McDonald, Mac & McDonald, Dick
McDonald, Mac & McDonald, Dick
Richard and Maurice McDonald, pioneers in the fast-food industry, were the first to use assembly-line efficiency in a restaurant kitchen. Their self-serve menu, under the golden McDonald arches, has transformed the eating habits of people all over the world.
In 1929, shortly after they graduated from high school, Maurice "Mac" and Richard "Dick" McDonald left their native New Hampshire for California. Attracted by the motion picture industry, their first jobs were as stage hands. Their first business was a small movie theater in a rented building in Glendora, California, on the east side of Los Angeles. Four years later, they still had not turned a profit, so they began to look around for a business that might be more lucrative.
In 1940 the brothers opened a drive-in hotdog stand in Pasadena, but shut it down to open a larger carhop drive-in with a barbecue pit on the corner of 14th and E streets in San Bernardino (50 miles east of Los Angeles). Within five years, with sales of $200,000 per year, they were among the richest families in town. Dick and his wife, with the single Mac, lived in a 25-room mansion with a view. Every year, they bought three brand new Cadillacs. With an annual income of more than $100,000 between them, they were content. In 1954 the McDonald brothers turned over the franchising rights of McDonald's to Ray Kroc. In return, they received one-half percent of the gross income until they were totally bought out by Kroc in 1961. In 1970 they sold their mansion and the lot at 14th and E, and moved back to New Hampshire.
After World War II, drive-in restaurants with carhops were a growing phenomenon, especially in southern California. The McDonald's carhop drive-in could easily serve 125 cars at a time, offering a menu that included barbecued pork and beef sandwiches, barbecued ribs, and hamburgers. Despite their prosperity, the McDonald brothers were not happy. According to John F. Love, "The brothers longed for a less complicated operation without the annoyances of unreliable carhops and the leather-jacketed customers they attracted."
In 1948 the McDonalds closed their drive-in for three months in order to streamline the operation. The new menu was very simple: hamburgers and cheeseburgers (which had been 80 percent of their business), french fries, shakes, soft drinks, and apple pies. The remodeled building, shaped like an octagon, had only 600 square feet. There were no tables to sit at, no jukebox, no cigarette vending machines, no payphones, no newsstands, and no carhops. As a result, the McDonalds succeeded in discouraging teenagers from patronizing their business.
Perhaps the most impressive aspect of the restaurant was the efficiency with which the food was prepared. Specially designed equipment included two 6-foot grills, stainless steel lazy susans, spatulas suited for volume flipping, and a stainless steel pump dispenser for squeezing a premeasured portion of ketchup and mustard evenly onto each bun. The tasks of the kitchen crew were broken down into clearly defined steps which untrained cooks could follow. The savings in preparation time allowed the McDonalds to lower the price of a hamburger from $.30 to $.15. A bag of french fries was $.10, a cup of coffee was $.05. Since all hamburgers were prepared with the same condiments, they could be prepared before they were ordered and kept warm along with the fries under infrared lamps. Orders could now be filled in 15 seconds. Children pressed their noses up against the glass windows to see the commercial kitchen while their parents were reassured that although the food was inexpensive, the kitchen was spotless, and the hamburger was fresh. For the first time, working class families could afford to eat out. Three years after their conversion to fast food outlet, the McDonald brothers were grossing $277,000 per year.
The unique automation of McDonald's and its high level of profitability received some press coverage which in turn brought numerous visitors. Many who toured the San Bernardino operation opened imitations in various parts of southern California. Glen Bell, a telephone repairman, was a regular customer whose Taco Bell restaurant grew into an international chain of more than 10,000 outlets. Dick and Mac sold a few franchises, and for the first licensee, they designed a rectangular building with a red-and-white tiled front, a roof that slanted downward from front to back, and solid glass from counter to roof. The architect, Stanley Meston, refused to add what the McDonald brothers really wanted: two enormous arches, one on each side of the building. George Dexter, a sign maker, was hired to add the bright yellow arches with neon lighting.
Chronology: Mac McDonald Dick McDonald
1929: Brothers left New Hampshire for California.
1940: Opened drive-in hotdog stand in Pasadena, California.
1943: Opened drive-in carhop in San Bernardino, California.
1945: Lived in a mansion and had three Cadillacs.
1948: Closed the carhop and reopened it as a fast-food restaurant without tables.
1951: Enjoyed a 40 percent rise in profits.
1954: Licensed the McDonald's name, architecture, and efficient kitchen system to entrepreneur Ray Kroc.
1961: Bought out by Kroc for $2.7 million.
1970: Returned to New Hampshire.
1971: Mac McDonald died.
1984: The 50 billionth McDonald's hamburger was served to Dick McDonald.
1998: Dick McDonald died at age 89.
In 1954 Ray Kroc, a seller of milkshake machines, learned that the McDonald brothers were using eight of his Multimixers in their San Bernardino restaurant. When the brothers ordered two more Multimixers, Kroc decided the time had come to see the operation in person. By this time, the McDonald brothers were grossing $350,000 per year and had sold 15 franchises. Two days of observation, along with a formal tour and long conversations with the proprietors, were enough to convince Kroc that the McDonald formula was a ticket to success. When Kroc suggested that they increase their effort to franchise their efficiency system, he envisioned each new McDonald's restaurant with eight Multimixers. Upon further reflection, though, he began to see the real potential behind the franchises. Selling hundreds of $.15 hamburgers every day was a lot better than selling one $150 milk shake mixer every 10 years.
