Fast-Food Nation Part One: The True Cost of America's Diet

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Alan B. Krueger, a professor of economics and public affairs at Princeton University, estimates that one-quarter of the workers in the restaurant industry are paid the minimum wage – a higher proportion than in any other American industry. Between 1968 and 1990, the years of the fast-food industry's rapid expansion, the real value of the federal minimum wage declined by almost fifty percent. Despite the U.S. minimum wage's recent increase to $5.15 an hour, its real value is still twenty-seven percent lower than it was in 1968. Nevertheless, the National Restaurant Association strongly opposes any increase of the minimum wage at the federal, state or local level. The organization has joined with other business groups, such as the U.S. Chamber of Commerce, to fight against any new minimum-wage legislation in Congress. According to a survey in Nation's Restaurant News, an industry trade publication, the average corporate-executive salary in the restaurant industry increased by roughly nine percent last year, while the average corporate-executive bonus rose by twenty percent to reach $131,000. Restoring the federal minimum wage to its 1968 level would add less than a dime to the cost of a fast-food hamburger.

In southern Colorado, the average worker earns about $25,000 a year; the average restaurant worker earns about a third of that amount. Almost every fast-food restaurant in Colorado Springs has a banner or a sign that says, Now Hiring. The competition between chains has led to price wars. Fast-food operators have little control over their fixed costs: their leases, franchise fees and purchases from company-approved suppliers. As a result, they are under constant pressure to keep wages as low as possible. From opening time until early afternoon, most of the fast-food workers appear to be immigrants, high school dropouts, middle-aged housewives and senior citizens. After that the work force behind the counter seems entirely adolescent, with teenagers taking orders, manning the grills and collecting plastic trays late into the night.

Jane Trogdon is a guidance counselor at Harrison High School, which is located near the interstate on the south side of town. She has worked at Harrison since 1968 and has observed some significant changes in the daily lives of its students. They are much poorer today and much more likely to be employed for long hours after school, mainly at fast-food restaurants. About sixty percent of the students at Harrison High come from low-income families. "More of our students now feel that they need to work in order to help their families and to help themselves," Trogdon said, "buying clothes, a car or things for their younger sisters and brothers." Although much has been written about the entry of women into the work force during the 1980s, less attention has been paid to the effects of declining American wages on the nation's young people. Trogdon worries about the consequences of working six- or seven-hour shifts after school. The academic performance of these kids is bound to suffer. About a third of the students at Harrison High now attend trade school, college or beauty school after graduation; the other two-thirds join the military or go to work.

There is also the issue of workplace safety. The most common workplace injuries at fast-food restaurants are minor burns from the fryers, broilers and grills. The industry's expansion, however, has coincided with a rising incidence of workplace violence in the United States. In 1996, more than twice as many salesclerks, cashiers and retail managers were killed on the job than police officers. Many of the features that make fast-food restaurants so convenient – such as their locations near highway offramps – also make them attractive targets for armed robbery. The same demographic group that is widely employed at fast-food restaurants is also responsible for much of the nation's violent crime. A robbery is most likely to occur early in the morning when the restaurant is empty or late at night near closing time. Employees are usually herded into the freezer; then robbers empty the cash registers and the safe, and hit the road.

The 1984 massacre at a McDonald's restaurant in San Ysidro, California, received nationwide attention. Twenty-one people were killed by a lone gunman, and McDonald's later donated the property to the local community. But crime and fast food have become so ubiquitous in American society that their all-too-frequent combination often goes unnoticed. In just the past couple of years: Armed robbers struck nineteen McDonald's and Burger King restaurants along Interstate Eighty-five in Virginia and North Carolina. A former cook at Shoney's was arrested in Nashville, suspected of being a fast-food serial killer who had murdered as many as fifteen people, including employees at McDonald's, Shoney's, Baskin-Robbins, Captain D's and Brown's Chicken & Pasta. A dean at Texas Southern University was shot and killed during a carjacking in the drive-thru lane of a Kentucky Fried Chicken in Houston. The manager of a Wal-Mart McDonald's in Durham, North Carolina, was shot during a robbery by two masked assailants. A nine-year-old girl was killed during a shootout between a robber and an off-duty police officer waiting in line at a McDonald's in Barstow, California. A twenty-year-old manager was killed during an armed robbery at a Sacramento, California, McDonald's. The manager had recognized one of the robbers, a former McDonald's employee; it was the manager's first day in the job. After being rejected for a new job at a McDonald's in Vallejo, California, a former employee shot three women who worked at the restaurant; one of the women was killed; the murderer left the restaurant laughing. And in Colorado Springs, a jury convicted a former employee of first-degree murder for the execution-style slayings of three teenage workers and a female manager at a Chuck E. Cheese restaurant. The killings took place in Aurora, Colorado, at closing time, and police later arrived to find a macabre scene. The bodies lay in an empty restaurant as burglar alarms rang, game lights flashed, a vacuum cleaner ran and Chuck E. Cheese mechanical animals continued to perform children's songs.

