#164: Howard Johnson’s – He Saw The Future

The Empire Builders Podcast

Seeing that the world was getting faster and smaller, Howard Johnson started a hospitality empire. The first restaurant franchise.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So, here’s one of those.

[Out of This World Plumbing Ad]

Dave Young:

So, are you going to actually tell me the topic, because the countdown is done?

Stephen Semple:

Oh, right. Howard Johnson.

Dave Young:

Howard Johnson, HoJo’s. Right on.

Stephen Semple:

Yeah.

Dave Young:

Right on. The aqua building with the orange roof. We stayed at some when I was a little kid.

Stephen Semple:

Oh, is that right?

Dave Young:

Howard Johnson’s, all right.

Stephen Semple:

Yeah.

Dave Young:

Hey, let me do something real quick. Hey, welcome to the Empire Builders Podcast, it’s Dave Young here with Stephen Semple, and today we’re going to talk about Howard Johnson’s as seen in Mad Men.

Stephen Semple:

Yes.

Dave Young:

It was a monster. It sort of preceded the Holidome trend that Holiday Inn… I think Holiday Inn kind of kicked their ass with the Holidome concept.

Stephen Semple:

Oh, yeah.

Dave Young:

That’s my guess.

Stephen Semple:

Here’s the thing, in 1965 sales of Howard Johnson’s exceeded that of McDonald’s, Burger King, and KFC combined.

Dave Young:

Wow, that’s many exceeds.

Stephen Semple:

Yes. When we talk about how it used to be a powerhouse, it was a monster that just seems to have disappeared. You see the odd one here and there.

Dave Young:

Yeah. If I had to guess the trend of, as I mentioned, Holiday Inn, Holidome sort of things, but my guess is that HoJo’s, Howard Johnson’s big rise was before the Interstate Highway system was built or right along with it-

Stephen Semple:

Right along with it.

Dave Young:

… in some places.

Stephen Semple:

Yes.

Dave Young:

But in the East probably predates it.

Stephen Semple:

Yeah, because there’s a couple of really interesting things. As we mentioned, it’s not a big powerhouse today. There may even be people that we’re talking to that might not even know what the heck Howard Johnson is. At its peak, it was massive, and basically it was a motor hotel along with a restaurant. They would have both. They had the restaurant, they had the motor hotel along with it.

Dave Young:

Right.

Stephen Semple:

Now, it started on the restaurant side. That’s where it started. In fact, it was the first ever restaurant franchise. They were the first ones to do franchising for a restaurant.

Dave Young:

So it was the prototype for Denny’s and all of those.

Stephen Semple:

All of those, yeah.

Dave Young:

Howard Johnson’s was there.

Stephen Semple:

Yeah, and the type of restaurant it was was that fast casual dining. Yeah, really. It was kind of like a diner. It was the first ever franchise and the first location, this wasn’t the franchise location, but the first location was Arlene Cape Cod, right at the intersection of Route 28 and Route 6A. Howard Dearing Johnson grew up outside of Boston in Quincy, and his first business was a drug store that he inherited from his father in 1925, along with a whole pile of debt.

The business was a money-loser. It had a soda fountain, a newsstand, and sold ice cream. Again, very much like those 1920s drugstores. We think about a drugstore today, and it’s not a place that you hung out. In the 1920s, it was a place that you hung out, and I said there was soda fountain, all that other stuff. They sold three flavors of ice cream, chocolate, vanilla, strawberry. One of the first things he did was he expanded the newspaper business. He got kids out delivering newspapers, and that stabilized the business from a financial standpoint.

The next thing he wanted do was improve the quality and offer more flavors of ice cream. He decided to lean into the ice cream. He experimented with ingredients until he decided to double the butter fat content in the ice cream.

Dave Young:

That’s a smart move.

