by Keith Aksel
As I explained in last week’s introduction, the American pro sports world is almost exclusively based on a franchise model of ownership, a fundamental principle that few observers fully comprehend. When events like the Rams’ move to Los Angeles occur, debates over relocation cover issues like ownership greed and self-interest. I argue that the enemy is not ownership, but rather the franchise model itself. It may seem obvious that franchises in pro sports are common, but sportswriters never stop and address the big picture. “Franchise” is a deeply important concept to grasp for American sports fans, and it’s time we dive in.
Because it shares the same lexicon as the business world, it is helpful to describe sports franchising through comparison with an overlord of American franchise businesses: the McDonald’s Corporation. This comparison is a simplification of the franchise model, but not an over-simplification. The principles supporting both pro sports franchises and fast food franchises are the key similarities for making my bigger points in this article.
McDonald’s established likely the most recognizable brand in the world, but allows private parties to subcontract that brand in their own individual franchises. Those privately owned franchises operate on their own, under the authority umbrella of McDonald’s corporate governance (that is the lamest sentence I’ve written in a long time).The company must approve new franchise deals, which require background planning and strategy to give franchisees a better chance of long term success.
American pro sports leagues largely operate under those same guidelines. Each league can approve expansion (adding new franchises) to private owners who are free to run their franchises as individual entities, under league purview. The league must sign off on the city a new franchisee prefers, a process that can take months, if not years, of planning and study.
The benefits to franchising can be large. Mickey D’s franchisees get the benefit of using the established brand to pull in sales. But, in return, the corporation receives a cut of revenue, and the franchisee must follow specific on-the-ground rules. McDonald’s franchisees are required to only use approved McDonald’s packaging bearing the company logo for its food. Failure to do so could result in fines or termination of the franchise agreement (although I assume the packaging thing would not elicit termination on its own).
Like McDonald’s, the NFL lends franchisees the use of the league’s money-making brand as long as they adhere to specific guidelines. For instance, the league mandates that NFL franchisees (teams) will follow league uniform rules. According to NFL bylaws, players can only bear the colors of the team approved by the league itself (Section 4, Article 2, if you care…). A failure to comply would result in fines and penalties for players and/or ownership.
The point of the sports-fast food comparison is to illustrate that the most important relationship in franchised sports is the relationship between the franchise (team) and the corporation (league), not between the franchise and the city it is located in. The city does serve a purpose for the franchise. The brand that a franchise attempts to build requires a buy-in by the city’s citizens, not to mention that the city name appears on team merchandise and facilities. But, as we have often seen, that city name is replaceable, sometimes many times over, as franchises relocate to find spaces that will better support the team. In other words, the franchise model treats a city as a vessel, a means to an end rather than an end in itself.
This is partly due to the go-big-or-go-home financial stakes involved in U.S. franchise models. Franchises in the NFL for example, start as big, expensive entities, and are expected to remain so to stay afloat. Franchise fees for the newest NFL team, the Houston Texans, reached approximately $700 million, not including the yearly investments that franchisees must make in their own team on a continual basis to conform to league standards. There is no lower tier for NFL teams to move down to when their fortunes fade. If you fail as an enormous NFL franchise, you fail completely, end of story. In the event that a city stops bringing the revenue and/or attendance that a franchisee foresaw, there are few ties that franchise laid that cannot be moved to a place that provides what the franchise needs. In that sense, a team’s ties to a city are a lower priority than keeping a franchise afloat- which often means relocation to a more fertile ground.
This brings us to the larger issue at hand. Because a pro sports franchise must start big immediately, there is little time for a team to foster a deep connection with its host city before operating. These franchises essentially pop out of thin air- where there was no team before, there is suddenly a billion-dollar behemoth taking over entire city blocks. Franchisees often do not live in the cities that their team is located in, operating as absentee landlords who visit their holding only when needed. Franchisees contrive an inorganic relationship to a city in order to get their team off the ground, but that relationship, as mentioned earlier, is a tentative one. With the exception of the Green Bay Packers, who have been owned by the public from the start, a franchisee essentially uses a city to house its business as long as the economic conditions are right. Just like the Golden Arches.
This is not to say that American leagues are okay with teams relocating willy-nilly. Leagues are almost absurdly careful about expansion, in the hopes that proper planning will eliminate the mistake of opening a franchise that doesn’t last. Which brings us back to the Rams: the leverage sought by Stan Kroenke for a new Rams stadium in Saint Louis was offensive to many, but altogether part of the franchise game. The Edward Jones Dome may not have actually been obsolete, but the desire to fund new facilities, and thus new energy behind the franchise, was all about keeping a big franchise’s heart beating. Just as suddenly as the Rams arrived in St. Louis from LA, they popped back up in So Cal as the latest effort to keep the monster alive. There is no telling where the team will end up ultimately- franchises that move often are more likely to keep moving. But the Rams’ lack of rootedness is precisely what keeps them from being rooted; franchises do not need to foster deep ties to a city, and there is little reason to think that those ties will suddenly appear this time in LA.
As I will show next week, club sports generally take an opposite tack. Buttressed by their league hierarchies, sports clubs are permitted to start small and grow gradually, a model that permits both deeper ties to the community and almost eliminates the incentive to relocate when conditions change. As some business scholars have pointed out, pro sports in the US is a sort of all or nothing venture. When it comes to club models of pro sports, this couldn’t be further from the truth.
 Yeah, I know club owners do the same thing. But, we are talking about how the absentee owner compounds already existing issues between a city and a franchise in this model.