Grinding It Out

Mindset & Growth

I have always believed that each man makes his own happiness and is responsible for his own problems.

It follows, obviously, that a man must take advantage of any opportunity that comes along, and I have always done that, too. After seventeen years of selling paper cups for Lily Tulip Cup Company and climbing to the top of the organization’s sales ladder, I saw opportunity appear in the form of an ugly, six-spindled milk shake machine called a Multimixer, and I grabbed it. It wasn’t easy to give up security and a well-paying job to strike out on my own. My wife was shocked and incredulous. But my success soon calmed her fears, and I plunged gleefully into my campaign to sell a Multimixer to every drug store soda fountain and dairy bar in the nation.

“As long as you’re green you’re growing, as soon as you’re ripe you start to rot.”

McDonald’s Discovery

I did some checking and was astonished to learn that the McDonalds had not one Multimixer, not two or three, but eight! The mental picture of eight Multimixers churning out forty shakes at one time was just too much to be believed. These mixers sold at $150 apiece, mind you, and that was back in 1954. The fact that this was taking place in San Bernardino, which was a quiet town in those days, practically in the desert, made it all the more amazing.

It was a hot day, but I noticed that there were no flies swarming around the place. The men in the white suits were keeping everything neat and clean as they worked. That impressed the hell out of me, because I’ve always been impatient with poor housekeeping, especially in restaurants. I observed that even the parking lot was being kept free of litter.

I was fascinated by the simplicity and effectiveness of the system they described that night. Each step in producing the limited menu was stripped down to its essence and accomplished with a minimum of effort. They sold hamburgers and cheeseburgers only. The burgers were a tenth of a pound of meat, all fried the same way, for fifteen cents. You got a slice of cheese on it for four cents more. Soft drinks were ten cents, sixteen-ounce milk shakes were twenty cents, and coffee was a nickel.

I could see plenty of problems there. The arches of the sign looked like they would topple over in a strong wind, and those neon lights would need constant attention to keep them from fading out and looking tacky. But I liked the basic idea of the arches and most of the other features of the design, too. That night in my motel room I did a lot of heavy thinking about what I’d seen during the day. Visions of McDonald’s restaurants dotting crossroads all over the country paraded through my brain. In each store, of course, were eight Multimixers whirring away and paddling a steady flow of cash into my pockets.

I paid particular attention to the french-fry operation. The brothers had indicated this was one of the key elements in their sales success, and they’d described the process. But I had to see for myself how it worked. There had to be a secret something to make french fries that good.

The McDonald’s french fry was in an entirely different league. They lavished attention on it. I didn’t know it then, but one day I would, too. The french fry would become almost sacrosanct for me, its preparation a ritual to be followed religiously.

A common problem with french fries is that they’re fried in oil that has been used for chicken or for some other cooking. Any restaurant will deny it, but almost all of them do it. A very small scandal, perhaps, but a scandal nonetheless, and it’s just one of the little crimes that have given the french fry a bad name while ruining the appetites of countless Americans. There was no adulteration of the oil for cooking french fries by the McDonald brothers.

Their potatoes sold at ten cents for a three-ounce bag, and let me tell you, that was a rare bargain. The customers knew it, too. They bought prodigious quantities of those potatoes.

“See that big white house with the wide front porch?” he asked. “That’s our home and we love it. We sit out on the porch in the evenings and watch the sunset and look down on our place here. It’s peaceful. We don’t need any more problems. We are in a position to enjoy life now, and that’s just what we intend to do.” His approach was utterly foreign to my thinking, so it took me a few minutes to reorganize my arguments. But it soon became apparent that further discussion along that line would be futile, so I said they could have their cake and eat it too by getting somebody else to open the other places for them. I could still peddle my Multimixers in the chain. “It’ll be a lot of trouble,” Dick McDonald objected. “Who could we get to open them for us?” I sat there feeling a sense of certitude begin to envelope me. Then I leaned forward and said, “Well, what about me?”

Second Wind

I was 52 years old. I had diabetes and incipient arthritis. I had lost my gall bladder and most of my thyroid gland in earlier campaigns. But I was convinced that the best was ahead of me. I was still green and growing, and I was flying along at an altitude slightly higher than the plane.

Early Hustle

They called me Danny Dreamer a lot, even later when I was in high school and would come home all excited about some scheme I’d thought up. I never considered my dreams wasted energy; they were invariably linked to some form of action. When I dreamed about having a lemonade stand, for example, it wasn’t long before I set up a lemonade stand. I worked hard at it, and I sold a lot of lemonade. I worked at a grocery store one summer when I was still in grammar school. I worked at my uncle’s drugstore. I worked in a tiny music store I’d started with two friends. I worked at something whenever possible. Work is the meat in the hamburger of life. There is an old saying that all work and no play makes Jack a dull boy. I never believed it because, for me, work was play. I got as much pleasure out of it as I did from playing baseball.

I had spent the previous summer and lunch hours during the school year working in my uncle Earl Edmund Sweet’s drugstore soda fountain in Oak Park. That was where I learned that you could influence people with a smile and enthusiasm and sell them a sundae when what they’d come for was a cup of coffee.

The only thing I really enjoyed about school was debating. Here was an activity I could get my teeth into—figuratively, of course—but I would not have hesitated to bite a debate opponent if it would have advanced my argument. I loved being the center of attention, persuading the audience that my side was right.

I was confident I could make my way in the world and saw no reason to return to school. Besides, the war effort was more important. Everyone was singing “Over There.” And that’s where I wanted to be. My parents objected strenuously, but I finally talked them into letting me join up as a Red Cross ambulance driver. I had to lie about my age, of course, but even my grandmother could accept that. In my company, which assembled in Connecticut for training, was another fellow who had lied about his age to get in. He was regarded as a strange duck, because whenever we had time off and went out on the town to chase girls, he stayed in camp drawing pictures. His name was Walt Disney.

I got a territory selling ribbon novelties, and I took to it like a duck takes to water. I’d have a sample room set up in whatever hotel I was staying in, and I’d learn what each buyer’s taste was and sell to it. No self-respecting pitcher throws the same way to every batter, and no self-respecting salesman makes the same pitch to every client. In 1919 anyone making twenty-five or thirty dollars a week was doing well, and it wasn’t long before—on good weeks with a lot of musical jobs—I was making more money than my father.

My selling job with the ribbon novelty outfit began to hit its limits before long. It was interesting, but I could see that I was not cut out for a career of peddling rosebuds for farm wives to sew on garters and bed cushions.

My employer was a firm named Wooster-Thomas. A very substantial sound to that, I thought.

One day when I went to work, the office was boarded up, and the sheriff had posted a notice that they’d gone bankrupt. That hurt! They owed me a week’s pay plus vacation time.

A few days later I went to work selling Lily brand paper cups. I don’t know what appealed to me so much about paper cups. Perhaps it was mostly because they were so innovative and upbeat. But I sensed from the outset that paper cups were part of the way America was headed.

Paper cups were not an easy sale when I hit the streets with my Lily Cup sample case in 1922. The immigrant restaurant owners I approached with my sales pitch shook their heads and said, “Naw, I hev glasses, dey costs me chipper.” My main sales were to soda fountains. Washing glasses was a real pain in the elbow for them. If they had water hot enough to sterilize the glasses, it would create a cloud of steam coming out of their soda fountain. Paper cups got around that problem. They were more hygienic, and they eliminated breakage and losses through unreturned takeout orders. Those elements became the principal points in my sales story.

Music Work

I had to arrive at the station promptly at 6 P.M. and play for two hours. I was off from 8 to 10 P.M., and then I returned to work until 2 o’clock in the morning. A few hours later—7 or 7:15 A.M.—I’d be off with my sample case in pursuit of paper cup orders. The only break in this routine was on Sunday, my day off from Lily Cup. But we had afternoon hours at the radio station then.

When I reached home, I would start undressing as I climbed up the stairs, and I’d already be asleep when my head hit the pillow.

Their singing was lousy but the jokes weren’t too bad, so I hired them for five dollars apiece. They kept working on their characters and developed a Southern Negro dialogue that was a huge success. That team went on to make show business history, later changing the name of their act to Amos and Andy.

Ethel used to complain once in a while about the amount of time I spent away from home working. Looking back on it now, I guess it was kind of unfair. But I was driven by ambition. I hated to be idle for a minute. I was determined to live well and have nice things, too, and we could do so with the income from my two jobs.

My cup sales kept growing as I learned how to plan my work and work my plan. My confidence grew at the same rate. I found that my customers appreciated a straightforward approach. They would buy if I made my pitch and asked for their order without a lot of beating around the bush. Too many salesmen, I found, would make a good presentation and convince the client, but they couldn’t recognize that critical moment when they should have stopped talking. If I ever noticed my prospect starting to fidget, glancing at his watch or looking out the window or shuffling the papers on his desk, I would stop talking right then and ask for his order.

My daughter, Marilyn, was born in October 1924, and having this additional responsibility made me work even harder.

