Fast Food Nation: What The All-American Meal is Doing to the World (42 page)

72
an investigation by the U.S. Department of Labor:
Cited in L. M. Sixel, “Giving Tax Break a Second Chance; Credit to Hire Disadvantaged Returns,”
Houston Chronicle
, October 16, 1996. See also Ben Wildavsky, “Taking Credit,”
National Journal
, March 29, 1997.

as much as $385 million in subsidies:
Cited in Sixel, “Giving Tax Break a Second Chance.”

“They’ve got to crawl”:
Quoted ibid.

about 1 million migrant farm workers:
See Schlosser, “In the Strawberry Fields.”

73
about 300 to 400 percent:
The lower figure is cited in Jennifer Waters, “R&I Executive of the Year: Robert Nugent,”
Restaurants and Institutions
, July 1, 1998. The higher figure, remarkably, comes from Denise Fugo, treasurer of the National Restaurant Association, quoted in Lornet Turnbull, “Restaurants Feeding Off Fit Economy,” February 23, 1999.

a higher proportion of its workers
: Interview with Alan B. Krueger.

73
the real value of the U.S. minimum wage:
See Krueger,
Myth and Measurement
, p. 6.

In the late 1990s, the real value:
Cited in Aaron Bernstein, “A Perfect Time to Raise the Minimum Wage,”
Business Week
, May 17, 1999.

a federal guest worker program:
See Jerd Smith, “Undocumented Workers Enliven State’s Economy, But at What Costs to Other Residents and Agencies?”
Rocky Mountain News
, April 18, 1999.

a 1997 survey in
Nation’s Restaurant News: Alan Liddle, “Demand Fuels Salary, Bonus Surge; Wages Still Lag,”
Nation’s Restaurant News
, August 18, 1997.

Increasing the federal minimum wage by a dollar:
According to economists Chinkook Lee and Brian O’Roark, every fifty cent increase in the minimum wage leads to a 1 percent price increase at restaurants. A McDonald’s hamburger costs 99 cents; a 2 percent increase in price is about 2 cents. See Lee and O’Roark, “Impact of Minimum Wage Increases.”

Roughly 90 percent of the nation’s fast food workers:
Of the roughly fifty to sixty employees at a a typical McDonald’s, only four or five are full-time, salaried managers. See Leidner,
Fast Food, Fast Talk
, p. 50–54.

74
an average of thirty hours a week:
Cited in Robert W. Van Giezen, “Occupational Wages in the Fast-Food Restaurant Industry,”
Monthly Labor Review
, August 1994.

earn about $23,000 a year:
Cited in Liddle, “Demand Fuels Salary, Bonus Surge.”

training in “transactional analysis”:
See Boas and Chain,
Big Mac
, pp. 91–93; Ben Wildavsky, “McJobs: Inside America’s Largest Youth Training Program,”
Policy Review
, Summer 1989.

75
forced to clean restaurants… compensated with food:
See Gillian Flynn, “Pizza As Pay? Compensation Gets Too Creative,”
Workforce
, August 1998.

As many as 16,000 current and former employees
…
a high school dropout named Regina Jones:
See E. Scott Reckard, “Jury: Taco Bell Short-changed Its Employees,”
Los Angeles Times
, April 9, 1997; Steve Miletich, “Taco Bell Is Found Guilty of Worker Abuses,”
Seattle Post-Intelligencer
, April 9, 1997; Stephanie Armour, “One Woman’s Story: More and More Workers Are Being Asked to Work Overtime Without Pay,”
USA Today
, April 22, 1998.

the trait most valued
: Reiter,
Making Fast Food
, p. 129.

76
A “flying squad” of experienced managers:
See Love,
Behind the Arches
, pp. 394–95; Boas and Chain,
Big Mac
, pp. 94–112.

amid a bitter organizing drive in San Francisco:
For the events in San Francisco, see Boas and Chain,
Big Mac
, pp. 104–12

77
employed fifteen attorneys:
Cited in Bill Tieleman, “Did Somebody Say McUnion? Not If They Want to Keep Their McJob,”
National Post
, March 29, 1999.

“one of the most anti-union companies on the planet”:
Quoted in Mike King, “Mc- Donald’s Workers Win the Union War But Lose Jobs,”
Ottawa Citizen
, March 3, 1998.

a money-loser:
See Mike King, “McDonald’s to Go,”
Montreal Gazette
, February 15, 1998.

