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Complete Story of Reed & Bell |
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The Volstead Act of 1919 had prohibited the sale and consumption of alcoholic beverages, so soldiers returning from the World War I battlefields in France flocked to Allen's root beer stand, finding the beverage a palatable substitute. By the summer of 1920, in order to meet the growing demand for his product, Allen opened a second root beer stand in Stockton, California. With more and more people clamoring for his product, Allen formed a partnership with Frank Wright, one of his employees, in order to establish five more outlets in the Sacramento area. After formally naming their product "A&W Root Beer" (the name reflecting the initials of the two partners), more outlets were opened in Houston, Texas, in 1922. Capitalizing on the increasing mobility of the American public, and the fact that more people were purchasing automobiles, Allen came up with the idea of transforming the root beer stands into drive-in restaurants. As people headed downtown in their cars on steamy summer evenings, Allen attracted them to his root beer stand by providing "car hop" services. Modeled after the bell hops of exclusive hotels, "tray boys" were hired to deliver root beer to customers while they sat in the comfort of their automobiles. By 1924, with the popularity of his soft drink and drive-in outlet assured, Allen decided to buy Wright's share of the business. At the same time, Allen registered the name "A&W Root Beer" and the A&W logo with the United States Patent and Trademark office, and began a comprehensive strategy to expand his business throughout the western United States. His first move was to establish a franchise restaurant chain for A&W Root Beer Stands. Selling the rights to franchises in Oregon, California, Washington, Nevada, and Arizona to two businessmen, H.C. Bell and Lewis Reed, the outlets within these states were renamed "Reed & Bell Root Beer." Then Allen moved to Salt Lake City, Utah and restarted his business. By selling A&W franchises throughout the United States, except for the five states where he had sold the rights to Bell and Reed, Allen created the very first restaurant chain in America. Demanding and meticulous in his franchise agreements, Allen stipulated in each contractual arrangement the precise design and floorplan of each root beer drive-in restaurant, the design and weight of the mugs his root beer was to be served in, and the mixture of the brew that had established his reputation and had given him a fortune. By the end of the 1920s, the A&W Root Beer Drive-In was becoming a common sight to many Americans. The Great Depression and World War II The crash of the stock market in the autumn of 1929 had profound effects for the entire American economy and the population across the country. Depending on the area of the country, A&W Root Beer Drive-Ins either thrived or closed down. Due to the drought in the southern part of the country, and the dust bowls across the Plains States, many A&W Drive-Ins were forced to cease operations. In general, however, the franchise drive-ins continued to increase in number throughout the 1930s, and in 1933 Allen happily reported that there were over 170 A&W outlets in the United States. By the end of 1941, when the United States entered World War II, more than 260 A&W outlets were in operation. Unfortunately, the advent of the war had a deleterious impact on A&W Root Beer Drive-Ins. Not only was there a shortage of employees, caused by young men going to the war and young women taking jobs to fuel the production of wartime materials, but the essential ingredients to make root beer were simply not available. Sugar and extract were scarce commodities, rationed carefully to the American public for consumption. Not a priority business for the success of the American war effort, A&W Root Beer Drive-Ins began closing at a rapid rate. When the war ended in 1945, nearly 80 of the A&W outlets across the country had been forced to close due to the shortages resulting from the war. Growth and Prosperity in the Postwar Era When Reed and Bell's franchise agreement expired in 1945, the A&W rights reverted to Allen, along with all the outlets run by the two men. With soldiers returning from overseas, and the government's offer of easy-to-obtain GI loans, hundreds of new A&W outlets opened across the United States. By 1950, over 450 A&W outlets were in operation. However, Allen suddenly decided to sell the business he had founded due to the illness of wife. A businessman from Nebraska, Gene Hurtz, became the new owner and immediately incorporated his holdings as the A&W Root Beer Company. Hurtz's management style allowed individual franchisees to run their business as they pleased, including marketing and public relations functions. In addition, Hurtz maintained an extremely small staff at his corporate headquarters, having no intention of providing extended support system for the franchisees he had contracted. Although franchisees grew more displeased with Hurtz's management style as the 1950s progressed, the number of A&W outlets continued to grow. Perhaps Hurtz's most important decision during his time as leader of the company was to allow the franchisees to serve food and develop their outlets as drive-in restaurants. By the end of the decade, there were more than 1,900 A&W restaurants throughout the United States, and the first outlet outside the country had opened in Canada. Growing discontent among the franchisees led Hurtz to sell the company in 1963 to the J. Hungerford Smith Company, the firm which had been brewing the root beer extract and bottling it since 1919. Hungerford was acquired by the United Fruit Company just three years later, and in 1970 management at United Fruit Company decided to merge with AMK Corporation in order to form United Brands Company. During these years of changing ownership, the A&W Root Beer Company was changed to A&W International, to reflect the firm's growing international operation, and a new marketing strategy was implemented which focused less on the root beer brand and more on the drive-in restaurant. Thus the promotion and success of the A&W outlet became more important than the promotion and sale of the root beer extract itself, a decision that would dramatically affect the viability of the company. Growth and Transition in the 1970s-80s United Brands management decided to bottle A&W Root Beer for distribution to retail stores during the early 1970s. Despite the somewhat altered flavor effected by the difference in packaging, the introduction of the beverage was successful and the company introduced Sugar Free A&W Root Beer in 1974. In conjunction with the development of these two products for the retail market, the company formed A&W Beverages, Inc., a wholly owned subsidiary with the purpose of selling the root beer to consumers apart from the restaurant chain. By 1976, A&W Root Beer had become the leading root beer sold in bottles and cans within the United States, surpassing long-time leader Hires. In 1978, company management at United Brands decided to form another wholly owned subsidiary, A&W Restaurants, Inc., to manage the growing number of restaurant franchises. The separation of the beverage from the restaurant chain, however, as distinctively administered entities and operations, gave rise to the prospect of each one becoming a takeover or acquisition target. In 1982, in a move that surprised no one, United Brands Company sold A&W Restaurants, Inc. to a well-known and enterprising real estate developer, A. Alfred Taub |