I have hinted in past postings that I tend to avoid the National chains. There are literally volumes of information out there which talks about the sociological, psychological, economical and philosophical meaning of the American dining experience. The RJG has read some of these and they pretty much explain what I know instinctively. While I could probably form my own dissertation on the topic, I'd rather not lose my intended audience with a lengthy diatribe, but instead share a few thoughts on the differences between Publicly Traded Companies, National, Regional and Local chains.
Publicly Traded Company. The restaurants that are openly traded on the NYSE, NASDAQ, OTC and any other exchanges, have one simple, clearly defined goal: Make a profit. And not only make a profit, but a larger one each quarter. And, if that isn't enough, a company is obligated to demonstrate consistent growth quarter over quarter. As mentioned here before, the RJG has held management positions at publicly traded companies. The demands are insane. Yet, for your grandmother who owns mutual funds in her retirement account, if these companies do not meet these financial targets, the stock goes down and everyone is upset (except the actual trader, who makes money up or down). It's important to understand that a Public company has only profit in mind. There is upside to this motivation. A horrible tasting, dirty restaurant is not going to be popular, and thus unprofitable. Which is why the major chains all tend to be uniformly good. Rarely excellent or exceptional, but also not terrible. But somewhere in the middle. Remember the goal is to appeal to the general buying public. This is one place the Regular Joe's Guide and the Chef Groupies see eye to eye. We both are interested in the individual restaurant. There are other benefits to being public, such as a windfall of cash to invest in premium property locations with ample parking. But there are downsides beyond conformity and location. One is labor costs, as in keeping them low. For most folks that work at the major chains, especially the fast food ones, it's a job. Something they must do in order to survive, but not one of choice. The pay is rarely above minimum wage, and requires exceptional managers to motivate the workforce. Except the managers are considerably underpaid as well. High turnover rates lead to inconsistencies, and worse, lack of attention to such details as cleanliness. These issues are not lost on the company, and many demand that their franchisees maintain a high standard, through whatever means necessary. But when the cat's away, the mice come out and play... Another common problem, at least for the regular visitor, is that you may find your favorite chain is suddenly gone. How can that be, especially if there was a line each time? Because the margins weren't there. All restaurants are evaluated for their ability to turn a profit. Sometimes, especially in high rent districts, the leases are too expensive to obtain new growth targets. And, finally, don't you find yourself frustrated when your favorite menu item is suddenly discontinued? Anything from food commodity prices to regional tastes can derail a once popular item. Just today I was reading how the large pizza chains are using a "hybrid" cheese, since the price of mozzarella is too high. Rather than pass on the cost to the consumer, who is likely not to stand for it, they find other less obvious ways to maintain their profitability. All of these reasons, and many more, should be enough to deter folks from frequently patronizing a publicly traded company that operates a restaurant. But the hordes go, name familiarity and easy parking apparently the main drivers. I leave this section with one last story. years ago, the RJG had a long term consulting assignment in Racine, WI. Now Racine is one of those Regular Joe's Guide dream cities. Every corner, seemingly, had an independent mom and pop restaurant, usually Italian. But the folks I worked with were, like me, from other parts of the United States. Instead of the cornucopia of interesting Italian places, they would frequent Olive Garden. "Olive Garden??" I asked in desperation. "I only go to marquee names" said the co-worker. And there you have it.
