McDonald’s: Still Golden
After All These Years
By Harold Frost
The History Channel Magazine, 2005
Thus was set in motion a food empire that has changed the world.
Dick and Mac and their team cooked food with the “Speedee Service System,” producing hamburgers before they were ordered, cooking each one to the same degree of doneness, using the same condiments. You could step up to the window of McDonald’s, order a couple of hamburgers, French fries, and a shake, and your meal would arrive in a paper bag in 15 seconds, piping hot (except for the shake), and not bad tasting, not bad at all. And you’d get 40 cents change from your dollar.
Kroc, 50, was a top salesman of the Multi-Mixer, a machine that made five milkshakes at once. Multi-Mixer sales were sluggish just then due to new competition, and Kroc was searching for a way to get the merchandise moving again. At McDonald’s, no less than eight Multi-mixers churned during peak periods.
On the day of Kroc’s visit, more than 150 customers lined up for lunch. “When will this die down?” he asked Dick McDonald, according to historian John F. Love in his book “McDonald’s: Behind the Arches.”
“Sometime late tonight,” replied Dick.
Kroc struck up a conversation with a guy scarfing down a burger. Judging from the fellow’s dress he might have been a carpenter. Perhaps his mid-day break lasted for 30 minutes; perhaps his daily lunch budget was 50 or 60 cents; perhaps he wanted, and felt he needed, a daily quotient of beef.
“How often do you come here for lunch?” Kroc asked the man.
“Every damned day,” came the reply.
In his motel room that night, Kroc, who was inclined to think big, envisioned McDonald’s restaurants coast-to-coast. Could he help create such an expansion? Could he run the show? He had schlepped sample cases for 30 years, his eye cocked for a really first-rate opportunity. He wanted to become rich and famous – he wanted to become great. The idea of greatness informs every chapter of his 1977 memoir “Grinding It Out.”
America in 1952 was bursting at the seams with dreams of greatness and let’s-get-rich brio. The U.S. Gross National Product grew boisterously. For many people, the zeitgeist was “almost wonderful,” writes historian James T. Patterson, “especially in the material sense….” People believed “there were no limits to progress….(and) almost nothing that American ingenuity – in science, industry, whatever – could not accomplish.” Meanwhile, America was graced with astonishing numbers of children because of the post-war Baby Boom (1945-1964) – the U.S. population climbed in the 1950s from 152 million to 181 million, a higher growth rate than in the 1940s, ’30s, ’20s, or ’10s.
Southern California, where Dick and Mac McDonald were located, was giddy with the excitement of good times. The Southland in the post-war years was growing at a rate of more than 100,000 people annually. The region had a massive manufacturing sector prominently featuring aerospace (military testing grounds were located on the nearby desert) and it also had the California zest for the new, the experimental, the hopeful – a historically fascinating vibe with roots in the Gold Rush.
Kroc wanted to franchise the bold concept created by Dick and Mac but the brothers were leery. They had tried franchising but found it burdensome. “Both were happy splitting the $100,000 per year they were making in San Bernardino,” writes historian Love. Fifty thousand bucks apiece was pretty good in 1952 when the average annual wage in the U.S. was about $3,000.
Kroc promised that he would handle all the headaches and send them a monthly royalty check. Dick and Mac thought it over briefly, said yes, and signed on the dotted line.
Kroc rolled up his sleeves and set to work. On April 15, 1955, 50 years ago this spring, in Des Plaines, Illinois, Kroc cut the ribbon at the first McDonald’s for which he was primarily responsible. “It made money from the start,” he notes proudly in his memoir.
McDonald’s Corp. today is by far the world’s biggest restaurant chain, with some 31,000 outlets globally, and it has inspired a legion of competitors. Historian Thomas S. Dicke summarizes: “The development of the fast food industry, led by Ray Kroc and McDonald’s, is one of the major business stories of the 20th century.”
