Preferred Shares Podcast

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 episode

The Johnson’s family cigar business

Howard Johnson quitting school at age 12

Worked at a drug store until buying it out, expanding sales

Johnson’s ice cream becomes hugely popular

Great Depression forces a pivot - franchises

WWII forces more changes

1959 IPO and continued growth

70’s struggles leading to an eventual buyout by Imperial Group PLC in 1979

Imperial eventually sells to Marriott in 1985

The first McDonald’s

Revamps, simplifications, and innovations

Ray Kroc’s entrepreneurial spirit

Kroc drops out of school at age 15

Countless business ideas and odd jobs

The Silent Night club’s simplified menu leaves a lasting impression

Becoming a disposable cup salesman

Cups leading Ray to Prince Castle and the Multimixer

WWII almost killing the mixer industry due to copper constraints

The Multimixer leading Ray to the McDonald brothers

An immediate realization of opportunity

Rapid 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 system

McDonald’s 1965 IPO and beyond

Harland Sanders tough upbringing in rural Indiana

Leaving home at age 12

A passion for cooking mixed with a a highway service station

Sanders’ special way to make fried chicken

Interstate 75 killing Sanders’ first restaurant

At age 66, Sanders starting over again to by creating franchises in a unique way

The 1964 sale of KFC and then 1969 IPO

Acquired by R.J. Reynolds, then RJR Nabisco, then sold to Pepsi in 1986

KFC spun off in 1997, and KFC China spun off as Yum China in 2016

Our takeaways

ArcGIS Interactive map, Interstate Highway System, McDonalds Locations, Continental United States

KFC, Kuwait City, 1980, Miranda Kopetzky

Colonel Sanders’ business card, late 1940s

Life Magazine , 7/2/1951, Vol 32 no. 1

Episode Resources

Grinding It Out, Ray Kroc, 1977

Roadside Empires, Stan Luxenberg, 1986

McDonald’s Golden Empire, Storymaps, ArcGIS, 2021

The Man Behind McDonald’s, David Holzel, BOSS, Fall/Winter 2016

KFC’s sustainable competitive advantage in the international franchising, Kofi A. Bediako, Journal of Business Cases and Applications, 2018

The First Giant Restaurant Chain: Howard Johnson’s: Rise and Fall, Gary Hoover, American Business History Center, 2021

Howard Johnson’s Superfans Can’t Let Go, Jimmy Vielkind, Wall Street Journal, 2022

America’s Eating Habits: Food Away From Home, USDA, Economic Research Service, 2018

Kentucky Fried Chicken Corporation and Heublein Inc. Annual Reports, 1959–1982

McDonald's Corporation Annual Reports: 1965–1967, 1969–1972, 1981, 1992, 1994–2012

Additional Reading

Curious 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.

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Disclaimer

All 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.