I didn’t do very well, because I thought of the customer first. I didn’t try to force an order on a soda fountain operator when I could see that his business had fallen off because of cold weather and he didn’t need the damn cups. My philosophy was one of helping my customer, and if I couldn’t sell him by helping him improve his own sales, I felt I wasn’t doing my job. I collected my salary of thirty-five dollars a week just the same. But my company was losing money on me by paying it, and I hated that. I vowed that I wouldn’t allow it to happen again the next winter.

With this and my piano playing income, I was able to go to a Ford dealership that August and buy a brand new Model T on a Bohemian charge account—cold cash.

I felt that my twenty-three-year-old face was too callow to be credible for a real estate wheeler-dealer, so I decided to grow a mustache. It was a disaster. Most men have a margin around their lips, a demarcation where hair doesn’t grow. I lack this feature, with the result that my mustache grew right down into my mouth. Moreover, it was a horrible brownish-red color. Ethel despised it, and I didn’t like it much either.

My first night of playing at The Silent Night made quite an impression on me. The place itself was fabulous—gorgeous, glamorous, and illegal. The owner was a rum runner who brought the illicit booze he served from the Bahamas.

The drinks were a dollar each for anything you wished, champagne, brandy, bourbon, scotch, whatever. I didn’t drink at all back then but the fixed-price drink menu and the stylish simplicity of the food service made a lasting impression on me. They had no printed menu because there were just three entrees: Maine lobster, steak, and roast duckling. Years later I recalled that spare bill of fare in my first motto for McDonald’s—KISS—which meant, “Keep it simple, stupid.”

The customers tossed tips into the hat, and I felt good about that until I discovered that I was expected to share the tips with all the other players. That was grossly unfair, and I was steaming mad. But it was the custom, apparently, and there wasn’t much I could do about it if I wanted to keep the job.

I was too busy worrying about whether I would last the entire evening. When I’d get home my fingers would be puffed and almost bleeding, and I had to soak them in a bucket of warm water.

…the old boy waved a dollar bill at me and asked if I could play “I Love You Truly.” I just stared at him and shook my head negatively. He was startled and the young girl slapped his hand with the dollar, knocking it into the top hat, and she shouted, “How dare you insult him with a dollar, you cheapskate!” Then she grabbed a twenty-dollar bill out of the bundle that protruded from his breast pocket and dropped it in my lap. “Hey, wait a minute,” I called. “Did you say ‘I Love You Truly’?” and I played the first few bars haltingly, as though striving to recall them. He nodded vigorously, and I went ahead with the tune and played the hell out of it. If my associates in the orchestra noticed the extra tip, they didn’t say anything about it. Special requests for a little bit extra to the piano player became a common thing after that.

I talked the violinist into playing the breaks with me and strolling through the audience, serenading each table individually. That doubled our tips immediately and was a big addition to our pay every week.

Cup Industry

The ten years between 1927 and 1937 were a decade of destiny for the paper cup industry. It was exciting to watch the business grow. But if I had known the disillusionment that was waiting for me, I might have gone into some other line of work.

My boss was a shrewd operator named John Clark, a man who could recognize sales talent when he saw it. I didn’t see his true colors for several years, after he made a bargain with me that the devil himself would have been proud of.

America had become an ice cream society in the last years of the twenties, thanks in large part to Prohibition. Bars and fine lounges in hotels sold ice cream, because they could no longer sell liquor, and dairy bars began to crop up all over the country.

Big things were happening in the paper container industry. A paper milk bottle called the Sealcone was introduced by a New York dairy. Sealcone had no closure, the housewife had to snip off the top with a scissors, so it didn’t drive glass bottles from the nation’s doorsteps as predicted. But the same technology that produced the Sealcone, using paraffined spruce fiber, was utilized by the makers of Tulip cups. When that firm merged with Lily Cup in 1929, it gave me a “straight-sided” cup that was much more rigid and adaptable to other container uses. It allowed me to go after sales to coffee vendors and cottage cheese packers.

When the market collapsed, he was crushed beneath a pile of deeds he could not sell. The land they described was worth less than he owed. This was an unbearable situation for a man of my father’s principled conservatism. He died of a cerebral hemorrhage in 1930. He had worried himself to death. On his desk the day he died were two pieces of paper—his last paycheck from the telegraph company and a garnishment notice for the entire amount of his wages.

Another piece of paper discovered among my father’s effects was a yellowed document dated 1906. It was a phrenologist’s report of a reading he had done on the bumps of the head of Raymond A. Kroc, aged four. He had predicted that I would become a chef or work in some branch of food service. I was amazed at the prognostication; after all I was in a food service–related business and felt a real affinity for kitchens. Little did I know how much more accurate that old boy’s prophesy would eventually prove to be.

Sales Battles

I was selling our little pleated “souffle” cups to the Walgreen Drug Company, a Chicago firm that was just starting a period of tremendous expansion.

Then he told me how much he appreciated my hard work, how well the company thought of my production, but I would have to take a salary and expense cut. It applied to everyone, across the board. This was a real blow. It wasn’t the reduction in salary that bothered me, but the affront to my ego. How could they treat the best salesman they had in this arbitrary fashion? I knew how much money I was making for them, depression or not, and I felt cold fury rising in me. I looked at him for a long minute, and then I said, very quietly, “Well, I’m sorry, but I can’t accept that.” “Ray, you have no alternative.” Now, when I get excited or agitated, my voice goes up in register and in volume. I was really agitated now. “The hell I don’t have an alternative,” I yelled. “I’m quittin’. I’m giving two weeks’ notice right now, and if you want me to leave today, I’ll leave today.”

I felt trapped. I hated being put on the defensive. I walked away, but she kept after me like the determined Scot she was, telling me to answer her. So I whirled around and let her have it. “I can’t take those cheapskates down there any more,” I blurted. “I’m quittin’!” Zingo! Her jaw dropped. Her eyes widened. Then she really lit into me. I was betraying her and our daughter. My pride was jeopardizing our existence. She stormed on about my foolishness, how desperate times were, how difficult it was for anyone to find a job (I knew that!). But I had taken my stand. I wasn’t going to back down, regardless. I couldn’t. Everything in me resisted it.

“Close the door and sit down,” he said. “Now, Ray, this is absolutely confidential. Here’s what we’ll do. I’ve made arrangements for you to get a special expense account that will make up for the ten percent salary cut. It will include the payment balance on your car of $20 a month. Now … will you stay?” “Thank you very much,” I said. “On that basis I’ll stay.” I felt several inches taller when I left that office. I’d won! This was going to be a fine prize to lay at Ethel’s feet.

Clark never told me so, but I knew as time went on that he was well aware that he had made a good deal. We had other run-ins from time to time, usually because of my insistence on protecting my customers. Most of these people trusted me enough that when I went into their stores, they’d simply wave and smile and go on waiting on customers. I would go to their stockrooms and see what their supply of paper cups was like. If they needed more, I’d order them. For the big-volume customers, I made certain they didn’t lose by dealing with me instead of a competitor. I’d tell them, “Look, I think you’d better stock up on paper cups. I believe there’s going to be a price increase. I have nothing official, of course, or I wouldn’t be able to tell you about it. But there’s something in the wind, and I think your prices are going to be going up.” When Clark found out about that, he was madder than a hornet. But it didn’t cost Lily Tulip anything. They had warehouses full of cups made at the existing prices, and it certainly built goodwill among my customers.

My battles with the boss were beginning to get me down, and I might have told him to go to hell once and for all if I hadn’t been having so much fun selling.

I was selling Ralph Sullivan a lot of paper cups. This started in about 1932, and it kept growing and growing until I was selling him 100,000 sixteen-ounce cups at a time. Walter Fredenhagen was running the Prince Castles in my area from his office in Naperville. I’d never met Earl Prince. But I started working on Walter, trying to talk him into looking at Ralph Sullivan’s operation.

“It sounds great,” I said at last, “but there is one thing I want you to do.” “What is it?” asked Earl expansively. “I want you to charge twelve cents for this drink instead of a dime.” “Huh?” I could tell that both of them were genuinely flabbergasted. “That’s right. Sell it for twelve cents. You’ll still be giving people a hell of a value, and it will actually increase interest and sales.” “Ray, I respect your ability as a salesman,” Walter said gently. “But obviously you are out of touch with the retail end. People just don’t want to be bothered with extra change, counting pennies, you see? It is a big inconvenience for a cashier, too. So forget it.” That taken care of, they were prepared to go on talking about other matters in setting up “One-in-a-Million.” But I kept insisting on the twelve-cent price, and it caused a pretty heated discussion. Finally Earl turned around to Walter and said, “Son of a bitch, I am going to teach this guy a lesson! I’m going to sell it for twelve cents in our first store and let him watch the thing fall on its face. Then, when we get it perfected, we can go into all the stores and sell it for a dime.” Walter didn’t answer. I think I’d worn them out. The record books of Prince Castles show that they did indeed start selling the “One-in-a-Million” at twelve cents. They never reduced the price. It took off like a barn fire. Earl Prince was not unhappy that he failed to teach me a lesson, either. I sold him five million sixteen-ounce cups that first year, so by adding on the two cents as I insisted, he made an extra $100,000.

