Ray Kroc

Founder of McDonald's Corp. Founded: 1955 "The definition of salesmanship is the gentle art of letting the customer have it your way."-Ray Kroc When Ray Kroc was a child, his father took him to a phrenologist-a practitioner who claimed he could predict the future by reading the bumps on a person's head. Kroc's chart revealed that his future would be in the food-service industry. Whether through psychic power or sheer luck, the phrenologist proved to be correct. Uniquely adroit at identifying popular trends, Kroc would go on to lay the foundation for the modern fast-food industry and champion the world's No. 1 fast-food chain. Like many entrepreneurs, Kroc began working early in life. While still in grammar school, the wouldbe fast-food king started a lemonade stand in front of his home in the Chicago suburb of Oak Park, he worked in a grocery store, and he spent a summer behind the soda fountain in his uncle's grocery store. Through these early experiences, Kroc began to view the world as one big place to sell to. By the time he was a teenager, Kroc had no patience for school, so he quit to take a job as a salesperson for Lily-Tulip Cup Co. He was a natural. Young, ambitious and willing to work hard for long hours, Kroc quickly became the company's top salesperson. In the course of selling cups, Kroc met Earl Prince; a client who had invented a five-spindle milk shake-mixing machine called a Multimixer. Fascinated by the speed and efficiency of the machine, and recognizing a cash cow when he saw one, Kroc, then 37, left Lily and obtained exclusive marketing rights to the machine. He spent the next decade and a half crisscrossing the country peddling the Multimixer to drugstore soda fountain and restaurant owners. As Kroc approached his 50th birthday, however, sales began to drop. During the early 1950s people were leaving the cities for the suburbs, forcing many neighborhood soda fountains to close. Ray was losing customers by the dozens. But one small restaurant in San Bernardino, California, ordered eight machines. Intrigued by the order, Kroc left for California to see for himself what kind of restaurant needed to churn out 40 milk shakes at a time. There he found a small hamburger stand run by two brothers, Dick and Mac McDonald. The McDonald brothers' restaurant was unlike any Ray had ever seen. In contrast to the popular drive-in restaurants of the time, it was self-service, had no indoor seating, and the menu was limited to cheeseburgers, hamburgers, fries, drinks and milk shakes, all of which were produced in an assembly-line fashion that enabled customers to place their orders and receive their meals in less than a minute. Kroc quickly calculated the financial rewards possible with hundreds of these restaurants across the country. But when he approached the McDonalds with the idea, they told him they weren't interested

in doing it themselves. So Kroc offered to do it for them. The brothers agreed, and gave Kroc the exclusive rights to sell the McDonald's method. Ray opened his first McDonald's in April 1955 in the Chicago suburb of Des Plaines. He used the meticulously clean and efficient restaurant as a showcase for selling McDonald's franchises to the rest of the country. For each franchise he sold, Ray would collect 1.9 percent of the gross sales. From that he would give the McDonalds one-half percent. Kroc sold 18 franchises his first year in business but was shocked to discover he was barely making enough money to cover his expenses. In his haste to acquire the rights to the McDonalds' methods, he had made them a deal they couldn't refuse. Unfortunately, it was a deal on which he couldn't make any money. Then Kroc met Harry Sonnenborne, a financial genius who showed Kroc how to make money-not by selling hamburgers, but by selling real estate. Under Sonnenborne's plan, Kroc set up a company that would purchase or lease the land on which all McDonald's restaurants would be located. Franchisees then paid Kroc a set monthly rental for the land or a percentage of their sales, whichever was greater. By owning the land the franchises were built on rather than just the franchises themselves, Kroc was guaranteed a profit. With his real-estate formula in place, Kroc set out to fulfill his goal-opening 1,000 McDonald's from coast to coast. But there were problems. Kroc continually clashed with the McDonald brothers over changes he wanted to make in their original formula. Kroc became increasingly frustrated and decided he wanted control of McDonald's all to himself. So in 1961, he bought out the McDonalds for $2.7 million-cash. Kroc thought the deal included the original McDonald's restaurant in San Bernardino, but the brothers said it did not. Infuriated, Kroc confided to a long-time employee, "I'm not normally a vindictive man, but this time I'm going to get those sons-of-bitches." And he knew just how to do it. Without the rights to their own name, the McDonalds were forced to rename their restaurant The Big M. So Kroc opened a brand-new McDonald's one block away and put The Big M out of business. With the McDonald brothers out of his way, Kroc was free to run the company as he saw fit. By 1965, he had opened more than 700 restaurants in 44 states. In April of that year, McDonald's became the first fast-food company to go public. Stock was issued at $22 per share. Within weeks it climbed to $49 a share, making Kroc an instant multimillionaire. By the end of the decade, Kroc had met and surpassed his goal, with nearly 1,500 McDonald's operating worldwide. By the 1970s, McDonald's was the largest food supplier in the country and would remain so through the next two decades. At the time of his death on January 14, 1984, a new McDonald's was opening on average every 17 hours. Ten months later, McDonald's sold its 50-billionth burger. Like many of the 20th century's most influential entrepreneurs, Ray Kroc was not a creator. When Kroc came onto the scene, convenience food already existed in many forms, from local diners to hot

dog stands. But it was Kroc who had the cunning ability to grasp all the complexities of the fast-food concept and deliver it in the best possible way.