The American restaurant industry is now preoccupied with labor issues. Surveys of owners and managers consistently find that workers are their greatest source of worry. At the thirty-eighth annual Multi-Unit Food-Service Operators Conference, held last October in Los Angeles, the theme was "People: The Single Point of Difference." Most of the 1,400 attendees were chain-restaurant operators and executives. The ballroom at the Century Plaza Hotel was filled with men and women in expensive business suits, a well-to-do group whose members looked as though they hadn't grilled a burger or mopped a floor in a while. The conference workshops had names like "Dual Branding: Case Studies From the Field" and "Segment Marketing: The Right Message for the Right Market." Awards were given for the best television and radio ads. A restaurant chain was selected Operator of the Year. Food-service companies filled a nearby exhibition space with their latest products: dips, toppings, condiments, high-tech ovens, breaded cheese sticks, the latest in pest control. The leading topic of conversation in the meeting rooms, hallways and hotel bars was how to find inexpensive workers in an American economy in which unemployment had fallen to a twenty-four-year low.

James C. Doherty, publisher of Nation's Restaurant News and the organizer of the event, gave a speech urging the restaurant industry to move away from a reliance on a low-wage work force with high levels of turnover and to promote labor policies that would create long-term careers in food service. How can workers look to this industry for a career, he asked, when it pays them the minimum wage and provides them no health benefits? Doherty's suggestions received polite applause.

The keynote speech was given by David Novak, vice chairman and president of Tricon Global Restaurants. His company operates more restaurants than any other company in the world – 30,000 Pizza Huts, Taco Bells and Kentucky Fried Chickens. A former advertising executive with a boyish face and the earnest delivery style of a motivational speaker, Novak charmed the crowd. He talked about the sort of recognition his company tries to give its employees: the pep talks, the prizes, the special awards of plastic chili peppers and rubber chickens. He believed the best way to motivate people is to have "fun".

"Cynics need to be in some other industry." he said. Employee awards create a sense of pride and esteem, they show that management is watching, and they do not cost a lot of money. "We want to be a great company for the people who make it great," Novak announced. Other speakers talked about teamwork, empowering workers and making it "fun."

During the President's Panel, the real sentiments of the assembled restaurant operators and executives became clear. Norman Brinker – a legend in the industry, the founder of Bennigan's and Steak and Ale, and the current owner of Chili's – spoke to the conference in language that was simple, direct and free of platitudes. "I see the possibility of unions," he warned. The thought "chilled" him. He asked his listeners to support the industry's lobbying groups, the National Restaurant Association and the Employment Policy Institute.

"And [Senator] Kennedy's pushing hard on a $7.25 minimum wage," he continued. "That'll be fun, won't it? I love the idea of that. I sure do – strike me dead!" As the crowd applauded Brinker's call to fight against unions and the government, the talk about teamwork fell into the proper perspective.

Your Trusted Friend

Ray Kroc was the man who took the McDonald brothers' Speedee Service System and turned it into a fast-food empire. Kroc was not a button-down corporate executive. He was a high school dropout and jazz musician who played the piano at speakeasies and, on one occasion, at a bordello. He was funny, charismatic and indefatigable. Most of all, he was a brilliant salesman and promoter. Born in 1902 and raised in Oak Park, Illinois, Kroc worked at his uncle's soda fountain as a high school freshman. The job taught him the joy of selling. "That was where I learned you could influence people with a smile and enthusiasm," he recalled in his autobiography, Grinding It Out, "and sell them a sundae when what they'd come for was a cup of coffee." He left school a year later, served in a World War I ambulance corps with Walt Disney, returned home and became a traveling salesman. Over the years, Kroc sold ribbon novelties, paper cups, Florida real estate, low-fat malted-milk powder and a table-and-bench combination that folded into the wall like an ironing board. He used the same basic technique to sell all of these products: "I'd learn what the buyer's taste was and sell to it." He was selling milkshake mixers in 1954 when he first visited the McDonalds' San Bernardino restaurant. The brothers were two of his best customers. They were satisfied with their wealth and had little ambition to work harder for more. Kroc saw their restaurant "through the eyes of a salesman" and dreamed of putting a McDonald's at intersections across the country. Like his friend and fellow Midwesterner Walt Disney, Ray Kroc had an obsessive concern for cleanliness and control, created an American institution out of the optimistic ethos of postwar Southern California and brilliantly marketed products to the parents of young children.