Author Tom Robbins wrote in 1983, “It could have been an omniscient computer that provided this land with its prevailing ambience, it might have been an irresistible new weapons system, a political revolution, an art movement, or some gene-altering drug. How wonderful that it was a hamburger!”
The American eagerness to eat quickly stretches back to “the early years of the republic,” writes historian Harvey Levenstein – in fact, it probably stretches back to colonial days in the 1600s.
A vast wilderness beckoned; lots of land awaited clearance. We ate quickly, got rich quickly, went bust quickly, decided overnight to move west to new territory. Tocqueville mentions America’s “restless temper”; Emerson, too, uses the word “restless” to describe our nature. Henry Chadwick wrote in 1850, “Americans do not care to dawdle – what they do, they want to do in a hurry” – a striking contrast, Chadwick felt, to his home country of England.
The first fast food restaurant opened in 1921, a White Castle in Wichita, Kansas. You went inside, sat down, and waited a little while. Fairly fast but not real fast.
In the 1920s, as the Ford Model T proliferated, a new type of restaurant arrived on the scene – the drive-in. Speed was actually not a priority in many of these establishments. You had to sit in your car and wait for the arrival of a carhop, usually a young woman, sometimes on roller skates. Dick and Mac McDonald employed carhops in their San Bernardino drive-in until 1948. The girls were slow, complained Dick McDonald – they always seemed to be talking with boys. In the autumn of ’48 they fired the carhops and re-engineered their place, creating their soon-to-be-famous assembly line. Historian Love writes that the brothers “defined a totally new food service concept…(Their hamburger stand was) the birthplace of a new generation of restaurants” offering a spectacular combination of speed, convenience, standardization, reasonable quality, and low prices.
Ray Kroc re-defined the food franchising concept. As John F. Love writes, “The essence of Kroc’s unique but amazingly simple franchising philosophy was that a franchising company should not live off the sweat of its franchisees, but should succeed by helping its franchisees succeed.”
Other franchising outfits, pre-dating Kroc, did not orient themselves in this direction. Harry Axene, king of the Dairy Queen realm, which launched in the late 1930s, saw no need to “set standards, oversee operations, purchase materials, or market products,” Love writes. Axene confined himself to three basic transactions: selling franchising licenses, selling patented machines that produced soft ice cream, and collecting royalties on ice cream mix.
“Dairy Queen didn’t commit enough resources to helping the franchisee succeed,” notes historian Dicke, “to teaching the franchisee, guiding him, holding his hand. They weren’t obsessed with making him hugely successful.” Ditto for most other franchising companies. Kroc was different. Kroc sponsored expensive research into the best way to run things and insisted that his people follow the formula. He encouraged his franchisees to call him directly if they had problems. He commiserated, taught, encouraged, cajoled, kicked ass.
He emphasized that every McDonald’s should reflect well on every other McDonald’s – in his opinion, consistency was a prime selling point. He introduced an “extreme regimentation that had never been attempted in a service business,” writes journalist Stan Luxenberg. He would read the riot act for any number of infractions, from raising the price of a hamburger by a few pennies to scrimping on the weight of the cooked sandwich. He warned or fired employees for chewing gum on the job and for having sideburns that were too long.
Kroc’s approach – fierce devotion to the success of the whole network and everyone in it – became the gold standard for food franchising, and, in turn, “franchising has become a foundation of the American economy over the last 50 years,” says Dicke.
One day in the spring of 1955, Sandy and Betty Agate of Chicago wrote a check for $950 and joined Kroc’s expanding army.
Betty’s previous employment was selling Bibles door-to-door; Sandy was a pressman with a hankering to be his own boss. Kroc sold them on the McDonald’s concept. He worked his salesman’s magic on a local banker, freeing up some capital. And the Agates were in business.
Their McDonald’s was located in Waukegan, Illinois, a Chicago suburb not far from Des Plaines, site of the first Kroc-created McDonald’s. Waukegan in 1955 had exactly one drive-in, a seasonal joint open from spring through autumn. It had a few lunch counters, lots of factories, and thousands of hungry workers. It was a “lunchpail town,” Betty fondly said, where men developed powerful appetites for beef.