This was the invention that really made big volume milk shake production possible, and it changed the course of my life. After Earl had the Multimixer in production, I took one of the machines down to the Lily Tulip office and held another demonstration.

Strangely enough, however, the Lily Tulip headquarters in New York wanted no part of it. In fact, they complained that they had been getting calls from customers in other parts of the country wanting to know about metal milk shake cup sleeves and “Multiple Mixers” or some such thing, and they declared that they were not about to become jobbers for some mixer maker in the Midwest. They were manufacturers of paper cups, and that is what they intended to remain. I could scarcely believe it. I knew we had barely dented the potential market for Multimixers. Earl Prince proposed that I leave Lily Tulip and go into business with him. I would market the inventions he came up with, starting with the Multimixer. I’d be the sole agent for Multimixer in the country. He’d manufacture the things, I’d handle the accounts receivable, and we’d split the profits.

Ethel was incredulous at the idea that I would give up my position at Lily Tulip and go off on a flyer like this. We had just moved into a fine home in a project named Scarsdale in Arlington Heights, northwest of Chicago. We were extremely comfortable there. Ethel loved it, and she felt threatened by this proposal. “You are risking your whole future if you do this, Ray,” she said. “You are thirty-five years old, and you are going to start all over again as if you were twenty? This Multimixer seems good now, but what if it turns out to be just a fad and fails?” “You just have to trust my instincts,” I said. “I am positive this is going to be a winner. Besides, Earl will come up with a lot of other marketable ideas. This is just the beginning. I want you to help me; come down and work in the office for me and together we will make it a terrific business.” “I will do no such thing.” “But Ethel. I need your help. You know I can’t afford to hire someone, and it would be good for you, for both of us. Please?” She absolutely refused to help. I’m sure she felt justified, but I felt betrayed. I just couldn’t believe she’d let me down like that. She wouldn’t even agree to work part-time or for a limited period, until I got the business going. That was when I began to understand the meaning of the word estrangement. It is a terrible feeling, and once it appears, it grows like dry rot. My disappointment with Ethel did not deter me, though. When I have my mind made up about a business deal, that’s it. I was going to move ahead regardless.

I got the Multimixer contract, and Sanitary Cup got sixty percent of my new company, which I named Prince Castle Sales. It was a satanic setup, but I didn’t see that then. It was the only way out, it seemed, and I had to take it. And, at any rate, the corporation would put up $6,000 of the $10,000 capital I needed to get started, so it didn’t seem such a big handicap. But it was soon to become an anchor chained around my neck.

I determined after a little over two years that I was going to have to get that sixty percent back somehow. So I went to Clark and broached it to him. It was then I learned how he’d misled me. The Coue brothers had given up their interest to him. They probably never cared about Multimixer at all, and he was going to take his pound of flesh from my heart. I was boiling mad, but there was not a damn thing I could do about it. “I think this machine you’re selling has a big future, Ray,” he said. “I was willing to discount the present to allow you to realize that future. But if you insist on getting my share back, then I must tell you that I want a handsome return on my capital investment.” Never mind that I hadn’t wanted his damned capital in the first place, and neither had Earl Prince. “All right,” I said, “how much?” I don’t know how he kept from choking on his own bile as he mouthed the figure: “Sixty-eight thousand dollars.”

So what we worked out was the culmination of the devilish deal he had tied me to. I had to agree to pay him $12,000 cash. The balance was to be paid off over five years, plus interest. My salary had to remain at the same level and my expenses in the same range. So, in fact, what I was doing was paying him the profits of my company. I didn’t know where in the hell I was going to raise the money, but I had made up my mind to do it. In the end, most of the cash came from my new home in Arlington Heights. I managed to get an increase in the mortgage, much to Ethel’s dismay. Her apprehensions about my becoming Mr. Multimixer had been laid to rest at this point, and I don’t think she ever got over the shock of discovering that we were nearly $100,000 in debt. She couldn’t seem to handle it.

Grinding It Out

For me, this was the first phase of grinding it out—building my personal monument to capitalism. I paid tribute, in the feudal sense, for many years before I was able to rise with McDonald’s on the foundation I had laid. Perhaps without that adversity I might not have been able to persevere later on when my financial burdens were redoubled. I learned then how to keep problems from crushing me. I refused to worry about more than one thing at a time, and I would not let useless fretting about a problem…

I worked out a system that allowed me to turn off nervous tension and shut out nagging questions when I went to bed. I knew that if I didn’t, I wouldn’t be bright and fresh…

Others marveled that I could work twelve or fourteen hours a day at a busy convention, then entertain potential customers until two or three o’clock in the morning, and still be out of bed early, ready to collar my next client. My secret was in getting the most out of every minute of rest. I guess I couldn’t have averaged more than six hours…

I was in there pushing Multimixers into this expanding market, to Dairy Queen, Tastee-Freeze, and the rest. I sold a Multimixer to a guy named Willard Marriott, who had just opened a drive-in called A & W Root Beer. His method of operation fascinated me. I considered myself a connoisseur of kitchens; after all, selling Multimixers took me into thousands of them. I prided myself on being able to tell which operations would appeal to the public and which would fail. Willard Marriott looked like a winner to me from the start.

I didn’t bother setting sales goals for Multimixer. I didn’t need any artificial incentives to keep me working at top speed. My estimate of when I was having a good year was when I sold 5,000 units. I have several of those. One year—1948 or 1949—I sold 8,000.

There was no question in my mind after we talked for a few minutes that this Mrs. June Martino was the one to hire. She was wearing a faded coat that hardly looked adequate for the December storm that was whipping down the LaSalle Street canyon that day, and she looked as though she’d missed several meals. Yet she had a presence that conveyed integrity and a restless native ability to deal with problems. This was enveloped in a warm, compassionate personality, a rare combination of traits. The fact that she had no bookkeeping experience bothered me not at all. I knew she would master the technical routines quickly. So I told her I couldn’t pay much, but if she was willing to work hard anyhow, I could promise her a bright future. We talked the same language. She did work hard—unbelievably hard—and in less than twenty years she was one of the top women executives in the country, secretary and treasurer of McDonald’s Corporation.

Al Doty once told me that he liked to have lunch with me because he always learned something about his own business trends. “You seem to be able to see further into the future than the rest of us,” he said.

I learned that unbeknown to June Martino and me, the salesman who had put me onto the thing was conspiring with my secretary to pirate the “Fold-a-Nook” from me. I fired both of them on the spot.

That man had been a fellow worker and golfing companion since Lily Tulip Cup days; I had loaned him money for the down payment on his house. So I took no pleasure in the fact that they later went broke. By the same token, however, I couldn’t listen for a moment when he called later to plead for a chance to get into McDonald’s. A good executive does not like mistakes. He will allow his subordinates an honest mistake once in a while, but he will never condone or forgive dishonesty.

McDonald’s Launch

I became intrigued by the stories of the McDonald brothers and their operation that kept eight Multimixers whirring up a bucket brigade of milk shakes out there in sunny San Bernardino. “What the hell,” I thought, “I’ll go see for myself.” So I booked my fifty-two-year-old bones onto the red-eye special and flew west to meet my future.

In 1937 they talked the owner of a lot in Arcadia, near the Santa Anita racetrack, into putting up a small drive-in building for them. They knew nothing about food service, but they had a man who was experienced as a barbecue cook, and he showed them the ropes.

…after World War II, the brothers realized they were running hard just to stay in one place. They weren’t building volume even though their parking lot was always full. So they did a courageous thing. They closed that successful restaurant in 1948 and reopened it a short time later with a radically different kind of operation. It was a restaurant stripped down to the minimum in service and menu, the prototype for legions of fast-food units that later would spread across the land. Hamburgers, fries, and beverages were prepared on an assembly line basis, and, to the amazement of everyone, Mac and Dick included, the thing worked! Of course, the simplicity of the procedure allowed the McDonalds to concentrate on quality in every step, and that was the trick.

I learned that the brothers had licensed ten other drive-ins, including two in Arizona. I had no interest in those, but I would have rights to franchise copies of their operations everywhere else in the United States. The buildings would have to be exactly like the new one their architect had drawn up with the golden arches. The name, McDonald’s, would be on all of them, of course, and I was one hundred percent in favor of that. I had a feeling that it would be one of those promotable names that would catch the public fancy. I was for the contractual clauses that obligated me to follow their plans down to the last detail, too—even to signs and menus. But I should have been more cautious there. The agreement was that I could not deviate from their plans in my units unless the changes were spelled out in writing, signed by both brothers, and sent to me by registered mail. This seemingly innocuous requirement created massive problems for me. There’s an old saying that a man who represents himself has a fool for a lawyer, and it certainly applied in this instance. I was just carried away by the thought of McDonald’s drive-ins proliferating like rabbits with eight Multimixers in each one. Also, I was swayed by the affable openness of the McDonald brothers. The meeting was extremely cordial. I trusted them from the outset. That trust later would turn to bristling suspicion. But I had no inkling of that eventuality.

The name, McDonald’s, would be on all of them, of course, and I was one hundred percent in favor of that. I had a feeling that it would be one of those promotable names that would catch the public fancy.

