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A Chronicle of the Howard Johnson Company – A Hospitality

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					A 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.

The Start

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
      Set standards
      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.

The Recovery

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.

The 1960s

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 Inn and 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
PLCof 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.




Current Profile of the Lodging Operation

Today, Howard Johnson International Inc. franchises over 500 hotels in 20 countries
and is still growing. For location information, go
to:http://www.hojo.com/HowardJohnson/control/locations_home

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.

For more information, go
to:http://www.cendant.com/announcements/proposed_separation.html

What Happened To the Restaurant Operations?
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
       restaurant chain.

				
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