McDonald's History & Overview

McDonald's Overview

• McDonald's is a restaurant chain famous for hamburgers, fries, milkshakes, and other sandwiches.
• The fast-food chain was created in 1948 and has become an icon.
• There are over 38,000 McDonald's restaurants in over 100 countries worldwide.
• McDonald's serves 69 million people around the world daily.
• One out of every eight Americans has worked at a McDonald's since the restaurant's inception.

The McDonald Brothers

• Maurice ("Mac") McDonald was born on November 26, 1902.
• Richard ("Dick") McDonald was born on February 16, 1909.
• Mac and Dick McDonald were from a poor family of Irish immigrants in rural New Hampshire.
• Their father, Patrick, worked in a shoe factory for 42 years and was laid off without a pension.
• The McDonald brothers were determined to become millionaires from a young age.
• Richard McDonald, at age eight, told his father he would be a millionaire.

Early Ventures in Hollywood

• In 1926, Mac McDonald moved to Hollywood with the help of a distant relative to work in the movie industry.
• In 1927, Dick McDonald joined his brother in Hollywood after graduating from high school.
• The McDonald brothers worked as handymen, truck drivers, and set movers at Columbia Movie Studios.
• They were paid $25 a week, which wasn't enough to fulfill their millionaire dreams.
• The brothers sought a way to stay in the movie business while saving money.
• In 1930, they learned about the Mission Theater, located 20 miles outside of Los Angeles.
• The owner wanted out of the lease due to slow business.
• The McDonald brothers took over the lease of the Mission Theater with a promise to pay later if they made money.

The Beacon Theater

• In 1931, the McDonald brothers renamed the Mission Theater to the Beacon.
• The theater had a seating capacity of 750 moviegoers.
• The brothers installed a snack bar.
• Business was slow during the early years of the Great Depression after the stock market crash of 1929.
• The brothers were often behind on monthly bills and faced the threat of foreclosure.
• In extreme times, the brothers buried their silver in the backyard due to the Great Depression.
• They observed that a nearby root beer and hot dog stand was consistently getting a lot of customers.

Transition to the Food Business

• After seven years of running the movie theater, the McDonald brothers realized that food sold better than movie tickets.
• The McDonald brothers sold the Beacon Theater and decided to enter the food business.
• In 1937, the brothers opened a food stand called the Airdome.
• The Airdome was an octagon-shaped food stand located near the Monrovia airport along Route 66.

McDonald's Origins & Early Business

• Hot dogs were the initial food sold at the Air Dome, later adding hamburgers for 10 cents each.
• All-you-can-drink orange juice was sold for 5 cents due to the town's ample orange supply.
• The McDonald's brothers' business thrived during racing season due to the town's racetrack appeal.
• In 1940, the brothers sought a $5,000 Bank of America loan to relocate due to slow business after racing season.
• With the loan, they moved their food stand 45 miles east to San Bernardino, California, a working-class town.
• They overhauled the menu to 25 items, primarily barbecue, renaming the stand McDonald's Barbecue.
• Drive-ins were popular then; McDonald's Barbecue was set on a corner lot with drive-in service.
• The business boomed, earning them $40,000 annually (approximately $700,000 in today's money).
• The McDonald brothers preferred serving working-class families over teenagers who mostly flirted with carhops.
• Carhops wore old uniforms from the Beacon Theater.

Shift to Hamburgers

• Post-World War II, the McDonald's brothers planned a remodel for faster service.
• Carhops were viewed as slow and unreliable, spending too much time flirting for tips.
• Hamburgers were the top-selling item and easiest to prepare.
• The drive-in was closed in October 1948 for redesign, inspired by the Ford assembly line.
• The sign outside read "Closed for Alterations: The first in America, the drive-in hamburger bar owned and operated by McDonald brothers".
• The name was shortened to McDonald's, dropping "Barbecue".
• December 12, 1948, McDonald's reopened with a new, efficient design and simplified menu.