The Agates opened their McDonald’s on Thursday, May 26, 1955. Sales were good that day and also the next day. By Saturday, word had spread about this new place with low prices, spiffy cleanliness, and hot crisp french fries, and customers were lining up to get in. One hour before opening. In the rain.
The Agates enjoyed banner sales that Saturday. On Sunday they ran out of ground beef. They placed an emergency call to their supplier, who said he could deliver a shipment in half-an-hour. Sandy Agate announced the delay to the customers. They waited, and when the meat came, they happily dined. When the Agates finally closed the doors that Sunday, perhaps their exhaustion was tempered with a sense of wonder at the bounty of America and the genius of Ray Kroc.
In their first year of operation Sandy and Betty netted $50,000. (Kroc himself was only making about $12,000 annually then.) Within a few years the couple bought a $100,000 house.
Not every McDonald’s restaurant offers a similar rags-to-riches story, of course. (For one thing, some outlets are company-owned; for another, not everyone got in at the beginning.) But the corporation takes pride, writes John F. Love, in its record of recruiting bold souls “willing to invest everything they had for the chance to quit working for someone else.” Love counts “hundreds” of successful husband-and-wife franchisee teams.
Today, says a Waukegan government official, the city has 24 fast-food restaurants, including four McDonald’s.
Competitors arrived. Burger King came on the scene in the ’50s (originally known as Insta-Burger King; inspired by the McDonald brothers). Taco Bell launched in 1962; Wendy’s was formed in 1969. But the McDonald’s caravan rolled on, introducing well-researched new products and gimmicks, some of which were created by franchisees.
McDonald’s Hamburger University opened in 1961, the same year that Kroc bought all rights to the McDonald’s concept for $2.7 million – a million bucks for both McDonald brothers plus money to pay the taxes.
Ronald McDonald debuted in 1963. Other creations: The Filet-o-Fish sandwich (1964; the question must be asked, why isn’t it named “McFish”?), the Big Mac (1968), the Quarter Pounder (1972), the Egg McMuffin (1973), the Ronald McDonald House (1974), and the first Drive-Thru (1975 in Sierra Vista, Arizona). (See here for a McDonald’s timeline [not an official company publication].)
Some people came to view the company’s speed and pervasiveness as oppressive and its food as bad. In 1974, Mimi Sheraton, food editor of the New York Times, described McDonald’s fare as “irredeemably horrible, with no saving graces whatever.” In one of journalism’s great food metaphors, she compared the company’s shakes to “aerated Kaopectate.” Meanwhile, health and environmental concerns were voiced (see sidebar below).
The firm’s expansion continued apace in the 1980s with the company paying much attention to its international effort. Kroc kept working full-time as he aged, despite his wealth (his net worth was once estimated at more than $600 million) and despite arthritis and diabetes.
He had achieved greatness (or at least wealth) by breathing down people’s necks; he was darned if he was going to stop. He peered out his office window in Southern California at the next-door McDonald’s and tracked the rate at which cars negotiated the Drive-Thru. He was not satisfied: “Gotta be faster,” he said. Soon thereafter, at his behest, McDonald’s invested vast sums in the addition of second windows to its Drive-Thrus; these are dedicated exclusively to the exchange of cash.
Ray Kroc died in 1984 at age 81. “Without question he’s the greatest figure in modern franchising,” says scholar Thomas S. Dicke. “He is one of the foremost business innovators of our history, and thus ranks, I believe, as one of the key shapers of modern American culture.” ●
The Slow Food Movement
By Henry Frost, 2009
In 1986, an Italian journalist named Carlo Petrini participated in a protest against an effort by McDonald’s Corp. to open a restaurant near the Spanish Steps in Rome. In the wake of the action, Petrini founded – or helped found – the Slow Food movement.
