Unsafe at this Speed?

How breakneck growth is testing the France family
By Keith Dunnavant
BusinessWeek
1999

It's a routine Monday morning inside Daytona USA, the $20 million interactive museum celebrating America's fascination with stock car racing. A mesmerized young fan peers inside Dale Earnhardt's legendary Chevy. A young woman struggles with a video-game simulator as she tries to "qualify" for a NASCAR race. Dozens wait in line for a bus tour of the adjacent Daytona International Speedway, home of the sport's most celebrated event, the Daytona 500. And as the sound of revving engines blares, fans of all ages parade through this shrine to speed like pilgrims treading sacred ground.

Lesa France Kennedy, who oversaw the building of the museum, lingers beside the humblest exhibit: a replica of her grandfather's 1930s service station. "That's where it all started," says the granddaughter of stock car racing pioneer Bill France, Sr., who died in 1992.

The daredevil moonshiners who chased each other around the dirt tracks of the rural South for tiny purses in the years before World War II paved the way for today's generation of millionaire drivers. But it is France Sr. who is widely credited with transforming stock car racing from sideshow to sport.

The charismatic onetime mechanic, driver and promoter organized the circuit to form the National Association for Stock Car Auto Racing (NASCAR) in 1947. In the process, he became a virtual dictator and created a dynasty that controls NASCAR, TV and licensing rights for America's fastest-growing sport, and several major tracks through International Speedway Corporation.

Although less flamboyant than his legendary father, 66-year-old Bill France, Jr. has quietly presided over an era of untrammeled prosperity - both for the sport and the family business. "This sport has grown because Bill has been able to hold all the factions together," says longtime racing entrepreneur Roger Penske. Unlike other professional sports leagues - complex organizations in which the real power lies with the franchise owners - Daytona-based NASCAR is wholly owned by the France family.

Over the past quarter-century, the emergence of corporate sponsorship and television coverage have radically altered the economics of NASCAR, pushing it beyond its rural Southern roots while attracting an increasingly national, increasingly upscale audience. A measure of NASCAR's success came on Oct. 14 when DaimlerChrysler announced that its Dodge division would officially return to stock car competition in 2001 after an absence of over 20 years. "To be honest, what really makes this work is the local market tie-ins and the exposure you get," says Dodge Vice President James R. Julow. "NASCAR fans are absolutely frenzied when the race comes to town."

Throughout the transformation of NASCAR, France has maintained a tight grip on the circuit. At the same time, he has taken ISC public and begun an aggressive acquisition and building campaign. ISC, whose revenues more than doubled from $74 million in 1994 to $186 million in 1998, recently merged with Penske Motorsports, adding tracks in California and Michigan to its portfolio. Now it's building or planning facilities near Kansas City, Chicago and New York.

France has strategically positioned daughter Lesa, 38, as the dealmaker at ISC and son Brian, 36, as the marketing whiz at NASCAR. Yet as NASCAR and ISC barrel into the future and as France inches toward retirement, a question looms: Can the next generation handle the treacherous curves ahead? Will it all come apart without Bill in control?

The issue of succession assumed greater urgency in November 1997, when France suffered a heart attack during a business trip to Japan. "That was very frightening for all of us," says Lesa, executive vice president of ISC. Bill is more philosophical. "It really didn't scare me," he says with a good ol' boy shrug. "You gotta die sometime."

Similar questions of succession were raised when control of NASCAR passed to young Bill from his father in 1972. "Bill France Sr. was like racing's answer to Henry Ford," says Mike Helton, NASCAR's chief operating officer. "They had cars before Ford, and they had racing before France, but just like Ford, France took things to another level."

Still, the France family today has leverage that Big Bill never could have imagined. With NASCAR attendance up 65 percent since 1990, TV ratings up 40 percent since 1993, and track operators begging for racing dates, the Frances wield almost absolute power. They alone decide when and where to schedule the top-flight races of the Winston Cup series, which have made mainstream sports icons out of stars like Jeff Gordon. And through ISC, the Frances also control eight major tracks–including Daytona, Phoenix, and Talladega. Rival operators complain that the close relationship between NASCAR and ISC represents a conflict of interest, but they dare not gripe too loudly. Bill might hear.

Over the course of a lifetime, France has watched NASCAR grow from a twinkle in his father's eye to a Sunday afternoon obsession for millions and an enterprise with estimated annual revenues in excess of $2 billion. "I remember that first [NASCAR sanctioned] race in Charlotte...my job was pulling guys off the fence who were trying to sneak in," he recalls.

