Chronicle of the Howard Johnson Company – A Hospitality Trailblazer
Howard Johnson International is presently a leading franchisor of mid-priced hotels for budget-conscious business travelers. Its present state of business does not reflect its vivid history. Howard Johnson International Inc. is a subsidiary of Cendant Hotel Group, the hospitality-franchising arm of Cendant Corporation; a spin off was executed in 2006. See bottom of this article for a 2007 update.
The history of the Howard Johnson Company starts with the effort of one man who takes an ice cream stand and develops it into a large conglomerate corporation with national recognition. The Company was often referred to as "HoJo". The Howard Johnson Company is a case history worthy of study by students and professionals in this highly competitive and changing hospitality industry. The Company started with an ice cream stand, operated and franchised restaurants and lodging facilities, operated commissaries, produced its own line of food and candy, operated its warehousing and distribution, and many other ventures along its ever-changing life. The successes and failures of this pioneering hospitality company that became a national icon present enough material for a thesis.
In 1925, Howard D. Johnson borrowed $2,000 to buy a small drugstore in Wollaston, Massachusetts.
The vanilla and chocolate ice cream was made with all natural ingredients and twice the normal butterfat content. Because of its instant success, other flavors were added.
He then opened a beachfront ice cream stand and kept adding flavors until 28 varieties were attained. The 28 flavors became a trademark of Howard Johnson. Over time more beachfront stands were added. With his ice cream now a large success, attention turned to the hot dog. His innovative method of preparing the hot dog involved clipping both ends and notching them lengthwise. The cooking method was also creative: the hot dogs were cooked in creamery butter that would infuse into the meat. Only the highest quality meats and lightly toasted, buttered fresh rolls were used. Howard Johnson's was to become famous for its ice cream and hot dogs for generations.
His success enabled him to borrow money to open a restaurant in Quincy, Massachusetts. This was the first Howard Johnson's restaurant and it featured fried clams, baked beans, chicken pies, hot dogs (frankfurters), and its locally famous Howard Johnson ice cream.
Impact of the 1929 Stock Market Crash
The stock market crash and consequent economic depression made it almost impossible to expand because the banks weren't lending money.
The Birth of Franchising
In 1935, Mr. Johnson sold his first franchise, a "Howard Johnson's" restaurant in Cape Cod, Massachusetts. The franchise agreement stipulated that Howard D. Johnson would:
Design the restaurant
Establish the menu
Be the purveyor of food and ice cream
By the following summer there were 17 franchises; all extremely successful. One franchisee opened a 70-seat restaurant in Cambridge, Massachusetts. By the end of 1936 there were 39 more franchised restaurants.
Howard Johnson recognized that the automobile would put millions of traveling Americans on the roads. He noticed there was a need to provide restaurants for these travelers. To provide instant identification, the famous bright orange roof was a landmark. The road sign was the Simple Simon and the Pie Man. By 1939 there were 107 Howard Johnson restaurants along East Coast highways.
The franchise agreement and manual contained strict standards of cleanliness, service, recipes, and menu items; the interior and exterior design of the restaurant was also mandated. Mr. Johnson meticulously wrote every instruction on anything that had to do with the running of his restaurants. Variation from one restaurant to the other was not allowed. For example, one chapter was devoted to "the appearance of the waitstaff. An entire page covered the subject of courtesy and assisting customers.
Howard Johnson became well known for its fried clams, hot dogs, old-fashioned chicken pot pie, generous turkey dinners with mashed potatoes, moist rich brownies, games and puzzles for the kids, high chairs for the tots, and 28 flavors of great ice cream to be enjoyed in, colorful surroundings
In less than 14 years, Howard D. Johnson now controlled a franchise network of over 10,000 employees, with 170 restaurants, many serving a million and a half people a year.
The Birth of Turnpike Restaurants
The Pennsylvania Turnpike was constructed and ready for service in 1940. The New Jersey Turnpike and Ohio Turnpike came into existence at the beginning of the 1950s. The Pennsylvania Commission decided not to operate the plazas themselves, but instead licensed them to Standard Oil of Pennsylvania. Standard Oil operated the gas stations and subcontracted the dining areas and gift shops to the Howard Johnson Company. Howard Johnson also bid and won exclusive rights to operate restaurants on the New Jersey Turnpike and Ohio Turnpike.
