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In the late 1940’s, Dick and Mac McDonald were searching for a way to improve their little drive-in restaurant business in San Bernardino, California. Rather than tinker with the business, which was bringing in a very comfortable $200,0001 yearly, they invented an entirely new concept based upon speedy service, low prices, and big volume.
They did away with car-hops in favor of self-service at the counter. They ditched their 25-item barbecue menu in favor of a limited menu of just nine items: hamburger, cheeseburger, three soft-drink flavors, milk, coffee, potato chips, and pie, with french fries and milkshakes added soon after they resumed operations. They re-engineered their stainless steel kitchen for mass production and speed with assembly-line procedures. And they slashed the price of their hamburger from a competitive 30 cents to just 15 cents.
When the new McDonald’s re-opened in December of 1948, business took a while to build. But it soon became apparent that they had captured the spirit of post-war America. By the mid-1950s, their little hamburger factory enjoyed annual revenues of $350,000 – almost double the volume of their previous drive-in business at the same location. It was not unusual for 150 customers to crowd around the tiny hamburger stand during peak periods.
Word of their success spread quickly, and a cover article on their operations in American Restaurant Magazine in 1952 prompted as many as 300 inquiries a month from around the country. Their first franchisee was Neil Fox, and the brothers decided that his drive-in in Phoenix, Arizona would be the prototype for the chain they envisioned. The resulting red-and-white tile building with a slanting roof and the “Golden Arches” on the sides became the model for the first wave of McDonald’s restaurants to hit the country, and an enduring symbol of the industry.
The McDonald brothers actually designed the assembly line kitchen – twice as large as their original – by drawing an exact chalk diagram on their tennis court. They were able to place the equipment most efficiently after studying their crew members as they walked through their food preparation steps. Occasional rain bursts washed out the chalk, prompting them to redraw and refine their design. But the brothers – successful beyond their dreams in San Bernardino – were barely tapping the franchising potential of the business concept they had pioneered.
For as little as a thousand dollars, franchisees would receive the McDonald’s name, a basic description of their Speedy Service System, and the services of Art Bender, their original counterman at the new restaurant, for a week or two to get them started. But then, in 1954, a milkshake machine salesman named Ray Kroc saw the McDonald’s operation first-hand. The fast food industry was about to take off.
1 All dollar amounts in U.S. figures. 1
Hello Mr. Kroc
Ray Kroc was 52 years old – an age when many people begin thinking about retirement – when he founded the company that has become the McDonald’s of today. But Kroc, who dropped out of high school at age 15 to drive a Red Cross ambulance in World War I, was a constant dreamer...a salesman who never stopped looking for the ultimate product to sell. He began by selling paper cups to sidewalk vendors in Chicago, took a fling at Florida real estate, and had ultimately built a good business as the exclusive distributor for “Multimixer” milkshake machines.
It was the sale of Multimixers, which first drew him to the McDonald brothers’ hamburger stand in San Bernardino, California. After all, if he could discover the secret of how they sold 20,000 shakes each month, how many more milkshake machines could he sell? But when Kroc showed up at McDonald’s one morning in 1954 and saw the rapidly moving line of customers buying bags of burgers and fries, he had but one thought: “This will go anyplace. Anyplace!”
After the McDonald brothers explained that they didn’t have the personal desire to oversee the expansion of their concept across the nation, Ray Kroc became their exclusive franchising agent for the entire country. A great salesman had discovered his ultimate product. Kroc formed the new franchising company on March 2, 1955 under the name of McDonald’s System, Inc.
On April 15, 1955 his prototype McDonald’s restaurant began business in Des Plaines, Illinois, opened with the help of Art Bender, who had served the first McDonald brothers’ hamburger and the first Ray Kroc McDonald’s hamburger. Bender went on to open the first of Kroc’s McDonald’s franchises in Fresno, California, and ultimately retired owning seven restaurants.
Rather than tinker with a successful format, Kroc retained the McDonald’s formula of a limited menu, quality food, an assembly-line production system, and fast, friendly service – adding to that his own demanding standards for cleanliness. Indeed, Quality, Service, Cleanliness, and Value – QSC & V – continues as McDonald’s operating principle today.
But it was in the area of franchising where Kroc uniquely applied the lessons of his sales background to create a successful organization. In many ways, it was a matter of necessity.