Under the Influence with Terry O'Reilly - S3E19 - When Founders Are The Face of The Company

Episode Date: May 11, 2014

This week, we discuss what happens when founders are the face of a company. No one can relay the passion of a company like the founder - but while they may be the heart and soul of a company, should they be the face? Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please, do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan, you just have to love storytelling.

Subscribe now, and don't miss a single beat. From the Under the Influence digital box set, this episode is from Season 3, 2014. You're so king in it. You're loving it in style. Your teeth look whiter than no, no, no. You're not you when you're hungry.

You're in good hands with us. You're under the influence with Terry O'Reilly. If I were to ask you what a diesel is, you might say it's an engine that runs on diesel fuel. And you would be correct. But would you be surprised to learn that the diesel engine was invented by someone named Diesel? Rudolf Diesel was a gifted engineer who knew that 90% of the energy available in fuel was wasted in a steam engine. His idea was to build an engine that didn't need external ignition to spark the fuel, but rather to create so much compression that the fuel would ignite on its own.

An early prototype exploded and almost killed him, but it proved his theory correct. Fuel could be ignited without a spark. One year later in 1898, Diesel unveiled an improved engine that delivered more power less expensively. His invention ran with an efficiency of 75% as opposed to the 10% efficiency of the modern-day steam engine.

His invention was immediately employed to power cars, trucks, boats, electric and water plants, factories, and oil fields. By 1912, there were 70,000 diesel engines working around the world, and Rudolf Diesel became a very rich man at the age of 40. One night in September of 1913, he boarded a ship to travel from Antwerp, Belgium to London, England to attend an important meeting. He ate dinner in the dining room, then retired to his cabin around 10 p.m., asking for a 6.15 a.m. wake-up call. But the next morning, his cabin was found empty.

His bed had not been slept in, his nightshirt was neatly laid out, and his watch was placed on the nightstand where he could see it from the bed. Ten days later, the crew of a Dutch boat came across a corpse floating in the sea. While the body was too decomposed to identify, the crew did retrieve a wallet and ID card. The name on it was Rudolf Diesel.

The death was officially ruled a suicide, although many considered it unlikely. Murder was the most probable cause of death, as his invention threatened the profits of many high-powered industries like the coal business. In any event, the case was never solved, and the founder of one of the most enduring inventions of our time had mysteriously vanished. In the world of marketing, founders play a vital role. They are not only the visionaries creating extraordinary products, but many times, those founders are also the spokespeople for their companies. It's an interesting marketing strategy, as no one can speak with more passion about a product than the founder.

But, on the flip side, founders are not invincible, nor are they above the founder. But on the flip side, founders are not invincible, nor are they above the law. When companies tie their fortunes to their founders, it can sometimes cause a lot of drama. And it makes for some fascinating stories when the founder is the face of a brand. You're under the influence. An advertising campaign can take many forms. It can be humorous or dramatic, a product demonstration or a hard-sell list of facts.

It can be populated by actors, experts, or real people, and sometimes, it can even feature the founder of a company. Choosing to put the founder in commercials is always a big decision. They might be the brains

behind the operation, but should they be the face? And what does a company do if something happens to the founder? Back in 1930, a man is operating a service station in Corbin, Kentucky. He begins to cook meals for hungry travelers who stop for gas. He doesn't have a restaurant, so he invites customers to sit at his own dining room table. His name is Harland Sanders.

One thing becomes clear. Customers love his food, and he realizes that busy people appreciate a good, quick meal. His food became so popular that he moved across the street to open a motel and restaurant to increase capacity. He called it Sanders Court and Cafe. As his fame grew, the Kentucky governor made Harlan Sanders an honorary Kentucky colonel in 1935 to recognize his contribution to the state's cuisine. Over the next 10 years, Sanders noticed that his chicken was the favorite menu item.

So he started to perfect a secret recipe of 11 different herbs and spices. Things went exceedingly well, until something happened in 1955. A new interstate highway was built. It diverted all the traffic away from his restaurant. The business he had spent 25 years building was gone in an instant. So, he auctioned off the restaurant and all of its contents, and decided to devote himself to franchising his secret recipe for fried chicken.

It's a remarkable moment, because Harlan Sanders was 65 years old. But he had instincts for marketing and a knack for selling. He began by rebranding himself. He modeled his new look after an old Kentucky colonel he used to see in cartoons growing up. White suit, black string tie, goatee, and mustache. As he later said,

he dressed to stand out. Then he jumped into his 1949 Ford and crisscrossed the U.S. trying to convince restaurant owners to add his chicken to their menus. The first true standalone franchise opened in Utah. A local sign painter coined the name Kentucky Fried Chicken, which the colonel loved because it distinguished his product from southern fried chicken.

