When the trailer for “The Founder”, an upcoming biopic on Ray Kroc, had finished playing on my TV during a commercial break, I knew I had to write about him.
This legendary entrepreneur has been a long-time idol of ours. His sheer determination and ‘never too old to start something new’ attitude propelled his business into the one and only McDonald’s we all know so very well today.
Arguably the most recognizable brand on the planet, McDonald’s is the undisputed king of fast food restaurants. The fast-food restaurant serves approximately 68 million customers each day in 36,000 restaurants across 119 countries worldwide.
Billion-dollar empire or not, a business still has to work its way up from nothing. Who would have thought a fast-food restaurant could become the face of capitalism? Ray Kroc did, and this is his story.
The story of Ray Kroc
In 1954, Ray Kroc, who was 52 years old at the time, was a multi-mixer milkshake machine salesman. He traveled all over the United States advertising and selling the product. However, sales were rapidly declining as a result of competition that offered the same products at much lower prices.
When a pair of brothers, the McDonald’s, bought eight of the multi-mixers in one order, Kroc was quick to investigate why these brothers needed so many in hopes of finding a more profitable market for his product. After Kroc traveled to the brothers’ restaurant named McDonald’s, he realized he could sell his product to every future McDonald’s they opened. With this in mind, Kroc became a franchising agent for McDonald’s and bestowed his knowledge of salesmanship to the brothers.
Contrary to Kroc’s wishes, the brothers planned to expand McDonald’s to only a few locations. Infuriated, Kroc decided to purchase the business for $2.7 million which would make the brothers millionaires after taxes. Furthermore, the brothers would receive a royalty of 1.9% of McDonald’s gross sales.
Feuding arose between the two parties once the brothers declared they would give the property to the employees that originally worked there. In response, Kroc denied the royalty agreement existed because it was not in writing and he terminated the property grant the brothers planned to do.
Also, the brothers repeatedly let Kroc know that he could modify the layout of the building, but they would not send the papers required to give Kroc the legal ability to make these changes, even after several requests from the entrepreneur. Kroc deviously opened up a McDonald’s next to the original one owned by the brothers which eventually went out of business and was renamed The Big M.
Kroc was now in full charge of the McDonald’s company. The “Speedee Service System”, first established by the brothers, continued to increase the rate at which the fast food was prepared and served through the use of efficient and effective assembly lines. He made franchisees follow strict formulas on how to make the food, how to package it, and how big the portions were to ensure the food tasted the same anywhere in the world.
“If you have time to lean, you have time to clean.”
– Ray Kroc
Kroc’s guidelines provided McDonald’s with competitive advantage over most fast food restaurants at the time. The menu contained very inexpensive products which guaranteed the customer that their expectation of how the food tasted, no matter where in the world they purchased it, would be matched.
The legacy of Ray Kroc
Kroc has taught us that there are many ideas and potential money makers sitting around without direction and anyone to lead it through barriers and over obstacles. The original McDonald’s was never intended to expand at all, let alone become the empire of fast food restaurants. The brothers were sitting on a gold mine without a machine to extract it. That machine was Ray Kroc.
Through his leadership, he ignited the business and transformed the company into a franchise. His decision to implement advertising in almost every type of media available during his time is a strategy that undoubtedly was effective.
Though heavily advertising a product, mainly to children, is sometimes deemed as unethical and inappropriate, I cannot argue that it doesn’t work because it clearly has in this case. And believe it or not, McDonald’s is the largest toy distributor in the world, with 1.5 billion toys distributed each year and its Happy Meals making up 20% of its total sales.
Kroc pushed to make children fans of the food at an early age. Why? Well, as these children grow up, they become more familiar with McDonald’s products and feel a sense of loyalty to its brand. This is a strategy Kroc exploited perfectly. It ensured sales remained high for many years; generation after generation.
Further, Kroc saw a pain in the market and brought a cure to its consumers. He saw how consumers had very few options when searching for a place to eat that didn’t require them to sit down. The idea of making McDonald’s a chain restaurant healed this consumer pain. Now, when consumers were not interested in spending a lot of money on a simple lunch and waiting a while for it to be prepared, they could surely find a nearby McDonald’s location and head toward those famous golden arches.
To read more on the life of Ray Kroc, be sure to check out his new autobiographical book “Grinding It Out: The Making of McDonald’s”.
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