Impact of World War II
With World War II came gas rationing, food stamps and the end of pleasure trips. One by one, the restaurants were forced to close. By the summer of 1944 only 12 of 200 restaurants remained in business. The Company barely survived by serving commissary food to war workers and army recruits.
By 1947, 200 new Howard Johnson restaurants were built or in construction in the Southeast and Midwest. In slightly smaller buildings than the prewar originals, over 700 items were served, including the famous fried clams, saltwater taffy and 28 flavors of ice cream.
By 1954 there were 400 Howard Johnson restaurants in 32 states. About 10% were extremely profitable company-owned turnpike restaurants. The orange roof rivaled Coca-Cola's trademark as to recognition.
Howard D. Johnson – A Pioneer in Many Concepts
In addition to lodging and restaurants, Howard D. Johnson pioneered the franchise concept, the turnpike restaurant concept, the super premium ice cream concept, the "Theme" restaurant concept, the commissary food distribution concept, and other innovations. The Company’s commissary prepared and warehoused many food items for restaurants. The Company pioneered the concept of processing and pre-portioning food in a central commissary. The Company produced its own line of boxed chocolate candy, canned goods, and frozen foods.
Son Promoted to President
In 1959, the Company founder, with headquarters still in Wollaston, Massachusetts, turned the Company’s presidency over to his son, twenty-six year old Howard Brennon Johnson. Howard was a graduate of Andover and Yale. The father Howard D. Johnson remained as chairman and treasurer. Howard D. Johnson died in 1972, at the age of 76.
The late 1950s also brought about an improvement of the highway system; creating increased lodging demand by business travelers and tourists. Again the Howard Johnson Company saw an opportunity. Many of the existing overnight accommodations were dirty and cramped motels with no services. Thus, the Howard Johnson Motor Lodge became a new division. These lodges were clean, with big guestrooms, fresh sheets, air conditioning, a modern bath, and television (new to America at that time). Each motor lodge had the familiar orange roof, and a Howard Johnson restaurant adjoining the property.
In 1961, the privately owned Howard Johnson Co. went public with national fanfare and interest; its stock was in great demand. The Company consisted of 88 franchised Howard Johnson's Motor Lodges in 33 states and the Bahamas. That year there were also 605 restaurants, 265 of them company operated and 340 franchisee-operated. Buyers of this IPO (Initial Public Offering) of Howard Johnson common stock made significant profits on the day of purchase.
In 1965, sales exceeded the combined sales of McDonald's, Burger King and Kentucky Fried Chicken. HoJo's was the second largest food server in the U.S., second only to the U.S. Army. The Company realized that its restaurants did not attract every consumer and therefore needed other marketing concepts for continued growth. It developed a restaurant chain called Red Coach Grill, which was an upscale steakhouse similar to the Steak and Ale chain, but ultimately the concept did little for the Company and chain met a quick demise. In 1969 the Company started a casual restaurant chain called the Ground Round. That chain survives today under separate ownership; the franchise owners and leadership of the Ground Round brand operate under the company name of Independent Owners Cooperative, LLC with more than 60 locations in 19 U.S. States.
Disaster Was Now About To Happen.
Along Comes the Energy Crisis and McDonald’s.
By 1975, Howard Johnson kept growing to over 1,000 restaurants and over 500 motor lodges in 42 states and Canada. Over 85% of the company's revenues depended on automobile travel. When the oil embargo of 1974 created nationwide gas shortages and high gas prices, traveling substantially declined.