Streamlined Menu & Service

• The original menu had six items: hamburgers, cheeseburgers, potato chips, coffee, soft drinks, and apple pie.
• Twenty carhops were eliminated, replaced by counter service, self-serve areas, and trash cans.
• Like previous stands, there was no dining area; customers ordered from the counter.
• The mascot, Speedy, a chubby man with a hamburger head and a chef's hat, symbolized quick service.

Initial Setbacks & Turnaround

• The restaurant's redesign allowed burgers to be sold for half the price of competitors.
• Initially, customers were unhappy, driving up and leaving when no carhops appeared.
• The first month was poor; employees parked in front to give the appearance of business.
• After three months, cab drivers, sales clerks, and construction workers became regular customers due to the quick service.
• Younger customers enjoyed ordering and carrying their own trays of food.
• Gradually, McDonald's became a massive hit, earning $100,000 annually.

Menu Evolution & Recognition

• By 1949, potato chips were replaced with french fries, and apple pies with milkshakes.
• Service time decreased from 20 minutes to 1 minute.
• In 1952, American Restaurant Magazine featured McDonald's as "the most revolutionary development in the restaurant industry in the past 50 years".
• People from across the US visited to experience McDonald's.

Design & Efficiency Innovations

• The brothers sought a special, unique look to replace the old Octagon shaped food stand.
• Dick McDonald created the iconic double arch design to give the building flair.
• Stanley Clark Meston, assisted by Charles Fish, was hired to design the new building.
• They meticulously measured every piece of kitchen equipment.
• The new design featured red and white tiles, stainless steel, colorful sheet metal, large glass panes, and neon lights.
• Two 25-foot yellow sheet metal arches with neon trim were included, known as the Golden Arches early on.
• Dick McDonald created a condiment dispenser modeled after a candy factory device to apply equal amounts of ketchup and mustard.

Franchising Begins

• By May 1953, Neil Fox became the first franchisee, opening a McDonald's in Phoenix, Arizona, with the Golden Arches design.
• Neil Fox's brother-in-law, Roger Williams, and Bud Landon opened the second franchise in Downey, California, on August 18, 1953.
• The Downey location is the oldest surviving McDonald's, maintaining its original look due to a different contract.

Franchising Challenges

• The McDonald brothers initially wanted to avoid franchising and open restaurants themselves, but dismissed the idea due to the perceived work involved.
• They hired franchise agent Bill Tancy, who sold 21 franchises, resulting in nine new McDonald's restaurants.
• Bill Tancy had to stop due to health issues.

The Ray Kroc Era Begins

• Ray Kroc, a multi-mixer salesman, noticed McDonald's ordered eight multi-mixers.
• He visited McDonald's, impressed by the operation, and began the journey that would turn McDonald's into what it is today

Ray Kroc's Early Life

• Raymond Albert Kroc was born on October 5, 1902, to Lewis and Rose Kroc.
• Lewis Kroc, an immigrant from the Czech Republic, worked for Western Union.
• Rose Kroc, born in the US, was a housewife and piano teacher.
• Ray grew up in Oak Park, Illinois, and learned piano, played baseball, and worked odd jobs.
• Ray worked in his uncle's drugstore, developing sales skills.
• He attended high school, excelled in debates, and was confident.
• At 14, he and two friends opened a music shop but soon closed it due to poor sales.
• Between sophomore and junior year he dropped out of high school.

Early Career & Personal Life

• Ray lied about his age to join the Red Cross as an ambulance driver during World War I but never deployed.
• He returned to Chicago, briefly went back to school, then worked various jobs.
• In 1919, he sold ribbon novelties and played piano, including at a brothel.
• He met his future wife, Ethel Fleming, at a summer resort where he played in a band.
• In 1920, the Kroc family moved to New York for Lewis's job.
• Ray worked as a cashier but lost his job when the company went bankrupt, prompting him to return to Chicago.
• Ray became a paper cup salesman for Lily Tulip Paper Cup Company and married Ethel Fleming in 1922.

Sales Success & Family

• By 1923, Ray was Lily Tulip's top salesman, working long hours and playing piano at a radio station in the evenings.
• In October 1924, Ray and Ethel had their only child, a daughter named Marilyn.
• In 1925 he earned enough money to buy a Ford Model T.
• In spring 1925. he sold paper cups to a German restaurant.
• Ray moved to Florida to sell real estate, but the real estate boom ended.

