Kroc, Raymond

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Kroc, Raymond

(1902-1984)
McDonald's Corp.

Overview

Founder of the immensely successful McDonald's franchise operation, Ray Kroc was a pioneer of the modern fast-food restaurant industry. He introduced management innovations that are now standard in the business, such as implementing assembly line methods and employing a part-time, teenage labor force to produce a rigorously standardized menu at a low cost. Kroc's formula allowed him to build an initial investment of a few thousand dollars into a giant, international corporate empire. At the time of his death, the chain's annual sales totaled over $8 billion.

Personal Life

The son of relatively poor parents, Ray Kroc was born in Chicago, Illinois, on October 2, 1902. He went to public schools in Oak Park, Illinois, a suburb of Chicago, but did not graduate, leaving school to open his own music store. When World War I began, he lied about his age to serve as an ambulance driver for the American Red Cross. A variety of jobs and 3 wives followed. He and his first wife, Ethel Fleming, a homemaker, had a daughter, Marilyn, who died in 1973. Kroc then married Jane Dobbins Green, a secretary whom he divorced. His third wife was Joan Smith, an organist and philanthropic foundation director. Ray Kroc died of heart failure in San Diego on January 14, 1984.

Career Details

After serving in World War I, Kroc returned home and became a ribbon novelty salesperson and a jazz pianist, playing with the Isham Jones and Harry Sosnick orchestras. In 1922 he went to work for the Lily-Tulip Cup Company, but soon left to become musical director for one of Chicago's pioneer radio stations, WGES. There he played the piano, arranged the music, accompanied singers, and hired musicians. Kroc was not satisfied, however, and the real estate boom in Florida soon found him in Fort Lauderdale, selling property. When the boom collapsed in 1926, Kroc was so broke that he had to play piano in a nightclub to send his wife and daughter back to Chicago by train. He later followed them in his dilapidated Model-T Ford.

Kroc then returned to Lily-Tulip as a salesman, later becoming Midwestern sales manager. In 1937 he came upon a new invention: a machine that could mix five milk shakes at one time, called the "multi-mixer." When Lily-Tulip turned down the opportunity to distribute the mixer, Kroc founded his own company to serve as exclusive distributor for the product in 1941.

Many years later, in 1954, Kroc heard of a drive-in restaurant in San Bernardino, California, owned by Richard and Maurice D. McDonald, which was operating eight of his multi-mixers. Curious as to how they could possibly use so many machines in a small establishment, Kroc found the brothers were doing a remarkable business selling only hamburgers, french fries, and milk shakes, while using the principles of the assembly line as their basis for production. Kroc, from his years in the paper cup and milk shake business, recognized the potential opportunity and approached the brothers about starting a franchise operation based on their restaurant. After some negotiation, the McDonald brothers agreed to join Kroc in a partnership. In exchange for one-half of one percent of the gross, Kroc was granted the use of the McDonald name, concept, and symbol, the golden arches, along with unlimited franchise sales rights.

Ray Kroc opened the first of the chain of McDonald's restaurants on April 15, 1955 in Des Plaines, Illinois. Small by today's standards, this restaurant, now the world's first "Hamburger Museum," was a little red and white tile affair where root beer was poured from a wooden barrel, potatoes were peeled in the restaurant, and local vendors supplied fresh hamburger meat. The mascot, now long forgotten, was Speedee, a hamburger-bun-faced creature. On that first day, Kroc's restaurant had sales of $366.12. By 1961 there were over 130 outlets, and in that year Kroc bought out the McDonald brothers for $2.7 million. From these humble beginnings emerged an empire which by 1984 had 8,300 restaurants in 34 countries with sales of more than $10 billion.

Ray Kroc revolutionized the restaurant industry in much the same way that Henry Ford had transformed the automobile industry a generation earlier. Kroc's greatest achievement was the ability to mass-produce food uniformly in astounding quantities, and then to convince millions of Americans that they needed to buy this food. To accomplish the first objective, Kroc reduced the food business to a science. Nothing was left to chance in the logistics of the McDonald's operations, which were carefully researched by sophisticated methods. Each McDonald hamburger, made with a 1.6-ounce beef patty, not more than 18.9 percent fat, is exactly .221 inches thick and 3.875 inches wide. All other aspects of the operation are equally rigidly controlled. Kroc also relentlessly stressed quality, banning fillers, such as soybeans, from his hamburgers.

The other side of the McDonald's story is the success of its franchising, marketing, and advertising. Three-quarters of the McDonald's restaurants are run by franchise-holders. By 1985 each franchise cost about $250,000 and ran for 20 years, after which it reverted to the company. When choosing franchise-holders, Kroc always looked for someone good with people. He said, "We'd rather get a salesman than an accountant or even a chef." The franchise owners were then intensely trained at McDonald's "Hamburger University" in Elk Grove, Illinois, where a training course led to a "Bachelor in Hamburgerology with a minor in french fries." The company also provided a lengthy manual that outlined every aspect of the operation, from how to make a milk shake to how to be responsive to the community. The capstone of the McDonald's operation, however, was advertising. Hundreds of millions of dollars were poured into advertising, to the point where the head of another fast-food company said in 1978 that consumers were "so preconditioned to McDonald's advertising blanket that the hamburger would taste good even if they left the meat out."