At the same time, fast food restaurants came into popularity offering quick food at low prices. McDonald’s and Burger King were strong competitors in the food business. Holiday Inn, Ramada Innand Marriott hotels built new lodging facilities that made the once modern Howard Johnson’s Motor Lodges appear old and antiquated. Competition from these new emerging chains was eroding the business of the Howard Johnson Company
Company Sold – Sold - Divided - Sold - Sold
In September of 1979, Howard Johnson accepted an acquisition bid from Imperial Group PLC of Great Britain. Imperial obtained 1,040 restaurants (75% company owned) and 520 motor lodges (75% franchised). During the next ten years Howard Johnson Company had two different owners, and countless new restaurant concepts. Many of the properties were sold off. The franchised hotel system was divorced from the restaurant chain.
In 1985 in a three-way deal, Marriott bought the Howard Johnson Company from the Imperial Group of London. Marriott's interest was in the restaurant locations and it quickly sold the motel/hotel/motor lodge system to Prime Motor Inns.
In 1990, the Howard Johnson trade name and the lodging system were sold to HJ Acquisition Corp.; later to be renamed Howard Johnson International, Inc., a subsidiary of Hospitality Franchise Systems Inc., or "HFS".
HFS charted a marketing concept for Howard Johnson to become a mid-price hotel chain catering to family and business travelers. Fried clams, ice cream, the orange roofs were out, bigger, and better hotels were in. A plan to upgrade all Howard Johnson hotel properties was initiated with a strict quality rating system.
Cendant Corporation Buys the Company
In 1997 Howard Johnson became a member of Cendant Corporation, and thus HOJO grew by developing more hotel chains servicing the tourist and business markets. Even though there was a recovery by the Company, management decided to rebuild the Howard Johnson brand based on value and to go global. The new marketing theme became "Howard Johnson Makes You Feel at Home." Further marketing concepts included "Kids Go HoJo" program, "Howard Johnson Comforts of Home", "Howard Johnson Home Office", and a frequent-traveler program called "Howard Johnson SuperMiles". A significant visible change is the system-wide new blue Howard Johnson sign.
In 2006 Cendant’s board of directors had approved a plan to separate Cendant into four independent publicly traded companies via three equity spin-offs in 2006 based on segment category and other criteria. Howard Johnson International will become a part of the independent hospitality services company.
In 1985 the Marriott Corporation bought Howard Johnson's for the real estate and the well-known Howard Johnson name was not an incentive. Marriott intended to convert all the 418 company-owned Howard Johnson restaurants to names that they already owned, one being Hot Shoppes. In 1986, a group of franchisees sued Marriott and Prime Inns. The settlement allowed the franchisees to form their own company, Franchise Associates, Inc. The settlement gave FAI the rights to the name "Howard Johnson's," the right to franchise restaurants and ice cream shops with the "Howard Johnson's" name, rights to the orange roof, recipes, and other intellectual property. (In the middle 60s the Howard Johnson restaurant chain had seen a high of over 500 units.) The decline of these restaurants was rapid, sinking to under 30 by the year 2000, to 11 by 2003 and finally down to a low of 5 restaurants in 2005.
2006 Recent Development: Cendant Hotel Group has confirmed that Howard Johnson International, one of the four companies recently formed to segment the company into separate entities has purchased complete rights to the HoJo’s ice cream, restaurant and frozen food businesses from Franchise Associates Inc.
What Happened to the Ice Cream and Frozen Food Line?
Under license by Franchise Associates, Inc., Fairfield Farm Kitchens, a company in Brockton, Massachusetts continues to make the well-known HoJo’s products such as Macaroni and Cheese, TenderSweet Fried Clams, Chicken Croquettes and Toastees. The ice cream is still made, however only at Boynton Beach, Florida by The Ice Cream Club, Inc., which also has its own line of ice cream. These food products are only available wholesale to supermarkets and HJ restaurants.
In 2006, as previously stated, Cendant purchased the complete rights to the HoJo’s ice cream, restaurant and frozen food businesses from Franchise Associates Inc.
UPDATE AS OF JANUARY 2007
The Howard Johnson's Restaurant in Connecticut franchise license has been canceled. Now there are just three restaurants remaining: Bangor, Maine; Lake Placid, NY; and Lake George, NY.
The Howard Johnson Motor Lodges still exist but they are not affiliated with the restaurants.
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