October 9, 2008 7 min read

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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 would-be 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

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.

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.