Stephen Semple:

And it was a hit. All of a sudden, he’s selling tons of ice cream. He then followed this with grilled hot dogs and fried clams. This drugstore became so popular that in 1925, he decided to open an ice cream stand in Williston Beach. I find this hard to believe, but legend has it that it was so popular that he would sell as many as 14,000 ice cream cones in a day.

Dave Young:

Whoa, that’s a lot of ice cream cones.

Stephen Semple:

That’s a lot. It really is, isn’t it?

Dave Young:

That’s a big line. Makes me want to stop and do the math. How many an hour is that? It’s a lot.

Stephen Semple:

A lot. It’s like, what, 20 a minute or something like that? 15 a minute. Anyway, that’s legend. Legend. I’m not saying it’s factual.

Dave Young:

Legend.

Stephen Semple:

Legend.

Dave Young:

Okay.

Stephen Semple:

The point is, even if it’s not a number like that, the point is it was damn popular to even create that type of legend. In 1929, he decides to open the first restaurant in Quincy Square. 1929, opens a restaurant. Early 1929. Well, what happens in 1929? Stock market crash. Puts a real crimp in things. He survives, but barely. Along comes 1935 and he wants to expand. He finds this empty lot in a perfect location.

Here’s what he believes. Going back to your point, what he notices is the automobile is gaining in popularity and is going to change everything. What he wants is a location near a highway with lots of parking and high visibility. Because what he’s noticed is that what people want is good food that’s fast at a reasonable price. They want to be able to pull in, get their food, move on. To your point, Dave, Howard Johnson grew initially with the growth of the automobile, and that was on purpose.

That’s what Howard observed. He had just survived the Great Depression. He didn’t have money to lease the land, and build, and banks were not really handing out cash at this point. Things were still very tight. The land is owned by Eugene Sprague. Howard approaches Eugene’s son, Reginald. He knew Reginald, they were buddies, and asked Reginald if he’d like to operate the second location. It was going to be a carbon copy of the first.

The idea was this, Howard was going to let them use the name. He was going to provide the design, and they’re going to buy the food, et cetera from him. Really, the concept of franchising restaurant is born. Now, what we also know is Martha Hopper had already done that in hair salons. He was now going to be applying this idea to restaurants. And so they go ahead with it, and it’s the first franchise restaurant.

By the end of 1935, so they opened this in 1935, they’re serving 700 meals a day, not including ice cream. It is really, really doing well. This success leads Howard to open more. By 1939, 4 years later, so in four years, they go from two locations, four years later, 107 locations grossing over $10 million in sales.

Dave Young:

Wow, 107. He’s either a logistical systems genius or he had somebody at headquarters that was just driving this ship.

Stephen Semple:

Along comes World War II hits, there’s food rationing, gas rationing, but they managed to stay in business by supplying the Military because now after the war, to help with expansion, labor is always a challenge. Here’s what he did after the war, he created, when you talk about logistics, he suddenly realized that they needed to get a hold of the logistics, and he learned a lot supplying the Army with food. Here’s what he decided to do, is the idea of a central location preparing the food with the restaurant, just finishing it.

Dave Young:

Oh, wow. Okay.

Stephen Semple:

Right.

Dave Young:

So like hash browns and-

Stephen Semple:

Basically how it’s done today.

Dave Young:

At McDonald’s. Yeah.

Stephen Semple:

Yeah, where the stuff is partially cooked, sent out, and the restaurant finishes it. Basically, like how caterers do it, what you learn when you’re supplying the Army. This made it easier. It made everything standardized, and they always had this idea because every location looked the same. It was the really visible roof. Because remember, his whole idea was visible locations. Up until 1954, everything was just the restaurants. 1954, they started adding motor lodges to the mix. At the peak, they peaked out at over 1,000 locations.

Dave Young:

Holy mackerel.

Stephen Semple:

Right. Huge.

Dave Young:

That’s a lot. Yeah.

