Three giants are carving up the $250 million running footwear industry in a way that spells trouble for anyone else who wants to sell the waffled-soled shoes.
The term, as one trade publication put it recently, is "franchise fever," and the names to remember are The Athlete's Foot, The Athletic Attic and Foot Locker.
The first two names are national franchising organizations with about 460 stores between them. Store owners pay $7,500 for the name, the national advertising and cut-rate purchasing deals from manufacturers, as well as about 3 percent of the monthly sales.
In first place is the eight-year-old Athlete's Foot, which grossed more than $100 million last year and now has 303 stores in its chain. Vice President Mark Lando looks to the day when the figure will top 1,000. He pointed out that an agreement has just been concluded to put 50 franchises in Japan by 1985, and stores are now located in England and Australia.
"Our only outlook now is grow, grow, grow," he said recently.
In second place is seven-year-old Athletic Attic, owned by former running star Marty Liquori and James Carnes, the U.S. men's track and field coach for the 1980 Olympics in Moscow, with 157 franchises as of the middle of July. It continues to open a new franchise a week around the country.
"We are gearing up for the day when we will have 1,000 stores," Liquori said from the Gainesville, Fla., headquarters. "In five years, the only people left will be Athletic Attic, Athlete's Foot and Foot Locker."
"You're going to see a fadeout of the little guys over the next three years," echoed Floyd Huff, general manager of the Foot Locker Division of the Kinney Shoe Corp., which in turn is owned by F. W. Woolworth Co.
It is five-year-old Foot Locker, the smallest and the newest of the three, which frightens the other two the most. The reason is that, unlike the other two, it is not a franchise operation. All of its 101 stores are owned by Kinney; it is a centralized, uniformed system with the vast resources of the huge store company behind it.
Because it has a centralized purchasing system which fills its 100,000-square-foot storage center in Los Angeles, Foot Locker can qualify for the sweetest deals that running-shoe manufacturers offer their big clients.
Nike, the huge Oregon-based company, offers a Futures I program, for example, which provides a 6 percent cash discount to buyers of more than 30,000 pairs of Nikes a year. Foot Locker, alone among the big three, qualifies for the deal because of its storage capability.
Athlete's Foot and Athletic Attic don't qualify, according to Nike executive David Kottkamp, because their hundreds of franchise owners buy separately in much smaller quantities.
They usually qualify, though, for Nike's Futures II program, where a 3 percent cash discount is given to purchasers of at least $1,000 a month work of Nikes.
"Foot Locker is the one to fear," Liquori conceded. "They have the money and the clout in malls. But they have no ownership interest, so the motivation among the stores isn't as great as with our organization."
Other smaller franchise and single-ownerchains in running footwear are located around the country, but most sources in the field agree that it will be three which will survive and flourish, even after the current running boom inevitably levels off and declines.
"We can adapt with the times," Liquori said. "We're not locked into athletic footwear alone. Some of our stores are strictly running. But some are recreational stores with leisure wear. Others have bicycles and tennis equipment, and we now have The Athletic Lady geared totally towards women."
Lando, on the other hand, maintains that it is precisely because Athlete's Foot specializes to the degree that it does that it will continue to grow.
"We're the ones who developed the speciality approach," he said. "Our stores are smaller and yet more profitable than those of Athletic Attic. We see trends in footwear coming before anyone else and stay one step ahead."
"The difference will be how much each company has specialized," Huff said. "We advertise that we have America's most complete athletic footwear selection -- not just running footwear. We'll always have what people want. A lot of it, too, will be the ability to maintain large inventories."
But what about the future of the individual store owner? Why would anyone aware of these market forces strike out on his or her own these days?
"Your note your own boss," said Victor Favuzza, owner of Fast Feet on Manhattan's East 59th St. "I didn't want to have to give someone 3 percent of my gross. If the location is good, there is no need to have their name over the door."
FAVUZZA has been in business only seven months, so it is difficult to say at this time if he will beat the odds. He says he is keeping his operation flexible enough to move into the racquet ball market and other areas as trends change. And it is precisely that flexibility which he claims the franchises lacking.
"Your product line is restricted with Athlete's Foot," he said. "They dictate to you what to carry."
Lando denies this, at least in part. But he does say that Athlete's Foot has an excellent reputation for quality footwear and that he doesn't want to see that ruined by products of marginal quality appearing in the stores.
He also denies that franchise owners are told what prices to charge, but acknowledges that there are "recommended orders," regarding purchases.
But, as Lando points out, all of this is clear in advance to anyone who reads the 23-page contract that all Athlete's Foot franchise owners sign. "They all know what they're getting into,: he said.
And it certainly is profitable. According to Lando, the stores in his franchise averaged $335,000 apiece in sales last year. No huge amount of floor space is necessary to operate effectively, which makes overhead quite reasonable. It is attractive enough to have drawn 107 individuals who now own the 303 stores in the chain. Many own a good deal more than one store.
For example, Stephen Kessler and a partner own two Athlete's Foot stores in Manhattan. One of them cost $65,000 a year in rent, but has one of the best locations in the city -- just off 5th Avenue on West 57th St., across the street from Bergdorf Goodman and next to Henri Bendel.
"The competition is growing faster than the market," he explained. "What we offer is knowledge and service that department stores or chains like Foot Locker don't. Athlete's Foot and Athletic Attic are known for the advice you're going to get when you walk in. You've got runners working as sales people."
The two franchise chains are so similar, in fact, that customers often think they're in the other chain's store. "I've had checks here made out to Athletic Attic," Kessler said.
"At first, it looks like McDonalds and Burger King," observed George Hirsch, publisher of The Runner magazine. "But when you examine them, you realize that it's totally different. With the fast foods, you have different products -- a Big Mac competing against a Whopper. Here, they're are selling the same product -- the Nikes and the Adidas."
Kessler fears department stores more than anything else. Giants such as Macys and Bloomingdales haven't made the commitment to carry the wide selections of running shoes or hire the experienced running personnel to sell them that the franchises do, but they could wreak havoc should they decide to do so, he feels.
"They're already into tennis clothing and leisure wear, and we certainly can't compete with them there," Kessler said. "So far, they have stayed away from running shoes, but that could change. And when they buy, they buy in volume."
Kessler pointed out that manufacturers also control the products carried in franchises.
"The manufacturers stipulate what will happen in the field," he said. "I have heard that you have to carry at least eight styles of Nikes or they won't supply a store."
Kottkamp denies any such set figure, but acknowledges that the company "wants a reasonable representation of the line."
According to various polls, somewhere around 20 million persons in this country call themselves runners. One area in which the Big Three differ sharply is how to reach them.
Athlete's Foot depends largely on full-page ads in national magazines as well as the pack of running publications. "We think that an ad in Sports Illustrated is more effective that a T-shirt with Athletic Attic on it," Lando said.
The T-shirt reference stems from the fact that Athletic Attic funds its own track team, which won the national team championships in California in June. Like Ford Motor Co. backing a racing team on the Grand Prix circuit, the approach is geared towards glamor.
"We think it's a very good way to promote our image," Liquori said. "And that is that the stores are run by real athletes. We think that this is better than a $30,000 ad in Sports Illustrated."
Foot Locker relies heavily on television and radio advertising, particularly in the Los Angeles area, where it has 28 stores. "The others can't afford TV," Huff said.