Howard Johnson: How One Man Changed an Industry
One of the most iconic restaurant and hotel chains in the U.S. began very simply: With $500, a pharmacy soda shop, and a young man in debt.
Howard Deering Johnson was only 28 when he purchased the small pharmacy in Quincy, Massachusetts. Even though he took on the debts of the pharmacy with his purchase, his hope was to create enough of a success out of his small venture to pay off the debt he had inherited when his father died. He began with livening up the various sides of the business–from sending paper boys out to sell newspapers in nearby communities to revitalizing the old soda foundation, Johnson dove in and hustled hard.
When Johnson realized the soda fountain in his drugstore had become the busiest part of his business, the seed for expansion was planted. Heady with success, Johnson looked for a way to ensure the money would keep rolling in. Improving his already popular products through the soda fountain seemed like the best bet, so he started with the idea of creating his own ice cream for sundaes and floats.
The original soda fountain offered three ice cream flavors—the usual chocolate, vanilla, and strawberry—and though the ice cream was good, Johnson believed it could be great. He began working with hand-cranked freezers in the basement, testing recipes until he hit on the right one.
No one knows for sure where the new recipe came from. Some say it was a modification of his mother's recipe, others say he purchased it from a German immigrant and still others say he snagged it from a pushcart vendor for $300. Regardless of where it came from, the result was the same: a more delicious version of each of the original ice cream flavors, made with higher butterfat content and natural flavorings which soon had customers lining up at the counter to get a taste.
The Luck of Howard Deering Johnson
By 1928, Johnson had opened up concession stands along the Massachusetts beaches, all featuring the delicious ice cream. His small investment netted a cool $240,000 by the end of that year—more than enough to pay off his father's debt many times over, and plenty to fund whatever venture might come next.
Johnson sank his handsome profits into more products. He was soon selling hamburgers and frankfurters from his original location, and in 1929 he expanded to a second location. This one was a sit-down restaurant with a broader menu, and of course, that famous ice cream. Johnson was also working on expanding offerings of the sweet confection, eventually creating 28 flavors that became the keystone of his eateries. Flavors included unique options like Peppermint Stick, Orange-Pineapple, Burgundy Cherry and even Fruit Salad.
“I thought I had every flavor in the world,” Johnson has been quoted. “That ‘28' became my trademark.”
As the businesses grew, Johnson met with success in every venture. But his biggest break came from a stroke of pure luck. In 1929, the mayor of Boston prohibited the production of Strange Interlude, a Eugene O'Neill play, from taking place in his city. As a result, the production moved to nearby Quincy. Patrons of the play, looking for a bite to eat during the long intermission, discovered the Howard Johnson restaurant—and word of mouth began to spread like wildfire.
The Early Years
Not all was wine and roses, however. The stock market crashed in 1929. Johnson—now a savvy businessman—simply waited out the financial storm. Given the popularity of the newly-expanded menu of fried clam strips, baked beans, frankfurters, chicken pot pies, and more, this trying time wasn't nearly as difficult for Johnson's business as it was for others in the restaurant industry. When the economy began to look up a bit, Johnson convinced an acquaintance to get into the business by opening and operating his own Howard Johnson's restaurant in Orleans, Massachusetts.
What Johnson likely didn't realize at the time was that his idea would make history. The second restaurant used the company name but wasn't company-owned, making it one of America's first franchising agreements. Today franchising among restaurants is quite common, but in the 1930s, it was revolutionary.
Upon finding great success with the first franchise agreement, Johnson expanded to the tune of 39 more restaurants by the end of 1936. In a business-savvy move, Johnson bid for and won exclusive rights to place restaurants on the heavily-traveled Pennsylvania, Ohio and New Jersey turnpikes. By the end of 1939, there were a total of 107 Howard Johnson's restaurants along the highways of the East Coast. By the time World War II began, there were 200 Howard Johnson restaurants open for business.
