Starting up the McDonalds

The beginning of a business success
WORLD
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Characters team Oct 02. 2016
by Characters team


In 1954, a fifty-two-year-old milk-shake machine salesman saw a hambuarger stand in San Bernardino, California, and envi- sioned a massive new industry: fast food. In what should have been his golden years, Raymond Kroc, the founder and builder of McDonald’s Corporation, proved himself an industrial pioneer no less capable than Henry Ford. He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, french fries, and milk shakes. By developing a sophisti- cated operating and delivery system, he insured that the french fries customers bought in Topeka would be the same as the ones purchased in New York City. Such consistency made McDonald’s the brand name that defined American fast food. 

By 1960, there were more than 200 McDonald’s outlets across the country, a rapid expansion fueled by low franchising fees. Ray Kroc had created one of the most compelling brands of all time. But he was barely turning a profit. Ultimately, it was his decision to use real estate as a financial lever that made McDonald’s a viable operation. In 1956, Kroc set up the Franchise Realty 

Corporation, buying up tracts of land and acting as a landlord to eager franchisees. With this step, McDonald’s began to generate real income, and the company took off. Kroc then introduced national advertising programs to support the rapidly proliferating franchises, and when it appeared that growth in the company’s home territory was slowing in the early 1970s, he started an energetic and success- ful push to make McDonald’s a global presence. Throughout the company’s spectacular growth, Kroc maintained a delicate balanc- ing act, imposing rigorous system-wide standards while encouraging an entrepreneurial spirit that welcomed ideas from all levels. Many of these ideas contributed to the company’s astonishing success. 

In amassing a $500-million fortune, the king of the hamburger transformed the nation’s cultural landscape and forged an industry that is among America’s greatest exports. The widely imitated suc- cess of McDonald’s offers an excellent example for today’s managers and executives searching for greater production efficiencies. By putting the humble hamburger on the assembly line, Kroc showed the world how to apply sophisticated process management to the most prosaic endeavors. To succeed the McDonald’s way, compa- nies must define the basic premise of the service they offer, break the labor into constituent parts, and then continually reassemble and fine tune the many steps until the system works without a hitch. Today, companies engaged in delivering pizzas, processing insurance claims, or selling toys benefit from the kinds of systems that Ray Kroc pioneered. To the degree that such operations main- tain quality control, and cherish customer satisfaction, profits may flow. 

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