77
about 300 to 1:
Roughly three McDonald’s closed per year in Canada during the early 1990s, while about eighty new ones annually opened. Cited in King, “Mc-Donald’s to Go.”

“Did somebody say McUnion?”:
Tieleman, “McUnion?”

80
Numerous studies have found:
” See
Protecting Youth at Work
, pp. 225–26.
Teenage boys who work longer hours:
Ibid., p. 132.

“
IT
’
S TIME FOR BRINGING IN THE GREEN
!”:
The ad appeared in the
Colorado Springs Gazette
on March 20, 1999. My account of the working conditions at FutureCall is based on conversations with former employees. For more on FutureCall, see Jeremy Simon, “Telemarketing,”
Colorado Springs Gazette
, February 15, 1999.

82
George, a former Taco Bell employee:
Whenever a person is identified only by a first name in this book, the name is a pseudonym. All of the people described really exist; none is a composite.

83
The injury rate of teenage workers:
Cited in
Protecting Youth at Work
, p. 4.
about 200,000 are injured on the job:
Ibid., p. 68.

Roughly four or five fast food workers are now murdered
…
more restaurant workers were murdered on the job:
In 1998, the most recent year for which figures are available, fifty-two police officers and detectives were murdered on the job — and sixty-nine restaurant workers were murdered on the job, mainly during robberies. The vast majority of restaurant robberies occur at fast food restaurants, because they are open late, staffed by teenagers, full of cash, and convenient. The homicide figures are cited in Eric F. Sygnatur and Guy A. Toscano, “Work-Related Homicides: The Facts,”
Compensation and Working Conditions
, Spring 2000.

more attractive to armed robbers than convenience stores:
See Laurie Grossman, “Easy Marks: Fast-Food Industry is Slow to Take Action Against Growing Crime,”
Wall Street Journal
, September 22, 1994; Kerry Lydon, “Prime Crime Targets; Highly Publicized Restaurant Crimes Have Drawn Both Criminal and Customer Attention to Security Lapses,”
Restaurants and Institutions
, June 15, 1995; Milford Prewitt, Naomi R. Kooker, Alan J. Liddle, and Robin Lee Allen, “Taking Aim at Crime: Barbaric to Bizarre, Crime Robs Operators’ Peace of Mind, Profits,”
Nation’s Restaurant News
, May 22, 2000.

at 7–Eleven stores the average robbery:
Cited in Scot Lins and Rosemary J. Erickson, “Stores Learn to Inconvenience Robbers: 7–Eleven Shares Many of Its Robbery Deterrence Strategies,”
Security Management
, November 1998.

84
about two-thirds of the robberies at fast food restaurants:
Cited in Grossman, “Easy Marks”; and Lydon, “Prime Crime Targets.”

about half of all restaurant workers:
Cited in Ed Rubinstein, “High-Tech Systems Look to Head Off Restaurant Shrinkage,”
Nation’s Restaurant News
, January 11, 1999.

The typical employee stole about $218:
Cited in “NCS Reports Employee Theft Doubled in Restaurant/Fast Food Industry,” press release, NCS and National Food Service Security Council, July 9, 1999.

“
It may be common sense
”: Interview with Jerald Greenberg.

OSHA was prompted:
See Ralph Vartabedian, “Big Business, Big Bucks: The Rising Tide of Corporate Political Donations,”
Los Angeles Times
, September 23, 1997; Joan Oleck, “Who’s Afraid of OSHA?”
Restaurant Business
, February 10, 1995.

84
OSHA recommended:
See “Recommendations for Workplace Violence Prevention Programs in Late-Night Retail Establishments,” U.S. Department of Labor, OSHA 3153, 1998

85
“Who would oppose putting out guidelines”:
Quoted in Vartabedian, “Big Business.”

“potentially damaging” robbery statistics:
Quoted in Jack Hayes, “Industry Execs Nix OSHA Guidelines at ‘Security Summit,’”
Nation’s Restaurant News
, May 19, 1997.

“No other American industry”:
Interview with Joseph A. Kinney.