Then things began a downhill slide.
By 1944, the number of restaurants dwindled to only 12. War rationing had decimated the company; food rations had cut down on the portions the restaurants could offer, and gasoline rationing had curbed long trips by vehicle, taking away the customer base. The rationing of sugar was an especially hard blow, as it meant less of the wildly popular ice cream for sale.
The changes forced Johnson to cut back dramatically on the number of locations open to serve the public. The company hovered on the verge of bankruptcy. Always one to readily adapt to change, Johnson kept his business afloat by manufacturing food and goods for military installations, defense contractors, and schools.
When the war was over, Johnson slowly reopened his East Coast locations and began to set his sights on the Southeast and Midwest. Americans hit the road again, and soon each restaurant became a resounding success. The number of restaurants boomed in the years following, and by 1951 there were more than 300 restaurants in business with overall revenue of $115 million.
An Iconic Look
One big secret to the success of Howard Johnson's restaurants was the roof. The long-lasting porcelain roof tiles were painted a vivid orange, a color that has been proven to catch the attention of motorists. Besides catching attention, the orange color was known to trigger subconscious hunger and feelings of excitement—all of which are a great way to entice hungry travelers to stop for a bite.
In keeping with Johnson's New England roots, a blue cupola and weather vane was placed on the roof as well. This look soon became ubiquitous of all Howard Johnson properties, and that visual branding would prove to be quite lucrative indeed.
Entering the Hotel Business
By 1954, Howard Johnson was well-established as one of America's first restaurant chains. With over 400 restaurants in 32 states, the Howard Johnson name was entering the lexicon of the American traveler, and it was time to offer something more.
The first Howard Johnson's motor lodge opened for business in Savannah, Georgia in 1954. Just like the restaurants, it featured the iconic orange roof and handsome weather vane. The lodge met with success, which led to further expansion. Some of the hotels were quite recognizable, with an extreme A-frame roof design that seemed revolutionary, ahead of its time, and even a little quirky. The smile those strange roofs brought to the lips of travelers only increased the hotel chain's allure.
Another factor that drove customers to the hotels was the fact that the buildings were placed very close to restaurants. Some hotels were adjacent to a Howard Johnson's restaurant, while later hotels actually placed the restaurant inside the building. Either way, weary travelers could be guaranteed a great place to sleep as well as a bite to eat before retiring, and that appeal helped catapult the chain to one of the most recognizable and popular in the world.
During this time, the company was looking into other ventures as well. The Red Coach Grill, an upscale restaurant chain, was aimed at the more discerning customer. Though it was well-received at first, the chain didn't last.
Ground Round, another restaurant concept that incorporated interesting new ideas including popcorn instead of bread at the table, tasty menus for kids, silent movies and cartoons playing on a big screen during dinner, and even a mascot known as Bingo the Clown. Although it is now under different ownership, the Ground Round chain has turned in a more upscale direction and is still popular today, with 30 locations in 13 states.
By 1959, Howard Johnson was ready to enjoy the fruits of his labor. It was time to explore retirement with his three homes and a 60-foot yacht. To that end, Johnson turned the company over to his son, Howard Brennan Johnson, who was then only 26 years old. Though the senior Johnson worked as chairman and treasurer, the day-to-day decisions on company operations and expansion fell to his son.
Two years after Howard Johnson stepped down from his position in the company, his son was determined to take the chain to new heights. In order to do that, the business would have to go public. That happened in 1961, when the company owned 605 restaurants, 88 motor lodges or hotels, 10 Red Coach Grill restaurants, and 17 manufacturing and processing plants. Net sales were reported at $95 million in 1960, with increases projected in the coming years. Going public gave the company the financial boost it needed to expand even faster.