A franchisee named Dave Thomas in Columbus, Ohio, develops the rotating bucket sign that would become world famous. A franchisee we'll hear more about later. When a local TV commercial is made that shows someone eating the chicken and licking his fingers, viewers call in to complain about the lack of manners, prompting the manager to defend the commercial by saying, well, it's finger-lickin'

good. And in that moment, one of the best-known slogans of the 20th century was born. Within 10 years, Colonel Sanders had over 600 franchises across the nation. Broke at 65, he was now rich at 75. The Kentucky Fried Chicken business grew so quickly it began to overwhelm the Colonel. So, he sold it to a group of investors in 1964. The Colonel was given a lifetime salary

and he signed an agreement to be the company's quality controller and, importantly, its face and trademark. I'm Colonel Harland Sanders and I'd like to tell you a little bit about my Kentucky Fried Chicken. Hey, you two coming? You go ahead, honey. I want to talk to these folks a little bit longer. Now, I said Kentucky Fried Chicken. There's only one way to cook Colonel Sanders' Kentucky Fried Chicken, and that's my way. We always use plump, young broilers, always fresh, never frozen chicken. It's cut

in pieces and each piece is dipped in milk and egg wash, then into seasoned flour, in which we have the 11 different spices and herbs for flavor. In the mid-60s, the colonel got into his first disagreement with head office. They moved their headquarters from Kentucky to Nashville, which incensed the colonel. Then, the company prepared to expand it to Canada, but the colonel blocked that move saying the sale agreement only covered the U.S. An out-of-court settlement was reached, and the colonel retained the rights to Kentucky Fried Chicken in Canada. He actually moved to Mississauga in 1965 to oversee his operations

and would live in a modest bungalow on Melton Drive until his death 15 years later. In 1973, the colonel sued the KFC parent company over alleged misuse of his image in promoting products he had not developed nor approved. Two years later, KFC sued Sanders for libel after the colonel publicly described their gravy as, quote, wallpaper paste, suggesting it was finger-lickin' bad. KFC lost the case.

It was a delicate time for Kentucky Fried Chicken, as there's nothing more damaging than a messy legal battle with your own spokesperson. Then, in 1980, Colonel Harlan Sanders, the man who began Kentucky Fried Chicken at 65, passed away at the age of 90. Meanwhile, the company was faced with a big dilemma. Their spokesperson was dead. Everything from the packaging to the advertising to the store signage

was completely tied to the Colonel in 48 countries around the world. For many years, the company struggled to keep his image alive in its marketing. At one point, an actor that resembled the Colonel was hired, but viewers weren't buying it. Then, an animated Colonel was created, voiced by actor Randy Quaid. A little chicken music, please. Thigh bones connected

to the wing bone. Wing bones connected to the drums. Hold it, hold it, stop the music. There's no bones in my crispy strips. Just juicy white breast meat, freshly prepared. A real meal. And this crispy strips meal is just $2.99. Bones not included.

Viewers just found it unsettling. Finally, after many fits and starts and experiments and failures, KFC decided to finally distance itself from its southern founder. It was a lesson for many companies that the death of a founder spokesperson had to be handled with great sensitivity and that the worst thing you could do was try to bring them back from the dead.

Today, over 60% of adults 18 to 25 don't know who the colonel is and the ones who have heard of him think he was the creation of KFC instead of the other way around. But KFC has survived, and a stylized rendering of the Colonel's face still graces their logo. The company has 18,000 locations, head office is back in Kentucky, and annual revenues top $15 billion. And that's a long way from the very first franchise

in the early 50s. Which brings us back full circle to Kentucky Fried Chicken franchisee Dave Thomas. And we'll be right back. If you're looking for flexible workouts, Peloton's got you covered. Summer runs or playoff season meditations, whatever your vibe,

Peloton has thousands of classes built to push you. We know how life goes. New father, new routines, new locations. What matters is that you have something there to adapt with you, whether you need a challenge or rest. And Peloton has everything you need, whenever you need it. Find your push. Find your power. Peloton. Visit Peloton at onepeloton.ca.