Musical Interlude & Return to Chicago

• After real estate, Ray played in the Willard Robinson Orchestra, earning $110 a week.
• The nightclub he played at was raided for illegally serving alcohol, landing everyone in jail.
• Ray and his family then returned to Chicago in 1927.

Paper Cup Success & the Multi-Mixer

• Ray focused on selling paper cups for Lily Tulip, securing deals with Walgreen Drug Company and other businesses including street vendors.
• During the Great Depression, he thrived, buying a new Buick, hiring a secretary, and employing a maid.
• Ray observed the growing popularity of Prince Castle ice cream parlors and a new, thicker milkshake developed by Walter Fredenhagen.
• Ray convinced Walter and Earl Prince to check out the milkshake in Michigan, leading to the development of their own version.
• Earl Prince invented the multi-mixer, a milkshake mixer with six (later five) spindles.
• Ray promoted the multi-mixer to Lily Tulip, but headquarters rejected it.

The Multi-Mixer Business

• Ray quit Lily Tulip to work exclusively selling the Multi-Mixer.
• A deal was worked out where Prince Castle Sales owned 60% and Ray Kroc owned 40%.
• Ray had a small office in Chicago and traveled extensively to sell the multi-mixer.
• In 1940, Ray bought out Sanitary Cup's 60% ownership of Prince Castle Sales.
• He increased his mortgage to raise the down payment and agreed to pay the rest over five years.
• This decision strained his marriage with Ethel.
• World War II restricted copper use, hindering multi-mixer production.
• Ray sold Malta Plenty (malted milk powder and paper cups) to stay afloat and continue paying off his debt.
• By 1945, Ray had full ownership of Prince Castle Sales.

Ray Kroc and the Multi-Mixer

• After World War II, Ray Kroc sold multi-mixers to establishments like Tasty Freeze, Dairy Queen, and A&W Root Beer drive-ins.
• In the late 1940s, Kroc sold an average of 5,000 multi-mixers annually, with one year reaching 8,000 units at $150 each.

Challenges and the Search for Innovation

• The early 1950s presented sales challenges as Walgreens and other stores removed soda fountains due to suburban growth.
• Kroc's customers dwindled, and competition from other multi-mixer companies impacted sales.
• Looking for a new product, Kroc considered the "Fulda Nook," a fold-up kitchen table, but later abandoned the idea due to a salesman's con.

Discovery of McDonald's

• In 1954, Kroc noticed a high volume of multi-mixer orders from a McDonald's restaurant in San Bernardino.
• Ray was shocked that this single restaurant needed eight multi-mixers.
• Kroc visited the restaurant and was impressed by its efficiency, clean-cut employees, and family-oriented atmosphere.
• Customers praised McDonald's food quality and prices, which were about half the cost of other restaurants.

Partnership with the McDonald Brothers

• Kroc met with Mac and Dick McDonald, learning their restaurant system, menu, and pricing:
  • Cheeseburgers: 19 cents
  • Hamburgers: 15 cents
  • Soft drinks: 10 cents
  • Milkshakes: 20 cents
  • Coffee: 5 cents
• The brothers showed Kroc the new restaurant design with yellow arches and neon lights.
• Kroc envisioned McDonald's restaurants nationwide, each with eight multi-mixers, but initially had no intention of owning the chain.

Kroc's Vision and Determination

• In 1954, at 52, Ray Kroc faced health issues and declining multi-mixer sales.
• Kroc studied McDonald's operations, focusing on the preparation of their popular french fries.
• Kroc proposed expanding McDonald's, offering to manage new locations.
• The McDonald brothers agreed, leading Kroc to become their franchise agent.

The Franchise Agreement

• Kroc's contract with the McDonald brothers included a $900 franchise fee.
• Kroc would receive 1.9% of gross sales from franchises, while the McDonald brothers got 0.5%.
• In 1955, Kroc founded McDonald's System, Inc., with Art Jacobs as a 50/50 partner.
• Their first McDonald's location was in Des Plaines, Illinois, near Kroc's home.