Slow Food proposes a re-thinking of the assembly line, grind-it-out, wolf-it-down aspects of fast food. It aims to enhance appreciation of traditional and regional cuisines and to foster connections between what people eat and their local ecosystems. (Some sources give Petrini sole credit for the founding of Slow Food; others, including “The Oxford Companion to Food,” say the movement was launched by a group of people.)
Slow Food is global. A significant book about the concept was published in 2005, “In Praise of Slowness: How a Worldwide Movement is Challenging the Cult of Speed” by Carl Honore. In an interview in 2009, Honore noted that slowness consciousness is reaching into many areas of modern life, including travel and parenting.
Notable members of Slow Food USA are authors Michael Pollan and Eric Schlosser and restaurateur Alice Waters. The movement is not without its critics; journalist Steven Shaw says the effort has a leftist poltical agenda and is antitechnology and antiglobalization (see Shaw’s Website here). More information about Slow Food can be found here and here.
By Henry Frost, 2005
McDonald’s has traveled a bumpy road over the last few years, plagued by spotty financial performance, criticism from health professionals, and management change.
A best-selling book published in 2001 attacked the company vigorously: “Fast Food Nation: The Dark Side of the All-American Meal” by Eric Schlosser, which describes, in copious detail, the health and environmental costs of the culinary revolution wrought by Ray Kroc.
The book chronicles the dicey marketing techniques of the fast food industry, the appalling abuses of the meat packing business, the climbing global obesity rate, and other issues. Schlosser clearly has an agenda: “Future historians, I hope, will consider the American fast food industry a relic of the twentieth century.” The book has been widely praised – some critics compare it to “The Jungle” by Upton Sinclair, the 1906 muckraking classic – but the kudos are not unanimous: a reviewer for the Wall Street Journal accuses Schlosser of a “cavalier manipulation of data.” A sampling of reviews can be found here.
(Update, 2009: Michael Pollan has become in recent years an important analyst of the food business, with much to say about fast food.)
In 2004, heart surgeon Dr. Delos M. (Toby) Cosgrove, CEO of the world-renowned Cleveland Clinic, sought, for health reasons, to terminate the 20-year lease of a McDonald’s located at the hospital, saying, “A lot of the diseases in America right now are related to how people take care of themselves. We’re trying to be a model for appropriate behavior….(McDonald’s) is not associated with heart-healthy food.”
Cosgrove threw Pizza Hut out on its ear, but McDonald’s fought the eviction effort with its usual battalion of lawyers. “Our menu is something we’re all proud of,” said corporate vice president Marty Ranft. “We’ve got a great relationship with the Cleveland Clinic. We are not interested in closing.” Ranft noted that McDonald’s has made significant additions to its menu in recent years, adding high quality salads.
In a story about the Cleveland battle, the Washington Post quoted McDonald’s customer Tanya Sutton: “I try to eat healthy, but for lunch I want something that’s cheap.” The article also quoted a nurse waiting in line to buy a McDonald’s chicken salad: “(The food at the hospital cafeteria) is not a lot better (than McDonald’s) and it’s certainly not affordable.”
According to the Post, McDonald’s played the race card, suggesting that “Cosgrove is racist for targeting Turan Strange, the African American small businessman who owns the franchise.” The company also “raised the specter of unemployment for its 40 low-wage workers and said that closing down will hurt Ohio beef producers.” In the end the restaurant stayed put.
McDonald’s has struggled recently with less-than-stellar financial performance. Fortune magazine asked in 2003, “Can McDonald’s Cook Again?” and cited years of declines in revenue growth, lack of innovation, and poor marketing. But the company enjoyed a robust ’04 and its stock price rebounded. “They’re definitely on the comeback trail,” says Janice Meyer, a restaurant analyst for Credit Suisse First Boston.
The man who led the turnaround, chairman and CEO Jim Cantalupo, died of a heart attack in April of ’04 at age 60. His successor, Charlie Bell, died of colorectal cancer in January, 2005, at age 44.