McDonald's Brand Loyalty
Ronald McDonald was popular with kids as soon as he was introduced in the '60s and he's been instilling brand loyalty ever since.Tim Boyle/Getty Images
This business plan gave Ray Kroc the success and leverage he needed to get the loan to buy out the McDonald brothers in 1961. By 1963, Kroc opened his 500th McDonald's restaurant. Also in that year, he introduced Ronald McDonald, a clown originally played by actor Willard Scott, who was famous for playing Bozo the Clown. This marked the beginning of McDonald's instilling brand loyalty in customers at a young age, a practiced it would later be attacked for.
In 1965, the company went public, and Kroc made $3 million. Two years later, he took McDonald's restaurants outside the U.S. to Canada, and eventually to Europe and Asia. His wealth would amass to $500 million in the following 10 years [source: Basic Books]. Twenty years after it went public, McDonald's was included in the 30-company Dow Jones Industrial Average. The McDonald's Web site boasts that the company has been a wise investment, saying about $2,000 worth of stock in 1965 would translate to more than $3 million worth in 2006 [source: McDonald's Corp.].
As we've seen, McDonald's is drenched in the business of real estate as much as it is in food. And, as we've all heard, the three most important elements of real estate are "location, location, location." Back in Kroc's days with the company, he would fly around in a plane or helicopter looking for the best spots to set up McDonald's restaurants. He specifically looked for land near schools and churches in a community [source: Kroc].
Today, as most of us can see, McDonald's restaurants are everywhere. But there's still a method to the madness. McDonald's typically looks for locations that are the most convenient for people -- in malls, near colleges or in airports [source: McDonald's Corp.]. This strategy continues Kroc's tradition of getting to the heart of a community through its gathering places.
Let's get to the nitty-gritty: McDonald's looks for intersections with traffic signals -- typically corners of two well-trafficked streets -- and ample parking. In terms of physical space, developers look for a site larger than 32,000 square feet (9,753 square meters) and a height of 22 feet (6.7 meters) [source: McDonald's Corp.].
After the franchisee and the site are lined up, the restaurant is built. You may have noticed that the architecture of McDonald's restaurants has begun to evolve away from the classic double-sloped roof. Many new restaurants are popping up with sleeker looks. These include restaurants with a cafe-style interior featuring lounge chairs to go along with the McCafe line of specialty espresso drinks. The immortal arches that don the facades have also been replaced by what's known as the "swish eyebrow," a yellow arch over a restaurant [source: Gogoi].
Modern drive-thrus incorporate displays to verify orders and some even have two order stations to speed up the process.
Tim Boyle/Getty Images
Today's McDonald's restaurants -- whether cafe-style or not -- still incorporate classic production line procedures in the kitchen. Each employee is typically in charge of a certain task so that orders are filled quickly, but technology has come a long way since Multimixers. New technology has made the process even faster and more convenient for the customer. In the drive-thru, for instance, McDonald's restaurants now have digital displays where the driver can look at his order. Increasingly automated equipment, such as those that dispense drinks and make french fries, has also helped keep things moving faster. These are part of a long line of increasingly efficient practices since Kroc switched from fresh potatoes to frozen fries in 1966.
McDonald's amazed many when some of the restaurants began outsourcing their drive-thru order-taking to call centers. To make sure the right order got to each car, a camera hidden in the drive-thru menu took a photo of the driver placing the order and sent it to the restaurant employee who doled out the food at the pickup window. This innovation proved to increase production and efficiency [source: Fitzgerald].
By simplifying their menu, the McDonald's brothers were able to speed up orders and bring in hordes of hungry customers.
Tim Boyle/Getty Images
Modern drive-thrus incorporate displays to verify orders and some even have two order stations to speed up the process.
Tim Boyle/Getty Images
By simplifying their menu, the McDonald's brothers were able to speed up orders and bring in hordes of hungry customers.
Tim Boyle/Getty Images
Dick and Mac McDonald
McDonald's, the company that would come to represent what people love or hate about America, has humble roots in the Great Depression. In the 1930s, brothersDick and Mac McDonald were struggling to make a living running a movie theater in California when they noticed that a nearby hot dog stand always seemed to do a lot of business. With a $5,000 loan, the McDonald brothers started the Airdrome hot dog stand in 1937 [source: Kroc]. By 1940, they moved it from Arcadia to San Bernardino and changed the name to McDonald's Barbeque [source:Young].
Despite success, the brothers wanted to do things better and faster. In a bold move, they temporarily shut down the place in 1948 and reopened with a new, experimental approach. They simplified the menu to focus on burgers, fries and milkshakes and got rid of those characteristic carhops, who were ubiquitous in the industry at the time. Adopting the process that revolutionized the auto industry, the brothers used an assembly line to prepare their food and improve the efficiency of the restaurant. They called it the Speedee System. The restaurant reopened to great success -- their risky move not only paid off but was to soon set the standard for success in the fast food industry.