Early Challenges and Solutions

• Building and operational challenges arose, relating to the blueprint, temperature, ventilation, and the french fries.
• Kroc developed a system using fans to ensure the french fries matched the original McDonald's quality.
• The McDonald brothers had sold the McDonald's name to 10 other stores in California and Arizona, restricting Kroc's franchising area.
• Kroc had to buy out the franchise rights for Cook County, Illinois, for $25,000 from an ice cream company, causing friction with the McDonald brothers.

Harry Sonneborn's Contribution

• Harry Sonneborn, former VP of Finance for Tasty Freeze, joined McDonald's and was familiar with Kroc through the multi-mixer.
• Harry offered to work for $100 a week, becoming a key asset with his legal and financial knowledge.
• Kroc maintained a family-friendly atmosphere, prohibiting pay phones, jukeboxes, and vending machines.

Expansion and Standardization

• By the end of 1955, Kroc had opened two more locations, grossing $235,000 in sales.
• Kroc implemented the "If you have time to lean, you have time to clean" motto.
• By 1956, eight McDonald's restaurants were open, and Kroc aimed for consistency across all McDonald's locations nationwide.
• The Franchise Realty Corporation was created by Harry Sonneborn as a solution to handling real estate.

Franchise Realty Corporation

• The Franchise Realty Corporation held McDonald's real estate, leasing land and buildings and passing costs to franchisees with a 20-40% markup lowering the franchise fee to $950.
• Starting with $1,000, Franchise Realty grew into $70 million worth of real estate.
• This financial model significantly contributed to McDonald's growth and remains in use today.

Fred Turner's Role

• Fred Turner was brought in to handle corporate operations due to his leadership skills.
• In January 1957, Turner started overseeing operations for all McDonald's stores for $475 a month.
• Turner determined the ideal hamburger patty composition: one-tenth of a pound, 19% fat content, all beef, no fillers.
• By 1958, there were 34 McDonald's restaurants with Fred Turner handling all food and supply purchases.

Growth and Challenges

• The inaugural McDonald's location in Honolulu, Hawaii was opened by 1959.
• Harry Sonneborn became the President and CEO of McDonald's.
• A franchisee caused financial issues by building stores on land without titles, forcing Kroc to borrow $400,000.
• Kroc secured $1.5 million from three insurance companies (in exchange for 22.5% of McDonald's stock) to build ten company-owned stores leading to rapid expansion.

Standardizing the McDonald's Experience

• The first company store was opened in Columbus, Ohio, in 1960.
• Kroc aimed to introduce new ideas, but the McDonald brothers had to approve these innovations.
• Fred Turner found out the original McDonalds was the only standard store:
• The other California locations offered varied menus that affected image and quality.
• August 30, 1960, marked the opening of the 200th McDonald's location in Knoxville, Tennessee.

Personal Life

• Kroc met Joni Smith in Minneapolis in 1961 and fell in love.
• Kroc divorced Ethel and proposed to Joni, but she didn't immediately divorce her husband.
• Ray gave Ethel their house, car, and all insurance, also $30,000/yr.

Buying Out the McDonald Brothers

• The brothers requested $2.7 million in cash for a complete buyout to get $1 million each after taxes.
• Ray didnt have the money so he asked them to finance but they wanted cash only.
• Ray and Sonneborn secured funds from educational and institutional investors like Princeton University and the Ford Foundation.
• Kroc completely owned McDonald's after he had the money.

Post-Buyout Changes

• The McDonald's rebrand happened with the McDonald brothers kept their popular location.
• Kroc forced the brothers to rename it "The Big M."
• The new McDonald's logo was brought in featuring the golden arches and speedy was cute.
• Franchisees could have only one store, making it so Kroc had control.