Kroc continued to pester the McDonald brothers regarding expansion. When they said they liked it fine in San Bernardino and had no desire to scout out new locations or hire managers for these outlets, Kroc said he would do it. He would do everything and just send them a check every month. Kroc's persistence paid off: the brothers started to talk numbers. Kroc suggested the parent company take two percent of gross sales of any franchised outlet. Until this time, the brothers had merely sold their name and their "speedy service system" for a one-time fee of $1,000. The McDonalds said this was too high, and insisted on 1.9 percent, of which Kroc would get 1.4 percent and the brothers would get 0.5 percent. Kroc successfully negotiated a 10-year contract which gave him the right to set up McDonald's restaurants throughout the country, except in a handful of territories in California and Arizona already licensed by the McDonald brothers.
Kroc's first McDonald's restaurant opened in Des Plaines, Illinois, near Chicago, on April 15, 1955. Adapting the McDonald's building design to a cold climate was easy enough, but according to their contract Kroc was not supposed to make any changes without written permission from the brothers. The brothers gave verbal approval for the addition of a furnace, basement, and winter enclosure around the ordering area so customers would be sheltered from the winter winds. Since the contract required written approval and the brothers refused to put anything in writing, Kroc's apprehensiveness grew.
Kroc's Des Plaines restaurant grossed $158,000 the first year, plus now he had a showplace to use in his effort to sell franchises for his McDonald's chain. All sales were made on the condition that owners manage their restaurants and strictly follow the automated system of food preparation spelled out by the McDonald brothers. Kroc's chain grew slowly at first, but within four years he had a hundred outlets. As he passed the six-year mark of his 10-year contract with the McDonald brothers, Kroc began to fear that his growing chain would be taken away when the contract expired. He had also come to realize that his profit, after the expense of managing the chain, netted him a lot less money than the McDonald brothers' one-half percent.
With 228 outlets and gross sales of $37.8 million since signing the contract, Kroc's share amounted to $718,200. Of this, $189,000 had gone to the McDonalds. In 1960 Kroc's net profit after expenses was $77,000, $23,000 less than the McDonald brothers' profit at its San Bernardino outlet alone. Kroc was bothered by the financial inequity of the agreement, but he also wanted complete control of the operation. In 1961 Kroc offered to buy out the McDonald's for half a million dollars. Dick and Mac considered the offer for a long time, then told Kroc the asking price was $2.7 million. Although he was already deeply in debt, Kroc successfully negotiated a loan; the interest he ultimately paid brought the cost up to $14 million.
Kroc's takeover set the stage for the rapid expansion of the chain throughout the United States and the world. Unfortunately, when the history of McDonald's began to be recorded, Ray Kroc's version took precedence. His outlet in Des Plaines, described as the "original" McDonald's, was turned into a museum. If the brothers were mentioned at all, it was only as someone who contributed the name. John F. Love quotes a letter written in 1983 by Dick McDonald to corporate headquarters: "Over the years, I have received letters and phone calls from television stations, radio stations, authors, reporters, et cetera, and they all told me the same story. It seems that if they contact your company in Oak Brook regarding my present address, they have been told that the company has no idea where I live or if I am even alive. On several occasions they have been told that there really was never a McDonald. They were told that McDonald's was only a fictitious name that was chosen because it was easy to remember."
In an effort to set the record straight, the company welcomed Dick McDonald back into the fold (Mac had died in 1971). In a widely covered 1984 media event, Ed Rensi, then president of McDonald's USA, cooked the company's 50 billionth hamburger at the Grand Hyatt in New York City and served it to Dick McDonald. Ray Kroc had died earlier that year.
Social and Economic Impact
As the world's largest quick-service restaurant organization, McDonald's contributed to a dramatic change in Americans' eating habits. Mac and Dick McDonald refined their kitchen production techniques so they could sell prepared food quickly, through a counter window, without using plates: quick service, self service, and paper service. This had never been done before and totally revolutionized the food service industry. In addition to speed, their efficient restaurant was a model of cleanliness that is still followed by McDonald's stores today. The McDonald brothers also brought families and children to fast-food restaurants. Today, special kids' meals with prizes and intense movie promotions suggest that the market that they introduced continues to be an important one.
The rapid growth of the McDonald's chain shows how quickly a brand can become popular. A mere 20 years after the McDonald brothers perfected their fast food system, the name "McDonald's" was known throughout the world. The success of McDonald's also shows that the less tangible entrepreneurship can be more influential than a product. Hamburgers weren't new; rather, the way hamburgers were made and sold was new. Though Ray Kroc built McDonald's national and international presence, it was the McDonald brothers who started it; and because they insisted that their restaurant be surrounded by the golden arches, a symbol that is recognized worldwide was created.
Sources of Information
Contact at: McDonald's Corporation
Oak Brook, IL 60523
Business Phone: (630)623-3000
Boas, Max, and Steve Chain. Big Mac: The Unauthorized Story of McDonald's. New York: New American Library, 1976.
Kepos, Paula, ed. International Directory of Company Histories. Detroit: St. James Press, 1993.
Kroc, Ray. Grinding It Out: The Making of McDonald's. Chicago: Henry Regnery, 1977.
Mattera, Philip. World Class Business: A Guide to the 100 Most Powerful Global Corporations. New York: Henry Holt, 1992.
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