Stephen Semple:

As we mentioned earlier, in 1965, their sales exceeded that of McDonald’s, Burger King and KFC combined.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Okay, Dave say, and they haven’t missed a thing.

Dave Young:

Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.

Stephen Semple:

1978, Howard Johnson sold the company for $630 million.

Dave Young:

Okay. He sold it in ’78. Was it still as big as it was in ’65?

Stephen Semple:

Its growth had slowed and it had started to decline, but it was still… I don’t know how many locations it had when it sold, but it was still was huge.

Dave Young:

Fascinating. Was it a leveraged buyout kind of a thing? I ask that because there’s so many businesses that meet their demise shortly after they sell to someone. Often it’s a hedge fund, or back in the day it was called a leveraged buyout, where these people that were just investors buy something thinking that it’s not going to require their input.

Stephen Semple:

Right. Well, it was sold to a company out of London, England called Imperial Group. Imperial Group owned things like Continental Banking, and they had some involvement with Marriott. Today, Howard Johnson is owned by Wyndham. Wyndham owns Howard Johnson today.

Dave Young:

How many locations today? What’s left of this guy?

Stephen Semple:

280 locations today.

Dave Young:

You certainly don’t see them as often, and it is always kind of a special treat when you’ve come across one for somebody our age that goes, “Oh yeah, I remember them when I was a kid.”

Stephen Semple:

Right. Now they don’t have any of the restaurants anymore. The restaurants went defunct. The only thing that exists sense is just the motor hotels.

Dave Young:

Because that makes sense. You know what was always I think probably one of the brilliant moves that he made, was just the color choice.

Stephen Semple:

Yes.

Dave Young:

Orange roof and the blue building.

Stephen Semple:

Yes.

Dave Young:

I’ve worked with so many retailers over the year, and you can’t get them to step outside their front door and look at their business from more than 20 feet away.

Stephen Semple:

Yes.

Dave Young:

The very first retailers, I was like, okay. I actually wrote a post. I should find it. This is 20 years ago, just a way to check the experience factor of your business. Look at your business, step outside your door, look at it from 10 feet away, and then double that and look at it from 20 feet away, and then just double that a couple more times. Still, you’re a couple blocks away. Do you stand out in any way at all? You could see a Howard Johnson’s from miles.

Stephen Semple:

Yes, but it’s really interesting that you should say that. We’ve interviewed in the past Rick Showers from Noble RV. When Rick opened his latest location, he opened it a couple of years ago, and it’s basically one of those ones where you’ve got a road that parallels the highway and he’s on that road. He’s not right on the highway, but he seems-

Dave Young:

Kind of a frontage.

Stephen Semple:

Yeah. When I was out seeing him and he was doing his signage, what did we do? We stepped across the street, we took a look at it, we walked down the road, we took a look at it, we drove by because in his location, it wasn’t just what was going on with him, it’s always about this context, what was around it. Here’s where Jay Mystery, one of our partners who’s a designer, is brilliant. Jay said, “Hmm, this is interesting. People are going to be driving home at around the time the sun sets.” So he specifically set the sign at the angle and put the sign with certain tonality in it so when the sun sets, it just vibrates. You cannot ignore it.

Dave Young:

It’s not reflecting sunlight in people’s eyes, it’s just being hit by that golden hour sun in colors that burst forth.

Stephen Semple:

In colors that burst forth. Then what we did is at night, we have a spotlight on it, and we made sure the spotlight had the right elements that when it hit that sign that the sign just glows. In his case, it worked out really well because he had a self-storage lot on one side and a self-storage lot on the other side that weren’t very lit. It was also very dark around him.

Dave Young:

Oh, yeah.

Stephen Semple:

But that’s the context that we used to make sure his place was super visible. It goes to your point, step outside your store and take a look at it. What are you going to do to become that visible location? This is what Howard Johnson did. Howard Johnson said, “I see the automobile becoming a thing. I see people traveling around. If they’re traveling around, they’re looking at the road. I got to make my place not only convenient and have parking, but visible.”

