Early Tuesday morning, a car crashed into a local McDonald’s restaurant in Seaside, California, about 5 miles from where I live. The McDonald’s caught on fire and collapsed. Fortunately all the employees were able to get out safely.
The owner, Landon Hofman, owns 7 local McDonald’s franchises. Here’s a clip from a local news story about how he reacted:
On Tuesday Hofman found jobs for all 42 of the employees from the Seaside store at his other locations.
“I have spent all morning long now taking all the employees from this store and redistributing them to the other stores because they’ve got bills to pay and mouths to feed,” he said.
This illustrates two things: (1) his compassion and (2) the value of diversification. On (2), if he had owned only one franchise, this would have been hard to do.
READER COMMENTS
FS
Jun 7 2018 at 7:54am
Coming out of college, I accepted a job with a company in another country. Unfortunately, that country’s immigration policies did not change as the company had expected, and the company could not get a visa for me.
The CEO of this quite large company, a man I had never met, heard about what had happened, and got on the phone. I learned this when one of his suppliers, closer to home, called me and asked me to interview, which led to me joining that company, instead.
Robert EV
Jun 7 2018 at 10:32am
He sounds like a wonderful boss.
But this is still patronage on the order of Downton Abbey. And wouldn’t it be even more respectful if these multiple restaurants were owned by a worker co-op? Then the workers wouldn’t have to count on a fundamentally paternalistic largess, they’d have the power to right by themselves, themselves.
Airman Spry Shark
Jun 7 2018 at 11:16am
@Robert EV,
Entrepreneurs are incentivized to maximize total output, whereas worker co-ops are incentivized to maximize output per worker; the latter ends up with monopoly-like underproduction.
Jacob Egner
Jun 7 2018 at 11:46am
Airman Spry Shark: Thanks for your comment. What you said makes sense, except perhaps we should replace “output” with “profit”? Anyway, seems like I’ll be changing how I think about worker co-ops.
David R Henderson
Jun 7 2018 at 12:59pm
@FS,
Great story. Thanks.
David R Henderson
Jun 7 2018 at 1:04pm
@Robert EV,
He sounds like a wonderful boss.
I agree.
But this is still patronage on the order of Downton Abbey.
I’m not sure how. Although I admittedly didn’t mention this in my post, I think Hofman is thinking long-term in a profit-maximizing way. And so it’s not patronage: instead, it’s keeping his eye on the prize and being a nice guy at the same time.
And wouldn’t it be even more respectful if these multiple restaurants were owned by a worker co-op?
I don’t think so. There’s not much legally stopping people from setting up worker co-ops. And yet it’s seldom done. The main reason, I think, is that most workers don’t want to take on that risk as well. And then there’s Airman Spry Shark’s point underneath your comment.
ColoComment
Jun 7 2018 at 2:01pm
Good illustration of those two points, but to Robert EV’s suggestion of patronage / paternalism as the underlying motive for Hofman’s action, I’d like to suggest that the owner’s motivation(s) may be a bit more complex than simplistically reducing it to what sounds akin to noblesse oblige.
It’s also good business practice.
“Hofman said he already had plans to rebuild the Seaside McDonald’s.”
Why would he NOT find his employees temporary positions at his other stores if he’s got a great staff that he wants to keep on the payroll for when this store is rebuilt? Any of them could find another gig somewhere, and would [have to] but for the offer of continued income from Hofman. In which case, he’d have to re-staff & re-train a whole new batch of employees: there’s a cost to that, too.
A quick look around Google also finds these illustrations of mixed motives when making similar business decisions:
“I think it was a wise business decision, but that isn’t why I did it. I did it because it was the right thing to do,” says Feuerstein.”
https://www.cbsnews.com/news/the-mensch-of-malden-mills/
“It’s the only business decision that I could make,” he said. “I don’t think there’s anybody worthy to run this company but the people who built it.”
https://abcnews.go.com/WN/owner-multi-million-dollar-company-hands-business-employees/story?id=9875038
“Amazingly, the Yard House was able to keep paying their employees during the 13 week shutdown and nearly all of them came back to work.”
(Behind paywall; quote taken from photo blurb)
https://www.denverpost.com/2017/09/04/yard-house-colorado-mill-hailstorm-paid-employees-while-closed/
WalterB
Jun 7 2018 at 2:45pm
The mere act of helping people who are clearly in need of help is now derided as “patronage”? My, my.
David R. Henderson
Jun 7 2018 at 3:31pm
@WalterB,
Good catch. Thanks.
Robert EV
Jun 7 2018 at 11:25pm
@WalterB and the like.
I’m
bad at verbal expression and frequently resort to using a word which doesn’t quite express what I mean.
When I wrote “patronage” I meant “noblesse oblige”, and by co-op I meant employee-owned and managed.
This is an employer with a great sense of morals. His company is now an employee-owned and managed company.
ColoComment
Jun 8 2018 at 11:25am
RobertEV, it can be done. Whether it can be scaled and/or successful long-term is another issue.
New Belgium, in my neck o’ the woods, is 100% employee owned. It did and does manage its business affairs quite successfully.
https://en.wikipedia.org/wiki/New_Belgium_Brewing_Company
It’s a tough type of business governance to make a success, though. There must be a strong culture & understanding & acceptance by all involved of business priorities (in what order they’ll be honored: be they maximizing profits, putting money aside for expansion rather than paying it out to the labor side, being kind to the environment, etc.) to settle the inevitable conflicts of interest.
Mark Z
Jun 9 2018 at 7:32pm
There’s nothing morally superior about an employee owned business to one not owned by employees. The latter, however, is clearly superior in terms of employee preferences. There’s nothing illegal about employee co-ops. And yet, most employees prefer working at companies owned by investors; co-ops are at a strategic disadvantage. A big reason for this is that employees don’t like their pay check to depend on how well the stocks did this week. Investors are willing to absorb the risk employees aren’t. A co-op can’t guarantee a fixed wage irrespective of performance without assuming a guaranteed profit margin, which is impossible without rich members or donor(s) willing to make up the difference if the co-op has a bad month.
So there are technical reasons why investor owned businesses make more sense in general, and why they are therefore far more common.
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