The Substance of Style at McDonald’s

August 13, 2006

Today’s Business section in the Dallas Morning News tells the story of Ed Bailey, whose ownership of 61 McDonald’s locations in the ultra-competitive Dallas dining market has made him one of the most successful restaurant franchisees in the world.
Mr. Bailey’s success as an entrepreneur began in the fashion business. Having first worked as a traveling dress salesman, Mr. Bailey soon opened and ran a successful men’s designer clothing store in Cincinnati for 10 years. When he got his first franchise from McDonald’s in 1984, he moved his family to Plano (a great place to live!) and was successful enough in the difficult Valley View Mall food court location that he obtained a second franchise within a year. Over the next 22 years, he added 59 more stores to his portfolio.
His story could have ended there as a great tribute to the American Dream lived by so many successful small business owners. But as the article points out, there’s a special angle to Mr. Bailey’s success. In the early 1990s, Mr. Bailey decided to distinguish his franchises by spending money to make them more aesthetically pleasing at the same time as his corporate management was pushing cost controls:

In 1992, Mr. Bailey opened unit No. 7 at Preston Road and Royal Lane just as McDonald’s was entering its low-cost era….
It was the most expensive McDonald’s built in the United States that year, with a $650,000 tab. A company-owned unit less than three miles away was the cheapest, costing half as much. The regional vice president chastised Mr. Bailey severely for this perceived folly.
“Two and a half years later, I bought that store because McDonald’s wasn’t making any money,” he says, stating fact more than bragging. “I was doing 40 percent more in sales in basically the same trade area.”

Mr. Bailey knew then what Virginia Postrel would later identify as the “aesthetic imperative.” In Ms. Postrel’s words:

Aesthetics–the look and feel of people, places, and things–is increasingly important as a source of value, both economic and cultural….
Aesthetics shows up where function used to be the only thing that mattered, from toilet brushes to business memos to computers and cell phones. And people’s expectations keep rising. New tract homes have granite countertops, so hotel rooms have to have granite countertops too. Family restaurants used to be all about price and food, but now they have to worry about their decor. We’ve gone from Pizza Hut to California Pizza Kitchen. If you’re in business, you have to invest in aesthetics simply to keep up with the competition.

Or, as Mr. Bailey’s experience showed, to beat the competition.
For more in the same vein, check out Ms. Postrel’s The Substance of Style. And be sure to read the entire Morning News article about Mr. Bailey.

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