Anyone who is over twenty years old can attest to a huge change in the stores we see in town. Although slow, if one flicked a switch from twenty or thirty years ago to today, the contrast in local amenities would be stark. In almost every city in the US, big corporate stores have dominated the market, pushing out the moms and pops and bringing a sparse amount of selection to our daily lives. Whether it be retail outlets, electronic stores, restaurants, supermarkets or hotels, it’s difficult for small businesses to compete with the power and money behind big business. But is it for the better?
The first chain restaurant began way back in 1935 by a man named Howard Johnson – yes, that Howard Johnson. Since people started investing a lot of money on hitting up restaurants rather than making it at home, businessmen jumped on the idea and franchises took off – not just in restaurants but in every kind of possible business.
The idea was that being part of a franchise or corporation meant access to greater support and instant branding. Since then, America really took its franchises to heart, with McDonald’s, Walmart, Starbucks, Best Buy and Target peppering cities and the countryside. It looks, however, like things might be changing.
Back in 2018, Yelp circulated a five-year mountain of data on local restaurants in the United States. It looked at 50 different metro areas across the country and came up with some surprising statistics. Although independent eateries were always preferred by a mid-sized margin, the gap between people choosing to review chains and local businesses almost doubled between 2012 and 2018. Interest in cookie-cut restaurants has been waning for a long time and in no small way. To boot, the average rating of a chain restaurant stood barely below a one-star review.
The stockpiled data was also used to see what cities have local restaurant options. It broke down different types of eating into the three following categories: fast food, fast casual and casual dining. The finds were interesting.
While New York City has seen a massive rise in gentrification over the last decade, with many landmark local businesses being pushed off the map, the Big Apple was still in the lead for local restaurant choices in the US. Franchises filled only 13% of available casual dining venues, 20% of fast casual restaurants and shockingly only 34% of fast food joints. Interestingly, independent fast food options were much higher in cities in the northeast, in particular New York, Boston, Providence, Pittsburgh and Philadelphia.
Although Cincinnati was the ultimate loser in terms of having independent food options to choose from, our Louisville was a dead third last. That’s a bit of bad news to those who like options. Chain restaurants in the River City filled 35% of casual dining joints, 45% of fast casual venues and a whopping 75% of fast food options. In defence, it should be said that the cities in the bottom tier of the survey are municipalities that have experienced a recent growth in population. In these situations, it takes time to install prominent local haunts into the new urban sprawl. While it makes sense, the trend in our city isn’t wonderful – and I think we should do something about it.
Why choose local?
A ton of studies have been done on chain businesses versus locally run establishments, and they all point to the same thing. Locally run stores help support local economy in a huge way. While franchises offer that same Big Mac and fries you’ve come to love, the money is funnelled in and shot out to corporate headquarters, wherever that is. In cities like Louisville that are currently struggling to brand ourselves to tourists, it’s more important than ever that we support the local flavor and keep our dollars within our midst.
A study done in 2012 (a bit dated, but the data still rings true) on ten cities looked at the direct flow of money in and out of the local economy based on different types of businesses. The data was quite clear. Shopping at independent retail outlets in Louisville generated four times more local return than shopping at chains. In addition, grabbing a meal at an indie restaurant instead of Burger King put just over two times the amount back into the city.
Another famous study done in Maine in 2004 saw an average of $68 dollars put back into the community when shopping at indie businesses versus only $43 when shopping at chain outlets on every $100 spent. Obviously, this is something we need to consider as consumers.
Going directly to the biggest and brightest store on the block isn’t always your best bet even when it comes to your own wallet. Remember, prices are set by vendors, not by the stores selling them. Any sales you get at chain outlets, you could also find at your local retailer. Additionally, inventory at corporate stores might offer you less selection due to having affiliations with specific vendors as opposed to others. Your local mom and pop won’t have that disadvantage and you might be surprised at what you find.
And it’s not all about money. Local businesses are way more likely to give you hands-on customer service, flexibility and help with your product. The friendly lady waiting to meet you at customer service at Target, for example, will likely be bogged down with corporate rules and red tape. Local businesses are also way more likely to support local causes and use resident talent and services, whether it be local banks, local professionals or local advertising options. It could benefit you directly.
Benefits of starting a franchise?
At first look, opening a franchise makes sense. Owners can use tried and tested procedures and support systems that seemingly would make your business stay afloat for longer. Additionally, your advertising is just about paid for and you don’t need the hassle of assembling a menu, an aesthetic and the many key decisions business owners need to make. However, it seems the possible advantage is probably not there and probably not worth it.
A study done at Wayne State University showed that franchises actually failed more often than independent entities. According to the report, a total of 68% of mom and pops survived after four years, as opposed to 62% of franchise businesses. Additionally, franchises generated way less money due to fees and commissions – about .5% average profit margin versus a take home of 18.4% at independent businesses. That’s a lot. Since a new business is a gamble anyway, you might want to put your stakes on the side that actually puts coin in your purse.
A more recent study done in 2019 using consensus data was more on the side of choosing a franchise – although not by much. On average, the report said that franchises did actually have a slight surviving advantage, but it remained extremely slight and basically disappeared after only two years. With such a small difference between the two, it seems that spending all your dollars to be controlled by a corporate board might not make sense anymore.
Times are changing, and perhaps the days of old will return, with unique establishments offering their own distinctive stance on sales, dinner and consumer culture. However, it will take effort. We each need to use our consumer dollars to promote our resident-run establishments just down the lane. Not only will we see our community’s economy thrive, we can create a consumer culture that reflects our own temperament and taste. We stand out, and our cities should too – we just need to try a little harder.