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How Chain Stores Sometimes Help Small Businesses

You might think that a chain store's arrival in your town means that big business is encroaching on something quaint and homespun. But the "chain" label can be deceiving.
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There's a movement to ban chain stores in the town of East Hampton, according to The New York Times. It all began when a 7-Eleven opened in the moneyed New York vacation community four years ago. "Many residents were upset that their charming hamlet now had a convenience store that could be found in Anytown, U.S.A," writes Joseph Berger.

That's a common local reaction to the encroachment of big, national retailers. But it can be inaccurate to paint all chain stores--or, for that matter, all mom-and-pop entrepreneurs--with a broad brush.

The Upside of Franchises

All chains are not evil. Nor are their owners. In fact, many of them are franchisees. It's easy to be skeptical of franchises, but they still represent a useful opportunity for immigrants or entrepreneurs with less experience. 

Elaine Osgood, founder of the 170-employee Atlas Travel in Milford, Mass., an Inc. 5000 company, got her entrepreneurial start as a franchisee of the Uniglobe travel agency. Beginning this way helped her learn the ropes and compete a career transition. Previously, she'd worked as both a schoolteacher and a child-welfare investigator.

At times she pondered starting her own psychology practice. But eight years of investigating child sexual abuse took their toll on her. How could she be her own boss, yet escape the world of clinical psychology? 

With little business experience to fall back on, she looked into franchise opportunities. Jiffy Lube? Nope. Video stores? Nah. A travel agency? That sounded fun and exciting. "Who doesn’t like to talk about travel?" is how she now describes her mindset back in 1986. With her husband’s agreement (he too noticed the drain of her child-welfare work) they remortgaged the house--and Osgood purchased a Uniglobe franchise. From that swirl of dust, Atlas Travel was born. 

Getting Past the Generalizations

Sure, it makes sense that residents want their town to keep its distinct characteristics. Why would they want it to look like elsewhere else? "We want to keep our main streets from becoming strip malls or Manhasset or Madison Avenue like the Village of East Hampton--filled with stores too expensive for all but the most elite to shop in," is what Jeanne Frankl, the chairwoman of the town's Democratic Party, tells the NYT's Berger. 

That sounds reasonable. But as we all know, 7-Eleven is hardly where "the most elite" shop. Moreover, writes Berger, "there are many local residents who want a place like 7-Eleven. To buy many household goods at reasonable prices, some residents have to travel to the big-box stores like Target and Costco in Riverhead, which, given the almost constant summertime traffic jam along the Montauk Highway, can be an hour's drive or more."

Then there's the case of the local franchisees. Berger describes Susan Borgida and her husband, Chet, who own a UPS packaging franchise. Borgida resents being lumped in with chain stores that actually are under corporate control. She wants the town's board to distinguish between stores managed by people like her--who truly are local owners--and the stores managed by faraway corporations. "The immediate connotation is bad, and we're certainly not bad for the people we serve," she tells the Times

The deeper Berger dives, the more it seems like the residents are skeptical about some chains, but not others. "Few people seem to object to the proliferation of Citarella, the fish and gourmet market that has three locations in Manhattan and has sprouted three branches in the Hamptons," he writes. 

A Store-By-Store Basis

Alex and Ani, a $230-million jewelry store chain with 642 employees and 39 standalone locations, opened its first store in 2009. Though its fast growth is anomalous, it raises an important question: When does a chain store become a chain store? When does it jump the shark, so to speak, and go from being a scrappy growth business with indie character to being the ubiquitious sort of McStore or Storebucks you'll find everywhere?

This question leads to one more: If towns want to prevent certain stores from moving in, at what point should they draw the line? In East Hampton, one resolution proposed this year defined "formula" stores as those with 15 locations anywhere in the U.S. with the same goods and décor.

Fair or not, resolutions like this are increasingly common. Berger's story cites other examples in San Francisco; Port Jefferson, NY; Nantucket, Mass.; Ogunquit, Me.; Fairfield, Conn.; and San Juan Bautista, Calif. In addition, two years ago, "the New York City Council amended zoning for the Upper West Side of Manhattan to limit chain stores along three avenues and confine banks to 25-foot storefronts."

The intention of many of these efforts--protecting mom-and-pop store owners--is noble. But the reality of small business in America is that many mom-and-pop entrepreneurs are franchisees.

Sometimes, as with Alex and Ani, today's mom-and-pop store becomes tomorrow's chain. And sometimes the store that local advocates want to label as a negative intrusion becomes wildly popular. Berger reports that the 7-Eleven is "one of the highest-grossing in the nation." Obviously, that's not happening unless some of the residents like shopping there. 

Then there's this reality: In some retail categories--drug stores, gasoline--it's just plain difficult to find independent stores. If there's no CVS or Walgreens, where will residents get medicine? Town supervisor Larry Cantwell seems to understand the retail reality. "It's a fact of life that you shop where something is available, and the purchasing power of the larger retailers makes them the only one able to compete with Internet transactions," he tells Berger.

"You don't want to be in a situation where you can't buy drugs because you prohibited the few stores still in business."

That's a reality worth keeping in mind, before painting anything in retail with a broad brush.

IMAGE: Flickr/djLicious
Last updated: Aug 4, 2014




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