Sunday, April 15, 2012

Fast Food Nation: Chapter 4 Summary

Chapter 4 of Schlosser’s Fast Food Nation discusses the expansion of the fast food industry through franchises. This rapid expansion in the fast food industry completely renovated America’s retail economy, leading to new companies in the auto parts business, weight loss business, and an array of strip malls scattered across the nation. A franchise is sort of like starting your own business, but you’re actually working for someone else. It’s supposed to be a win-win situation in which a franchisor can expand their company without spending funds, and a franchisee can start their own business with the security of a company. Sounds good, right? When the money isn’t rolling in, the arrangement between franchisor and franchisee often “degenerates into a mismatched battle for power” where “the franchisor almost always wins” (Schlosser).

Franchises are great, right? Advocates for franchises consider it the “safest way of going into business for yourself” (Schlosser). The International Franchise Association, which is obviously backed by large corporations that use franchises, has for years released studies that prove franchisees to be better off than independent businessmen. In reality, Timothy Bates, a professor of economics at Wayne State University, conducted a study and found that “within four to five years of opening, 38.1 percent of new franchised businesses had failed” (Schlosser). He compared that to the failure rate of new independent businesses, which was “6.2 percent lower” (Schlosser). Conflicts between franchisees and franchisors are common and ugly. To better things from the past, franchisors are required to provide lengthy disclosure statements that spell out their rules for prospective franchisees. The disclosures, however, are usually in tiny print and the number of pages of the document can often reach triple digits. The win-lose situation for the franchisee becomes even more evident: franchisees are not covered by federal laws that protect employees, laws that protect independent businessmen, or consumer protection laws.

After all of this ill treatment, why are franchises still seen as a great thing? Franchisees are sometimes afraid to criticize their chains in public, and it makes sense. They fear reprisals such as ”the denial of additional restaurants, the refusal to renew a franchise contract at the end of its twenty-year term, or the immediate termination of an existing contract” (Schlosser). When one considers signing a contract, they should go at it with caution.  A businessweekarticle by Karen Klein, Hearing Only Good News about a Franchise? Keep Digging,

helps inform an anonymous reader before they purchase a Mail Boxes Etc. franchise. This reader has not received any negative feedback about the corporation or about franchises in general. Hopeful franchisees, be cautious and smart. According to the article, getting feedback from franchise owners is essential, and if this feedback has no hint of negativity, you’re “either not talking to the right people or not talking to enough people” (Klein).

Franchises are still established at an increasing rate despite the treatment of franchisees. Why? Success. Everyone is aiming for it, and a franchise promises it. The nation is full of hopeful people who are willing to take risks, and sometimes it is a win-win situation. Among executives in suits and ties are Little Caesars employees, all looking for success.