Small business loans backed by the federal government helped the Golden Arches and its rivals conquer the city.
The story of fast food in America has been well documented; Eric Schlosser’s Fast Food Nation and Morgan Spurlock’s Super Size Me explored the public health consequences of our addiction to cheap, convenient calories. The sheer girth of America’s national obesity epidemic often creates the impression that fast food, for good or ill, is an equal-opportunity American experience.
It’s not: Obesity rates skew towards people of color, particularly children, who tend to live in urban areas. That disparity speaks to a more structural challenge—one produced by policies that ushered fast food into the urban market.
That’s the theory driving Supersizing Urban America by Chin Jou, a professor of American history at the University of Sydney. The book digs into how the federal government helped fast food franchises expand into cities by backing small business loans in the late 1960s.
The classic fast-food narrative usually sets us in 1950s, with burger chains sprouting up in the new postwar suburbs and interstate highways. But today, fast food joints have an equally pervasive presence in the urban fabric of the United States. “I had assumed that fast food came to cities at the same time, because now it’s kind of inescapable,” Jou tells CityLab. “You see fast food restaurants on every corner; it seems like they were always there. But it was a concerted effort by fast food to expand.”
In the 1970s, the city represented a logical next move for the fast food business, especially as national advertising made the major brands household names before storefronts even reached neighborhoods. Indeed, zoom into the city of your choice on this handy map from our friends over at ESRI and you can see how densely chains such as Subway, McDonald's, Burger King, Pizza Hut, Dunkin’ Donuts, Wendy’s, and KFC have occupied the country.
“The traditional suburbs and small towns were saturated, and these companies realized there was an untapped market in cities,” Jou says.
The structure of the city itself allowed for fast food to thrive. Busy lunch times in business districts could make up for sleepy weekends and the speedy service could handle the concentrated populations in dense inner cities.
The business success was probably too good. Fast food’s limited real estate needs made it easier for franchises to become more profitable than grocery stores, requiring less overhead and less parking space. “The margins for fast food today are about four to six percent, which doesn’t sound like much,” Jou says. “But by comparison, it’s just over one percent for grocery stores.”
Combine that advantage with franchise system itself—where licensing the company name to individually owned restaurants meant it was easier to qualify for loans. “Grocery stores might have higher gross receipts than what was allowed to qualify,” Jou says. “Fast food franchisees would qualify as small businesses, even though they were part of bigger corporations.”
Jou opens her book with a paragraph from Fast Food Nation that struck her while she was working at the Office of History at the National Institute of Health. Schlosser cites a statistic that the Small Business Administration had backed 18,000 franchise loans between 1967 and 1979—often subsidizing new Burger Kings and McDonald’s; by 1996, the federal government had nearly $1 billion in 600 franchises of 52 fast food companies.
Tapping into the buying power of an emerging black middle class helped fuel the industry’s urban expansions. One of the first McDonald’s franchises in New York City opened in 1973 at 215 West 125th Street, right by the Apollo Theater in Harlem. Burger companies saw a new place for business, while the federal government saw a potential urban revitalization tool: Presidents Lyndon Johnson and Richard Nixon both tried to use the chains as a way to ameliorate the late-1960s crisis in cities.
After the 1965 riots in Watts, Los Angeles, Johnson sent SBA administrators to identify what had heightened tensions. An SBA administrator named Eugene P. Foley went back Los Angeles about six times and emerged with his answer: Jobs and businesses were key. ”By 1968, [Foley] had written this book called The Achieving Ghetto,” Jou says. “He called for a ‘domestic political Marshall Plan’ for these center cities.”
Jou cites a 1968 pamphlet from a three-day SBA conference in New York, titled Managing for a Better America. ”One of the panels discussing franchising and SBA loans was led by an SBA administrator and the head of Dunkin’ Donuts at the time,” Jou says. “Franchises were seen as having a role in revitalizing cities.”
The idea became attractive to politicians trying to court black voters. Even as Richard Nixon deployed his now-infamous Southern strategy, he also set up the Office of Minority Business Enterprise to promote black-owned businesses. “After the riots, the [office] convened a group of franchisors to sign pledges to recruit African-American franchisees,” Jou says. “But without sufficient government data, we don’t have any way to show what materialized from that promise.”
As Jou writes, by the mid-1980s, about 300 of the 9,000 worldwide McDonald’s outlets were owned by African Americans, and the company would boast that it had put about half of all black-owned fast-food franchisees in business. But a form of fast-food redlining kept those African-American franchisees in predominately minority communities. “As Jesse Jackson put it, sometimes African-American franchisees would get the ‘recycled,’ less desirable locations,” Jou says.
Meanwhile, corporate advertising presented fast food as a public good for the black community. Jou points to the often cringeworthy ads, particularly the now famous McDonald’s early-90s “Calvin” TV spots, where a young man from Brooklyn moves up the ranks from a part-time gig to manager. As NPR’s Gene Demby noted for Codeswitch in 2014: “...the Calvin spot doesn't even pretend to be about food. McDonald's: Get off those streets and get you a damn job!”
"That was really the message coming out of these companies, it was really trenchant,” Jou says. “At the same time, McDonald’s may have produced more black millionaires than any other business, and I wouldn’t be surprised if that’s actually the case. A lot of other Fortune 500 companies can’t claim that their high-level executives started as entry-level employees.”
The history of minimum wage policy complicates that success story. While today, most fast food companies remain mum on the minimum wage hikes that voters in several cities have chosen, the industry opposed Congressional efforts to raise the minimum wage in 1972. At the time, McDonald’s founder Ray Kroc had advocated for an exemption for 16- and 17-year-olds to be paid 80 percent of the minimum wage. The complete minimum wage hike was vetoed that year by Richard Nixon (who had received campaign contributions from Kroc).
While fast food as work is a focal point for government policy, the health effects of proximity to fast food tend to get overlooked. The design of fast food franchises—and their ubiquity in communities that may otherwise be labeled “food deserts”—helped cement their key roles in low-income areas. “Fast food restaurants can sometimes be safer, and more comfortable than people's homes,” Jou says. “They're brightly lit, they’re air conditioned in the summers and they function as de facto community centers. It’s enormously popular among teenagers because the food is affordable.”
The medical evidence, as you’d expect, shows that access to fast food is a public health problem. If you live, work, or go to school near fast food, you’re more likely to become a frequent consumer of it, and communities of color tend to have more fast food restaurants that also make up a higher proportion of dining options in those neighborhoods. But closing the neighborhood burger franchise isn’t any kind of solution.
”The book isn’t meant to be an attack on ‘fast food values,’” Jou says. “It's more complicated. The fact is the food is affordable. If people don't have cars or time to go grocery shopping or cook for themselves, it is objectively a cheap alternative to other options. Other upmarket chains might seem healthier, but they’re not necessarily any better. We give some chains a pass because their clientele is seen as wealthier and whiter.”