If you're enjoying this episode, why not dip into our archives, available wherever you download your pods. Go to terryoreilly.ca for a master episode list. Dave Thomas left high school to work in a local restaurant at the age of 15. At 18, he went into the army during the Korean War. When he was discharged, he discovered his old restaurant boss now owned a few franchises of a new concept called Kentucky Fried Chicken. But the restaurants were not doing well,

so his boss made a deal with him. Save the franchises in Columbus, Ohio, receive 45% of the profits, and become a partner. Thomas jumped at the opportunity and in no time had turned the KFC outlets around. He met Colonel Sanders in 1956 and was deeply impressed with his dedication to quality and his marketing expertise. He suggested to the Colonel that the famous bucket be used as a rotating sign outside restaurants and even told Sanders he should star

in the company's commercials. Sanders was impressed. Years later, Thomas would say that the Colonel saved him because by 1968, a once-broke Dave Thomas sold his KFC franchises for $1.5 million. Not long after, he complained that he couldn't find a decent hamburger in Columbus

and decided to open his own restaurant in November of 1969. He named it after his 8-year-old daughter, Wendy. The restaurant showed a profit after only 6 weeks. In 1973, he followed the example of his mentor, Colonel Sanders, and started selling franchises. Within 10 years, Wendy's had 1,000 locations. By 1984, Thomas had given up the day-to-day operations. But not long after, the company started to falter. The new president urged Thomas to take on a more active role again.

So, in 1989, Dave Thomas returned to become the quality control inspector and TV spokesman, just as his mentor Colonel Sanders had done many years before. If I was stranded on a tropical island and I could have only one meal, what would it be? It would be this, a Wendy's Old Fashioned Single Combo. It has all the things I love. A Wendy's quarter pound single served hot off the grill, an order of Biggie fries, and an ice cold 20 ounce drink. It's the best meal you can have, certainly around here. His on-camera style was anything but polished. He seemed bashful, low-key, and homespun.

People loved him. In a survey a few years later, low-key and homespun. People loved him. In a survey a few years later, it was found that 90% of North Americans knew who he was. As a matter of fact, Dave Thomas starred in over 800 commercials, the most in advertising history for the founder of a company. Dave Thomas' humble personality helped make Wendy's the number three burger chain in the world.

In 1993, Thomas decided to go back to high school to get his diploma. At his graduation, at the age of 60, his classmates voted him most likely to succeed. He continued to

do Wendy's commercials right up until his death in 2002 when he died the company immediately edited all the ads to remove him feeling it was unseemly to continue with his image but Wendy soon learned it had underestimated his bond with consumers. So, within five months, they released ads that promised the food would still be prepared Dave's way and sent posters of Dave to all its outlets saying, Our name is Wendy's, but we'll always be Dave's place.

Wendy's seemed to do it right. They refused to bring Dave back in the form of an actor or an animated character, but preferred instead to continue to think of ways to honor and remember him. In spite of losing their founder and spokesperson, Wendy's has managed to survive and thrive, and today has over 6,500 stores in 27 countries. Today we're going to make a wreath of succulent plants, learn how to choose pots and pans,

how to care for your gardening tools, and how to make flavored oils. Losing a founder is a critical fork in the road for most companies because a founder is not only the face of a company, but its heart and soul as well. In February of 2004, Martha Stewart, founder and sole spokesperson of Martha Stewart Living Omnimedia, was sentenced to five months in prison for insider trading.

While many high-profile CEOs had been indicted for similar offenses, few of them were the face of a media empire like Martha Stewart. By the early 1990s, her company had grown to include two magazines, a popular television show, a syndicated newspaper column, a series of how-to books, a radio show, a website, merchandising, and $763 million in annual sales. Every division of the company was branded with Martha's face, taste, and style. So the day the jail sentence was announced, the company braced for the worst. Viacom immediately pulled the Martha Stewart TV show from its CBS outlets,

which accounted for many of the show's major markets. The stock price of Martha Stewart Living Omnimedia plunged from $49 to $5.26. Magazine subscriptions fell 21%. Advertising revenue losses were pegged at more than 30%, all of which resulted in the company registering its first annual loss ever. After this sentence was handed out, the company started to de-brand the Martha Stewart brand. It introduced two new magazines that didn't bear her name.

It launched a new non-Martha TV show about pets and began to make other plans that further distanced itself from its founder. But Martha Stewart wasn't happy about that. She strongly felt her brand

was inextricably tied to her personality. And she also felt she could overcome this setback in time she responded from prison by doing what one writer called some significant office redecorating she fired her ceo and brought in a new president and new chairman after all martha may have been in the slammer but she was still the majority shareholder. But then something interesting started to happen while she did her time.