The McDonald brothers were getting so much business that they needed eight Multimixers, machines that make five milkshakes at once. Today, a Multimixer sits as a museum piece in the replica of an early McDonald's.
Tim Boyle/Getty Images
In the next six years, business was doing so well that the brothers sold 21 franchises and opened nine outlets [source: Gilpin]. The original restaurant was bustling with so much business that the brothers ordered eight Multimixers -- machines that made five milkshakes at one time. The distributor of Multimixers -- a salesman by the name of Ray Kroc-- was so intrigued at this news that he traveled to California to see what the fuss was about.
Amazed and inspired at the success of the McDonald brothers, Kroc wanted in. He had dreams for the potential of McDonald's restaurants and asked Dick and Mac to hire him as their franchise agent. In exchange for licensing the name to him, the brothers would get a percentage of sales.
Kroc opened his first McDonald's restaurant in 1955 in Des Plaines, Ill. After some bumps in the road, Kroc was eventually successful, and in the next five years, he got 200 more restaurants off the ground [source: BBC]. Kroc was dedicated to the Speedee process that made the McDonald brothers so successful, and he used the motto of "quality, service, cleanliness and value." Some people say he was almost obsessed with cleanliness. Kroc often told workers, "If you have time to lean, you have time to clean" [source: Pepin].
Although Kroc's business deal with the McDonald brothers started swimmingly, relations soon soured. At first, Kroc just wanted to sell as many Multimixers as possible. But by 1961, he bought the entire business for $2.7 million. When they gave up rights to the McDonald's name, Dick and Mac reopened their original San Bernardino hamburger joint as The Big M. Kroc, upset over the brothers' refusal to relinquish the original restaurant, opened up a McDonald's restaurant nearby. The Big M was run out of business.
Soon, using these tactics, Kroc made short work of the rest of the competition. Now in control of McDonald's Corp., he was ready to take on the world. Next, we'll delve into the business side of how Kroc built the McDonald's empire.
McDonald's, the company that would come to represent what people love or hate about America, has humble roots in the Great Depression. In the 1930s, brothersDick and Mac McDonald were struggling to make a living running a movie theater in California when they noticed that a nearby hot dog stand always seemed to do a lot of business. With a $5,000 loan, the McDonald brothers started the Airdrome hot dog stand in 1937 [source: Kroc]. By 1940, they moved it from Arcadia to San Bernardino and changed the name to McDonald's Barbeque [source:Young].
Despite success, the brothers wanted to do things better and faster. In a bold move, they temporarily shut down the place in 1948 and reopened with a new, experimental approach. They simplified the menu to focus on burgers, fries and milkshakes and got rid of those characteristic carhops, who were ubiquitous in the industry at the time. Adopting the process that revolutionized the auto industry, the brothers used an assembly line to prepare their food and improve the efficiency of the restaurant. They called it the Speedee System. The restaurant reopened to great success -- their risky move not only paid off but was to soon set the standard for success in the fast food industry.
The McDonald brothers were getting so much business that they needed eight Multimixers, machines that make five milkshakes at once. Today, a Multimixer sits as a museum piece in the replica of an early McDonald's.
Tim Boyle/Getty Images
In the next six years, business was doing so well that the brothers sold 21 franchises and opened nine outlets [source: Gilpin]. The original restaurant was bustling with so much business that the brothers ordered eight Multimixers -- machines that made five milkshakes at one time. The distributor of Multimixers -- a salesman by the name of Ray Kroc-- was so intrigued at this news that he traveled to California to see what the fuss was about.
Amazed and inspired at the success of the McDonald brothers, Kroc wanted in. He had dreams for the potential of McDonald's restaurants and asked Dick and Mac to hire him as their franchise agent. In exchange for licensing the name to him, the brothers would get a percentage of sales.
Kroc opened his first McDonald's restaurant in 1955 in Des Plaines, Ill. After some bumps in the road, Kroc was eventually successful, and in the next five years, he got 200 more restaurants off the ground [source: BBC]. Kroc was dedicated to the Speedee process that made the McDonald brothers so successful, and he used the motto of "quality, service, cleanliness and value." Some people say he was almost obsessed with cleanliness. Kroc often told workers, "If you have time to lean, you have time to clean" [source: Pepin].
Although Kroc's business deal with the McDonald brothers started swimmingly, relations soon soured. At first, Kroc just wanted to sell as many Multimixers as possible. But by 1961, he bought the entire business for $2.7 million. When they gave up rights to the McDonald's name, Dick and Mac reopened their original San Bernardino hamburger joint as The Big M. Kroc, upset over the brothers' refusal to relinquish the original restaurant, opened up a McDonald's restaurant nearby. The Big M was run out of business.
Soon, using these tactics, Kroc made short work of the rest of the competition. Now in control of McDonald's Corp., he was ready to take on the world. Next, we'll delve into the business side of how Kroc built the McDonald's empire.
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