Ray Kroc – The man who made McDonald’s big

The founders of McDonald’s were two brothers who introduced a series of groundbreaking innovations in the fast-food business and opened an exemplary, highly successful restaurant in San Bernardino in 1948. However, Ray Kroc is rightfully considered the true founding father of McDonald’s today, as he recognized the potential of this new restaurant type far better than its creators – and was willing to do what was necessary to turn the new idea into a powerfully expanding enterprise.

The McDonald brothers opened a tiny drive-in in eastern Pasadena in 1937 and, a few years later, a much larger drive-in in San Bernardino. The restaurant, built in an octagonal shape, was so successful that the two brothers soon became part of the upper crust in San Bernardino. They moved into one of the city’s finest homes – a 25-room mansion – and took pride in being the first in town to drive the latest Cadillac. By 1948, they had accumulated more wealth than they had ever expected.

Teenagers Destroyed the Image

But soon, their restaurant faced problems, much like many other drive-ins. The customer base consisted largely of teenagers, dish and cutlery usage was high, and employee turnover was rampant. The frugal brothers despised paying the high bills for stolen or broken dishes and cutlery. Above all, they wanted to attract a different clientele – until then, drive-ins had been meeting points for teenagers and had a very poor image.

They closed their restaurant for three months, completely redesigned it, and created the prototype for McDonald’s restaurants as we know them today worldwide. The kitchen was systematically reconfigured for mass production and extremely short preparation times. The brothers embraced every technical improvement and innovation that could shorten the workflow. No longer would chefs and their individual culinary skills determine the quality of the products offered. Instead, they invented an entirely new preparation process for a small and strictly limited selection of items.

Similar to Henry Ford, who revolutionized automobile production with strict division of labor, they broke down the food preparation process into a series of simple routine tasks that could be performed even by employees who had never worked in a kitchen before. To achieve this, they had to commission the creation of entirely new kitchen equipment.

To serve customers within thirty seconds or even faster, they began preparing and packaging food in advance, rather than after orders were placed, as was previously the custom. With self-service, disposable packaging, lightning-fast service, and »assembly-line« food production, a new type of restaurant was born – unlike anything that had existed before. The restaurant now attracted a different clientele. Instead of teenagers, families with children became the primary visitors to McDonald’s.

Lack of Ambition Caps Success

However, the transition from a teen hangout to a family restaurant didn’t happen overnight. Initially, it seemed as though the new concept wasn’t working. The brothers had to wait six long months before they matched the revenue levels achieved before the redesign. But the brothers were persistent – and it paid off. Sales rose to $277,000 in 1951, about 40 percent more than before the reopening. By the mid-1950s, annual revenue soared to $300,000 thanks to increasing automation. The brothers pocketed a net profit of $100,000 – a enormous sum at the time.

Word of the restaurant’s success spread like wildfire. Curious restaurant owners or aspiring ones came from all over the country to explore why the restaurant worked so well. The two brothers were so proud of their success that they willingly gave tours of their restaurant, patiently and meticulously explaining their innovative concept. They found it amusing that visitors sketched the restaurant’s layout and wanted to know every detail of the operation. In doing so, they naturally attracted a multitude of imitators who copied their concept – often poorly.

They began selling licenses sporadically, and eventually, about a dozen restaurants operated under the name McDonald’s. The financially strong Carnation Corporation offered to market the system nationwide through a franchise model, but the brothers declined. »We’d be day and night on highways and in hotels, chasing after suitable locations and managers. We’d just be tying a millstone around our necks – we won’t do it.«

John F. Love, who documented this impressively in his 630-page book The McDonald’s Story, concluded that the brothers had only proven »that their only problem was that they didn’t look beyond the borders of San Bernardino and were satisfied with the status quo.« »We had more money than we could spend«, the McDonalds said, »and no desire to work more. Our free time was more important to us. We had always wanted to be financially independent, and we had achieved that goal.« If they earned more money, they argued, they would only have to worry about the next income tax return.

With such modesty and contentment, one certainly doesn’t build a business empire. The credit for building such an empire belongs not to the McDonald brothers but to Ray Kroc, who is today regarded as the founder of this empire and is still revered within the company.

A Milkshake Machine Salesman with Vision

Kroc, then a salesman for milkshake machines, was suffering from declining sales and grew curious about why one customer was ordering more machines than anyone else – the McDonald brothers. This is one of many interesting parallels in the histories of McDonald’s and Starbucks. Starbucks was also discovered by a coffee machine salesman, Howard Schultz, who wondered why a small retailer in Seattle was ordering unusually large quantities of a specific type of coffee machine. He investigated and, in doing so, discovered Starbucks, which he would later turn into the world’s leading coffeehouse chain.

Upon arriving in San Bernardino, Kroc – like many other visitors – was immediately captivated by the new restaurant type. Much more clearly than the McDonalds themselves, he recognized the tremendous growth potential of this new fast-food format. As a salesman for restaurant products, he had traveled extensively and developed an excellent sense of market trends and changing customer needs. »Kroc«, writes John F. Love, »immediately recognized the enormous potential McDonald’s held for nationwide expansion. Unlike the more down-to-earth brothers, he was accustomed to extensive travel and saw hundreds of large and small markets where he calculated strong sales opportunities. He knew the industry and understood that McDonald’s could become a serious competitor.«

A few days later, Kroc picked up the phone and asked Dick McDonald if he had found an agent for his franchise system yet. »Not so far«, McDonald replied. »How about me?«, Kroc asked.

The very next day, Kroc drove to San Bernardino and negotiated a contract with the two brothers, securing the exclusive right to recruit franchisees across America. The contract stipulated that Kroc would be responsible for expanding the chain, while the brothers retained control over production and shared in the profits. In the early 1960s, the two brothers sold the rights to the McDonald’s brand to Kroc for $2.7 million. Kroc raised the money from investors.

Kroc created an elaborate system of franchisee participation in strategically significant decisions, especially regarding planned actions at the restaurant level. His franchise system differed significantly from the prevailing practices in the industry. Until then, franchisors were mostly focused on quick profits, demanding exorbitant license fees or selling overpriced equipment and products to franchisees. Kroc, however, thought long-term because he had set a bigger goal: He did everything to ensure the success of the franchisees. He saw them as his customers – and only if he helped them succeed would McDonald’s as a whole succeed.

Kroc demanded greater authority and control than other licensors because he understood how quickly a brand could be destroyed if varying quality standards were tolerated across locations. Franchisees who neglected cleanliness and hygiene or tried to improve the proven system on their own could cause significant damage to the entire brand’s reputation.

Kroc was a brilliant salesman and managed to convince more and more people of his concept. He won over franchisees primarily because he was obviously meticulous about the truth and did not – as was common at the time – make unrealistic promises. He provided them with factual and precise information. »When you’re selling something so intangible, it’s easy to be labeled a fraud. But if the other person realizes you’re honest, it’s a whole different story«, Kroc said.

Today, McDonald’s operates over 41,800 restaurants in more than 120 countries. In 2024, the company generated global revenue of nearly $27 billion. Kroc certainly could not have foreseen the tremendous worldwide success the company would achieve in the coming years and decades. But what set him apart from the McDonald brothers, the actual inventors, was the fact that he set bigger goals and was more ambitious.

This is an excerpt from Rainer Zitelmann’s bestseller » Setze dir größere Ziele«, which has been published in its 10th edition in Germany and has been translated into 18 languages.