In many ways, France is the typical pioneer's heir. His father was a high school dropout who loved cars and disappointed his middle-class parents by becoming an auto mechanic. In the early '30s, at the depths of the Great Depression, with a wife and a baby son to support, Bill Sr. decided to move to Florida to escape the Maryland winters. On the way to Miami, his car broke down in a backwater called Daytona, where several major racers of the day were setting speed records on the beach' long, flat straightaway.

Within a few years, Big Bill was promoting stock car races on the beach, the forerunner of today's Daytona 500. His success lifted him out of the grease pit, and by the end of World War II, he was staging races throughout the Southeast.

With the nascent sport struggling - there were no standard rules, and promoters often skipped town before awarding prize money - France gathered a small group of car and track owners at the Streamline Hotel in Daytona Bach in December 1947 and formed NASCAR. He nearly went broke after building Daytona International Speedway in 1959, but it would grow into NASCAR's chief temple of zoom and would represent the first brick in ISC, the sport's largest track operator.

While their father was a rebel determined to blaze his own trail, Bill Jr. and his younger brother, James, the longtime second-in-command who is now president of ISC, have spent their lives building on his foundation. They inherited their father's love of racing and gravitated to the family enterprise after studying business in college. While Big Bill lived by the seat of his pants and the dominance of his personality, the second generation has prospered through financial and marketing savvy, taking the sport to Main Street and Madison Avenue. "We were raised on the idea that you either get bigger or smaller," observes James, "and we've been determined to make NASCAR a truly national sport."

In 1971, when R.J. Reynolds was no longer allowed to advertise on TV, it coughed up $100,000 to sponsor the Winston Cup. Before that, corporate America's biggest involvement with NASCAR was when the fuel additive company STP Corp. paid Richard Petty a few bucks to paint its logo on his car.

This year, RJR Nabisco will invest about $20 million in NASCAR and corporations as diverse as Eastman Kodak, Texaco, and Procter & Gamble will spend anywhere from $5 million to $10 million to be identified closely with major drivers. In 1998, says IEG Sponsorship Report, big business pumped $476 million into NASCAR.

Although it was slowly building a national following, NASCAR was largely ignored by TV until 1979, when CBS aired the Daytona 500 flag-to-flag for the first time. Now every Winston Cup race - and a growing number of events on the Busch Grand National circuit, NASCAR's equivalent of Triple A baseball - are televised live on network or cable TV. Only the National Football League generates higher average ratings among major sports.

With drivers complaining about the 32-week racing schedule - even as track owners clamor for additional dates - there has been talk for years about a rival league arising from all the demand. Any effort to create such a circuit would have to include O. Bruton Smith, chairman of Charlotte-based Speedway Motor Sports Inc., the chief competitor of ISC. Like the Frances, Smith has cashed in on the stock car boom by taking his company public, building an empire that includes tracks in Charlotte, Dallas, and Bristol, Tenn.

But through a combination of trust and fear, France has been able to keep the coalition of drivers, car owners, and track operators from splintering during these heady days. "Bill has a tremendous ability to make all the people in this sport see the big picture...that if we do things a certain way, everybody wins," Helton says.

Earlier this year, when France appointed Helton to the new position of chief operating officer of NASCAR, effectively delegating many day-to-day responsibilities to his trusted aide, the move was interpreted by some as a prelude to retirement Not so, says Helton. "I don't see Bill slowing down one bit. Believe me, he's still the man."

France, who rises every morning before dawn, starts his day by surfing the Internet. "I can't tell you how many times he has called me at 6:30 in the morning to ask if I've seen something in the paper," Lesa says. Several years ago, Bill broke both ankles in a freak boating accident. Instead of taking time off from work, he bought a customized van and installed a ramp to his office, running his empire despite being unable to walk.

Yet even before the heart attack, France had been preparing for a new generation of leadership. He expects to step aside within the next three or four years. "I don't want to be sitting around here when I'm 80, getting in the way," he says. "The older you get, the more conservative you become. You've got to make sure that attitude doesn't talk over. You've got to make room for new ideas and see where they lead."

Empowered by their father, both Brian and Lesa are already hving an impact on the family business. After graduating from the University of Central Florida with a marketing degree, Brian spent two years working at NASCAR's short tracks on the West Coast. One night during a race in Oregon, he black-flagged, or disqualified, future Winston Cup driver Jimmy Spencer. "Bill needs to send that kid back to college," Spencer shouted, shaking his helmet at the press box. "We're trying to race here!"

