Moving Out of the Chains and into the Community

[Dave Baldwin]

I have been wanting to attend the InSider Coffee Breaks for the last several weeks, but haven't been able to make it due to time conflicts. One thing that I feel compelled to mention is the impact that we can all have on our economy by making an effort to patronize the locally-owned coffee shops instead of the major chains.

I'm not a purist or a saint about this (which I just had to mention in case someone sees me at a Starbucks and rats me out!) However, I do go to the locally owned coffee shops whenever it's a practical option. I find that happening more and more often lately.

I don't know about everyone else, but I personally like the authentic and one-of-a-kind flavor that you can't find in a chain. It is sad to see so many locally-owned stores struggling to make it, while at the same time, national franchises are funneling money out of the local economy.

The other striking thing that occurs to me about this, from a sales point of view: I've been advised since starting my business not to bother trying to sell anything to a corporate franchise. Why? Because they are contractually forbidden from doing business with local merchants. They are required to use suppliers, and the buying decisions are made in some other city.

I think that if we all made the effort to "vote" with our dollars, larger businesses might start to respond. Who knows? What might happen if franchise businesses were faced with the dilemma, "Support the economies of the towns where you do business, or go OUT of business?"

Just food for thought.

[Pat Howlett]

Thought about this a bit more last night and would like to suggest that one "Think Local First" - When we 'Think Local" we're going to have a chance to include those businesses that are "locally" owned.

National Media (costly to the small business) does a very good job of getting us to 'think big solution provider" - small business owners can help level the playing field by at least encouraging other local business owners to look for a local solution and then... compare value.

The reality is that we can't find all the products and services we need from locally owned businesses. But, if we place the local business front and center in our buying options... I believe that we will gain the best from both small and large, local and national (& global).

Now, I of course will continue to encourage inSiders to "Meet Local = Buy Local" since I believe when we buy local it's because of the "Relationships" (and equal or better value) we have with the local business owner or the employees or the product/service... it IS our differentiator - it's also what I'm personally all about. :)

[Pat Howlett]

Very good thread - love that our little local initiative can lead to this type discussion.

inSide919 is part of a "Chain" of Micro Business Networks, we intend to be a very successful "National" Chain... while stimulating the local economies that we serve.

Towards that end we'd like to encourage folks to partake in the "Local Coffee Break" as it grows and in time this will be happening in all 268 of our chain operations.

A "franchise coffee chain" can of course participate in the LCB, as long as it is "owner operated" as our goal here is to get 'owners' of businesses to "MEET" the "owners" of other member businesses. Starbucks can not - as a locally owned business we can make that decision.

There certainly are differences between a business that "provides a job" to the local economy - compared to a locally owned business that does this PLUS invests in other areas of their community (ie: locally owned businesses support local non-profits to a much higher degree than their larger corporate counterparts, use more local services & products and a larger portion of "profits" stay within the community - many studies estimate this difference to be close to 28% of revenue, a HUGE raise to the local marketplace and these dollars circulate).

All that said, we're still talking about "American" Business and we should WANT a small business owner to become wildly successful and grow to the level that they can/want.

[David Bartos]

Michelle,
Thank you for this debate. You have eloquently stated some very thought provoking points. I think we both agree that as a consumer our purchasing power is greater now than it has been in a long time.

Before we wield that power we are all wise to give pause and consider alternatives that benefit those that not only rely on us but those we rely on.

Dave

[Michelle Gower]

I know we are moved on to another post on this but Dave (Bartos), I would say you bring great points to the table as well, especially from an economic standpoint. Yes, bigger companies can operate at a loss much easier than the little guy.

Yes, Coca-Cola was one guy, and interestingly it was when the bottled version took off that things went squirrelly for him. Well, for a while anyway ;).

I think what Dave and I ended up pointing out is that it's still a gray issue. Like I said I very much support buying from the little guy, but don't beat myself up about shopping at the chain because I know I'm still benefiting a neighbor by keeping them employed that day.

And again I feel that, even if big chains drain wealth, they can also create jobs. A ton of unemployment means less dollars being spent and that certainly can't help the local business owners either.

So my original opinion remains...I think the two have to co-exist. If Dave Bartos suddenly went global with his firm...do we then brush him off and find someone smaller? I don't think that's the answer.

I agree that Buy Local should probably be called Buy Small. To that end, buying online should be the last thing we all do! But that's for another post!

[Dave Baldwin]

This is such a fascinating and relevant debate that I feel the need to start a new blog post on the subject. I will do just that in about 30 minutes!

[David Bartos]

Michelle,

You make a very eloquent argument here for buying at chain stores. The premise that Chains don’t support the local economy is as you point out is fallacious. Chains employ local labor and Chains buy local advertising among other services.

The argument against Chains revolves around the decision locus. When decision making is removed from the local economy it directly affects the ability of small businesses to compete. Advertising for Best Buy doesn’t support the small newspaper, direct mail company, or local ad agency. Media buys happen on Madison Avenue with major media outlets.

