Jack Russell, president of Ja-Bo, Inc., was born and raised in Peoria. Upon graduating from the University of Montana, he completed a term in the U.S. Armed Forces and decided to enter the hotel/restaurant business. He spent two years at the Sheraton Cadillac Hotel in Detroit before entering the training department of Kentucky Fried Chicken in 1971. Eight months later he opened KFC’s training school on the West Coast, becoming the personnel director for the region. After a six months temporary assignment to Hong Kong, he spent six years in England for the KFC company. After returning to the U.R., while working in San Francisco, the Peoria area KFC franchise of seven stores went up for sale. Jack and his wife Bonnie purchased the franchise with the help of an SBA loan package in November 1982. In 1984, they added another KFC store in Bartonville.
As a small business owner, what are your major concerns in today’s business economy?
There are several, but one of them is rising costs. That includes everything from mandated coverages, such as potential healthcare mandates, to a tightening labor force which forces us to pay more for labor.
The healthcare issue is really going to play a larger role in small business. Within the next ten years, I believe we are going to see close to a revolution in business as we know it. Healthcare is a big concern for me. I fully accept the fact that we have to do something about healthcare to get more people covered. We are actually covering the uninsured now, by passing the costs on to the people who are paying.
We offer health insurance and many people refuse to pay for it because they can get the same care free, without paying a deductible. They are making smart economic decisions. Why should they buy healthcare when they can get it free? Business often gets accused of just not caring for people and not wanting to offer health insurance. A lot of businesses do care and try to work something out, but people don’t want the healthcare plan offered because they can get it free. The healthcare issues is going to come down, and from what I’ve heard, small business is going to get hurt worse than anyone. Big business will probably come out a little bit better.
What will be the cost to small business?
I don’t think anyone has put a pencil to the shake-out costs of expanding healthcare coverage. My fear is that nobody is going to take a hard look at what mandated healthcare is going to do to small business. Small retail business of less than $10 million operate on a bottom line margin of about 2-3 percent. That doesn’t allow much of a cushion. When all of a sudden you add mandates like family leave and ADA (and there will be more as time goes by), and then put healthcare on top of this, I’m afraid it will force some small businesses out of business. 2-3 percent is just not a large margin. And kind of a “hiccup” means the business is gone.
As the cost of mandated healthcare emerges, businesses will have to make a decision to do one of two things: raise prices or cut costs. Raising prices in this day and age is very dangerous. People are very conscious about value for money. The biggest cost of most businesses is labor. As more and more costs are added to labor, we will see the same thing happen to many businesses that happened to gas stations. In the ‘50s and ‘60s you had full service gas stations; now you have a convenience/gas station with one person at the counter. Small businesses, franchisees and anyone who can will be pushing for some kind of automation to cut costs. Our fast food industry will be looking for automation, to the place where one day a person won’t even be needed in the kitchen; we will have literal microwaveability. Taco Bell has already worked very hard at taking production out of the store through pre-packaged goods. When this occurs, people at entry-level and low-level jobs will be pushed out of the workforce onto the welfare roles. So by trying to get everyone insurance we will put people on public assistance to a greater degree than they are now.
All of this will result in fewer entry-level jobs. Our industry gets knocked by many people who say, “Well, you don’t want to be a hamburger-flipper or a chicken cook all your life.” This misses the point; we are an entry level employer from where people move on. With us, workers learn to show up on time, to work as part of a team, to be clean and to follow instructions – to be part of the workforce. But if we can’t even get workers into the workforce, how does the next group get them? Small business is really going to take a hit, and I don’t think anyone has figured out how many people are going to be forced out of work. Every time the minimum wage is raised (and nobody but some of the Republicans in Congress wants to look at this) is costs the workforce one- to three-thousand entry level jobs. They just disappear, because we can’t afford them. Right now, minimum wage is $4.25, but our average wage is $5.00. Who’s at minimum wage anymore? As wages go up, we as franchisees tell the corporation, “You’ve got to help us cut our costs through automation. Find us some way to do things that will cut down on preparation labor in the back of the store, which is our production facility.”
One of the proposals of the Clinton administration to finance healthcare is a seven percent payroll tax. How would that affect small business?