I should have been more cautious there. The agreement was that I could not deviate from their plans in my units unless the changes were spelled out in writing, signed by both brothers, and sent to me by registered mail. This seemingly innocuous requirement created massive problems for me. There’s an old saying that a man who represents himself has a fool for a lawyer, and it certainly applied in this instance. I was just carried away by the thought of McDonald’s drive-ins proliferating like rabbits with eight Multimixers in each one. Also, I was swayed by the affable openness of the McDonald brothers. The meeting was extremely cordial. I trusted them from the outset. That trust later would turn to bristling suspicion. But I had no inkling of that eventuality. The agreement gave me 1.9 percent of the gross sales from franchisees. I had proposed 2 percent. The McDonalds said, “No, no, no! If you tell a franchisee you are going to take two percent, he’ll balk. It sounds too full and rounded. Make it one and nine-tenths, and it sounds like a lot less.” So I humored them on that one. The brothers were to get .5 percent out of my 1.9 percent. This seemed fair enough, and it was. If they had played their cards right, that .5 percent would have made them unbelievably wealthy.

I’ve often been asked why I didn’t simply copy the McDonald brothers’ plan. They showed me the whole thing and it would have been an easy matter, seemingly, to pattern a restaurant after theirs. Truthfully, the idea never crossed my mind. I saw it through the eyes of a salesman. Here was a complete package, and I could get out and talk up a storm about it. Remember, I was thinking more about prospective Multimixer sales than hamburgers at that point. Besides, the brothers did have some equipment that couldn’t be readily copied. They had a specially fabricated aluminum griddle for one thing, and the set-up of all the rest of the equipment was in a very precise, step-saving pattern. Then there was the name. I had a strong intuitive sense that the name McDonald’s was exactly right. I couldn’t have taken the name. But for the rest of it, I guess the real answer is that I was so naive or so honest that it never occurred to me that I could take their idea and copy it and not pay them a red cent.

Ethel was incensed by the whole thing. We had no obligations that would be jeopardized by it; our daughter, Marilyn, was married and no longer dependent on us. But that didn’t matter to Ethel; she just didn’t want to hear about the McDonalds or my plans. I had done it again, and once too often as far as she was concerned.

Our thirty-five years of holy matrimony endured another five in unholy acrimony. I had no time to bother with emotional stress, though. I had to find a site for my first McDonald’s store and start building.

I couldn’t just leave my potatoes outdoors as the McDonalds did, for example, and there was no room for a back building on this lot, even if I’d wanted one, which I didn’t. So I called the McDonald boys and told them about my problem. “Well, sure you need a basement,” they said. “So build one.” I reminded them that I had to have it documented by a registered letter. They pooh-pooed it; said it was all right to go ahead, they weren’t much good at writing letters and they couldn’t afford to hire a secretary. Actually they probably could have hired the entire typing pool at IBM if they’d had a mind to. I hung up hoping that they would have second thoughts and send me written confirmation, but they never did.

That would have worked, had the McDonalds been reasonable men. Instead, they were obtuse, they were utterly indifferent to the fact that I was putting every cent I had and all I could borrow into this project. When we sat down with our lawyers in attendance, the brothers acknowledged the problems but refused to write a single letter that would permit me to make changes. “We have told you by telephone that you may go ahead and alter the plans as we discussed,” said their attorney, Frank Cotter. “But the contract calls for a registered letter. If Mr. Kroc does not have that, he is put in jeopardy,” said my counsel. “That’s your problem.” It was almost as though they were hoping I would fail. This was a peculiar attitude for them to take because the more successful the franchising, the more money they would make. My attorney gave up on the situation. I hired another and he quit, too, saying I was plain crazy to continue under such conditions. He could not protect me if the McDonalds should close in on me. So I said, “Let ’em try,” and I plunged ahead.

I got on the telephone and talked it over with the McDonald brothers. They couldn’t figure it out either. This was a tremendously frustrating situation. My whole idea depended on carrying out the McDonald’s standard of taste and quality in hundreds of stores, and here I couldn’t even do it in the first one! I contacted the experts at the Potato & Onion Association and explained my problem to them. They were baffled too, at first, but then one of their laboratory men asked me to describe the McDonald’s San Bernardino procedure step-by-step from the time they bought the potatoes from the grower up in Idaho. I detailed it all, and when I got to the point where they stored them in the shaded chicken-wire bins, he said, “That’s it!” He went on to explain that when potatoes are dug, they are mostly water. They improve in taste as they dry out and the sugars change to starch. The McDonald brothers had, without knowing it, a natural curing process in their open bins, which allowed the desert breeze to blow over the potatoes.

Finally, about three months after we’d opened the store, we had potatoes that measured up to my expectations. They were, if anything, a little better than those tasty morsels I’d discovered in San Bernardino. We worked it out so the blanching was done on a regular production-line basis.

One of my suppliers told me, “Ray, you know you aren’t in the hamburger business at all. You’re in the french-fry business. I don’t know how the livin’ hell you do it, but you’ve got the best french fries in town, and that’s what’s selling folks on your place.”

I had been made aware of the ten other sites in California and Arizona that the brothers had lent their names to, and we’d agreed that was fine. I was to have all the rest of the United States. But there was one other agreement they hadn’t told me about, and that was for Cook County, Illinois, where I had my home, my office, and my first model store. The brothers had sold Cook County to the Frejlack Ice Cream Company interest for $5,000! It cost me $25,000 to buy that area from the Frejlacks, and it was blood money. I could not afford it. I was already in debt for all I was worth. I couldn’t blame the Frejlacks, of course, they were completely aboveboard and fair. But I could never forgive the McDonalds. Unwittingly or not, they had made an ass of me—in the Biblical sense. I’d been blindfolded by their assurances and led to grind like blind Samson in the prison house.

First Stores

I would drive down to Des Plaines each morning and help get the place ready to open. The janitor would arrive at the same time I did, and if there was nothing else to be done, I’d help him. I’ve never been too proud to grab a mop and clean up the restrooms, even if I happened to be wearing a good suit.

In the evenings, I would commute back to Des Plaines and walk over to the store. I was always eager to see it come into view, my McDonald’s! But sometimes the sight pleased me a lot less than other times. 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. He took it in good part. I know he was as concerned about these details as I was, because he proved it in his own stores in later years. But perfection is very difficult to achieve, and perfection was what I wanted in McDonald’s. Everything else was secondary for me.

I could foresee that unless I moved a lot faster, expenses were going to gobble up my $950 license fees long before a franchise could complete its building, generate business, and start returning 1.9 percent of its sales to me. I was spreading myself far too thin as it was, so the only way to speed up the franchising process would be to hire someone to help. I was damned if I did, doomed if I didn’t.

…it became evident to me that Harry was exactly the man I needed to help me get McDonald’s going. The problem remained, though, as I explained to him once more, that I could not afford to hire him. His answer was that he would go home and figure out the lowest possible salary he could take and still be able to support his family; then he’d get back to me. I had to admire his persistence, and also the resolve he had that he would devote every working minute to McDonald’s—twenty-four hours a day if necessary. I believed him. It was exactly the way I felt, and June Martino, too. All my thoughts led to the conclusion that I had to hire Harry. I could visualize him handling finance while June ran the office and I was responsible for operations and new development. With that sort of setup, we could move ahead rapidly, which was the only way to go.

In a few days, Harry called back and said he could come to work for $100 a week take-home pay. It was an offer I couldn’t refuse. Good thing for McDonald’s that I didn’t, because the company could never have grown as it did without the unique vision of Harry Sonneborn.

This is the most joyous kind of executive experience. It’s thrilling to see your creation grow. It’s dangerous, of course, because a small mistake can be absolutely ruinous. But in my definition, an executive is a person who rarely makes mistakes.

One of the basic decisions I made in this period affected the heart of my franchise system and how it would develop. It was that the corporation was not going to get involved in being a supplier for its operators. My belief was that I had to help the individual operator succeed in every way I could. His success would insure my success. But I couldn’t do that and, at the same time, treat him as a customer. There is a basic conflict in trying to treat a man as a partner on the one hand while selling him something at a profit on the other. Once you get into the supply business, you become more concerned about what you are making on sales to your franchisee than with how his sales are doing. The temptation could become very strong to dilute the quality of what you are selling him in order to increase your profit. This would have a negative effect on your franchisee’s business, and ultimately, of course, on yours.

…there would be no pay telephones, no jukeboxes, no vending machines of any kind in McDonald’s restaurants. Many times operators have been tempted by the side income some of these machines offer, and they have questioned my decision. But I’ve stood firm. All of those things create unproductive traffic in a store and encourage loitering that can disrupt your customers. This would downgrade the family image we wanted to create for McDonald’s. Furthermore, in some areas the vending machines were controlled by the crime syndicate, and I wanted no part of that.

System Building

I’ve always dealt fairly in business, even when I believed someone was trying to take advantage of me. That’s one reason I have had to grind away incessantly to achieve success. In some ways I guess I’m naive. I always take a man at his word unless he’s given me a reason not to, and I’ve worked out many a satisfactory deal on the strength of a handshake.

