Chain Restaurants and the Interstate

Welcome to Episode 15 of the Preferred Shares Podcast.In this episode—another in our series on the beneficiaries of the spending on the interstate highway system of the United States—we take turns discussing Howard Johnson’s, McDonald’s, and KFC. In this episodeThe Johnson’s family cigar businessHoward Johnson quitting school at age 12Worked at a drug store until buying it out, expanding salesJohnson’s ice cream becomes hugely popularGreat Depression forces a pivot - franchisesWWII forces more changes1959 IPO and continued growth70’s struggles leading to an eventual buyout by Imperial Group PLC in 1979Imperial eventually sells to Marriott in 1985The first McDonald’sRevamps, simplifications, and innovationsRay Kroc’s entrepreneurial spiritKroc drops out of school at age 15Countless business ideas and odd jobsThe Silent Night club’s simplified menu leaves a lasting impressionBecoming a disposable cup salesmanCups leading Ray to Prince Castle and the MultimixerWWII almost killing the mixer industry due to copper constraintsThe Multimixer leading Ray to the McDonald brothersAn immediate realization of opportunityRapid expansion due to Harry Sonneborn, Franchise Realty Corp, mass marketing of automobiles, post-war suburbanization, the GI Bill, and the continued buildout of the interstate highway systemMcDonald’s 1965 IPO and beyondHarland Sanders tough upbringing in rural IndianaLeaving home at age 12A passion for cooking mixed with a a highway service stationSanders’ special way to make fried chickenInterstate 75 killing Sanders’ first restaurantAt age 66, Sanders starting over again to by creating franchises in a unique wayThe 1964 sale of KFC and then 1969 IPOAcquired by R.J. Reynolds, then RJR Nabisco, then sold to Pepsi in 1986KFC spun off in 1997, and KFC China spun off as Yum China in 2016Our takeawaysArcGIS Interactive map, Interstate Highway System, McDonalds Locations, Continental United StatesKFC, Kuwait City, 1980, Miranda KopetzkyColonel Sanders’ business card, late 1940sLife Magazine , 7/2/1951, Vol 32 no. 1Episode ResourcesGrinding It Out, Ray Kroc, 1977Roadside Empires, Stan Luxenberg, 1986McDonald’s Golden Empire, Storymaps, ArcGIS, 2021The Man Behind McDonald’s, David Holzel, BOSS, Fall/Winter 2016KFC’s sustainable competitive advantage in the international franchising, Kofi A. Bediako, Journal of Business Cases and Applications, 2018The First Giant Restaurant Chain: Howard Johnson’s: Rise and Fall, Gary Hoover, American Business History Center, 2021Howard Johnson’s Superfans Can’t Let Go, Jimmy Vielkind, Wall Street Journal, 2022America’s Eating Habits: Food Away From Home, USDA, Economic Research Service, 2018Kentucky Fried Chicken Corporation and Heublein Inc. Annual Reports, 1959–1982McDonald's Corporation Annual Reports: 1965–1967, 1969–1972, 1981, 1992, 1994–2012Additional ReadingCurious to see what else we’ve been working on? Below are some pieces we’ve written independently that we think you’d like:"Going South: Implications of Business and Population Migration", a whitepaper by Douglas Ott (Andvari Associates) and Lawrence Hamtil (Fortune Financial) published June 2024.A Few Thoughts On Diversification Strategies, Lawrence Hamtil (Fortune Financial) published October 2024.Enjoy this episode? Share it with someone who loves business history as much as you do!You can also follow Preferred Shares, Devin, Doug, and Lawrence on Twitter.DisclaimerAll opinions expressed by Preferred Shares hosts and guests are solely their own opinions and do not reflect the opinions of their respective employers. This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. None of the information contained in the podcast or this web site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person.Clients of Andvari and Fortune Financial may maintain positions in the securities discussed in this podcast. Furthermore, from time to time, the Hosts may hold positions or other interests in securities mentioned in the Podcast and may trade for their own accounts based on the information presented. The Hosts may also take positions inconsistent with the views expressed in its messages on the Podcast. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.preferredsharespodcast.com