Corporate / National Chains. In most cases, there's little to distinguish a Corporate Chain from a Publicly Traded Company. Both are generally in it only to make a large profit. Instead of dealing with the public shareholders, corporate chains generally deal with a few well-heeled investors, all of which expect exactly what the shareholders do - profit. Some of you may be surprised to find out that chains like Subway (ever heard of Doctor's Associates? That's who owns the Subway chain!) and Quiznos are not on the stock exchanges, but rather are privately held. But there are some key differences. Wall Street demands a strategy for growth. Profits need to "meet or beat the street". And, perhaps more importantly, "positive guidance" is expected for future quarters. Not stating the words properly can send a companies stock plunging. The RJG once worked for a company that exceeded the "consensus" Wall Street view, only to follow with some cautionary words about the next two quarters, as they (correctly predicted I might add) saw a downturn in the overall economy. Shareholders punished the stock by selling off in hordes and dropping the stock some 40%. It took years for the stock to recover, but only after being bought out by a rival firm. Corporate chains do not have these restrictions tied to them. Now certainly, any group of private investors can be just as brutal, and many are. It's just that they are not "required" to be as profitable. An enlightened board will realize that sometimes taking one step back is necessary to take two steps forward. Strategies are not limited by one quarter alone, but can be put in place with the bigger picture in mind, without the stress of the current quarter's numbers being in line with "expectations". A classic example of a privately held company, who is a national chain and operates like a public company in every way - except one - is Chick-fil-A. But that "one thing" is probably the main driver for keeping it private. See, Chick-fil-A is closed on Sundays. Founder Truett Cathy firmly believes that's a day of rest for the family, and a day to go to church. They know the minute the company becomes public, then being open on Sunday will be mandatory. The markets will demand it. A "corporate chain" is defined more by its attitude than by its size. There are chains that are corporate, even though they are regional geographically. Any chain that is national, but only has a few locations, is almost guaranteed to be a "corporate chain". It takes serious cash to expand. There are two ways to get that cash: Public markets and private investors. Both want to see a healthy return on their investment.
The top 2 categories represent what the Regular Joe's Guide tries to avoid. That doesn't mean we do not eat at those places, but we try to be selective. Some notable exceptions are Jersey Mike's and Five Guys Burgers and Fries, places that operate similar to a regional chain, but are on a national scale.
The next two categories are just as exciting as independent restaurants: The Regional Chain and the Local Chain.
Regional Chains. Regional chains are cool. They typically represent an area's culture via a unique food type, or a destination defining place. An example of the latter, and perhaps the best example of a large regional chain, is In-N-Out Burger (INOB). When the RJG goes to California, Arizona or Nevada on business, he makes a sincere attempt to eat at INOB at least once per visit. They are what I wish Wendy's, McDonalds and Burger King would have become. The RJG once worked for a company based in Pleasanton, California. Like many Bay Area suburbs, INOB was well entrenched there for many years. Yet, no matter what time I had arrived, there was a line around the building! This is an area defined by chef-driven, high end restaurants. Where mom and pops struggle to survive, and most homes clear the million dollar mark. And yet INOB has a huge line - always. Taco Bell and Arby's do not, I assure you. Why? Because it's damn good. Only the freshest ingredients are served. The menu is perfect: You can get variations on a hamburger, soft drinks and milkshakes. That's it! The kids that work there at INOB are a blast through a time tunnel some 40 years ago. Always smiling, and fresh faced. Everybody who works there wants to work there - and there's competition for those jobs. Why? Because they pay more and will also contribute to their college education. Think you could pull that off at a public company? I don't think so! I once asked my brother-in-law, who is in the restaurant industry, why he didn't franchise a location in Denver? When they opened the first Krispy Kreme in Denver, they had to get the police out to direct traffic for nearly a month. A Krispy Kreme for crying out loud! Can you imagine an In-N-Out Burger? He'd be rich in a week. His answer came within 2 seconds of my question "They don't franchise". And he added that everyone wants to open an INOB, for all the reasons I just stated. It appears they are perfectly content to grow at a snails pace, while providing an outstanding fast food experience. They are my heroes.
As I mentioned at the preface of this section, the other type is defined by the food and culture of the region. Chili parlors in the Cincinnati/Tri-State region, Greek hot dog stands in and around Detroit, Taco houses in the Plains states of Kansas and Oklahoma and beyond, Poutine in Quebec, and the list goes on. I make sure to stop at a Skyline, Coney Island, Taco Tico or whatever neat regional chain I can find in my journeys. These always prove to be fun, and a unique experience.
Local Chain. The local chain is almost always an outgrowth of a local popular restaurant, generally opening another location to ease the crowds at the parent restaurant while offering a convenient location for many of their patrons. Many times, it can be a familial thing. For example, in Dallas, the Herrera's Mexican chain is each run by a different sibling or cousin. The Brewery Bar in Denver expanded to the DTC, to save many of their customers the long drive over to the unsettling industrial area west of downtown. Yet both locations thrive equally, as the main place was too crowded to get in most days. The Yogi Berra-ism "Nobody goes there because it's too crowded" actually applies in cases like these. The RJG will typically list the exact location of a local chain, since it can be just as unique to the chain as to any other restaurant.