Personal Struggles and the Filet-O-Fish

• Joni declined to divorce her husband, so Kroc built a McDonald's near The Big M out of spite.
• Kroc fell in love with Jane Green and married after two weeks in 1963.
• A franchisee suggested a fish sandwich called the Filet-O-Fish to boost sales on Fridays.
• In 1962, Kroc introduced the Hula Burger (grilled pineapple and cheese) alongside the Filet-O-Fish
  • The Filet-O-Fish out sold the Hula Burger substantially

Ronald McDonald

• Ronald McDonald was introduced in 1963
  • He was a McDonalds mascot and a clown
  • He wore a yellow jumpsuit, red hair, and big red shoes.
• Willard Scott, who played Bozo the Clown, is often credited as the original Ronald McDonald.

Ronald McDonald's Evolution

• Scott, who initially played Bozo the Clown, was approached by McDonald's in 1963 to portray a hamburger-happy clown in commercials.
• The original Ronald McDonald look lasted until 1966.
• Circus performer Coco the Clown was hired to redesign Ronald McDonald's image in 1966, creating the classic look known today.
• The redesigned Ronald McDonald made, his television debut on Thanksgiving 1966 during the Macy's Day Parade on the McDonald's float.

McDonald's Expansion and Financial Decisions

• Ray Kroc became president of McDonald's in 1965.
• Kroc focused on expanding McDonald's restaurants in suburban areas near where most people lived.
• In April 1965, McDonald's went public, selling shares at $22.50 each, to fund further growth.
• In 1965, McDonald's switched to using frozen french fries instead of having employees cut potatoes.
• By the end of 1965, McDonald's had 700 restaurants in 44 states.

Internal Conflict and Leadership Changes

• By the end of 1966, tension grew between Harry Sonneborn and Ray Kroc over the future of McDonald's.
• Sonneborn anticipated a recession and suspended plans for new restaurant construction.
• Sonneborn resigned as president and sold his stock in McDonald's in 1967, believing it would become worthless.
• Ray Kroc then took over as president and chairman of the board, resuming construction of new restaurants.
• Fred Turner was appointed as president of McDonald's in 1968.

Menu Innovations

• In January 1967, hamburger prices increased from 15 cents to 18 cents.
• Jim Delligatti, a franchisee from Pittsburgh, Pennsylvania, created the Big Mac in 1967.
• The Big Mac consists of two beef patties, special sauce, lettuce, pickles, American cheese, onions, and a three-piece sesame seed bun.
• The Big Mac debuted in Uniontown, Pennsylvania, for 45 cents.
• The Big Mac was sold in all U.S. McDonald's restaurants by 1968.

McDonald's Brothers and Ray Kroc's Role

• The McDonald's brothers sold the Big M after losing business due to Ray Kroc opening McDonald's restaurants nearby; they then left the food business.
• Ray Kroc is considered the founder of the McDonald's Corporation as it is known today, despite not creating the original concept.
• Mac McDonald later got married.
• Dick McDonald moved back to New Hampshire and eventually married his childhood sweetheart.

International Expansion

• Canada opened its first McDonald's in Richmond, British Columbia, in 1967.
• The first McDonald's in a U.S. territory opened in San Juan, Puerto Rico, in 1967.

Ray Kroc's Personal Life

• Ray Kroc rekindled his relationship with Joan Smith in 1968.
• Ray Kroc divorced his wife Jane, and she was given the house in beverly hills
• Ray Kroc and Joan Smith married on March 8, 1969, on a ranch home in Southern California that Ray had bought in 1965.

McDonald's Branding and Design

• By 1968, McDonald's opened its 1000th restaurant
• The McDonald's logo changed in 1968 to the two yellow arches meeting in the center, forming the "M".
• A franchisee in Knoxville, Tennessee, introduced a fried turnover-styled apple pie to the menu creating a new dessert item.
• In June 1969, McDonald's restaurants transitioned to a brick and mansard roof design with expanded indoor seating.

McDonald's Competitiveness and Quality Focus

• Ray Kroc emphasized that McDonald's hamburgers were made with 100% real beef and no soybean filler.
• Kroc ensured customers received their food in less than five minutes or their money back.

