologists, and psychologists: Why have the chains succeeded?''

After three years of research around the country, interviewing Dairy Queen customers, Wall Street analysts, and a lot of people in between, he compiled his findings in the just-published ``Roadside Empires: How the Chains Franchised America'' (Viking, 300 pp., $17.95). It is the first such book since 1968 to chronicle their rise.

Among his observations are these:

Although franchising started in the 1940s, it experienced a tremendous explosion in the '70s. Its growth consistently outpaced the overall economy and didn't slow down during the recessions of 1974-75 and the early '80s. More than 95 percent of today's chain stores were started within the last 30 years, the vast majority within the last 20. Many of the giants have shown their largest growth in the last 10. McDonald's, for example, had 1,500 outlets in 1970, 6,200 in 1980.

As a major component in the shift of the US economy from the production of goods to the providing of services, franchises have entered nearly every service business: home nursing, lawn care, rental cars, computers, barbering, and dentistry to name a few.

In many communities, local activists opposed franchise expansion. Yet, save a few instances, they only delayed expansion of the chains.

In the mid-'70s, having already saturated cities and suburbs, the chains turned to towns once considered too small for national outlets. ``Luring customers away from small, family run operations,'' says Luxenberg, ``franchises have meant the end to so-called Mom-and-Pop units, from general stores to bed and breakfasts.''

Aware that the obvious appeal of the national chains -- convenience, recognizable/standardized service, and, arguably, quality -- didn't tell the whole story, Luxenberg has turned a spotlight on other crucial advantages they offer: corporate methods of marketing and advertising, including know-how about inventory, displaying merchandise, and keeping records -- and the financial backing of a large corporation.

``Pooling funds from hundreds of small investors and borrowing from large institutions, franchise entrepreneurs could build big, eye-catching outlets, in comparison with which local businesses would seem shoddy and outdated,'' he writes.

Luxenberg's personal opinion of these developments is mostly negative. ``We've lost the neighborhood diner, the neighborhood barbershop,'' he notes. ``Gas stations are hurt because you have chain muffler shops and chain repair places undercutting them. Those were kind of community centers, places where people could hang out and meet people. And when they're gone, jobs are lost, too.''

Growth of the chains has also resulted in a stultifying homogenization of products and communities, he insists. ``You lose a lot of regionalism -- like Southern cooking, or genuine Mexican influences in the Southwest.'' They destroy a sense of community by mass producing environments that minimize personal contact -- encouraging customers to drop in quickly and move on.

Because employees or managers are forced to operate inside a straitjacket of corporate regulations, he adds, ``franchises have little chance to tailor their units to their own taste or local preferences.''

Chronicling the rise of chains before 1979 federal regulations called for disclosure data -- ranging from business background of officers to corporate financial records -- Luxenberg also documents how chains sometimes wiped out the personal savings of small operators who got involved in shady deals. Others couldn't compete with the chains' astronomical advertising budgets.

There are those who underline the advantages of chains. Dr. Hilda Wassen, chairman of the marketing department at DePaul University in Chicago, has written extensively on franchising.

``Before the era of chains, small independent retailers didn't have much of a chance competitively against large chains or the large retailer,'' she says. She cites the example of Ben Franklin Stores, which became an umbrella organization for many local novelty shops nationwide that successfully competed with Woolworth's and Kresge's.

``The franchiser provides the local businessman with training, and record keeping, and buying power they wouldn't have as individuals,'' she continues. ``A lot of those who have `gone out of business' have just gone into franchising, where they are doing better than before.''

She adds that, before the era of chains, a traveler had no idea what kind of consumer market he was getting into. ``Now with food and lodging especially you have a good idea of what you will get, how fast, and at what price.''

By contrast, Luxenberg feels that the time when the franchises contributed something positive to society has long passed. He cites experts who agree that nearly every city now has a more than adequate supply of such businesses -- but who predict that the expansion will continue for the forseeable future.

And he adds that growth is spurred in part by the growing numbers of women entering the work force, many of whom want to run their own businesses.

Luxenberg's most heartfelt concern is the effect of the franchises on the outlook of children:

``They come to believe that nationally advertised products sold in shiny outlets are superior to local goods.

``Having no memories of a world without chains, children grow up thinking of a 7-Eleven as the premier neighborhood grocery store.'' -- 30 --{et