Since taking over NASCAR's marketing operation, however, Brian hasn't heard many complaints. He has exploited the racing boom to boost licensing and merchandising revenues to an estimated $1.2 billion. Fans can buy everything from computer games to bed linens emblazoned with the NASCAR logo. Miniature die-cast cars alone are expected to generate over $350 million this year.

Several years ago, Brian started lobbying his father to consider the benefits of a unified national television package. Since the 1970s, individual track owners have controlled their own TV rights, keeping 65 percent of the income while paying 25 percent to the drivers and 10 percent to NASCAR. With as many as six networks and cable channels vying for races, TV rights fees have quadrupled in the past decade, to about $110 million. The split will remain the same, but beginning next year, NASCAR will negotiate a single package - probably divided between one network and one cable channel - that is expected to fetch as much as $400 million. That would raise ISC's share of the take by about $87 million, estimates analyst Scott C. Barry, who tracks motor sport stocks for the Raymond James brokerage in St. Petersburg.

"This television deal is going to be the booster rocket to take us to the next level as a sport," Brian says.

Like her brother, Lesa France Kennedy worked various NASCAR jobs, but after earning a business management degree from Duke, she fully expected to move to another city and start climbing a corporate ladder. During the summer before her senior year, however, her late grandmother asked Lesa to join her in the Daytona ticket office after graduation. She never left.

"This place is such a part of me," Lesa says. "You can't help feeling the weight of all that history."

When the Frances floated what amounted to an initial public offering in November 1996 - ISC had been traded on the pink sheets since 1958 - Bill placed Lesa in charge of expansion projects. In 1996, under his guidance, the family opened Daytona USA, built almost entirely with fees raised from sponsors, such as Goodyear, Gatorade, and Circuit City. Last year, 331,491 visitors paid $12 each to walk among the shadows of stock car racing's past.

"We're in the business of entertainment and we're competing with a lot of other things people can do with their time," Lesa says.

That attitude - that there's more to stock car racing than speed - mirrors the change in culture at ISC after it went public. Taking ISC to Wall Street validated the sport, but it also forced the Frances to pursue more of a bottom-line approach. "In the past, we didn't pay that much attention to quarterly results," Lesa says. "We were more focused on the long term. Now, the need to grow colors everything we do."

ISC's $228 million deal to expand the France empire into the Kansas City area - which required only $81.7 million of ISC money and is scheduled to open in 2001 - may be the ultimate symbol of NASCAR's arrival as a big-time sport. Convinced that having three major motor sports events per year would exceed the economic impact of a Super Bowl, local authorities raised the rest of the necessary funds. "When you lay out the numbers and show [the local officials] how they can recoup their investment in one year," Lesa says, "it's not a very hard sale." Now ISC is working with Donald Trump to find a location to build in the New York area.

Even though company insiders believe Brian will end up running NASCAR and Lesa managing ISC, Bill France stops short of anointing one or the other. For more than a half century, his name has towered over the sport. He sets the schedule and makes the rules, period. That's why there are so many questions about NASCAR's future after France steps aside - even if Bill doesn't entertain them. "This thing will be growing and full of life long after I'm gone," he says.

Brian, however, concedes that with the sport growing so fast nd moving in so many different directions, NASCAR "may be too big and too complicated in the future for one sheriff." But regardless of whether Helton or one of the France children takes the wheel, the next generation will be forced to confront the problems of growth. Fifty years ago, Big Big had to sell promoters on the idea of hosting NASCAR races. Now their entrepreneurial descendants beg his son for a date. "It's a nice problem to have," Bill Jr. says with a smile.

No one complains louder about race dates than Smith of Speedway Motorsports. Even though he maintains a solid working relationship with the Frances - his cooperation in the decision to seek a unified TV deal was crucial - the two rivals have frequently clashed over the NASCAR schedule. That tension will only increase as both Speedway and ISC build more tracks, inevitably bumping heads in the scramble to capture new markets.

There will be plenty of other pressures, too. Some will urge the abandonment of short tracks in such tiny outposts as Martinsville, Va., for sparkling asphalt palaces in cities like Chicago. Others wil push for splitting the circuit into two divisions, doubling the number of available dates. And sponsors and TV networks will worry about any change that might dilute the product.

About the only thing for certain is that Bill France's shoes keep getting bigger each day.

Copyright 1999 by Keith Dunnavant

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