…we wanted McDonald’s to be more than just a name used by many different people. We wanted to build a restaurant system that would be known for food of consistently high quality and uniform methods of preparation. Our aim, of course, was to insure repeat business based on the system’s reputation rather than on the quality of a single store or operator.

I knew in my bones that the key to uniformity would be in our ability to provide techniques of preparation that operators would accept because they were superior to methods they could dream up for themselves. But research and development and a staff to supervise and service operators effectively takes money.

We started Franchise Realty Corporation with $1,000 paid-in capital, and Harry parlayed that cash investment into something like $170 million worth of real estate.

I believe that if you hire a man to do a job, you ought to get out of the way and let him do it. If you doubt his ability, you shouldn’t have hired him in the first place.

One of the reasons his subordinated lease idea worked so well was that in the late fifties we didn’t have the proliferation of franchise operations and the fierce competition for commercial fringe property that developed in the course of the next twenty years. Another reason was that both Harry and I were pretty good salesmen, and we could romance a property owner with the notion of earning at least a little something from his vacant land.

Harry made a trip to San Bernardino about the time we were really starting to roll, and Dick McDonald asked him what he thought the future of McDonald’s would be. Harry told him that one day this company would be bigger than F. W. Woolworth. Dick really did a double take at that. He told me later, “I thought you had a genuine nut on your hands, Ray.” But Harry knew exactly where he wanted to go, and he knew how to get there.

I felt deeply indebted to Harry and June. They worked tirelessly, and I knew that both of them were neglecting their family obligations completely so that they could stay on top of things in our rapidly building operation. June later told me that all the while her two boys were growing up, she never made it to one of their birthday parties or graduation ceremonies, and there were several times that she had to be in the office on Christmas. I knew what she and Harry were doing, because I was in the same boat. It was a little easier for me, perhaps, because of the continuing cold war between Ethel, my daughter, and me. My total commitment to business had long since been established in my home. But that made me feel all the more grateful toward Harry and June. I couldn’t give them raises to compensate them for their past efforts, but I could make sure that they would be rewarded when McDonald’s became one of the country’s major companies, which I never doubted it would. I gave them stock—ten percent to June and twenty percent to Harry—and ultimately it would make them rich.

But the fundamentals do not spring forth, self-evident and active, from the brow of every former grocery clerk, soda jerk, military man, or specialist in one of the hundreds of other callings who join the ranks of McDonald’s operators. Quite the contrary; the basics have to be stressed over and over. If I had a brick for every time I’ve repeated the phrase QSC and V (Quality, Service, Cleanliness, and Value), I think I’d probably be able to bridge the Atlantic Ocean with them. And the operators need the stress on fundamentals as much as their managers and crews.

San Bernardino is on the edge of the desert, remember, and you could probably put its average annual precipitation in a martini glass and still have room for an olive. But on the day the McDonald boys opened their new drive-in, it snowed three inches in San Bernardino! What few customers did make it through the traffic jams and into their parking lot sat in their cars and honked their horns angrily. Snow had covered the signs that advertised self service—no carhops.

My answers aren’t very satisfying; they don’t sound much different than the rules that students of business administration find in their basic textbooks. It’s hard to come up with real answers because the weight of the judgment is not in the rule but in the application. As a result, I have sometimes been accused of being arbitrary. June Martino believed, for example, that I once fired a member of our staff because he didn’t wear the right kind of hat and didn’t keep his shoes shined. She was correct as far as it went, I didn’t like those things about the man, but those weren’t the reasons I fired him. I just knew that he wasn’t right for us; he was prone to making mistakes, and the hat and the shoes were merely symptoms of his sloppy way of thinking.

What happened after that was the kind of personnel hocus-pocus that government is famous for but should never be permitted in business, least of all in McDonald’s. The man hung on. He was on the verge of being fired several times in the following years, but he was transferred or got a new supervisor each time. He was a decent guy, so each new boss would struggle to reform him. Many years later he was fired. The assessment of the executive who finally swung the ax was that “this man has no potential.” Bob Frost now admits he was wrong. I had the guy pegged accurately from the outset. But that’s not the point. Our expenditure of time and effort on that fellow was wasted and, worst of all, he spent several years of his life in what turned out to be a blind alley. It would have been far better for his career if he’d been severed early and forced to find work more suited to his talents. It was an unfortunate episode for both parties, but it serves to show that an astute judgment can seem arbitrary to everyone but the man who makes it.

Fred wasn’t buying these items on behalf of the corporation, and we weren’t selling to the operators. We set the standards for quality and recommended methods for packaging, but the operators themselves did the purchasing from suppliers. Our stores were selling only nine items, and they were buying only thirty-five or forty items with which to make the nine. So although a McDonald’s restaurant’s purchasing power was no greater in total than that of any other restaurant in a given area, it was concentrated. A McDonald’s bought more buns, more catsup, more mustard, and so forth, and this gave it a terrific position in the marketplace for those items. We enhanced that position by figuring out ways a supplier could lower his costs, which meant, of course, that he could afford to sell to a McDonald’s for less.

A side benefit of the purchasing system we were working out as we went along was that it gave us an automatic inventory check.

Operations Mindset

People have marveled at the fact that I didn’t start McDonald’s until I was fifty-two years old, and then I became a success overnight. But I was just like a lot of show business personalities who work away quietly at their craft for years, and then, suddenly, they get the right break and make it big. I was an overnight success all right, but thirty years is a long, long night.

There is a certain kind of mind that conceives new ideas as complete systems with all of their parts functioning. I don’t think in that “grand design” pattern. I work from the part to the whole, and I don’t move on to the large scale ideas until I have perfected the small details. To me this is a much more flexible approach.

…every time, these things turned out in the clear light of the following day to be more fanciful than functional. And the reason usually was that some small but essential detail had been overlooked in my grand design. So, at the risk of seeming simplistic, I emphasize the importance of details. You must perfect every fundamental of your business if you expect it to perform well.

The purpose of all these refinements, and we never lost sight of it, was to make our griddle man’s job easier to do quickly and well. All the other considerations of cost cutting, inventory control, and so forth were important to be sure, but they were secondary to the critical detail of what happened there at that smoking griddle. This was the vital passage in our assembly line, and the product had to flow through it smoothly or the whole plant would falter.

sharpies

The man who would later become Secretary of the Treasury under Richard Nixon listened politely to my sales pitch on McDonald’s vitality and growth potential. Then he asked to see my balance sheet. After glancing over the single page, he stood up, and I knew the interview was over. He was kind about it, and I suppose I really couldn’t blame him. Yet I resented the rebuff, and you can be sure that I did my banking elsewhere from then on.

Taking Control

Harry’s line of thought had this annex: Since we were not obliged to renew licenses, at the expiration of the licenses the company could wind up operating all of the stores. I would not agree with that. I never did and I never will. It can’t happen so long as my influence and that of Fred Turner enforce the view that the corporation is in the hamburger restaurant business, and its vitality depends on the energy of many individual owner-operators. The corporation has purchased stores—many of them, as I will show in later chapters. But our procedures for doing so are clearly spelled out to franchisees. We bend over backward to be fair in every case. We recognize that it would be unwieldy and counterproductive for the corporation to own more than about thirty percent of all stores. Our slogan for McDonald’s operators is “In business for yourself, but not by yourself,” and it is one of the secrets of our success.

“This is ridiculous!” he moaned. “I had Maurice and Richard come down from San Bernardino, and they spent most of the day here poking around. They get ready to leave, Ray, and you know what they tell me? They say, ‘You are doing everything just right. All you have to do is continue this way and the business will come.’ Hellfire, they were no help at all!”

I get furious all over again just thinking about that California situation during the first five years we were in business. It was aggravation unlimited. In many ways it was a parallel to the frustrations I faced at home with my wife. The McDonald brothers were simply not on my wavelength at all. I was obsessed with the idea of making McDonald’s the biggest and best. They were content with what they had; they didn’t want to be bothered with more risks and more demands. But there wasn’t much I could do about it, California was simply too far away for me to deal with effectively from Chicago.

The brothers’ own store in San Bernardino was virtually the only “pure” McDonald’s operation. Others had adulterated the menu with things like pizza, burritos, and enchiladas. In many of them the quality of the hamburgers was inferior, because they were grinding hearts into the meat and the high fat content made it greasy. The McDonald boys just turned their backs on such poor practices. Their operators refused to cooperate with mine in volume purchasing and advertising. We asked them to contribute one percent of their gross toward an advertising campaign that would benefit our stores and all of them as well, but they would have nothing to do with it. All I could do for the time being was to live with it.

In our business there are two kinds of attitudes toward advertising and public relations. One is the outlook of the begrudger who treats every cent paid for ad programs or publicity campaigns as if they were strictly expenditures. My own viewpoint is that of the promoter; I never hesitate to spend money in this area, because I can see it coming back to me with interest.

…you can learn all you ever need to know about the competition’s operation by looking in his garbage cans. I am not above that, let me assure you, and more than once at two o’clock in the morning I have sorted through a competitor’s garbage to see how many boxes of meat he’d used the day before, how many packages of buns, and so forth. My way of fighting the competition is the positive approach. Stress your own strengths, emphasize quality, service, cleanliness, and value, and the competition will wear itself out trying to keep up.

