Schlosser follows Matthew Kabong, a pizza delivery man in Pueblo, Colorado (40 miles south of Colorado Springs) at a Little Caesar’s pizza franchise. Schlosser is attempting to understand how one fast-food franchise operates, from the inside. Kabong was born in Nigeria, and he studies electrical engineering when he’s not delivering pizzas. Another employee, Scott, studies at the University of Southern Colorado in Pueblo. And the owner of the franchise, Dave Feamster, can also be seen on the premises—although Schlosser writes that Feamster looks “out of place” in the dim light of the store.
Fast food pizza restaurants have the additional element of delivery, which provides another difficult and low-paying job to employees. But Schlosser finds that these particular Little Caesar’s establishments are run fairly well, and with some concern for their workers—this, because the manager and owner of the franchises, Dave Feamster, has a stronger connection to his employees and to his community than do many fast-food franchisors.
Feamster was a professional hockey player for the Chicago Black Hawks in the 1980s, until a freak injury at the base of his spine kept him from playing. Not knowing what to do with himself after a lifetime of playing hockey, Feamster eventually realized that he had played youth hockey with the son of Mike Ilitch, the founder of Little Caesar’s. A friend dialed Ilitch, Sr., and Feamster eventually found the courage to talk to Ilitch on the phone—he began to be trained as an assistant manager, and used 15,000 dollars (most of his remaining savings) to buy a franchise.
Feamster, although he was an NHL player, has not had a particularly easy life, and Schlosser takes pains to describe how brief and unsatisfying Feamster’s playing career was. It was difficult for Feamster to leave the bright lights of professional hockey for the relative anonymity of running a few pizza franchises—and Schlosser seems to respect Feamster for his choice and his hard work.
Schlosser goes on to explain how the franchising system, so important to fast food in America, works. “The franchisor wants to expand an existing company without spending its own funds. The franchisee wants to start his or her own business without going it alone.” Although franchising was invented by American businesses at the tail end of the 19th century, it was really the fast food industry, and Ray Kroc in particular, who pioneered and perfected the idea. Many fast-food companies, like McDonald’s, now make a good deal of their money as landlords, who own the land on which new franchises are built and maintained, and from franchise fees.
Here, Schlosser lays out in detail how franchising works, although before this point he has referenced how important it is to the profits of major fast-food companies. Perhaps most important is the idea that fast-food companies are essentially landlords for franchisees who “buy,” but really rent, the store and the logo, and sell the food. In this way, then, because the fast-food corporations make their money from the rents and not as directly from the food, food quality, as a result, is less than important to the company and to the franchise.
Schlosser notes that Ray Kroc encouraged “tenacity” and “competitiveness” among his early franchisees in the 1960s and ‘70s, and he “made many millionaires” of them, the way “Microsoft did in the 1990s,” helping those who had bought small amounts of stock in the company early to cash out big in ensuing years. Schlosser also writes that McDonald’s in the 1970s, during a period of franchise expansion, changed some of its stores from the original, “old-time” McDonald’s, whose Golden Arches were a structural part of the buildings, to the common “mansard roof” McDonald’s now seen—though the company retained the golden arches in their sign, as a way of pointing to the company’s rich history and powerful brand connection with its customers.
This section describes the transformation of the Golden Arche, from an architectural feature of the first McDonald’s to a logo and a symbol—a way for people to identify rapidly that a McDonald’s is in the area, enticing them with the yellow glowing light of its sign. Schlosser notes just how identifiable the Golden Arches are, and implies, here as elsewhere, that McDonald’s connection with its customers is as much psychological and emotional as it is related to the taste of the burgers and fries.
Franchising lobbying groups, like the International Franchise Association (IFA), and the big fast-food corporations argue that franchising is both a successful proposition for the franchisor (nearly always, because of the rents and fees franchisees must pay) and a good, safe investment for the franchisees themselves. But Schlosser argues that these statistics are misleading, since only those franchises still in business are included in surveys conducted by the IFA—and many franchises do not stay in business long. A Burger King or McDonald’s franchise, in the late 1990s, cost over 1 million dollars to purchase, whereas Subway franchises cost the lowest of the major chains—about 100,000 dollars.
Schlosser strongly implies here that franchise success rates are not particularly high, and that corporations use franchises as a means of “testing out” markets where they might like to expand—not caring necessarily if the businesses in those markets fail, since the corporation’s cash flows are large enough to suffer a few lost franchises here and there. Of course, for the franchisees opening those stores, the loss of income can be highly damaging, to say nothing of recently-hired employees who are then quickly without a job if the franchise folds.
Schlosser notes that franchises are beneficiaries of major legal loopholes, which enable the corporations to whom rent is paid, like Burger King, to make enormous profits, while pushing a great deal of the risk—and the potential for failure—onto the franchisees themselves. Subway franchises, for example, must pay extra large payments to the Subway corporation, in exchange for the smaller up-front fee to purchase the franchise. In addition, some franchises are not protected by federal laws designed to enforce fair contractual practice, since franchisees are labeled “independent contractors” and not businesses or vendors typically afforded those rights.
The use of the “independent contractor” label falls into the more general category of “deregulation,” against which Schlosser argues again and again in the book. Because “independent contractors” do not have official status as employees, they are not covered by the same regulations regarding fair payment and other equitable practices. In effect, the franchisee is “left out” of the pact between the business and the government. Instead, the federal government financially backstops the large corporation coordinating the franchises—even though these corporations make millions or billions in profits, dwarfing the franchises’ earnings.
Moreover, federal funds designed to help small businesses, as part of a federal program called the Small Business Administration (SBA), are often used to help franchisees, on the argument that they are not representative of large corporations, like McDonald’s, but rather “small business owners” contracting with those corporations. Thus government money is taken to fund private enterprise and drive out genuinely independently owned business (mom and pops); in addition, many SBA recipients fail, thus ensuring that the federal government must foot the bill for corporations who wish to “experiment” in franchising locations, often in places where business is no good—all the for the sake of corporate profit, and at the expense of the franchisee.
This is perhaps one of the more shocking revelations in the book. Because of the independent contractor loophole, franchises are treated as small businesses, meaning the corporate parent can receive government small-business funding. But, of course, this funding does not benefit mom-and-pop stores, as was intended—rather, it supports exactly the same corporate behemoths, like McDonald’s, that are putting mom-and-pop stores out of business. Schlosser points out this loophole and considers it a glaring error in the way government monitors business practices.
Schlosser closes the chapter by writing that Feamster is a relatively rare success story in franchising. He now owns five Little Caesar’s stores in the Pueblo area, and though he began as a franchisee about 200,000 in debt, he now presides over a business that clears 2.5 million dollars a year in revenue. Feamster is active in the community, and he supports a local hockey team, as a way of reconnecting with his former NHL life. Schlosser notes that Feamster even buys tickets so his employees can attend a “Success Seminar” of Peter Lowe’s, nearby. Some of the workers are won over by a speech in which the actor Christopher Reeve notes how his riding accident (which left him paralyzed) changed his life and helped him to value what was important, although Schlosser implies that the event alternates between moments of genuine emotion and calls for personal success that are often tied to making money.
Here, Feamster is attempting to do something nice for his staff—a break in the monotony of the work-day, and perhaps, too, a genuine opportunity for staff members to learn something new about themselves and how to operate in the corporate world. But it is worth noting, as Schlosser implies but does not articulate outright, that Feamster’s practice here is not so different from the “stroking” used by other franchises owners and managers, to encourage workers without necessarily giving them better wages or increasing their benefits. Thus, without realizing it, Feamster is falling into the patterns of behavior common across the fast-food industry.