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Ray Kroc And History About McDonald’s

Introduction

This business report focuses on Ray Kroc and the founding of McDonald’s. The choice of Ray Kroc and the McDonald’s story is one of a meteoric rise from obscurity to become a global brand and a household name especially in the western world. The success story of Ray Kroc and McDonald’s, is thus one that is not only inspiring, but more importantly, it provides a model for other businesses and entrepreneurs to follow and emulate.

Albert Raymond Kroc (Ray Kroc) was born in 1902 and died in 1984. He left school before age 18 and lied in order to get recruited by the Red Cross during World War I, portraying his tenacity in committing to what he believed in. Kroc was engaged in several jobs as a young man and was very hardworking. He for instance worked as a salesman during the day and worked at night playing the piano in clubs. (Kroc and Anderson, 1990) In 1937 he became a distributor for a multi-mixing machine that enabled restaurants to mass-produce quality milkshakes.

Working as a distributor involved much travelling and he visited a restaurant owned by brothers, Mac and Dick McDonald while travelling through San Bernadino in California. The restaurant served

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burgers, fries, sodas, and shakes and their service delivery was fast and very organized. Impressed by the restaurants efficiency and the patronage of their service, Kroc acquired a franchising right for the business and founded the Mcdonalds Corporation in 1955. In 1961, he bought out Mac and Dick McDonald. (Kroc and Anderson, 1990)

Ray Kroc was president of the McDonald Corporation from 1955 to 1968, chairman of the board from 1968 to 1977, and served as senior chairman till his death in 1984. At the time of his death, McDonalds had more than 7,500 operating restaurants with annual sales reaching $8 billion. (Kroc and Anderson, 1990)

Entrepreneurship and Investing in Good Products

The success story of McDonald’s shows the value of being able to identify good products and investing in them. As stated in the introduction, Kroc had displayed tenacity and commitment when he saw an opportunity to join the Red Cross during World War I. These same values were displayed when he became impressed with the running of the McDonald brothers’ restaurant, hence his decision to obtain a franchise.

Knowing the viability of one’s product and making business decisions that reflect such knowledge has been seminal in the development of the McDonald’s business. Knowing the right time to invest for instance, could be said to be an important consideration in Kroc’s decision to buy out the McDonald brothers in 1961. Within 10 years of the founding of McDonald’s Corporation, Ray Kroc had received massive returns on his investments, making him a multimillionaire and McDonald’s was generating an annual revenue of $1 billion. (Kroc and Anderson, 1990)

Comparing McDonald’s meteoric success with other business giants like IBM and Xerox shows that, McDonald’s used one-third the time IBM and Xerox used to achieve the same level of annual revenue.  It is evident from the above that one’s entrepreneurial skills would be of no benefit if good business opportunities cannot be spotted and invested in. (‘Book Review: Grinding It Out, The Making of McDonalds’, n.d.)

The Quest For Perfection

One of the cardinal pillars that propelled Ray Kroc and the McDonalds business to a place of success is the quest to achieve perfection in the delivery of service. Kroc’s phenomenal success with McDonalds is based on the business principles of quality, service, cleanliness, and value. To ensure that these principles are adhered to in all McDonalds restaurants, a maintenance of strict uniformity of product was put in place, leading to a speedy rise in the number of franchises being opened and over time, more items were added to the McDonalds menu.

A commitment to achieving perfection means paying attention to detail, and not taking for granted things that others may consider to be insignificant to the success of business. Thus though some consider ‘micromanagement’ an ill in business, the McDonald’s story shows the value of seeking perfection to the minutest detail (evidently where possible). Ray Kroc for instance cites instances where things others considered trivial had not gone down well with him, since he considered even those trivial things as being able to have a great impact on business –

“Sometimes Ed MacLuckie would have forgotten to turn the sign on when dusk began to fall, and that made me furious. Or maybe the lot would have some litter on it that Ed said he hadn’t had time to pick up. Those little things didn’t seem to bother some people, but they were gross affronts to me. I’d get screaming mad and really let Ed have it… …Perfection is very difficult to achieve, and perfection was what I wanted in McDonald’s. Everything else was secondary for me.”[i]

The Value of Using the Best Human Resource

It goes without saying that the human resource capabilities of an organisation will to a large extent, determine its success. One of the important factors that has contributed to the success of McDonalds is its commitment to hire only the best staff. Much as Ray Kroc is credited with the success of McDonald’s it is evident that he could not have achieved this feat single-handedly. Key staff members like Harry Sonnenborn who was in charge of finance, and June Martino, who was a mediator played crucial roles in the success story of McDonald’s.

