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Wall Street History
https://www.gofundme.com/s3h2w8
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07/06/2001
Fast Food
Prior to World War I, when a guy went calling on a girl at her
home it constituted a "date." By the 1940s, though, Americans
were becoming more accustomed to dates involving a movie and
maybe a restaurant meal, but certainly not on a regular basis.
And middle class families simply didn''t eat out at all.
After World War II this all began to change. First came take-
outs, where mothers would pick up items such as chicken to take
home. ["Don''t cook to-night.call Chicken Delight!" Whatever
happened to them, anyway?] Then you had the drive-ins, where
waitresses raced about on roller skates while you sat in your car,
and, finally, restaurants added tables and counters. Two brothers
were able to take advantage of the new trends, Dick and Maurice
(Mac) McDonald.
In 1937 the McDonald brothers opened up a hot dog stand near
Santa Anita Racetrack in California. After the racing season
ended business slowed, so they erected a larger operation in San
Bernardino, selling hamburgers, barbecue, assorted sandwiches,
soft drinks and hot dogs. Their operation proved to be a great
success, but the service began to slip so the brothers realized they
had to become more efficient. They then purchased better grills,
cut the number of menu items, used paper plates and cups, and
stressed speed, cleanliness and low prices. It was a formula for
success and by 1951 they were selling more than $250,000 worth
of burgers and drinks out of that single location. The following
year they began to purchase other franchises.
Hamburgers were the great American food and while there were
lots of "hamburger heavens" before World War II, including
chains like White Castle, often they weren''t particularly
attractive and the owners lacked vision. Enter Ray Kroc.
Kroc invested his entire life savings to become exclusive
distributor of a five-spindled milkshake maker, the Multimixer.
He was having some success selling the machines to restaurants,
fast food operations, and drug stores, earning about $12,000 a
year, when one day he delivered a machine to the McDonalds.
Kroc knew that business was terrific and sensing an opportunity,
he asked the McDonalds if he could become franchising agent.
The year was 1954. Ray Kroc was already 52 years old.
Dick and Mac had perfected their system, using a simple menu of
shakes, burgers, and fries. Kroc bought the name and proceeded to
market it to the masses. Part of Kroc''s genius was in recognizing
that America was increasingly a society on wheels, and families were
seeking entertainment outside the home. He was going to turn
McDonald''s into a family place, not just a burger joint frequented
by teenagers.
In 1954 the McDonald brothers granted Kroc an exclusive 10-
year franchise to license operators of the restaurants. The first
contract provided for Kroc to receive $950 for each franchise
sold plus 1.9% of the store''s gross revenues, with half of that
going to the McDonald brothers. The following year he opened
up the first franchise in Des Plaines, Illinois and also organized
McDonald''s System, Inc., also in Illinois. By 1957 Kroc had 14
McDonald''s up and running (another source says about 35), with
100 in 1958, and 200 in 1959. Most of these original franchises
were just stands, with only a handful having seats because they
were still catering to the take-out and drive-in crowd.
The franchises agreed to accept McDonald''s guidance in all
matters, while purchasing supplies from companies approved by
headquarters. Whether it was food preparation and quality,
serving methods or advertising, Kroc and Company set the
standard. The huge expansion that was to follow was largely a
result of the policy of selling franchise rights for large territories
to entrepreneurs who then would sell the franchises to the local
operators. Ray Kroc was building his empire on what he would
call good old-fashioned elbow grease. "Work is the meat in the
hamburger of life," he once said.
In 1961 Kroc bought out the McDonald brothers for $2.7 million
and by 1966 there were 800 restaurants. [Kroc claimed that there
were only 8 failures in the first 11 years McDonald''s was
opened.] Gross revenue was about $35 million (I''ve also seen
higher figures) and the company went public on the New York
Stock Exchange. $2,000 worth of stock bought in those early
days is worth about $3 million today. And in 1966 there were
still just 10 items on the menu, none costing over 29 cents:
Hamburgers - 15 cents
Milk Shakes - 25 cents
Soft Drinks - 10 and 15 cents
Fish Sandwich - 29 cents
I didn''t know they had a fish sandwich back then? Ya hungry?
In the late 1960s, McDonald''s began to widen its menu options,
introducing the "Big Mac" in 1968 and then, in conjunction with
its big breakfast push, the Egg McMuffin in 1973.
Kroc was also known to be a big stickler for cleanliness. One of
his more famous sayings was "If you have time to lean, you have
time to clean." Parents out there may want to try this on their
kids.
By 1980, there were 6,500 outlets with revenue of $6.2 billion.
By then, Kroc was making more on real estate deals - finding
locations for the restaurants - than franchise fees. And as he
spread his operation overseas, McDonald''s was fast becoming a
symbol of American business around the world.
McDonald''s also became an important stepping stone for
Americans entering the labor force. The company claimed in
1998 that 1 in 8 Americans had worked or did work for them.
Today McDonald''s has about 30,000 restaurants and $40 billion-
plus in sales, with franchises in 120 countries.
Ray Kroc died in 1984 at the age of 82, but not before he added
an interesting chapter to his life when he purchased the San
Diego Padres baseball franchise in 1974. He was one of the
more outspoken owners, once commenting in 1977 on
television''s control over baseball:
"Baseball has prostituted itself. Pretty soon we''ll be starting
games at midnight so the people in outer space can watch on
prime-time television."
Or this one on the designated hitter:
"I believe a commissioner should be a dictator. If he''s a darn
good dictator, you give him a gold watch now and then. If he''s a
lousy dictator, you fire him. Bowie Kuhn is not a good dictator.
Authority only goes to those who have the guts to use it and he
doesn''t use it. How can he allow the American League to play
one kind of baseball with the designated hitter and the National
League play another type of baseball?"
Ray da man!
Sources:
"The Pursuit of Wealth," Robert Sobel
"The Great Boom," Robert Sobel
"1,000 Years / 1,000 People," Gottlieb and Bowers
"The New York Times Century of Business," Floyd Norris
and Christine Bockelmann
McDonalds.com
"Baseball''s Greatest Quotations," Paul Dickson
Brian Trumbore
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