By 1963, the chain had seen all-time high profits for four years running. Most of the restaurants were now company owned as the junior Howard Johnson worked to phase out franchising—he wanted to put more of that money into the company's pocket. By 1964, there were 130 hotels in business, each with a restaurant adjacent or attached. In addition, the most popular food offered by the restaurants was now being sold in grocery stores throughout the Northeast, including those famous 28 flavors of ice cream.
The early 1970s showed enormous profits for the chain, but there were struggles, especially with the higher prices of gasoline and fewer motorists on the road. For a company that catered to those who traveled across the country, this was a very bad omen.
The first full year of the energy crisis hit in 1974, but the chain continued to create revenue by changing things up. Many restaurants began offering 24-hour service, cocktail lounges began to replace soda fountains, and special menu promotions were designed to bring more customers into the expanded seating capacity of the majority of Howard Johnson's restaurants. Expansion of new restaurant and hotel options moved into population centers, rather than the highways that were once the company's bread-and-butter.
By 1975, there were a total of 929 Howard Johnson's restaurants, 536 motor lodges and several other active ventures open under the Johnson name. Expansion had spilled over the U.S. shores to Puerto Rico, the British West Indies, the Bahamas and Canada.
But despite all this change, the company was struggling. The introduction of cheap fast-food chains like McDonald's and Burger King meant increased heat from the competition, and hotel chains like Holiday Inn and Marriott fought for their market share by offering amenities that made Howard Johnson's locations seem old and outdated. As the public became more accustomed to food served almost as soon as they ordered it, even the service at Howard Johnson's—though it had not changed—was berated by many as agonizingly slow. The chain continued to offer the same things that had been so appreciated by travelers in the past, but now it was seen as not quite enough to entice the public.
That's when Howard Brennan Johnson made what many consider the ultimate bad choice. He chose to stop all expansion. Seeing that the company was bleeding cash as a result of the energy crisis, high gas prices, and competition, he chose to stand pat and hold onto the money that was coming in, but didn't reinvest any of that money in the current restaurants and hotels, nor build any new ones.
Johnson told a Forbes reporter in 1978, “My expansion plans got stalled in the 1974 oil embargo. I overreacted. I stopped all expansion, and once you stop, you know how hard it is to get the monster going again.”
Howard Johnson is Sold
Neither Howard Johnson nor his son had ever expressed interest in selling the company. On the contrary, they intended to keep it—or so everyone thought until 1979, when the family accepted an acquisition bid from Imperial Group Ltd. of Great Britain. For the Johnson family, the deal was incredibly lucrative; the senior Johnson alone collected over $35.2 million from the $630 million deal.
At the time of the changeover, there were 1,040 restaurants, 520 motor lodges and a few other ventures, such as the Ground Round chain. The successor to the Johnson family was G. Michael Hostage, a manager who had spent the previous 15 years with Marriott Corporation. He inherited serious problems from the Howard Johnson's brand, including a balance sheet that declined from $34 million in 1979 to $14 million just one year later.
Imperial dove into the challenge. Hostage vowed to unify the staff and ownership of restaurants and their adjacent hotels, allow restaurant managers to purchase food supplies from outside the company if they wished, and create food-and-lodging package deals designed to appeal to the money-conscious traveler. Some side ventures, such as the Ground Round chain, were expanded.
He was also quite serious about how the businesses appeared to discerning customers. Many of the restaurants or hotels hadn't been updated since the early ‘70s, which was a potential death knell in the wake of so many new, shiny competitor hotels. In order to keep their business partnership with Howard Johnson's, Hostage required franchise owners to spruce up their hotels and restaurants—he even offered low-interest loans to help facilitate the transformation.
In addition to corporate discounts, a new reservations system, and great marketing plans, expansions were planned that would include conference rooms, banquet areas, and executive-themed rooms.
A Slow but Steady Decline
By September of 1985, things weren't going very well for Hostage or Imperial. An offer from Marriott was accepted, and Imperial sold the entire company for $314 million. Immediately upon completion of the sale, part of the company was sold off to Prime Motor Inns, Inc. The restaurants and lodging were now owned by separate companies, and thus the breakdown began.