One of the key indicators of motivation identified by management theorists is an employee’s prospect of growth in an organisation. (Morgan, 2006) It is worthy of note, that June Martino began working in McDonald’s as personal assistant and rose through the ranks to become a mediator. Obviously, if she did not see a future in the organisation, she would not have stayed and her talents and competent input into McDonald’s would have been lost.

This principle is still a guiding principle in McDonald’s and has lived on after the death of Ray Kroc. In the U.S. for instance, an annual national award was instituted in 1999 to award and honor hardworking restaurant managers. The award is performance based and is fittingly named after the founder of McDonald’s – The Ray Kroc Award. It is thus no wonder that there are currently about 13,700 restaurants in the U.S. alone, with more than 80 per cent of the businesses independently owned and run by local franchises. (http://www.franchising.com/pressreleases/5584/)

The current president of McDonald’s, Don Thompson, has for instance said concerning the managers who won the 2007 Ray Kroc Award that:

“This prestigious group of managers represent an essential part of the McDonald’s family … We value their contributions to our team and are proud of all of their accomplishments. From the energetic way in which they manage their restaurant to their commitment to customer service, each of these managers truly raises the bar for McDonald’s and our industry.”[ii]

Defining the Appropriate Business Model

The value of the above discussed factors that contributed to the success of Ray Kroc and McDonald’s would not be complete without a discussion of the business model that Ray Croc chose for McDonald’s. Having started out as a franchisee himself, Kroc saw the value of allowing people to own their own business and still be part of the bigger McDonald’s family, as reiterated in Don Thompson’s speech.

Kroc maintained that the McDonald’s Corporation should not own more than 20 per cent of the restaurants. Thus though the premises where a restaurant is cited may be owned by the Corporation, the business of operating the restaurants still lies with the franchisees. Again, choosing a business model that motivates people to realise their individual dreams and aspirations under the McDonald’s Corporation has proved to be a massive global success of Kroc’s business.

Conclusion/Summary

To conclude it can be argued that a variety of factors carefully coordinated towards the achievement of a specified goal, is foundational in the success of every entrepreneur or business. Kroc’s personal character traits of being committed to a course, hardwork, tenacity of purpose, good human relations, and the ability to spot and invest in viable business opportunities played seminal roles in his personal success and in the success of McDonald’s.

Good leadership is thus important in entrepreneurship. Good management skills and practices – e.g. choice of business model, good human resource management, and financial management – are also foundational in the success of entrepreneurs. These are qualities that were identified in Ray Kroc and in the development of McDonalds.

References:

[i] quoted in ‘Book Review: Grinding It Out, The Making of McDonalds’, http://www.billionairebusinessman.blogspot.com/2005/10/book-review-grinding-it-out-making-of.html (accessed on 05/15/08)

[ii] quoted in ‘’McDonald’s(R) Top Restaurant Managers Honored with Prestigious Award in Honor of Founder Ray Kroc’  http://www.franchising.com/pressreleases/5584/ (accessed on 05/15/08)

 Bibliography:

‘Book Review: Grinding It Out, The Making of McDonalds’,             http://www.billionairebusinessman.blogspot.com/2005/10/book-review-    grinding-it-out-making-of.html

Kroc, R. and Anderson, R. (1990). Grinding It Out: The Making of McDonald’s, St.        Martins Publishers.

‘’McDonald’s(R) Top Restaurant Managers Honored with Prestigious Award in Honor   of Founder Ray Kroc’  http://www.franchising.com/pressreleases/5584/      (accessed on 05/15/08)

Morgan G. (2006) Images of Organisation, Thousand Oaks, California: Sage       Publications

The Columbia Encyclopedia, (n.d.) http://www.encyclopedia.com/doc/1E1-        KrocRa.html (accessed on 05/15/08)

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