Competition has from time to time planted spies in our stores. One very prominent franchisor once got hold of a McDonald’s operations manual. Word was that he intended to use it to expand his drive-ins to include hamburgers and french fries. My attitude was that competition can try to steal my plans and copy my style. But they can’t read my mind; so I’ll leave them a mile and a half behind.

“Litton, you are getting your ears beat down, and it’s not right,” I said. “We can agree on that. But I’m going to tell you something I feel very strongly about. The thing that has made this country great is our free enterprise system. If we have to resort to this—bringing in the government—to beat our competition, then we deserve to go broke. If we can’t do it by offering a better fifteen-cent hamburger, by being better merchandisers, by providing faster service and a cleaner place, then I would rather be broke tomorrow and out of this business and start all over again in something else.”

Feeling this way made it impossible for me to go on living with Ethel. I moved out of our home in Arlington Heights to an apartment in the Whitehall.

She wound up getting everything I had except my McDonald’s stock. She got the house, the car, all the insurance, and $30,000 a year for life. I was happy to pay the alimony. I respected Ethel, she was a lovely person and a wonderful homemaker, and I wanted to be sure she was secure.

Harry Sonneborn helped me arrange a transaction in which executives of McDonald’s would purchase Prince Castle for $150,000 cash. It was worth far more, but I didn’t mind, I had to have the money immediately and my own people would be the beneficiaries of the deal (they subsequently sold the company for about a million dollars).

The most important item in my plans for the company was to end our relationship with the McDonald brothers. This was partly for personal reasons; Mac and Dick were beginning to get on my nerves with their business game playing.

But the main reason I wanted to be done with the McDonalds was that their refusal to alter any terms of the agreement was a drag on our development. They blamed their attorney for this lack of cooperation, and he and I certainly were at dagger’s point all the time; but whatever the reason, I wanted to be free of their hold on me. I knew from conversations I’d had with Lou Perlman and others that the McDonald boys could be persuaded to sell.

So I called Dick McDonald and asked him to name their price. After a day or two he did, and I dropped the phone, my teeth, and everything else. He asked me what the noise was, and I told him that was me jumping out of the 20th floor of the LaSalle-Wacker Building. They were asking $2.7 million!

“That’s for all the rights, the name, the San Bernardino store, and everything. You know, we feel we’ve earned it. We’ve been in business over thirty years, working seven days a week, week in and week out.” Very touching. But somehow I just couldn’t seem to work up any tears of pity.

That was the McDonald brothers’ last minute insistence on retaining their original restaurant in San Bernardino. They were going to have their employees run it for them. What a goddam rotten trick! I needed the income from that store. There wasn’t a better location in the entire state. I screamed like hell about it. But no way. They decided they wanted to keep it, and they were willing to pull the plug on the whole arrangement if they didn’t get it. Eventually I opened a McDonald’s across the street from that store, which they had renamed The Big M, and it ran them out of business. But that episode is why I can’t feel charitable or forgiving toward the McDonald brothers. They went back on their promise, made on a handshake, and forced me into grinding it out, grunting and sweating like a galley slave for every inch of progress in California.

Early Scale

I have a whole album of mental snapshots from that period. Turning through them brings back a rush of memories. Not nostalgia, but reaffirmation of my faith in McDonald’s and the people who helped me build it. I speak of faith in McDonald’s as if it were a religion. And, without meaning any offense to the Holy Trinity, the Koran, or the Torah, that’s exactly the way I think of it. I’ve often said that I believe in God, family, and McDonald’s—and in the office, that order is reversed. If you are running a hundred-yard dash, you aren’t thinking about God while you’re running. Not if you hope to win. Your mind is on the race. My race is McDonald’s.

Of our first 160 stores, only 60 were units for which we had developed the restaurants and were receiving income above the service fee. The rest were units in which the operators themselves owned the restaurants, and they paid us only the 1.9 percent service fee. This put us in a rather paradoxical situation. Our gross sales figures continued to climb, and many individual units were prospering. One store in Minneapolis chalked up a then incredible one-month sale of $37,262. At the same time, we were barely able to meet our payrolls in corporate headquarters. Harry Sonneborn issued an order that no bill for more than a thousand dollars would be paid in full. Anything over a thousand would be paid in monthly installments.

We had forty-five people in our office then, and their cost was more than our revenue. The week finally came that we were overdrawn at our bank and couldn’t meet our payroll. Gerry’s solution was to switch the pay period from weekly to bimonthly.

Personal Life

Would I have been happy if I’d never met Joni Smith? I don’t know. Certainly I was fulfilled in my work. It was my life. Yet, having met her, I realized there was something missing. So I went after it. I would have given anything. I would even have dropped McDonald’s to win her.

First off, because Los Angeles had been the cradle of drive-in restaurants, and they had grown so wildly throughout the region, the industry had accumulated more corrupt habits than a flophouse janitor. Suppliers had formed a series of cartels and managed to push prices out of sight. For example, the same buns we were paying twenty cents for in Chicago were going for forty cents in L.A. Meat was the same way. But meat was even worse, because of the dramatic fluctuations in supply. When beef grew scarce, fast-food operators began performing the ancient ritual known as turning pockets inside out. To make matters more difficult, California distributors took it for granted that a franchisor walked around with his hand out for kickbacks in exchange for granting exclusive contracts. The distributor always made out, because he would get back the amount of the payoff and maybe even a little extra in increased prices to the franchisee. Convincing these people that we were an honest operation, that we protected our operators, and that we would take no kickbacks, was a big order. They could not be persuaded that if they would supply McDonald’s restaurants with items the way we wanted them at prices that would allow us to sell hamburgers for fifteen cents, our growth would put them on Easy Street. McDonald’s had no identity as a system out there, and that sharpened the other barb of our problem—low volume.

“Ray, I’ve been getting a lot of business from you, and I’d like to show you my appreciation. I’d like to give you something for your stores—a sign or a clock—what would you like?” “Listen, Harry, you don’t know me, so I am going to forgive you for that,” I said. “But let’s get this straight, once and for all. I want nothing from you but a good product. Don’t wine me, don’t dine me, don’t buy me any Christmas presents. If there are any cost breaks, pass them on to the operators of McDonald’s stores.” Harry Smargon has prospered with McDonald’s, and I never heard him so much as hint at a kickback again.

Gene took our portfolio home and spent about a week analyzing it. He returned with a report that pointed out duplications, areas where we needed more protection, and some overcharges. I thought it was a terrific report, and I pointed out that he had forgotten to bill us for it. He said, “I’m not going to send you a bill. I don’t think you can afford it. But you’ve got a great concept here, and I think we’ll be able to do some business in the future. I’ll be in touch.” As a matter of fact, Gene wound up reorganizing the insurance coverage for our franchised stores and later developed a plan whereby we could pool a number of our restaurants, regardless of location, and take advantage of discounts. His Keeler Insurance Company grew right along with McDonald’s. In 1974 when Keeler became a division of the Frank B. Hall Company, Gene was named chairman of the board.

In midsummer of 1963, Nick Karos came to me with a proposal he had drafted for a television advertising campaign. The projected cost was $180,000 and he wanted to pay for it by raising the price of hamburgers in our company-owned stores a penny, from fifteen to sixteen cents. “Nick, this is a terrific plan,” I said. “But we’re not gonna raise the price. What I want you to do is go back to Chicago and present this to Harry Sonneborn. Make him come up with the money.” I knew he’d be able to do it, because the logic of his one-page memo was irrefutable. It demonstrated precisely how an ad campaign would repay its cost many times over, while failing to spend the money would cost us much more in the long run. Nick was successful, although Harry went along very reluctantly. The advertising campaign we put together was a smash hit. It turned Californians into our parking lots as though blindfolds had been removed from their eyes, and suddenly they could see the golden arches. That was a big lesson for me in the effectiveness of television.

…should have been happy, but the undeniable fact was that I was miserable. I had forced Joni out of my mind, but I could not get her out of my heart. She and her husband had long since moved to Rapid City, South Dakota, to open McDonald’s stores of their own, and I knew they were doing very well from the daily financial reports I received on all our operations. I wondered if she missed me as much as I missed her.

Some people are bachelors by nature. I am not. I guess I need to be married to feel complete. That’s why I fell so hard for Jane. Her name was Jane Dobbins Green. She was John Wayne’s secretary. A mutual friend introduced us, and I was charmed by Jane’s sweet disposition. She was lovely, a sort of diminutive Doris Day, and she was completely opposite to Joni in manner. Joni is a strong person who knows her own mind. Jane was compliant: If the sky was clear and I said it looked like rain, Jane would agree. We had dinner together the night after we met, and the next night, and the night after that. In fact, we had dinner together five nights in a row. I was enchanted. Within two weeks we were married. Of course, Joni found out about it eventually. One day I got a telephone call from her and we had a brief, businesslike conversation that she ended by asking, “Ray, are you happy?” I was shaken and astonished. It took me a moment to catch my voice. Then I blurted, “Yes!” and slammed down the receiver.

