Thursday, October 29, 2009

The Mcdonald's Success Story

As Ray Kroc sat in his car, he watched a miracle unfold. The parking lot was full, the lines were long, and customers were leaving with an arm-full of food and a smile on their face. Kroc stopped a few to see what was going on: “You’ll get the best hamburger you ever ate for fifteen cents. And you don’t have to wait and mess around tipping waitresses.” He had travelled the country selling milkshake machines, visiting countless restaurants of all types. But he had never seen a merchandising operation like this. It was 1954; fourteen years after the McDonald brothers opened their small burger drive-in in the town of San Bernardino, California.

The brothers—Mac and Dick McDonald—had started the fast-food stand in 1940, but didn’t achieve real success until eight years later. It was then that they turned the kitchen into a mechanized assembly line—with each step in the cooking process being stripped down to its essence and accomplished with minimum effort. They got rid of the carhops and indoor seating, replacing them with a system where customers would order directly through outdoor service windows. By concentrating their efforts on keeping costs down, the brothers could maintain low prices for a consistently good product. This inevitably led to a high rate of customer turnover. “Our whole concept was based on speed, lower prices, and volume,” Dick McDonald recalled. “We were going after big, big volumes by lowering prices and by having the customer serve himself.” By 1954, they had haphazardly licensed ten other drive-ins, many of which were poorly managed and had no consistent system. They were McDonald’s only by name.

This is where Ray Kroc, a spunky salesman from Illinois, entered the picture. Kroc was a visionary. No matter what kind of business he had pursued over his life, he dreamt big. From selling milkshake machines to flipping real estate in Florida, his goal was always to be the best. There was no settling for second place. So when he pitched his franchise idea to the McDonald brothers (he had already tried with Carl Karcher and Harry Snyder), he didn’t hesitate to think big. “Visions of McDonald’s restaurants dotting crossroads all over the country paraded through my brain,” Kroc later recalled. At first, the brothers politely declined. They were content with the decent living they made running just one store in California. Kroc persisted, explaining that he would help open all the stores—doing all the hard work—and the brothers would just sit around and collect royalties. They agreed. A contract was drafted that day, and Kroc was on his way back to Chicago.

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