Introduction of the Shamrock Shake

• The Shamrock Shake was first introduced in 1970 to celebrate St. Patrick's Day in the U.S., Canada, and Ireland.
• The Shamrock Shake's origin is debated, with two stories: one from franchisee Hal Rosen in 1966, and another from Rogers Merchandising in Chicago.
• The original shake may have contained lemon-lime sherbet and vanilla ice cream, later simplified to vanilla with green coloring.
• Mentions of mint flavoring first appeared in a 1979 advertisement.
• In 1980 there was also Shamrock sundaes, but it was quickly discontinued because of poor sales

McDonaldland and Original McDonald's Closure

• McDonald's hired an advertising group to create McDonaldland, a fantasy land with characters like the Hamburglar, to appeal to children.
• McDonaldland-themed commercials ran until 2003.
• The original McDonald's, renamed the Big M, closed its doors for good in 1970 after the brothers sold.

Further International Growth

• The first Australian McDonald's opened in Yaguna, New South Wales, in 1971; known locally as "Maccas".
• The first Asian McDonald's opened in Tokyo's Ginza district in the summer of 1971.
• The first European McDonald's opened in Zandam, Netherlands, in 1971.
• By the end of 1971, There was now McDonald's in all 50 states

Menu Innovations and Slogans in the 1970s

• In 1971, the Big Mac meal introduced, an early version of a value meal, with a Big Mac, fries, and a soft drink.
• McDonald's adopted the slogan "You deserve a break today" in 1971.
• The Quarter Pounder was introduced in 1972.
• By 1972, Quarter Pounder was available across all mcdonald's in the United States
• The original San Bernardino McDonald's location was torn down in 1972.
• Mac McDonald passed away on December 11, 1971, at the age of 69.

Financial Success and Breakfast Introduction

• By 1972, McDonald's was making a billion dollars in sales annually.
• The Egg McMuffin added to the menu in 1972 after it was pitched to Ray Kroc, initiating McDonald's entry into the breakfast market.
• The first Egg McMuffin was served at the Belleville, New Jersey, McDonald's in 1972.

Ray Kroc's Business Ventures

• Ray Kroc attempted to buy the Chicago Cubs in 1972, but it didn't materialize.
• The first Swedish McDonald's restaurant opened in Stockholm on October 23, 1973.
• Ray Kroc bought the San Diego Padres baseball team in 1974.
• He gave all the workers for the team raises

Community and Operational Innovations

• Ray Kroc opened the first Ronald McDonald House in Philadelphia, Pennsylvania, in 1974, to support families of hospitalized children.
• McDonald's opened its first drive-through in Sierra Vista, Arizona, in 1975, after rival Wendy's claimed they had the first modern drive-through in 1971.
• The goal was to have the order in and out in 50 seconds or less

Expanding and Reassigning Roles

• The 4000th McDonald's opened in Montreal, Canada, in 1976.
• Chef Renee Ahrend was hired to make McDonald's food more nutritious and create new menu items in 1976.
• Ray Kroc reassigned himself to the role of senior chairman in 1977.
• Ray Kroc, Harry Sonneborn, and June Martino reunited at Ray's 75th birthday celebration in 1977.
• In 1977 McDonald's had their breakfast menu consisting of eggs, hot cakes, sausages, hash browns, danishes, and egg mcmuffin

Global Expansion and the Happy Meal

• The 5000th McDonald's restaurant opened in Kanagawa, Japan, in 1978.
• Yolanna Coffinio created the "Menu Ronald" in Guatemala in the mid-1970s, including a hamburger, small fries, and a small sundae.
• The Happy Meal, developed by Bob Bernstein, was first introduced in the Kansas City market in October 1977 and launched nationally in the U.S. in 1979.
• Original happy meal toys available in 1979 were the mcdoodle stencil, wrist wallet, id bracelet, a puzzle lock, a spinning top, and a mcdonaldland character eraser

Accessibility and Continued Expansion

• Menus in Braille were introduced in 1979.
• The 6000th McDonald's restaurant opened in Munich, Germany, in 1980.

Menu Experiments and Innovations of the 1980's

• McDonald's introduced the McChicken sandwich in 1980 but discontinued it due to poor sales, later reintroducing a smaller version on the dollar menu.
• Chicken McNuggets, created by Chef Renee Arend in 1979, were test-marketed in select areas in 1981.
• Chicken McNuggets made its national U.S. debut in 1983.