Dave Young:

Absolutely. This is Advertising 101, yet so many business owners don’t get it. This is a lesson McDonald’s learned decades ago. All the gas companies learned decades ago. If you’re driving down… Have you ever driven across Kansas? Well, you’ve driven across Canada.

Stephen Semple:

Yes.

Dave Young:

You drive across Manitoba. It’s as flat as Kansas.

Stephen Semple:

Yeah. Yes.

Dave Young:

Right? It is.

Stephen Semple:

Yeah.

Dave Young:

You drive across Kansas or Nebraska, and the kids are finally, after a couple of hours, the kids are waking up and they’re a little cranky because they got to pee and you start scanning the horizon. Pretty soon, this faint tiny little set of McDonald’s arches is visible on the horizon. There’s probably a familiar-looking gas sign popping up way in the air next to it. Those are usually your first sightings. In some cases, there are some McDonald’s in some of the flat states that you can see five miles out.

Stephen Semple:

Well, and what’s interesting with all this, Dave, is talking about small towns. I live in a small town. The town I live in is 20,000 people. There’s businesses here that are actually on Main Street or whatever, and their automatic assumption is because lots of people live here and have lived here for a long time, and it’s a small town, everyone knows where I am. I had a business the other day that I Googled, and it turns out they’re right on the main highway.

I’ve lived here full time for six years. I’ve been coming up here for decades. They’ve been around forever. I had no idea they existed. Why? They have no signage. They just assume, “Oh, well, we’re here. Everyone knows we’re here. Everyone knows we’re here.” Well, it’s like, no, not everyone does. Don’t make that assumption.

Dave Young:

Often it’s not the business owner’s fault. Often it’s very restrictive codes that cities put in place.

Stephen Semple:

It can be.

Dave Young:

When I lived in Tucson, one of the cities just north of Tucson, Oro Valley, they’re part of the Tucson Metro, but I don’t know how long ago, maybe 20 years ago, maybe 30 years ago, they passed these really restrictive sign ordinances that required businesses to have a sign in the city’s color. It was like a verdigris sort of the green that copper turns into. The Target store had a green target on it. McDonald’s couldn’t have golden arches, they had to have green. I mean, it was insane. It is just surreal driving around where those signs still exist. Now they’ve changed the law since, but a lot of companies just never redid the signs.

Stephen Semple:

Sure. If that’s the context, that’s the challenge everyone else is facing. You got to come up with ideas. You can’t roll over and sort of go, “I can’t do anything.” You got to figure out what you’re going to do.

Dave Young:

That’s the brilliant thing about some logos that use shape as an iconic, you’re still going to recognize Target. You’re still going to recognize McDonald’s. The thing that I’ll end on this, I know we’re running over time, but the thing that most businesses forget is that signage, paint, big orange rooftops and bright blue buildings, all of those things are permanent advertising.

Stephen Semple:

They are.

Dave Young:

You don’t have to pay somebody for the color orange on your roof, Howard Johnson, every year.

Stephen Semple:

If you want to learn more about this, because this whole concept of shape and color is language, and if you want to learn more about this, go to the WizardAcademy.org and watch for Dave’s course on the 12 Languages of the Portals and the 12 Languages of the Mind. I took this course. It’s freaking amazing. That’s where you can learn more about this.

Dave Young:

Thank you. I’ve got to find the dates and get it posted.

Stephen Semple:

Better get it posted now, because people are going to be looking.

Dave Young:

I know. Well, thanks for the trip down memory lane and stopping at a HoJo’s for some hash browns and such.

Stephen Semple:

And ice cream, with twice the buttermilk.

Dave Young:

14,000 cones. Yikes.

Thank you, Stephen.

Stephen Semple:

All right, thanks David.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. If you have any questions about this or any other podcast episode, email to [e-mail].