THE SIGNAGE FOUNDATION FOR COMMUNICATION EXCELLENCE, INC.

The American business system is not only highly competitive, but also extremely varied, particularly in terms of types of ownership and operation. One cannot determine the value of on-premise business signage and the effect of regulation upon certain businesses without some background knowledge of certain discrete segments of the retail marketplace. One sector, which is often misunderstood, is franchising. The advent of franchising in the United States increased the diversity of the American retail economy and intensified the difficulty in comprehending it.

A comparison of two operations in the quick service food segment of the franchising industry will illustrate the diversity and subtlety of the system. McDonald's and Subway are both product franchisers; such franchisers retain considerable power over their franchisees, particularly with respect to operational management and quality control.

In the McDonald's franchise system, the parent company exercises nearly absolute proprietary control -- the franchisee cannot own the underlying real estate (McDonald's owns 95% of the real property of its sites) and must rigorously conform to certain standards or protocol which dictate not only the type of product and the manner in which it will be served or delivered, but also the type and manner of building and signage that will appear on site. Conversely, Subway, while exercising control over product, permits its franchisee control over building type and store "trade dress", with the exception that the corporate on-premise signage package must be utilized somewhere on site.^[16]

If diversity in the product franchise system is not enough, the business form franchiser is entirely different from either a Subway or McDonald's franchise. In most cases, the business form franchiser permits use of existing buildings and retention of real-property ownership, providing national major media advertising and marketing programs in exchange for 10-20% of gross revenues (the figure varies per franchiser). In this sense, the original small business owner and his/her business is preserved (i.e., a local motel or muffler shop), with the only changes ones of visual image and access to regional/national advertising. In the face of severe sign-size limitations and perhaps "mere survival" circumstances, these changes are especially beneficial. In such situations, the only drawback to franchising is that business must be increased sufficiently to afford the percentage of gross volume due to the franchiser. However, an effective on-premise signage program, in tandem with major media advertising, will usually bring in the necessary additional customers and dollars.

At least 50% of retail business in the United States today is controlled by national corporations, of which a significant proportion are product and business form franchisers.(Large national or regional, company-owned chains account for most of the balance.)^[17] The market recognizes that a standardized advertising and identification system, coupled with national marketing programs, increases business enough to justify a significant payment of gross income to a franchiser; because of this symbiosis, the on-premise signage programs for local franchises are inextricably tied to the parent company's major media advertising and marketing campaigns. Such major media efforts make certain that company trademarks and logos are prominently featured, and that these company "identifiers" are echoed on site, primarily by on-premise signage.^[18] In many cases, additional reinforcement of the company's image and its product/service is provided by "signature" improvements, further enhancing the site's total signage spectrum and ability to communicate with the consumer.

Because ownership and management controls differ from franchisee to franchisee, one cannot generalize about how much commercial speech a particular franchisee needs to be successful, or how the franchise system will respond to restrictive regulation.In instances of regulation which limits size or restricts content, or both, the franchise may forego creative sign design in exchange for standardized corporate signage, which enjoys near instant recognition by a majority of consumers, often without the business displaying anything other than a small corporate logo sign, perhaps reinforced by "signature/trademark" site design.

When municipalities attempt to "level the competitive playing field" between franchised and non-franchised business by an across the board restriction on size or copy or placement, or all three, the business most likely to suffer is the non-franchised business. Why? Because such regulatory practices may foreclose the ability of independent local business to respond to franchised competition through custom on-premise signage capable of effective communication without major media backup. Further, severe on-premise sign restrictions may have a chilling effect on federal small business programs designed to encourage the entry of minorities and women into entrepreneurial activities.

The view that franchising is anti-small business and that restriction to "identification only" signs is necessary to blunt its perceived competitive edge, also fails to recognize that the restriction may prevent the business form franchiser from providing ways for the non-affiliated small business to both stay in business and retain site ownership and control of day to day operations. On the other hand, if a community desires to encourage non-affiliated or independent business and thinks that small, "boutique" signage is the answer, it may drive the local independent business to franchise operations in order to offset lost revenues attributable to loss of an on-premise sign easily visible and readable to the passing potential consumer. In other words, since local independent business usually cannot afford the alternate commercial communication offered by major media advertising, particularly television, the business may turn to the franchiser as a "partner" in order to survive. Accompanying this partnership may be standardized retail signage -- a result possibly not intended by the community.

A sign code's influence on the competition between independent businesses and franchises should be reflective of the community's intent as established through meetings and input from the community's business owners, citizens, and planners. Therefore, before a community undertakes signage regulation, all members of the community should be given the opportunity to fully understand the role signage plays in the competitive battle between local businesses and between local businesses and those of neighboring communities, and to fully participate in the regulatory process from informed points of reference or contention.