Her stock price began to rise considerably as investors started betting on a Martha Stewart comeback. Plans for two new Martha Stewart TV shows were announced just before her release. A Gallup poll in August of 2005 showed that Martha Stewart had a 52% favorable rating, a higher score than she had six years before the indictment. When she was finally released, she went right back to work to rebuild her brand. Within five years, she had added over 5,000 new products, she had published her 71st book, ran four magazines, and had four new TV shows. All told, it was a fascinating lesson in contemporary business. Clearly, the public has a short memory when it comes to mistakes made by

people or brands they love. And Martha Stewart was proved correct in her assessment of her company. It was better to maintain her powerful branding than to distance itself from the setback. Unlike Colonel Sanders and Dave Thomas, Martha

Stewart was able to achieve something neither of those two founders could do. She came back from the dead. If you're looking for flexible workouts, Peloton's got you covered. Summer runs or playoff season meditations, whatever your vibe, Peloton has thousands of classes built to push you. We know how life goes.

New father, new routines, new locations. What matters is that you have something there to adapt with you, whether you need a challenge or rest. And Peloton has everything you need, whenever you need it. Find your push. Find your power. Peloton. Visit Peloton at onepeloton.ca. The Men's Warehouse is a fine men's specialty store. We are not a place where you can buy a cheap suit cheap. We are a place where you can buy quality designer clothing at a 20 to 30% discount. I guarantee it. A familiar face with a familiar voice.

George Zimmer has been the longtime spokesman for Men's Warehouse in the U.S. and recently for Moore's Clothing for Men here in Canada after purchasing the Canadian company. His longtime sign-off line wasn't just a slogan, it was his personal promise. You're going to like the way you look. I guarantee it. Zimmer founded Men's Warehouse back in 1973 in Houston, Texas. Since then, it has grown to include more than 1,200 locations. And one in every three tuxedos rented in North America comes from Zimmer's stores. He has been the company's spokesperson for almost 30 years.

Then, one day in June of 2013, George Zimmer was fired by the board of directors from the company he founded. Reports stated that Zimmer had relinquished the day-to-day running to a new president but had a hard time giving over control. Further rumors stated that he was trying to take the company private, which the board was against. So, he was terminated.

But it wasn't just another CEO firing because Zimmer was the founder and 30-year public face of the company. Many customers protested his ousting. One person on Facebook said, You're going to miss the way I shopped. I guarantee it. Business Insider reported that after Zimmer's firing, shares tumbled 10% and profits were down by 28%. The first non-Zimmer commercial got a big thumbs down from the press and many customers. And while the company has a legal right to use Zimmer's image and over 500 hours of his footage,

as of this writing, it hasn't exercised that prerogative. They're in that same bind that Kentucky Fried Chicken and Wendy's was in, except their founder didn't die, he was just banished. Which is a similar fate in marketing. George Zimmer's campaign wasn't particularly creative, but it resounded with men. He wanted to establish his company's credibility in the low-price apparel market

by going on air to state he would stand behind every purchase. Because, as Zimmer said, if they can't believe the company founder, who can they believe? And, according to the New York Times, the company spends less on advertising than its competition. When you can spend less and still get as much attention, something is working. The current friction between the company and Zimmer is messy and very public. It will be interesting to see how Men's Warehouse in Moores does over the next five years, and how they overcome the loss of their firmly established spokesperson.

It won't be easy. I guarantee it. It is widely believed that almost 50% of a company's reputation is attributed to the founder or CEO. A founder has a special place in a company. They are significantly different from a CEO because they hold the original spark. They are the ones who slammed their fist on the table at one point in time and said, there has got to be a better way.

And that better way launched a company. Founders feel that putting their face in the company marketing signals their willingness to stake their personal reputation on their product. It's powerful marketing if that founder is compelling. The Colonel was utterly unique in look. Martha Stewart is inventive and prolific. George Zimmer was a straight shooter with a distinctive sound.

Yet, Dave Thomas was the opposite of the above. He was bashful and always dressed in short sleeves and an apron, proving that the term compelling can take many forms. When done right, a founder's presence in advertising creates a kind of personal relationship. It's easier to identify with a brand that has a human face. People liked Dave Thomas' humbleness. Women talked about being like Martha. Men could relate to George Zimmer's gritty style. A founder's charisma can overcome many obstacles, be they competitors' claims, market forces, prison terms, and sometimes even death.

It's all part of the secret recipe of marketing when you're under the influence. I'm Terry O'Reilly. Hi, Terry. I have to say I'm amazed. First, he stars in FCTV. Then he does Mackenzie Brothers. Then a couple of sitcoms. And he still had time to open a thousand Wendy's restaurants. Dave Thomas was amazing.

Cheers. Under the Influence was produced at Pirate Toronto. Sound engineer, Keith Ullman. Cheers. influence. Okay, I won't beat around the bush. I like the cut of your jib. And your jib would look even better in an Under the Influence t-shirt. You'll find them on our shop page at terryoreilly.ca slash shop. See you next week.