For Black History Month, I am introducing Franchise The Golden Arches in Black America by Marcia Chatelain. It is a fascinating look at the complex relationship between McDonalds and the black community in America and the naive hope that black capitalism would magically solve racial inequality in the absence of a major change in policies and attitudes. This is a story of how a global icon reluctantly embraced black franchisees and customers, and found that this became a huge driver of profits in their American operations. While McDonalds did a lot to support local communities, they are also guilty of drinking their Kool Aid and believing that they occupy a privileged position in the black community.
At a time when businesses are rightly asked to take on a greater role to solve social issues, this is a useful reminder that businesses can’t achieve racial equality by themselves.
For Black History Month, I am introducing Franchise The Golden Arches in Black America by Marcia Chatelain. It is a fascinating look at the complex relationship between McDonalds and the black community in America and the naive hope that black capitalism would magically solve racial inequality in the absence of a major change in policies and attitudes. This is a story of how a global icon reluctantly embraced black franchisees and customers, and found that this became a huge driver of profits in their American operations. While McDonalds did a lot to support local communities, they are also guilty of drinking their Kool Aid and believing that they occupy a privileged position in the black community.
At a time when businesses are rightly asked to take on a greater role to solve social issues, this is a useful reminder that businesses can’t achieve racial equality by themselves.
You are listening to the Book Judge, a podcast about books that give you important insights if you are interested in business. I am your host, Conrad Chua. This is your curated reading list that will give you a better grip on how to approach the complex issues that businesses face.
I am recording this in October 2020 which is also Black History Month. I chose a book that looks at the complex history of black capitalism in America through something that we can all identify with, Fast Food. Today’s episode is the book Franchise The Golden Arches in Black America by Marcia Chatelain. At a time when consumers, employees and politicians are asking businesses to take a stand on diversity and racial equality, this is a timely read on how we got here.
Most of the business literature about the history of McDonalds has centered around Ray Kroc, the man who bought out, ahem forced out, the original founders of McDonalds and created a fast food empire. Ray was a larger than life character who was played by one of my favourite actors Michael Keaton in the movie The Founder. That movie focused on how Kroc stumbled upon the ideas of franchising to the middle class and owning the real-estate of his franchise restaurants that proved to be the rocket fuel for growth. Kroc stopped at nothing to achieve his vision of global fast food domination including stopping the founders from ever using the McDonalds name in their restaurants. I mean that’s their own name! The movie is like There Will be Blood but with Big Macs instead of oil.
Chatelain’s book fills in the huge gaps that movie and business cases ignore. And that’s the role that black capitalism and consumers played in the rise of McDonalds in America. Black owned franchises are consistently some of the most profitable restaurants in McDonalds’ America operations and while McDonalds has done a lot in supporting local communities the overall picture is more muddied.
The McDonalds brothers started their first restaurant in California along one of the new highways that Americans were flocking to in their new cars. In 1954, Ray Kroc joined the brothers and started McDonalds on a path that would see them far outpace the other fast food chains that were emerging at the time. Think Burger King, Wendys, Taco Bell.
McDonalds’ rapid growth in the 1960s coincided with the rise of the Civil Rights Movement in America. Initially, McDonalds tried to avoid having to confront the evils of racism. Most of its franchises were in California where there wasn’t the segregation in the South. But McDonalds was forced to look at the issue of how it was going to serve the black community in the wake of the nation-wide unrest following the assassination of Dr Martin Luther King. Its solution --- to ride the wave of black capitalism.
Black capitalism was not a new idea but in the late 1960s managed to attract a wide political coalition. The Nixon administration joined black leaders in promoting federal loans, economic grants and affirmative action policies for federal contracts as a way to salve the country’s wounds while playing to the economic conservatives. The government saw franchising as a way to revitalize inner city neighbourhoods that were blighted by urban decay and the riots. So there were many schemes to encourage franchising in inner cities.
Moving to the inner cities was not a natural move for McDonalds but it turned out to be extremely profitable for the company. Most of the fast food companies started in Southern California and appeaed to the American middle class who were discovering the car and the highways. But McDonalds was different in one aspect which was they owned the real estate that their franchise restaurants were built on. So Ray Kroc saw a huge opportunity when inner city sites opened for restaurants. The property values were depressed because of years of deprivation, white flight and in some cases rioting. McDonalds’ franchising model effectively outsourced the higher insurance and maintenance costs of inner city restaurants to franchisees. And when revenue from inner city locations exceeded anyone’s expectations, so did McDonalds’ profits.
Opening locations in inner cities made McDonalds recognize that they needed black franchisees. Starting in the 1960s they recruited a small but growing number of black franchisees who oversaw some of their most profitable locations. What McDonalds did not count on was these black franchisees organizing themselves into the National Black McDonalds Operators Association or NBMOA. The NBMOA continues to exist and has become a powerful voice within McDonalds.
This is the part of the podcast where I place the spotlight on one part of the book that you can use immediately in your business, or in an interview, or just to impress your business school friends. I call this the Did You Know section.
We have all seen fat food ads but Chatelain does a deep dive into how McDonalds learnt to sell burgers to the black community in America. They did this by working with one of the few African American advertising executives in the early 1970s, Tom Burrell. Burrell’s work with McDonalds helped propel his young agency to become a global advertising icon.