Hamburger U
Ray Kroc believed that the success of his company lay in his franchisees following "the McDonald's Method" to the letter. To ensure this, he developed a 75-page manual that outlined every aspect of running a McDonald's operation. Nothing was left to interpretation. Burgers had to be exactly 1.6 ounces, served with a quarter ounce of onion, a teaspoon of mustard and a tablespoon of ketchup. Fries had to be cut at nine-thirtyseconds of an inch thick. The manual even specified how often the restaurant needed to be cleaned. In 1961, Kroc came up with a way to gain even greater control over his franchisees. In the basement of a McDonald's in Elk Grove, Illinois, he opened a training center that would eventually become Hamburger University, where students earned their degrees in "Hamburgerology" with a minor in french fries.

McTrivia

There are more than 25,000 McDonald's in operation worldwide today. 1 in 8 Americans has worked for McDonald's According to a recent survey, the McDonald's golden arches are now more recognizable around the world than the Christian cross.

The Ray Kroc Story If I had a brick for every time Ive repeated the phrase Quality, Service, Cleanliness and Value, I think Id probably be able to bridge the Atlantic Ocean with them. Ray Kroc How do you create a restaurant empire and become an overnight success at the age of 52? As Ray Kroc said, I was an overnight success all right, but 30 years is a long, long night. Origins In 1917, 15-year-old Ray Kroc lied about his age to join the Red Cross as an ambulance driver, but the war ended before his training finished. He then worked as a piano player, a paper cup salesman and a multi-mixer salesman.

In 1954 he was surprised by a huge order for 8 multi-mixers from a restaurant in San Bernardino, California. There he found a small but successful restaurant run by brothers Dick and Mac McDonald, and was stunned by the effectiveness of their operation. They produced a limited menu, concentrating on just a few items burgers, fries and beverageswhich allowed them to focus on quality at every step. Kroc pitched his vision of creating McDonalds restaurants all over the U.S. to the brothers. In 1955 he founded t he McDonalds Corporation, and 5 years later bought the exclusive rights to the McDonalds name. By 1958, McDonalds had sold its 100 millionth hamburger. A Unique Philosophy Ray Kroc wanted to build a restaurant system that would be famous for food of consistently high quality and uniform methods of preparation. He wanted to serve burgers, buns, fries and beverages that tasted just the same in Alaska as they did in Alabama.

To achieve this, he chose a unique path: persuading both franchisees and suppliers to buy into his vision, working not for McDonalds, but for themselves, together with McDonalds. He promoted the slogan, In business for yourself, but not by

yourself. His philosophy was based on the simple principle of a 3 -legged stool: one leg was McDonalds, the second, the franchisees, and the third, McDonalds suppliers. The stool was only as strong as the 3 legs. Rewarding Innovation Ray Kroc believed in the entrepreneurial spirit, and rewarded his franchisees for individual creativity. Many o f McDonalds most famous menu itemslike the Big Mac, Filet-O-Fish and the Egg McMuffin were created by franchisees. At the same time, the McDonalds operating system insisted franchisees follow the core McDonalds principles of quality, service, cleanliness and value.

The Roots of Quality McDonalds passion for quality meant that every single ingredient was tested, tasted and perfected to fit the operating system. As restaurants boomed, the massive volume of orders caught the attention of suppliers, who began taking McDonalds standards as seriously as McDonalds did. As other quick service restaurants began to follow, McDonalds high standards rippled through the meat, produce and dairy industries. Again, Ray Kroc was looking for a partnershipthis time with McDonalds suppliersand he managed to create the most integrated, efficient and innovative supply system in the food service industry. These supplier relationships have flourished over the decades: in fact, many McDonalds suppliers operating today first started business with a handshake from Ray Kroc. Hamburger University In 1961, Ray launched a training program, later called Hamburger University, at a new restaurant in Elk Grove Village, Illinois. There, franchisees and operators were trained in t he scientific methods of running a successful McDonalds. Hamburger U also had a research and development laboratory to develop new cooking, freezing, storing and serving methods. Today, more than 80,000 people have graduated from the program. The End of a Legend Right up until he died on January 14, 1984, Ray Kroc never stopped working for McDonald's. Even when he was confined to a wheelchair, he still went to work in the office in San Diego nearly every day. He would keep a hawk's eye over the McDonald's restaurant near his office, phoning the manager to remind him to pick up the trash, clean his lot, and turn on the lights at night. From his passion for innovation and efficiency, to his relentless pursuit of quality, and his many charitable contributions, Ray Krocs legacy continues to be an inspirational, integral part of McDonalds today.

Sources Grinding it Out: The Making of McDonalds by Ray A. Kroc, Ray A. Kroc 1977. McDonalds: Behind the Golden Arches by John F. Love John F. Love 1995. aboutmcdonalds.com 2009.