86
Hundreds of fast food restaurants are robbed:
This is my own estimate. The Los Angeles Police Department is one law enforcement agency that does track restaurant robberies, of which the vast majority are fast food robberies. The population of Los Angeles is about one-eightieth the total U.S. population. In 1998, 520 L.A. restaurants were robbed. Even if you assume, conservatively, that L.A. restaurants are four times more likely to be robbed than restaurants elsewhere in the country, that still leaves an estimated 10,000 U.S. restaurant robberies every year. The actual number is most likely higher. The FBI does compile statistics on convenience store robberies, and during the mid-1990s about 28,000 of them were robbed every year (more than 500 a week). According to the LAPD’s 1998 robbery statistics, restaurants were robbed nearly twice as often as minimarts. See “Restaurant Robberies in L.A. from 01/01/98 to 12/31/98” and “Mini-Mart Robberies in L.A. from 01/01/98 to 12/31/98,” Los Angeles Police Department; and Greg Warchoi, “Workplace Violence, 1992–96,” Bureau of Labor Statistics Special Report, July 1998.

88
“Cynics need to be in some other industry”:
The speeches and panel discussions at the Thirty-eighth Annual Multi-Unit Foodserver Operator Conference were tape-recorded by the Sound of Knowledge, Inc., San Diego, California.

Mahmood A. Khan’s
Restaurant Franchising
(New York: Van Nostrand Reinhold, 1992) provides a straightforward examination of the subject, much like a textbook. Stan Luxenberg’s
Roadside Empires
is less thorough but much more interesting, examining the franchise boom in the context of American postwar culture.
Big Mac
, by Max Boas and Steven Chain, John Love’s
Behind the Arches
, and Ray Kroc’s
Grinding It Out
also contain good material on the early days of franchising in the fast food industry. A number of articles published in academic journals helped me understand some of franchising’s finer details: Francine Lafontaine, “Pricing Decisions in Franchised Chains: A Look at the Restaurant and Fast-Food Industry,” Working Paper 5247, National Bureau of Economic Research, September 1995; Scott A. Shane, “Hybrid Organizational Arrangements and their Implications for Firm Growth and Survival: A Study of New Franchisors,”
Academy of Management Journal
, February 1996; H. G.
Parsa, “Franchisee-Franchisor Relationships in Quick-Service-Restaurant Systems,”
Cornell Hotel & Restaurant Administration Quarterly
, June 1996; Scott A. Shane and Chester Spell, “Factors for New Franchise Success,”
Sloan Management Review
, March 22, 1998; Robert W. Emerson, “Franchise Terminations: Legal Rights and Practical Effects When Franchisees Claim the Franchisor Discriminates,”
American Business Law Journal
, June 22, 1998. The
Franchise Opportunities Guide
, published annually by the International Franchise Association, gives a rosy view of “the success story of the 1990s.”
The Franchise Fraud: How to Protect Yourself Before and After You Invest
(New York: John Wiley & Sons, 1994), by Robert L. Purvin, Jr., regards the promises of franchisors with more suspicion. Mr. Purvin — an attorney who serves as chairman of the board of trustees of the American Association of Franchisees and Dealers — helped to ensure the accuracy of my legal analysis. Susan Kezios, president of the American Franchisee Association, spoke with me at length about the legislative reforms being sought by her organization. Richard Adams, the president of Consortium Members, Inc., an alliance of disgruntled McDonald’s franchisees, described some of the franchising practices of the world’s largest fast food chain. Rieva Lesonsky, the editorial director of
Entrepreneur
magazine (which annually publishes the “Franchise 500: Best Franchises to Start Now!”) gave me a much brighter view of the industry. Peter Lowe took time from his hectic schedule to discuss success. In addition to Dave Feamster, I interviewed a number of other fast food franchisees who shall remain unnamed. I am grateful to Feamster not only for giving me free rein at his restaurant, but also for allowing me to spend an evening delivering Little Caesars pizzas in Pueblo.

Page

94
“Instead of the company paying the salesmen”:
Luxenberg,
Roadside Empires
, p. 13.

95
often earned more money than the company’s founder:
See Emerson,
Economics of Fast Food
, p. 59; Love,
Behind the Arches
, pp. 171–75.

“common sense”:
Kroc,
Grinding It Out
, p. 111.

“any unusual aptitude or intellect”:
Ibid., p. 111.

96
“We are not basically in the food business”:
Quoted in Love,
Behind the Arches
, p. 199. See also Kroc,
Grinding It Out
, p. 109.

more than $180 million a year:
By 1998, the year of Richard McDonald’s death, the annual system-wide sales of McDonald’s exceeded $36 billion. Cited in “The Annual,” McDonald’s Corporation 1998 Annual Report.