Managing Growth

I was busy trying to decentralize our management structure. We had 637 stores now, and it was unwieldy to supervise them all from Chicago. It has always been my belief that authority should be placed at the lowest possible level. I wanted the man closest to the stores to be able to make decisions without seeking directives from headquarters. Harry didn’t quite see things my way in these matters. He wanted tighter corporate controls, a more authoritarian posture. I maintained that authority should go with a job. Some wrong decisions may be made as a result, but that’s the only way you can encourage strong people to grow in an organization. Sit on them and they will be stifled. The best ones go elsewhere. I knew that very well from my past experience with John Clark at Lily Tulip Cup. I believe that less is more in the case of corporate management; for its size, McDonald’s today is the most unstructured corporation I know, and I don’t think you could find a happier, more secure, harder working group of executives anywhere.

Quality Debates

There were diehards in our organization who thought that the only good french fry was made from a fresh potato. For them there was something mysterious, almost sacred, in the rites of peeling, washing the starch out, and blanching. I was to blame for this attitude, I suppose, because I had put so much emphasis on it, and I insisted that our classes at Hamburger U. make it a ritual. But for an operator to insist on peeling his own potatoes in the store instead of using a frozen product was on the same order as insisting on slaughtering his own steers and grinding the hamburger. Not quite as messy, of course, but potato peelings gave us plenty of problems nevertheless.

Of course, the quality of our french fries was a large part of McDonald’s success, and I certainly didn’t want to jeopardize our business with a frozen potato that was not up to our standard. So we made certain that the frozen product was thoroughly tested and that it met every condition of quality before we made it part of the system.

I appreciated Art’s honesty. I like people who level with me and speak their minds. I always say exactly what I think; it’s a trait that’s gotten me in trouble plenty of times, but I never have problems getting to sleep at night with a guilty conscience. That’s why I could never be a politician. People have told me from time to time that I should run for president. They think I could run the country with the same integrity and sound business sense that I gave to McDonald’s. I know it wouldn’t work. Not that I think a politician has to be dishonest—but he has to compromise some things he believes in strongly for the sake of political expediency. I could not do that.

Art’s death troubled me in another way, too. I could not help but recall those many bachelor dinners when I would tell him about Joni like some lovesick schoolboy. I was content with Jane. She was a fine lady, but it was Joni I loved and knew I always would.

IPO & Expansion

Our biggest argument with the underwriters was on what the initial selling price should be. We had split the stock a thousand to one by that time, and the underwriters thought we should go out at seventeen times earnings. I wouldn’t stand for that. I knew we were worth more, and I stood to lose more than anyone else if we went out too low. Harry agreed. He fought for twenty times earnings, and he made several trips between New York and Chicago trying to get them to see it our way. It was a stalemate. We had come down to the final deadline when I walked into Harry’s office and told everyone involved that there was no way we would go for less than twenty. That was a pretty heavy moment. But I meant it; even if we had to flush away all the hours and weeks of effort that had got us to this point, I was determined not to sell McDonald’s short. No way!       * So we went on the market at $22.50 a share, and it shot up to $30 before trading ended that first day. The issue was oversubscribed—a tremendous success. Before the first month ended, it had climbed to $50 a share, and Harry, June, and I were wealthier than we’d ever dreamed possible.

…any rate, we were accepted, and to celebrate, Harry and his new wife, Aloyis, and June Martino and Al Golin all ate hamburgers on the floor of the New York Stock Exchange. Boy! That got terrific coverage in the newspapers. Not only because of the hamburgers, but Aloyis and June were among the first women ever allowed on the floor of the exchange. This was in July 1966, a year in which we broke through the top of our charts again with $200 million in sales, and the scoreboards on the golden arches in front of all our stores flipped to “OVER 2 BILLION SOLD.”

Our first store with inside seating opened in Huntsville, Alabama, in July 1966. It was pretty primitive compared to the kind of seating we have now—a narrow counter with stools and a couple or three small tables—but it was a big step forward.

There is a cross you must bear if you intend to be head of a big corporation: you lose a lot of your friends on the way up. It’s lonely on top. I never felt this so keenly as when Harry Sonneborn and I had our final confrontation, and he resigned. Recalling the various elements of this situation is like thinking about a set of Chinese boxes, each one nesting inside another. When the last one is removed, you are left with an empty box, a sense of loss.

The most important problem I had with Harry, however, was his growing conservatism in real estate development. He was listening to bankers and others who told him the country was heading into a recession in 1967 and that McDonald’s ought to conserve cash and hold down its construction of new stores. Finally Harry put a moratorium on all new store development. No more construction.

Harry had a substantial chunk of McDonald’s stock, but he was so certain the company would go down the chute when he left that he sold it all. He wanted the money, I’m told, to go into the banking business in Mobile. But it’s a shame, because although the sale gave him a few million dollars at the time, the stock subsequently had a series of splits that made each share worth ten times as much. Had he kept it, his stock would be worth over $100 million. So his lack of faith in us was very costly for him.

When I was told that we were waiting for the local economy to improve in those areas, I hit the ceiling. “Hell’s bells, when times are bad is when you want to build!” I screamed. “Why wait for things to pick up so everything will cost you more? If a location is good enough to buy, we want to build on it right away and be in there before the competition. Pump some money and activity into a town, and they’ll remember you for it.”

Hard Decisions

Then his face clouded, and his eyes bulged with anger. He hit the table with his fist so hard the silverware danced, and nearby diners flinched in alarm. “Dammit, if you knew about this frigged-up situation in the office, why didn’t you do something about it?” he rasped. For once in my life, I didn’t answer fire with fire. I felt like a father who has failed to stick up for his son, and there was no way I could explain to Fred the kind of tightrope I’d been on with Harry. So I told him to calm down, and one day he would figure it out for himself.

Goldstein had been a delicatessen owner in Washington, and Gibson had been an assistant secretary of labor in Truman’s administration; so they knew which way the salami was sliced and who had the strongest hand in our negotiations: They did. But I managed to hammer out a deal for a few million dollars more than Harry Sonneborn had been willing to pay. Gibson and Goldstein wound up getting about $16.5 million in cash. That was a very good dollar, but I didn’t begrudge it. I don’t stew about what the other guy is making in a deal like this; I’m concerned about whether it is going to be a good thing for McDonald’s. Usually there’s no reason both sides can’t come out winners and be happy. What we got in return was worth far more to McDonald’s than the $16.5 million. We have increased the number of stores in the area from forty-three to ninety. But we also acquired a lot of fine executive talent in the move.

We were in the midst of Lyndon Johnson’s muddle-headed “guns and butter” economy with the war in Vietnam, and even our increasingly sophisticated purchasing operations could not cope with inflation. Some of our people believed we should recommend an increase to twenty cents instead of eighteen. But I came down hard on that one. They argued that customers wouldn’t want to be bothered with pennies, and that it would be harder for our girls and boys to make change. However, if you look at it strictly from the customer’s point of view—which is how I do it, because this guy is our real boss—you see the importance of every penny. And, cripes almighty, going to eighteen cents is a twenty percent increase! Anyhow, I prevailed. We made it eighteen cents, and then we waited anxiously for the sales figures and customer counts to come in so we could compare them to Gerry Newman’s predictions.

Brand Power

For example, a great deal of study had gone into creating the appearance and personality of Ronald McDonald, right down to the color and texture of his wig. I loved Ronald. So did the kids. Even the sophisticates at Esquire magazine loved him. They invited Ronald to their “Party of the Decade” for top newsmakers of the sixties. McDonald’s was chosen to cater the party because we had the “biggest impact on the eating out habits of Americans in the decade.”

Succession

By early 1968 I was ready to hand the baton to Fred Turner, and he took it without breaking stride. As president and later chief executive officer, he pressed ahead with the programs I’d started and came up with some dynamic variations of his own. In a way, this was nepotism, because although I have never had a son, Fred is close to the age a boy of mine would have been, and he has all the desire and aptitude for the business that I could wish. So I’ve often said that I do have a son and his name is Fred Turner. He has never disappointed me. The great growth of the company over the last five years has been due to Fred’s planning and vision and the work of Ed Schmitt and the rest of Fred’s team of executives.

Stockholders might question the wisdom of licensing an area and then, two years later, buying it back for much more money. But Fred believed strongly in the potential of Canada, and he didn’t let the possibility of adverse criticism slow him down. I thought, “That’s my boy!”

There was one other thing I had to do to set the situation in the Chicago office straight, and that was to ask June Martino to retire. It was a tough thing for me. June was a wonderful person, and she had been a tremendous asset to the organization. But she was part of the old regime, and her approach would no longer work. June had the same deal Harry Sonneborn got. She held onto her stock, however, and it made her extremely wealthy. I see June from time to time. She’s an honorary director of the corporation, and she does some good work for McDonald’s in the Palm Beach area. One thing June and I will always have in common is a love for McDonald’s.

Joni & Marriage

I hadnt seen Joni for five years when we met at the Western Region Operators Convention in San Diego. Truthfully, I didn’t expect to be hit by the same wave of emotion that had bowled me over before. But that’s exactly what happened.