A seven percent payroll tax puts us out of business. We’re gone! We close up shop and go home; it’s that simple.
Illinois’ Worker’s Compensation costs are of major concern to many businesses. How does this cost affect your business?
We don’t have a problem with it. We have a safety incentive for our people. If people don’t get hurt, the managers get a bonus. The objective is to run a safe workplace. The other thing that really helps us is we’ve been with out insurance company for a long time and we have a good record. We work hard at keeping our workplaces safe. We try to keep a clean workplace, and if you do that, you are not going to have as may accidents. We don’t have a big problem with the Worker’s Comp issue.
Do you face a problem in hiring the workers that you need to successfully run your business?
Our industry now is very different from what it was twenty years ago. It used to be that we were the recipients of the baby boom generation, and it was great. There were more young people wanting to work than you can imagine. So you just picked some our and they usually worked out fine. Kids really wanted to work and earn money then, and fast food was an exciting, new opportunity.
Fast food work today is not the “in” thing. Kids are more picky about where they work; they would rather work at a T.J. Maxx, a Famous Barr, a record shop or someplace other than fast food. Having said that, we do get a hard-working group of people. We try to devise ways to keep our workers in an ever-changing workforce, from employee committees to merchandise incentives and ways to get raises. I try to get involved as much as I can with managers and employees finding out what challenges and motivates workers. We employ workers from a variety of places – from the high schools to ICC to work-release programs.
You mentioned that you have to pay wages higher than minimum wages often associated with fast food because of a shortage of labor. When did this start happening?
The shortage has probably been in the last two or three years. The workforce change began about September of 1988. It’s funny to put it that way, but in talking with my managers, we determined that, starting at that time, we began having problems attracting and keeping workers. I have talked to other people about this and we have concluded that was when the children of the baby boomers began entering the workforce. It was the start of the new workforce, more or less. It is a different generation. You have to motivate these workers differently – talk and work with them differently.
How are family leave and ADA affecting small business today?
What they do is form a compression on a small business. These things mandate what you have to do, and when you are mandated as to what you have to do, it limits you as to what you can do and how you can do it. Family leave is great and everyone wants it. That’s fine if it’s applicable to your situation. We’ve been practicing family leave for several years in an effort to keep employees. But in many companies, mandated family leave limits the other benefits they might be able to offer. Maybe an employer who has to offer family leave benefits cannot then offer an educational bonus, an incentive program, a healthcare contribution or some other program. No one takes all the effects of these mandates into account. You only have a certain number of dollars, and if you have to put them one place, you can’t put them in another.
We have a program that pays for tuition and books to ICC for employees who have worked a certain number of hours for us. We have kept some of our best employees through this incentive. With costs of labor rising because of government mandates, these are the types of things that get cut out. Right now we have our education policy on hold because things are so tight.
You are currently chairman of the board of the Peoria Area Chamber of Commerce. How did you first get involved in the Chamber and how did your leadership there develop over the years?
About eight or nine years ago I talked to Phil Carlson about getting involved with the Chamber. They put me on the government committee and every Tuesday I attended City Council meetings. That was the start of my involvement. I was later given the chance to be on the board and served on various committees. I was chosen chairman last year.
One of the criticisms of the Peoria Area Chamber of Commerce by small businesses has been that is has ignored the needs of smaller businesses, concentrating on the larger businesses in town. As a small business owner yourself, what is your perspective on this?
I can understand where they are coming from and they have a point. That is one of the reasons we have gone through a restructuring of the board and its committee system, flattening the organization. There used to be four councils: small business, government relations, organization, and downtown development. We started asking the question “What is really important?” We did several surveys and got a lot of feedback from our ambassadors and sales team.
The results directed us to restructuring into what the organization is now.
Instead of four committees we now have seven. Education and some other concerns used to be under government relations, but now are separate committees. There will be both a transportation and a communications committee. One of the things we heard from our members was, “We don’t know what you’re doing. Tell us what you are doing! All we hear about is all of the downtown development concerns. Are you doing anything else for us?” We didn’t communicate effectively to small businesses about what we were doing for them.
There will be more people on each of these committees. Before, committee members were basically board members. Now more committee members will me from member companies. We will also have more subcommittees, which will get many more small business people involved. That will give us much better feedback and input because we will have a much more diverse group.
