By Harrington, David E.; Treber, Jaret
Regulation , Vol. 35, No. 4
Funeral industry--Laws, regulations and rules
Fast food restaurants--Laws, regulations and rules
Fast food restaurants--Prices and rates
Coffeehouses--Laws, regulations and rules
Dunkin' Donuts Inc.--Laws, regulations and rules
Starbucks Corp.--Laws, regulations and rules
In the 19th century, it was common for funeral homes to be more than just funeral homes. Many were also furniture stores or liveries. At the time, many towns had too few deaths to support stand-alone funeral homes. Hence, it was natural for the local cabinetmaker to also be the undertaker, keeping his woodworking shop busy making both cabinets and coffins. Similarly, many livery owners used their wagons to deliver freight or-draped in black cloth-to carry bodies to cemeteries.
We estimate that more than a third of funeral homes in Michigan and Wisconsin prior to 1925 were combination firms: three-fourths of them partnered with furniture stores and the rest with liveries. These funeral homes reduced their costs by producing more than just funerals, a phenomenon that economists call economies of scope. Funeral homes that also sold furniture or hauled freight could lower their costs by keeping their capital and labor busy-no twiddling of thumbs or idle woodshops waiting for someone to die.
During epidemics, the cabinetmakers of these combination firms were busy building coffins and having their wagons carry bodies to cemeteries. During happier times, these firms spent more time making cabinets and delivering freight. It is a morbid example of the "peak load" problem, the problem that producers face when their businesses experience surges and slumps in demand and they need to keep costly capital on hand to satisfy the surges. Today, electricity producers must be able to handle surges in demand when temperatures soar and people crank up the air conditioning. Then, funeral homes needed to handle surges in demand when epidemics heated up and families sent for the undertaker.
Over the first half of the 20th century, funeral homes shed their partnerships with furniture stores and liveries as towns turned into cities and funeral directors handled more aspects of burial preparation. At the same time, commercial cemeteries became much more prevalent, both because many church and town cemeteries filled up and because consumers were willing to pay for graves and markers in newly created memorial and garden cemeteries.
Modern Combos--Funeral Homes and Cemeteries Coming Together
Over time, funeral homes naturally gravitated toward combining with cemeteries rather than furniture stores or liveries. In 1934, Hubert Eaton built a funeral home within his Forest Lawn Memorial Park in Glendale, Calif., establishing the first modern funeral home and cemetery combination. Today they are so common that funeral industry professionals commonly use the term "combination firms" to refer to the joint operation and/or ownership of cemeteries and funeral establishments. Some shorten the term even further, simply calling them "combos." Similarly, a stand-alone funeral home now means one located outside of a cemetery, rather than being independent of a livery or furniture store.
There are two advantages of combos. The first is that they may realize economies of scope by keeping their labor and capital busier than stand-alone facilities. For example, combos can share facilities. Arrangement rooms that would often sit idle at stand-alone funeral homes could be used to make cemetery arrangements. Also, combos may eliminate the need to collect the same information at two places, first at the stand-alone funeral home and then at the stand-alone cemetery. Savings that accrue from economies of scope may then be passed along to consumers.
The second advantage is that some consumers may prefer to patronize combos. Some might want to work with a single person to choose both funeral services and cemetery goods because they find the process painful and working with a single person will be quicker. They also may have elderly relatives and want the funeral services performed near the gravesite, or live in a congested area and want to avoid having a funeral cortege crawl through snarled streets.
For the empirical component of our study, we used the Nomis Funeral Home and Cemetery Directory--called the "Yellow Book" by industry professionals-to identify combos across the country. …