History of McDonalds...lesson on biz...

Cordell Davenport

Tags money

McDonalds is an example of the benefits of being persistent and recognizing an opportunity. McDonalds, the most popular restaurant, invented the fast food industry, and how to run systemized franchises. It was started by Ray Kroc, a high school dropout who took a job selling cups during the day and another playing a piano for a radio station at night. He became a top salesmen for his daytime employer. While working there, he met a guy who invented a milk shake mixing machine. He noticed its potential and obtained exclusive marketing rights. For 17 years he sold this machine.

Once when sales were down, a restaurant in San Bernadino, CA called McDonalds ordered eight milk shake machines. Kroc drove down to their restaurant to see up close what the restaurant was doing and why it needed so many milk shake machines. Kroc was amazed by the restaurant's operations. Then, other restaurants cooked food on order and served it either to people who sat down inside or in their cars outside. This restaurant offered only limited menu options, mainly French fries, hamburgers, cheeseburgers, soda and milkshakes. There was no inside seating and the workers made the meals in an assembly-like fashion. Thus, orders were placed and received very fast. Initially he was not thinking about owning McDonalds or even anything to do with hamburgers. He only considered how rich he could be if every McDonalds had 8 milkshake machines. Once he saw the bigger picture potential, he approached the two owners about opening several of the restaurants. Kroc was not then in the best of health. At 52, he was diabetic and suffered from arthritis. He had already lost his gall bladder and most of his thyroid gland, but he believed that his best life was still ahead of him. The brothers had no desire to open up a chain of McDonalds because they thought they would never be home. So Kroc talked them into licensing new stores with him.

Kroc first franchised a McDonalds in 1955. He sold 18 franchises his first year in business. For each franchise he sold, he would collect a percentage of the gross sales.

Kroc was shocked to discover he was barely making enough money to cover his expenses. He ended up taking the advice of an expert in real estate and made money not by selling hamburgers, but by selling real estate. He set up a company that would purchase or lease the land on which all McDonald’s restaurants would be located. Franchises then paid Kroc a set monthly rental for the land or a percentage of their sales, which was greater. This guaranteed him a profit. By 1960 there were 228 McDonalds. In 1961 he bought out the McDonalds brothers for full control for $2.7 million cash. By 1965 he had opened more than 700 restaurants in 44 states.

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