Chains remove the effectiveness of a local small business economy and also minimize local expertise and local knowledge when it comes to the products and services that a local economy supports.

It is important to point out that the word “Chain” and “Franchise” have become intermingled in this discussion.

A “Chain” is a large conglomerate of establishments with a single decision making source that is far removed from the community where the consumer lives.

A “Franchise” is a typically locally owned and operated branch of a larger idea and is executed with local flavor and flair by a local business owner. (Although there are large franchise holders that own hundreds of franchises and thus are mini-Chains).

Your argument concerning Coca Cola is interesting however when one man was peddling syrup from drug store to drug store, he was in fact a small local business.

In fact the “Buy Local” trend should be modified to read “Buy Small”. Small employers in the United States numbered 6.0 million in 2006, representing 99.7% of the nation's employers and 50.2% of its private-sector employment. (Source: U.S. Dept. of Commerce: Bureau of the Census.)

Small Business owners bring decisions and prosperity to their local community and are constantly under pressure from “Chains” that move into a community with low attractive prices that are subsidized with higher prices in other parts of the world.

Big Box retailers can operate at a loss in a community for a year or more without feeling a significant impact in their bottom line. Once Coca Cola became large enough that it could subsidize profits from one community with revenue generated in another it became an institution large enough to drain wealth from one area into another.

So, Yes Michelle, I say “Buy Local”. I also encourage us all to “Buy Small”. We should take care of those individuals that contribute directly to our local schools, churches, charities, and communities.

[Michelle Gower]

I agree with the overall sentiment, but I have to also state my feelings on this--

1) Franchises are often owned by local people.
2) Big-box stores in your town staff local people.
3) Local coffee shops wouldn't exist without Starbucks popularizing it.

I believe in shopping local whenever you can, but I don't feel bad about going to a bigger chain if I need to, for reason #2 above. If we always refuse to shop at the big chains to the point that they lay people off, guess who they lay off? Our neighbors. If we refuse to go to the Subway because it's a franchise of a big box chain, guess who that hurts? Oftentimes, our neighbors, because it's often a local guy who bought the franchise. Franchise owners have NO control over where they must purchase their supplies. Franchise agreements are airtight and the support they get in return from the home office is traded off by the consistency of using the same suppliers, which typically give franchisees better pricing that they need to make a profit that affords the local employees they've hired. Even more so, it ensures consistency in product. Imagine going to five Subways around town and ordering the exact same sandwich only to have it taste very different at each one because each owner was allowed to order their ham and their cheese from different suppliers (half of whom will go with the supplier who is cheapest, not the best, if given the chance)?

Now, I'll play a bit of devil's advocate here. The argument is that we should shop at the little guy because he's well the little guy. Does this mean we shouldn't drink Coca Cola because it's a nationwide drink? Only the local guy's concoction? Remember, Coca Cola didn't turn a profit for the first nine years, and it was just one guy trying to sell syrup to the soda fountain owners. I guess Pepsi is technically local since it was born in New Bern, NC, but still, it's purchased everywhere in the world.

What happens when the local coffee shop in town does well enough that it ends up doing more business than the next 5 local shops combined? Do we stop gathering there? Has it become too big to be local? If our friend Joe ends up expanding his appliance repair shop to four locations in the Carolinas, do we step down to someone smaller?

I only say this because ALL the big box chains were startups at one point. Expanding used to be considered a sign of great success and a reminder to the rest of us that the American Dream was still attainable. Is it only acceptable to look down on big box now? If you threatened the franchises with your dollars, chances are you'd simply put out of business one of your neighbors who sank $50,000-$500,000 into his or her own slice of the American Dream over something they can't control.

In regards to coffee shops, they may have always been around, but never to the extent that they are thanks to Starbucks. Starbucks made it popular, and many local shops were able to get started because of Starbucks' making it a trendy thing to do (grab a latte in the morning). Sometimes, without the big boys, the little guy doesn't stand a chance.

Some of your favorite 'small guy' foods are now owned by corporations. Odwalla is owned by Coca Cola and Naked Juice is now owned by Pepsi, for example. While I wasn't thrilled to see that occur, I also understand that it helped out the little guy by giving him greater distribution and until they are bought out, a better and more secure living. Do we never sell to the larger guys in our attempt to stay local? At what point do we cut off our own growth?

Again, I'm all for buying local, I'm just saying that there are also local benefits to shopping at the chain stores. Local benefits as in benefitting the locals.

[Ron McCulloch, MBA]

To that end, check out Hope Cafe on Tryon Road in Garner. It's a church on Sunday and a coffee shop during the week. Very nice place. They also have open mic Friday nights.

[Janet Daughtry]

Thanks for sharing Dave. Great thoughts and an important reminder to support our community and small businesses!