Despite its astounding success, and despite the fact that the company worked hard to project a charitable and community-oriented image, McDonald's came under attack on several fronts. A number of communities refused to allow its restaurants in their area, seeing it, as one commented, as a "symbol of the asphalt and chrome culture." The company was also criticized for its extensive use of part-time teenage help, and especially for the $200,000 which Kroc donated to Richard Nixon's reelection campaign, since the administration soon after recommended amending the minimum wage law to provide for a "youth differential." This would have allowed employers to hire teenagers at 80 percent of the minimum wage. The architecture of the buildings and the nutritional content of the food were additionally assailed, although nutritionist Jean Mayer said, "As a weekend treat, it is clean and fast."

In the mid-1970s Kroc turned his energy from hamburgers to baseball, buying the San Diego Padres. He owned the team from 1974-79, but had less success at this endeavor. During the season opener in his first year as owner, the Los Angeles Times reported that Kroc took over the stadium's public address system and apologized to the fans in attendance for a series of errors by the Padres, saying, "This is the most stupid baseball playing I've ever seen." This prompted a new rule in major league baseball prohibiting anyone but the official announcer from using the public address system during a game. In 1979 he gave up operating control of the team, saying with his typical crustiness, "There's a lot more fun in hamburgers than in baseball. Baseball isn't baseball anymore." Kroc was credited with promoting and developing the team, which reached the World Series five years after it, the same year in which Kroc died. Each player wore a black armband with the initials R.A.K. to commemorate the late owner.

Social and Economic Impact

The 1960s witnessed the rise of an entire fast-food restaurant industry modeled on McDonald's production techniques, with fierce competition between rival franchise chains. In 1977 when he teamed with Robert Anderson to write Grinding It Out: The Making of McDonald's, Kroc called his start in the hamburger business a "happy accident."

Kroc stressed QSC—quality, service, and cleanliness. In later years "value" also became a core item, and because he felt personally responsible for maintaining high standards, he would frequently make unannounced visits to local franchises to ensure all operations met his goals. Kroc and subsequently, McDonald's, promoted a staff of jubilantly cheerful, all-American youth. A staunch advocate of the free enterprise system, he liked to attribute his success to the democratic virtues of persistence and determination. Kroc also became known for his blunt speech, domineering personality, and impatience with those unwilling or unable to follow his driving work pace. Kroc estimated that dozens of successful franchise owners had become millionaires thanks to McDonald's.

Kroc was also successful because he allowed employees and franchise owners to state ideas and make decisions; he was a forefather of the "empowerment" movement. Bill Carlino, in Nation's Restaurant News, reported that Kroc once said, "If a company has two executives who think alike, one of them is unnecessary." Some of McDonald's signature items, like the Big Mac, Filet-O-Fish, and Egg McMuffin weren't developed by the corporate chefs in the test kitchens but by licensees.

Irv Klein, a veteran operator, summed up Kroc's success by stating, "What Ray did was help create an industry. He had a built-in sensor that allowed him to understand the public and the people who worked for him. He came into this business later in his life but at the right time."

Chronology: Raymond Kroc

1902: Born.

1937: Began distributing multi-mixer machines.

1954: Visits a McDonald's restaurant for the first time.

1955: First McDonald's franchise opened in Des Plaines, Illinois.

1961: Bought out the McDonald brothers for $2.7 million.

1961: Established Hamburger University.

1969: Formed Kroc Foundation.

1974: First Ronald McDonald home built in Philadelphia.

1974: Purchased San Diego Padres baseball team.

1977: Co-authored Grinding It Out: The Making of McDonald's.

The Kroc Foundation was established in 1969 to support medical research on diabetes, arthritis, and multiple sclerosis (MS), three diseases that had personally affected the entrepreneur: Kroc's daughter Marilyn died of diabetes, he suffered from diabetes and arthritis, and his sister had MS. Under the direction of his wife Joan, the Kroc Foundation also initiated Operation Cork (Kroc spelled backward) in 1976 as a national educational program to help the families of alcoholics. In the mid-1970s, McDonald's restaurants joined with professional athletic teams in building Ronald McDonald houses associated with children's hospitals across the United States to provide temporary housing for families of children undergoing medical treatment away from home.

By 1996 the golden arches of McDonald's were, as reported in Nations Restaurant News, "the second-most widely recognized trademark in the world, behind Coca-Cola." In the United States alone it is estimated that 96 percent of Americans between ages 16 and 65 have eaten at least once at a McDonald's restaurant and that McDonald's was the first job for 1 in 15 Americans.

Kroc cut a commanding figure, with his thin hair brushed straight back, his custom blazers impeccable, and the bulky rings on his fingers glinting as he ate his hamburger with both hands. Aware of his abrasiveness, he once commented: "I guess to be an entrepreneur you have to have a large ego, enormous pride, and an ability to inspire others to follow your lead."