Chick-fil-a and the Chain-ification of America

Your tax dollars support big chain businesses, not local shops.

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The town of Mebane, North Carolina, recently approved a joint incentive package with Alamance County to provide about $1 million in incentives for Chick-fil-a to build a new distribution center. That total includes the waiving of regulatory fees, as well as a cash transfer of about $780,000, depending on Chick-fil-a’s total investment in the area. The goal for Chick-fil-a in building its own distribution centers is reportedly to cut other logistics and distribution businesses out of the equation in favor of handling those tasks itself.

There are a couple of problematic aspects to deals like this one, beyond the simple absurdity of subsidizing one of the most dominant brands in American fast food, which increased its profits by 54 percent last year on $3.8 billion in revenue, and generates more revenue per restaurant than any other American fast food chain.

First, it’s the government helping Chick-fil-a empire build by potentially aiding it with a move into new lines of business. It’s not hard to imagine the company becoming a logistics power in addition to a fast food chain, someday, thanks to the support it received building out its network. But that’s just a bit of conjecture.

Second, and far more concretely, deals like this one lead to the chain-ificaton of America, in which big national chains — be they in food, retail, or whatever — can bury small, local competitors thanks to an assist from the state, with the ultimate result of crushing local culture under the boots of dominant brands and making everywhere look like everywhere else. It’s extra insulting that a Chick-fil-a is receiving subsidies at a moment in which scores of independent restaurants are shutting their doors due to the pandemic.

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Perusing the list of the most subsidized food outlets in America is to see nothing but the dominant chain restaurants: Dine Brands Global, which owns Applebee’s and IHOP; McDonald’s; Darden Restaurants, which owns Olive Garden and Longhorn Steakhouse, among others; Wendy’s; and Starbucks. Chick-fil-a, compared to the millions of dollars those other chains have received, has benefitted from an almost-reasonable sounding $424.5 thousand, before the recent $1 million infusion from North Carolina.

Those may not sound like huge amounts compared to the hundreds of millions, or even billions, that giants like Amazon and Boeing receive from taxpayers. But each of those dollars helped large companies gain an advantage over a small, local restauranteur.

It’s the same in retail: Big box stores like Home Depot, Lowe’s, and Bass Pro Shops receive massive subsidies, while a local hardware or sporting goods store does not. So of course communities get more of the former, while the latter disappear.

Now, you may be thinking, “Pat, aren’t many of these restaurants based on the franchise model, so aren’t they technically small businesses too?” And that’s a valid point! Many chain restaurants, such as McDonald’s or Chick-fil-a, are operated by franchisees, who are nominally independent owners who pay their parent company licensing fees in order to use its brand. Franchising is hailed as a way for aspiring small business owners to open a shop without taking on the risk of having to build brand recognition.

But franchising also has some serious problems. Though portrayed as independent businesses that come with a lot of economic freedom, franchises really aren’t. Here’s a good rundown of the many restrictive clauses in franchising contracts that allow parent companies to control franchisees, including the hours they work, the prices they charge, where they can subsequently be employed, and in which venues they can seek justice when they feel they’ve been wronged.

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Parent companies take an upfront payment from the franchisee, and then have the power to nickel and dime their franchise owners with fees and costs associated with rolling out new products. They can also control how and to who franchisees sell their operations when they want to move on. Black McDonald’s franchisees recently alleged that the company has discriminated against them by placing them disproportionately “in undesirable inner-city locations with high security and insurance costs and below-average sales,” as Reuters reported.

Of course, some franchisees are able to do incredibly well for themselves. But building an independent small business, this is not.

Franchising is also a problematic practice for workers. There’s a reason that the Fight for $15 Movement, which advocates for a $15 per hour minimum wage, started with fast food employees walking off the job: These are positions that often come with low wages and paltry benefits. Many states have restricted the ability of workers to sue their franchise owner’s parent company for wage- and other labor-related abuses. Franchises have also been busted keeping wages down by agreeing not to poach each other’s workers.

So by subsidizing chain outlets, state and local governments are bolstering a problematic business and labor model, while ultimately lining the pockets of the major parent companies that license franchises, and that certainly don’t need help to keep the billions rolling in.

Doing the opposite and focusing on policies that promote small, local, truly independent businesses, studies have shown, would raise incomes and lower poverty, and be good for entrepreneurship and business formation.

And, not for nothing, it would prevent the loss of the sort of places that give communities character and help differentiate one area from another. If you want to slow down the chain-ification of your community, the first thing to do is to stop giving the chains a leg up over everyone else.

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ONE MORE THING: Speaking of North Carolina, here’s another case of unnamed companies, that presumably forced local officials to sign non-disclosure agreements preventing the release of their identities, likely receiving subsidies from taxpayers.

I try not to pick too much on local journalists: They’re overworked, underpaid, and expected to competently cover everything from crime to education to politics to economic development on impossible deadlines. It’s a rough gig. But the story covering these deals is simply terrible.

Not a single line is dedicated to questioning whether it might be problematic — on economic or democratic grounds — for mystery companies to extract resources from the community. The secrecy is treated as normal, and all the claims about economic growth and job creation these companies will provide are taken at face value. Ugh.


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Thanks again!

— Pat Garofalo