And when I made my after-dinner speech about how I had attained all I’d ever wanted in life except one thing, little did they suspect that the missing element—all I needed to make life complete—was sitting there at that very table beside me. They probably thought I was referring to some staggering sales record or having Colonel Sanders become a McDonald’s licensee or some such thing. But Joni knew. I knew she knew. And she wasn’t frowning. Man! I felt like a teenager on his first date.

Jane and I were supposed to be leaving on a world cruise. Joni had asked me to go through with it and break the news to Jane gently during the three months we would be gone. Okay. I thought I could handle that. But fond as I was of Jane, the more I thought about being away from Joni that long, the more impossible it became. First, I decided I would get off the boat in Hong Kong. Then I changed my mind and made it Acapulco. Then, by God, it was the Panama Canal. Finally, I said to hell with it, I would not go on the cruise at all. I didn’t want to hurt Jane any more than was necessary, but I had to have a divorce. Immediately! I took care, though, to insure that she would be financially secure. Jane still lives in our Beverly Hills home, and I continue to see some of her relatives who are long-time McDonald’s operators.

Joni and I were married there, in front of the massive stone fireplace, on March 8, 1969. At last I felt like a complete person. Now, I told myself, I could take life a little easier and enjoy it. I was finished grinding it out. But business is not like painting a picture. You can’t put a final brush stroke on it and then hang it on the wall and admire it. We have a slogan posted on the walls around McDonald’s headquarters that says, “Nothing recedes like success. Don’t let it happen to us or you.” I wasn’t about to let it happen to me. Fred Turner was doing a fine job of running the company, as I had known he would, but there were lots of areas that needed my attention.

Think Big

But the reason I hated the MiniMac idea was that it was thinking small. Brent’s plan was to buy enough property for a full-size store and put up a small unit. If it does well, then expand it. It was hard to argue against the program, because it took off very successfully. The initial MiniMac did about $70,000 gross the first month. But after they had built about twenty-two mini-units, some without seating and some with only thirty-eight seats, they finally got tired of my screaming and scrapped the program. And it’s a damned good thing they did, because those minis were converted into regular stores and the majority of them are doing tremendous business. I believe that if you think small, you’ll stay small.

Menu Identity

…it’s not difficult to demonstrate how much our menu has changed over the years, and nobody could argue with the success of additions such as the Filet-O-Fish, the Big Mac, Hot Apple Pie, and Egg McMuffin. The most interesting thing to me about these items is that each evolved from an idea of one of our operators. So the company has benefited from the ingenuity of its small businessmen while they were being helped by the system’s image and our cooperative advertising muscle. This, to my way of thinking, is the perfect example of capitalism in action. Competition was the catalyst for each of the new items. Lou Groen came up with Filet-O-Fish to help him in his battle against the Big Boy chain in the Catholic parishes of Cincinnati. The Big Mac resulted from our need for a larger sandwich to compete against Burger King and a variety of specialty shop concoctions. The idea for Big Mac was originated by Jim Delligatti in Pittsburgh. Harold Rosen, our operator in Enfield, Connecticut, invented our special St. Patrick’s Day drink, The Shamrock Shake.

There are some things we can do and maintain our identity, and there are others we could never do. For example, it’s entirely possible that one day we might have pizza. On the other hand, there’s damned good reason we should never have hot dogs. There’s no telling what’s inside a hot dog’s skin, and our standard of quality just wouldn’t permit that kind of item.

Site Selection

Some executives have maps of the country with different colored pins indicating their sales outlets. I don’t have such a map. I don’t need one, because I have it all in my mind, and that includes the kind of store on a given location, who the operator is, what kind of volume he’s doing, what his problems are, and so forth.

Back in the days when we first got a company airplane, we used to spot good locations for McDonald’s stores by flying over a community and looking for schools and church steeples. After we got a general picture from the air, we’d follow up with a site survey. Now we use a helicopter, and it’s ideal.

Public Scrutiny

…situation. There also are all kinds of social and political currents swirling around in a big city that you don’t have to deal with in suburbia. Occasionally activists of one kind or another have tried to use an attack on McDonald’s to advance whatever cause they were pushing. We are a convenient symbol of establishment business. Our development in New York City, for example, was characterized by snobbish writers as some sort of sinister plot. Here was Daddy Warbucks dressed up like Ronald McDonald setting out to milk money from an unsuspecting populace. What these fanatics actually opposed was the capitalist system. Their political cant held that to be successful in the context of free enterprise, a business must be morally corrupt and guilty of all kinds of shabby business practices. I feel sorry for people who have such a small and wretched view of the system that made this country great.

There are rare circumstances in which a neighborhood genuinely feels that McDonald’s would not be in keeping with its character. This happened in the posh Lexington Avenue area of New York City, and we withdrew. It cost us a lot of money, but we sure don’t want to locate in an area where people don’t want us—that makes for a losing business proposition.

So I got in the car with Joni at the airport and told her that I was thinking of buying the San Diego Padres. She looked at me quizzically and said, “What on earth is that, a monastery?”

…had read that the owner, California banker C. Arnholt Smith, was in deep financial difficulty and would be forced to sell. Several groups had expressed interest, so there was more than a little suspense about the affair. Don called Buzzy Bavasi, general manager of the club, and told him that Ray Kroc wanted to buy. “That’s fine,” Buzzy said. “Who else is in the group?” “He is the group.” There was a long, skeptical silence. Then Don added, “He owns seven million shares of McDonald’s common stock, which is selling for about fifty-five dollars a share.” Buzzy did a little mental arithmetic and said he would be glad to talk to Mr. Smith about it.

Doing things like buying baseball teams and hockey teams always opens a person to criticism from folks who think they have better ideas about how one’s money should be spent. There is a common fallacy that money will solve problems. It won’t. Money creates problems, and the more you have, the bigger the problems, not the least of which is how to spend it wisely. People have sometimes accused me of being a hungry tiger for money. That’s not true. I’ve never done anything for the sake of money alone. Several years ago, when we were first beginning to generate big income, I made a speech at a financial meeting, and a fellow got up and said, “Isn’t it interesting that Mr. Kroc has so much enthusiasm and spirit. You know that he owns four million McDonald’s shares and the stock went up five dollars.” I was floored. Actually embarrassed. The fellow was looking at me. So I said into the mike, “So what! I can still only wear one pair of shoes at a time.” I got a hell of a hand. But, you see, that’s the mentality. The person who thinks only in terms of “Where’s mine?” can’t imagine anyone else not thinking the same way. We’ve actually had writers criticize McDonald’s policy of furnishing free coffee and hamburgers when natural disasters strike as being a self-serving public relations gimmick. That’s kind of hard to take, because we’re always trying to be good neighbors and responsible citizens. We’ve always encouraged our franchisees to become involved in community activities and to make donations to worthwhile charities.

We were accused of “shocking manipulation” in our dispute with labor unions in San Francisco. I suppose that’s another way of saying we don’t fool around. It’s always shocking to be a loser. I was quoted as asking Mayor Alioto, “What would it take to put a third McDonald’s in San Francisco?” I never spoke those words or any like them.

A student at one of my talks at Dartmouth asked if I demanded that my executives in McDonald’s follow my politics. “I can answer that,” Fred Turner interjected. “Kroc voted for Nixon and I voted for McGovern.” “That’s right,” I added, “and we were both wrong.”

Giving Back

I had resisted the foundation proposal at first because it was presented as a tax shelter. I’m not interested in that sort of thing. I don’t make charitable donations because they will give me tax deductions. That’s a peculiarity of mine that runs against common business practice. It’s the same thing with expense accounts. I’ve never submitted a personal expense account to McDonald’s in my life.

I have purchased a fleet of nineteen customized Greyhound buses, outfitted with kitchens, rest rooms, telephones, color television, and lounge-style seating and I rent these to the corporation for one dollar a year. Each of our districts books the use of one of these Big Mac buses to its operators for worthwhile activities such as taking disadvantaged children and senior citizens on outings. I also bought the company plane, a Grumman Gulfstream G-2 jet. McDonald’s rents it from me for the same low price, one dollar a year. The G-2 can fly anywhere in the world, and we make good, cost-cutting use of it for executive travel. My point here is that I believe in spending my money in useful ways. It wasn’t until Don Lubin proposed the foundation as a means to benefit medical research that I pricked up my ears and started paying attention.

Learning & Craft

My brother Bob talks the language of science. He’s pedantic and painstaking; he’s willing to get fewer things done in order to make fewer mistakes. I’m impatient. I’m willing to make a few mistakes in order to get things done.

One thing I flatly refuse to give money to is the support of any college. I’ve been wooed by some of the finest universities in the land, but I tell them they will not get a cent from me unless they put in a trade school. Our colleges are crowded with young people who are learning a lot about liberal arts and little about earning a living. There are too many baccalaureates and too few butchers. Educators get long faces when I talk like this and accuse me of being anti-intellectual. That’s not quite right. I’m anti-phony-intellectual, and that’s what too many of them are.

Press On

“Press On: Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.”