Stories of start-up fails are commonplace in the 21st century. Investors vie to be the first to pour dollars into vague ideas. The environment is rich for scamming. Some observers are characterizing Burgerim’s fall as historic or unprecedented. But the franchise has always been a way to buy a tiny piece of the capitalist dream—and where you find hopes, you find people exploiting them.
The United States is the land of franchise opportunity, home to more than 190,000 quick-service restaurants. Although most American consumers associate franchising with fast food, the model has been used to make business ownership possible across other sectors—from oil-change centers to day-care centers. In a nutshell, a franchisee pays for the right to run a business outlet, follow all their rules, and assume most of their liabilities, in hopes of squeezing out some profits. In fast-food franchises, you can become pretty wealthy if you are able to maintain the bottom line for top earners like McDonald’s. While conducting research for my most recent book, Franchise: The Golden Arches in Black America, I learned that for African Americans, franchising isn’t just about making individuals rich. In fact, African Americans have used the wealth generated from franchising to help close the racial employment gap by providing jobs in their communities, and they’ve shared their dollars with historically black colleges and universities and partnered with storied civil-rights groups, like the NAACP. Even today, black franchise owners often see themselves as torchbearers of Martin Luther King Jr.’s dream, although they often forget about his wish to see organized labor and his critiques of capitalism. But franchising is all about dreams—and sometimes fantasies—about building wealth without leveraging your entire future.
The reality is far more stark. As I reviewed the pages of trade magazines and the prospectuses of companies long gone, like Muhammad Ali’s ChampBurger—yes, that Muhammad Ali—I found many examples of concepts that spectacularly collapsed. When a roast-beef-sandwich stand or fried-fish shack franchise dissolved, it often left eager, first-time businesspeople deeply disappointed and in debt. If a closure happened in a black community, it often meant that a youth jobs program had fewer assignments. It forced people to wonder if blacks could actually get a piece of the capitalist pie, because of the systematic denial of African Americans to pursue business ownership and experience economic mobility.
Read: The unfulfilled promise of black capitalism
Perhaps the most striking example of the racialized boom-and-bust of franchise restaurants arose in Tennessee, the center of the fried-chicken industry in the 1960s. (Even Kentucky Fried Chicken moved its headquarters to Nashville in 1963.) Inspired by the growth of KFC, the local lawyers John Jay Hooker and Henry Hooker decided to get in on the action in 1967. With no experience in restaurants but with a keen sense of marketing and connections to the city’s political and business elite—particularly the ways in which markets were segmented across racial lines—the brothers established one fried-chicken company with two high-powered brand ambassadors and namesakes from the music industry. For white customers, there was Minnie Pearl’s; for black consumers, there was Mahalia Jackson’s.
Minnie Pearl’s was named for the white Opryland comedian who played a country bumpkin character famous for wearing a hat accessorized with a still-affixed retail tag. Mahalia Jackson was a black gospel singer known as “the Negro songbird,” and her stores would be designed to look like a church. She appealed to black community groups looking to use franchising as an economic-development tool. John Jay summed up something advertisers said in a far more delicate way in an article in the black newspaper Atlanta Daily World: “Why should Black people have to buy chicken from [a] white face?”