Marriott almost immediately began converting the iconic restaurants into Big Boy and Saga brands. The new owner worked depressingly fast; out of 199 restaurants in 1985, only 90 remained by 1987, and by 1991 there were only 50 still in operation.
Over the next several years, the hotel chain moved from one owner to another, each with bigger plans than the last. Eventually one of those owners, Hospitality Franchise Systems, took aim at the iconic orange roofs. They believed the roofs didn't project a progressive image. The buildings were gradually changed, and soon those interesting Howard Johnson's hotels looked just like any other hotel in any other well-populated area.
A merger with CUC International Inc. in 1997 almost brought the end for Howard Johnson's brand. A scandal that found CUC International inflating profit reports and bilking shareholders resulted in a class action lawsuit that threatened to decimate the new owners. During this time, the squeaky-clean Howard Johnson's brand was seen as a possible life-preserver for the sinking ship that was CUC International, and thus a strong marketing campaign began.
By the start of 2000, the Howard Johnson's name had regained dignity and a growth strategy was working. That led to the hotels that most people know today, which included Howard Johnson Inns (with restaurants attached or adjacent), limited-service Express Inns, high-end Plaza Hotels, and full-service Howard Johnson hotels.
Howard Johnson's Innovations
Even though the Howard Johnson's brand is not what it was during the best of its history, there are some innovations that make our lives much better today. Howard Johnson pioneered the idea of franchise businesses by allowing restaurant owners and eventually hotel owners to use the iconic name yet create their own business under that umbrella. The result was a franchise model that still exists today in almost every large service company.
During the struggles of World War II, Howard Johnson turned to feeding hungry soldiers, war workers, and school kids. The experience helped Johnson hone the process of packaging foods in a central location and transporting them to other locations for final preparation and cooking. He figured out how to package foods so that they could simply be heated up on site, which helped along today's modern food industry.
One of the most long-lasting innovations was the offer of fried clam strips in his restaurants. Though fried clam strips are quite common today, they were not at all typical during the early years of Howard Johnson's restaurants. Most places served the whole clam, which was off-putting to some customers. By serving only the clam strips, they could be eaten much like French fries, without sacrificing the taste seafood lovers sought.
When restaurant offerings were created, the little ones were not forgotten. Howard Johnson's restaurants are known as one of the first places to offer a dedicated kids' menu, a welcome change for road-weary travelers with children in tow. Today almost every family-friendly restaurant offers a kids' menu as a matter of course.
One of the most interesting innovations isn't about something Howard Johnson actually did, but rather, about how strongly the chain of restaurants and hotels was embedded in popular culture. The 1968 film 2001: A Space Odyssey was considered one of the first films to include ‘product placement.' One of the very clear product placements in the movie was for Howard Johnson's – the logo of the iconic brand is featured prominently on the space station.
Howard Johnson's Today
Today, Howard Johnson hotels can still be found throughout the nation, although they certainly don't look the same. Those iconic orange roofs are gone, and most look like any other hotel. Now owned by Wyndham Worldwide, Howard Johnson's marketing team has gone back to the company's roots and advertises the brand as a way to relive the bygone days of the American road trip.
When it comes to the restaurants, however, things aren't so promising. The restaurants attached or adjacent to the hotels gradually fell out of favor and were demolished by new owners, with the exception of a very select few. As of 2016, only one remains. It can be found in Lake George, New York. The orange roof still calls out to weary travelers, and the sign out front declares it the “Last One Standing.”
Out of everyone involved in the saga that was Howard Johnson's restaurants and hotels, Howard Johnson himself never lost sight of where he was going and where he came from. Until the day he passed at the age of 75, he has driven around in a fine black Cadillac with the license plate “HJ-28” – the number, of course, stood for the 28 flavors that launched his orange-roofed empire.