“
grinding it out
”: Kroc,
Grinding It Out
, p. 123.

97
“Eventually I opened a McDonald’s”:
Ibid., p. 123.

The distinctive architecture of each chain:
For the use of chain architecture as “packaging” and Louis Cheskin’s advice to McDonald’s, see Thomas Hines,
The Total Package: The Evolution and Secret Meanings of Boxes, Bottles, Cans, and Tubes
(New York: Little, Brown, 1995), pp. 121–24.

98
“mother McDonald’s breasts”:
Quoted in “Brand Iconography: The Secret to Creating Lasting Brands?”
Brand Strategy
, February 20, 1999.

an IFA survey claimed that 92 percent:
Cited in Dan Morse and Jeffrey A. Tannenbaum, “Poll on High Success Rate for Franchises Raises Eyebrows,”
Wall Street Journal
, March 17, 1998. For the results of a similar, equally dubious IFA poll, see
Joan Oleck, “The Numbers Game: Retail Franchise Failure Rates,”
Restaurant Business
, June 10, 1993.

98
38.1 percent of new franchised businesses:
Cited in testimony of Dr. Timothy Bates to the Subcommittee on Commercial and Administrative Law, Judiciary Committee, U.S. House of Representatives, June 24, 1999.

According to another study:
Despite the high failure rate, the study’s author, Scott A. Shane, believes that franchising is still the best way to expand a company quickly, though the financial risks are often understated. See Scott A. Shane, “Hybrid Organizational Arrangements and Their Implications for Firm Growth and Survival: A Study of New Franchisors,”
Academy of Management Journal
, February 1996.

“In short”:
Testimony of Dr. Timothy Bates.

99
Ralston-Purina once terminated:
See Boas and Chain,
Big Mac
, pp. 162–63.

100
more legal disputes with franchisees:
Cited in Richard Behar, “Why Subway Is ‘The Biggest Problem in Franchising,’”
Fortune
, March 16, 1998.

the “worst” franchise in America:
Quoted in Jennifer Lanthier, “Subway Bites,”
Financial Post
, November 25, 1995. For other accounts of Subway’s questionable business practices, see Barbara Marsh, “Franchise Realities: Sandwich Shop Chain Surges, but to Run One Can Take Heroic Effort,”
Wall Street Journal
, September 16, 1992; Jeffrey A. Tannenbaum, “Right to Retake Subway Shops Spurs Outcry,”
Wall Street Journal
, February 2, 1995.

“
Subway is the biggest problem in franchising
”: Quoted in Behar, “Subway.”

“
almost as geared to selling franchises
”: Lanthier, “Subway Bites.”

A top Subway executive has acknowledged
: See Behar, “Subway.”

101
30 to 50 percent of Subway’s new franchisees:
Cited ibid.

Coble’s bill would for the first time:
For a detailed analysis of the legislation and strong criticism of its proposals, see Harold Brown, “The Proposed Federal Legislation in 1999,”
New York Law Journal
, January 28, 1999; Rochelle B. Spandorf, “Federal Regulating Legislation,”
Franchising Business and Law Alert
, November 1999.

“We are not seeking to penalize anyone”:
Testimony of Howard Coble to the Subcommittee on Commercial and Administrative Law, House Judiciary Committee, June 29,1999.

“whiny butts”:
For this quote and Ireland’s views on franchise reform, see Kirk Victor, “Franchising Fracas,”
National Journal
, September 26, 1992; Deirdre Shesgreen, “Franchisees Seek Protection on Hill,”
Legal Times
, January 4, 1999.

“free enterprise contract negotiations”:
Quoted in “Small Business Franchise Partnerships Feared Endangered if Federal Government Muscles In,”
PR Newswire
, July 1, 1999.

“
Small businesses and franchising succeed
”: Quoted ibid.

102
A 1981 study by the General Accounting Office:
For the GAO study and the congressional investigation that prompted it, see Luxenberg,
Roadside Empires
, pp. 256–59.

The chain was “experimenting”:
Quoted ibid., p. 258.

a recent study by the Heritage Foundation:
See Scott A. Hodge, “For Big Franchisers, Money to Go: Is the SBA Dispensing Corporate Welfare?”
Washington Post
, November 30, 1997.