What are your thoughts on downtown development and the merging partnership that seeks to coordinate downtown and riverfront development?
This city turned its back on the river for decades, if not centuries. Everything downtown faces the bluff, and we literally turned our back to the river. Now we are changing that; we realize we have an asset here, and we have to turn it into the best asset we possibly can. To go along with that, the river is not Peoria’s responsibility; the river is the area’s responsibility. The riverfront has two sides; it is the Peoria side and the Tazewell and Woodford county side. We have to get everyone involved. The last thing we should do is run off helter-skelter saying, “This is what we are going to do. The rest of you don’t count.” We need to say to Tazewell and Woodford counties: “Here are some plans that we have. What do you want to see on the riverfront? Let’s do some tradeoffs.” We have an asset in the river that should never be a divider; it should be a bridge – a way to develop this entire area. The riverfront could be a potential draw for tourism, industry, commerce, and culture for miles around. If we work together in developing both sides of the river, the development will be coordinated; people will realize that somebody used some foresight.
We have to take a look at Peoria’s downtown area and see what needs to be done to draw people downtown. We are now beginning to understand that retail alone is probably the last thing that will do that. We can have retail down there, but it has to be in adjunct with something else. People will go downtown for entertainment and cultural events. If we can combine some of these things, the retail shops will follow. We probably will not look at a large retail anchor, but if we can create the draw, then businesses will come and the shops will come. This will be a major development on which the Chamber will be working.
How is The Heartland Partnership, the umbrella organization for local chambers and development groups, progressing?
When you have a vision, it’s never where you want it to be as soon as you want it to be there; it’s just one of those things. We have been able to accomplish some things with The Heartland Partnership that have not been accomplished before. The Heartland Partnership groups got together and said, “We need a highway to Chicago. Let’s forget what road we’re going to take and what land we are going to go over. Can everyone agree we need a road to Chicago? Let’s work on getting some money for a study.” Everyone said, “Yes, that makes sense. Let’s go for a road to Chicago and let the experts decide where it should be.” A year later the job got done because a united community representing 250,000 people said “We want a road.” We have been able to get money for the study because we spoke with one voice.
The second thing that has happened under The Heartland Partnership is an education initiative. We have examined what is best for this area in education and what is good for business. How can we produce, through our educational system, people who know how to read and write and want to go to work in the Central Illinois area? Business wants a trained and trainable workforce.
The Heartland Partnership began seeking some good models for education. Through some private funding, we were able to take a trip to Louisville, Kentucky to take a look at the Kentuckiana Education and Workforce Instituted, which is a system of 14 difference high school academies.
Peoria has some problems to deal with in the area of education, but because we have some far-sighted people in this community, we are ahead of a lot of places. We now have three high school academies in District 150, which is more than 99 percent of school districts in the United States have. We also have the Adopt-A-School Program.
What are your thoughts on the Peoria labor market?
The perception is that Peoria is a tough labor town. For years and years people have assumed that Caterpillar would always be there. In the last ten years, however, we have realized that it may not always be here, so we need to diversify. Some companies that have opened for business here have grown tremendously: RLI, L.R. Nelson, CDC, Foster Gallagher, Fleming Packaging, Advanced Technology Services, to name a few.
We are faced with a tight labor market. We don’t have a lot of businesses that are growing by leaps and bounds, and these businesses can only absorb so many people. We are putting people out into the workforce that don’t have enough skills to pick up some of these jobs. Companies are not available to employ some of these people. We are in a “chicken and egg” scenario. We have to get companies in to hire these people, but if they aren’t trainable, companies aren’t going to come in to hire them. If we don’t train the workforce, I will guarantee you the companies won’t come. One of the things we have to do is get the workforce trained and trainable, so we can go to companies and offer a workforce, saying, “What do you want us to train workers to do? We will train them. They are already trainable.” With good basic skills, we can go after some of these companies and train workers for them. But we have to get our workforce to that trainable stage. That means getting students to stay in school; we have a drop-out problem. Students have to believe that what they are doing is relevant and that they are going to have a job tomorrow. We have to get everyone working together in business and education. Business is going to have to play an absolutely much larger role in education, both in having a say in what goes on in the schools as well as helping to fund education programs.
