Ray Kroc was born in 1902. When he was 15 years old he lied about his age and landed a job as an ambulance driver for the Red Cross. He became a salesman, initially selling paper cups. He had a chance meeting with Earl Prince, the inventor of the five-spindle multimixer, a machine for making milkshakes (five at a time). Ray Kroc convinced Earl to give him exclusive marketing rights for the mixer and successfully sold it all over the country for the next 15 years.
One of his largest customers was a California based restaurant owned by the McDonald brothers. Kroc found out that they used a mass production, assembly line system for their hamburgers and sandwiches. The owners were not interested in expanding the operation, but he convinced the brothers to make him their exclusive agent. In 1954 Ray Kroc opened his own McDonald’s drive-in in Des Plaines, Illinois, paying the brothers a percentage of the receipts, and he officially established the McDonald’s Corporation.
At the time, Kroc was suffering from diabetes and arthritis. His gall bladder and thyroid gland had already been surgically removed. Still, he managed to convince the brothers to sell the company to him. He asked them to name their price. The $2.7 million that Ray Kroc paid in 1961 for the McDonald’s Corporation is considered to be one of the greatest acts of salesmanship of all time.
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 McDonald’s, but for themselves, together with McDonald’s. 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 McDonald’s, the second, the franchisees, and the third, McDonald’s suppliers. The stool was only as strong as the 3 legs.
Ray Kroc believed in the entrepreneurial spirit, and rewarded his franchisees for individual creativity. Many of McDonald’s most famous menu items — like the Big Mac, Filet-O-Fish and the Egg McMuffin — were created by franchisees. At the same time, the McDonald’s operating system insisted franchisees follow the core McDonald’s principles of quality, service, cleanliness and value.
While running McDonald’s he realized that a big chunk of the profits could come from the land on which the franchisees were established. In 1956 Ray Kroc set up the Franchise Realty Corporation, which bought land and leased it out to franchisees.
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 the scientific methods of running a successful McDonald’s. Hamburger U also had a research and development laboratory to develop new cooking, freezing, storing and serving methods. To date, more than 80,000 people have graduated from the program.
After 1961, Kroc began recruiting franchisees in earnest. The revenues that the company received from the franchisees made it easier for Kroc to raise capital in the financial markets. He utilized some of the money to create an enduring advertising campaign that centered on the company’s mascot — Ronald McDonald.
Once the domestic market was saturated with McDonald’s franchisees, Ray Kroc turned his attention overseas. It has opened outlets in more than 65 countries. McDonald’s tailor-made its offerings for the country in which it was operating. In order to make the chain’s name more easily pronounceable for Japanese consumers, it was changed to Makudonaldo. In India and in the Middle East, pork is not served. In Ireland the promotions proclaimed, “Our name may be American, but we’re all Irish.” McDonald’s now opens about one-third of its new restaurants in foreign markets.
After handing over the operations to Fred Turner in 1968, Kroc began to take a macro view of the organization that he built from scratch. He continued to mo
nitor business of the newer franchisees. His paranoia regarding the success of McDonald’s was intact as ever. Whenever he traveled he insisted that his chauffer drive him to at least six franchisees for him to conduct surprise checks.
In 1977, Ray Kroc became the Senior Chairman. McDonald’s had sold 65 billion hamburgers by 1987, the year before it opened store number 10,000.
In 1974, Kroc became a hero to some for reasons completely unrelated to business. He purchased the San Diego Padres baseball team and prevented them from moving to Washington, D.C.
Kroc passed away from natural causes in January 1984, at the age of 81, just 10 months before McDonald’s sold hamburger number 50 billion. Today McDonald’s operates over 31,000 restaurants worldwide, employing more than 1.5 million people.