At the time, McDonalds had these national advertising companies that catered to the white middle class demographic. But these ads became a point of contention with black franchisees who had to contribute a percentage of revenue for these marketing efforts that did not resonate with their predominantly black customer base.
Chatelain brings out one example in her book. There was a campaign called “You deserve a break” which was a national success that McDonalds wanted to circulate to its black franchisees. Burrell personally studied the reaction of black customers and he saw that the tagline was a massive fail with them. Black customers did not have a break in their lives. They were not like white families who could take a break from work and bring their kids to McDonalds as a treat. Black families went to McDonalds because they were hungry and there was little choice in the neighbourhoods they lived.
Burrell retooled the advertising campaign to say “So Get Up and Get Away to McDonalds”. He also made the print advertisement to feature exclusively African Americans. He wasn’t satisfied with replacing white faces with African Americans. He dressed the models with Afro-centric clothes and jewellery. It was a huge success.
So bear this in mind if you are launching a new product or service. Think about your assumptions regarding your target market. Sure you might have big data but are there groups that are not captured by your data? Do you have someone on the team who understands these neglected groups?
McDonalds continued to build on the success of this first campaign to reach out to black customers. In the 1980s, they controversially introduced black slang into their campaigns. But what they also did was to introduce the idea that a job at McDonalds was a good job that could set inner city kids on a successful career path leading to middle class security. There was a series of commercials centering on a character called Calvin, a black teenager who dresses up in hip street wear the first time you see him leaving his home. Turns out he is on his way to working behind the counter at McDonalds, where he learns discipline and responsibility. For those of you who are in the Book Judge Facebook Group, I will post the video of these ads there for you.
Anyway, the Calvin series runs over several years and we see Calvin become a member of the management team in the local McDonalds and ends with him working to own his own franchise.
Now, I don’t know about you but when I look at these commercials, I spot these little tropes that reinforces negative perceptions of black America. There are always these men just hanging around a corner trying to get Calvin to join them.
Chatelain points out that there were still very few black franchisees, and presumably almost none of them came up through the ranks of flipping burgers. In fact, the end of the Calvin series of commercials coincided with the popular idea of the McJobs. These dead end jobs that paid very little and had no prospects. I was in college at this time and I remember the joke that English majors could only look forward to flipping burgers.
But these ads did try to show McDonalds grounding themselves in the community. This was a conscious corporate decision that manifests itself in corporate McDonalds allowing franchisees to choose which local initiatives to support. And one area where local and corporate McDonalds really focused on was sports. They supported the local high school sports teams by providing food all the way up to sponsoring national youth sports. Whatever you feel about fast food and McDonalds, you have to acknowledge the role that it played in promoting many of these sports community initiatives. I am from Singapore and I too remember how McDonalds in Singapore supported the elderly population, whether that was in hiring older people including my father I have to say.
In America, all this led to the perception that McDonalds restaurants avoided damage and destruction during the 1994 Rodney King riots because they were part of the community. It is not clear that was what really happened but it was a perception that McDonalds was happy to promote.
In 2016, One McDonalds in Ferguson Missouri became the focus of America in the wake of the Michael Brown riots. Journalists and police officers used the McDonalds on Florissant Avenue to get drinks or charge their phones. But there was also looting and destruction at that restaurant. Whatever happened, images of that McDonalds was on every TV in America as media covered the riots.
And this brings me to my big takeaway from this book. That when you peel away the corporate PR and political self-congratulations about black capitalism, the truth is. There is still a long way to go to achieve racial equality. In the US much of the attention has been focused on putting an end to brutal police practices. But all these events happen in a complex web of policies and communities that can’t be conveyed in a tweet or a 2 minute youtube video. And this is not just something that is confined to the US. In the UK where I live now, I am a minority but in Singapore where I am from, I belong to an ethnic majority that has predominant numbers in the leadership of the private sector, politics and the civil service. In a way, we have consoled ourselves that we have a meritocratic system and that’s how the cookie crumbles but books like Franchise and the data should make people question these assumptions. We need to peel back the data to have a much more open conversation about race and economic opportunity.
For every book I introduce, I have this segment called the author question. One question that I could ask the author. Chatelain talks a lot about food justice in this book. How in every conversation about the poor health outcomes in the black community, it always come down to their diet which does have a higher percentage of fast food than other communities. But Chatelain pushes back on the assumption that black communities are exercising their choice to eat poor quality food. When you look at the entire food infrastructure in predominantly black neighbourhoods, there isn’t that much choice other than fast food.
So my question to Marcia Chatelain is what policies can be changed to encourage more healthy food choices to be set up within minority communities? She is not on twitter as far as I can tell but I will send her the question through her website.
That’s all for this episode of the Book Judge. You can subscribe to this podcast through Apple Podcasts or Spotify or wherever you get your podcasts. And that now includes Amazon Music. So if you have an A L E X A, you can listen to this podcast with your smart speaker. While you are there, leave a rating. It helps others discover this show.
If you have comments, you can tweet me @ConradChua16, or DM me on Instagram. I am chuakh there.
Till next time this is your Book Judge, Conrad Chua