What are area companies doing to get the workers they need?
I know companies right now in this community that are training somebody to read, write and get their GED on company time. These people are working part-time and going to school part-time, getting paid for learning math and English. This may be non-productive tie, but some companies feel they have no choice anymore, because of the workforce that is out there.
One of the statistics that really bothers me is this: Back in the early ‘80s approximately 20 percent of the people in Peoria County were at poverty level. Now 37 percent of people in the Peoria area are at poverty level, but the number of people in poverty has remained the same. What that tells us is that our best and brightest people have left while the poor have remained.
How is the Caterpillar-UAW labor dispute hurting the Peoria area in your opinion?
From a personal standpoint, the continued labor unrest is affecting business at Kentucky Fried Chicken. I’ve talked to many people who agree. If a person’s business is blue collar-based, and ours is very heavily that way, business is slow. Caterpillar’s union people have never worked without a contract before and this is a very strange situation for them. They are not comfortable with it. They have been working over a year without a contract and they don’t see an end. They are sitting on their money, and this is creating a problem with certain businesses.
Caterpillar has made a massive investment in Peoria area facilities. They just announced that they will finish their Southtown facility. Despite the company giving every indication that they will remain in the area long-term, you constantly hear business people and union member alike say that ten years from now, Caterpillar will have left Peoria. What are your thoughts on this?
I honestly believe (and I will probably get a lot of arguments on this) that it is ludicrous to say that Caterpillar will be gone from the Peoria area within ten years. Will it be at the same level that it is now? Probably not, but I will bet you dollars to donuts that there is not a business out there that will be at the level they are now. American is in the midst of a very volatile business climate, aptly described as “permanent whitewater.” Rapid change and flexibility are becoming the name of the game. Caterpillar has to be attuned to this like everyone else. I would defy any bank in this community to say that they are going to be at the same staffing level as they are now.
Caterpillar will be here ten years from now. They may be more automated. They may change what they do here. They may move some things out and other things in. But they will be here. At what level? I don’t have the foggiest idea. But they have invested billions and they are not going to walk away from that.
Peoria is a great community. It’s a big enough community to have a good variety of customers, yet small enough to know your customers and suppliers. It’s a big enough community to have a lot to do, but it’s a small enough community to get involved and make a difference. Involvement and participation make a difference. I would urge everyone to find somewhat to get involved in the community. Businesses must get involved, and not just at lower levels of the business. We need to get presidents and senior vice presidents involved in making this community a great place to work. If we were more diversified, if we had more industries, if we had a great workforce with great skills, there would probably be some companies wanting to come in; and we wouldn’t worry about Caterpillar. One of the worst things we can do is keep worrying about whether Caterpillar is going to be here in ten years. Let’s assume they are not. What are we going to do? Let’s get this community on the right track; Caterpillar will always be a plus. But we have to get involved and get our workforce trained and get more business into the area.
Is there anything that we haven’t discussed which is of particular concern to you at present?
Something that is very exciting to me at present is that I’m looking for a new career. At age fifty, if there are other challenges I want to take on in life, I have to do them now. Bonnie and I have worked together for years now at KFC and we make a pretty good team. Now she wants more and a challenge and I want more of a challenge. One of the best ways we can do that is for her to run this company and for me to go find out what I want to do, and get another job. That’s a little scary but it’s very exciting.
The fast food business is still an exciting, very challenging business, but the challenges are not my challenges any longer. It’s not what I really want to do. And if I don’t really want to get my teeth into it and I can’ get my heart into it, I need to get out of I will hurt the business. My people deserve more than somebody who is just hanging around.
I have had it in the back of my mind for two or three years that I would like to get involved in manufacturing. A KFC store is two-thirds a production facility. We do just-in-time inventory, team quality initiatives and employee incentives. We do basically everything that a manufacturing business foes, bringing in materials and creating a finished product to sell. So it’s not that far off. And, there are many different kinds of things to manufacture, from making specialty items for marketing efforts to banding steel. I have gone through career counseling at ICC and have learned where some of my strengths are and where I could start directing my efforts. It’s something I’m very excited about. IBI