In the early years of McDonald's, the company could not afford national advertising. Kroc used his talents as a promoter to charm reporters. His feelings about McDonald's developed an almost religious intensity, helping to convey a powerful, well-defined sense of the brand. McDonald's was to remain a place for children and families. Kroc soon discovered an effective way of bolstering McDonald's family image and simultaneously getting free publicity. The company began to link itself with various charities, especially those involving children. Fred Turner, the executive who put together the McDonald's operations manual, later admitted that the company's early charitable work had a hidden agenda. "We got into it for very selfish reasons," Turner said to author John F. Love. "It was an inexpensive, imaginative way of getting your name before the public and building a reputation to offset the image of selling fifteen-cent hamburgers. It was probably ninety-nine percent commercial." Over the last three decades, the well-known Ronald McDonald House Charities have provided housing for more than 2 million families of seriously ill children. The concept was developed by a Philadelphia advertising agency in 1974.

Ray Kroc innately understood that the marketing of his company was as important as the food it sold. "A child who loves our TV commercials," he explained, "and brings her grandparents to a McDonald's gives us two more customers." McDonald's now runs dozens of radio and television ads every day in major American markets. The fast food industry as a whole spends about $4 billion a year on advertising.

In addition to children, companies today aim many of their ads at "heavy users" – men between the ages of eighteen and twenty-four, who often eat fast food three or four times a week. The wry and ironic Jack in the Box ads featuring Jack, the violent Del Taco ads and the Carl's Jr. ads with sauce dripping onto a beautiful woman's dress have been extremely popular within this key demographic group. Companies are also increasing the size of their portions to attract heavy users. Hardee's offers the Monster Burger, Burger King sells the Big King, McDonald's is introducing the Big Xtra, and Little Caesar's gets right to the point, describing its pizzas as "Big! Big!" The Monster Burger contains a half pound of beef, three slices of cheese and eight strips of bacon.

The competition for young customers among the fast-food chains has led to a wide range of marketing alliances. McDonald's has joint promotions with the National Basketball Association and the Olympics. Tricon Global Restaurants has a three-year deal with the National Collegiate Athletic Association. Pizza Hut has linked with Discovery Zone, a chain of children's play centers. Burger King and the children's network Nickelodeon, Subway and The Simpsons, Denny's and Major League Baseball, McDonald's and the Fox Kids Network have all signed agreements that will mix fast-food advertising with children's entertainment. America's fast-food culture has become indistinguishable from the popular culture of its children.

In May 1996, the Walt Disney Co. signed a ten-year global-marketing agreement with the McDonald's Corp. A few months later, Disney hired a former Burger King executive to run its film-marketing division. The deal with McDonald's followed a decade in which toys inspired by Disney films proved extraordinarily successful at attracting children to fast-food restaurants. The target audience for these promotions is children between the ages of two and seven. According to the Los Angeles Times, the budget for the Disney film George of the Jungle doubled after the alliance with McDonald's was signed. The script was rewritten to include a scene in which the lead character eats a Big Mac, and a representative from McDonald's visited the set to ensure that the hamburger was properly displayed.

Confidential documents from a recent McDonald's advertising campaign reveal some of the thinking behind fast-food marketing today. The McDonald's Corp. was facing a long list of problems. "Sales are decreasing," one memo notes. "People are telling us Burger King and Wendy's are doing a better job of giving. . . better food at the best price," another warns. Consumer research indicated that future sales were at risk. "More customers are telling us," an executive wrote, "that McDonald's is a big company that just wants to sell. . . sell as much as it can." An emotional connection to McDonald's that customers had formed "as toddlers" was now eroding. The new advertising had to make people feel that McDonald's still cared about them. "The challenge of the campaign," wrote a company vice president, "is to make customers believe that McDonald's is their 'Trusted Friend.' "

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