Ray Kroc (1902 – 1984)

The Fast-Food Visionary Who Super-Sized the American Dream

Born in 1902 in Oak Park, Illinois, Ray Kroc would grow up to be a lot of things, but an overnight success wouldn’t be one of them.  It wouldn’t be until he was 54 that he would embark on the journey that would put his stamp on the world.

He did start young however.  After quitting high school to become a door-to-door salesman, at 15 Kroc would lie about his age to join the Red Cross to become an ambulance driver during WW I. Although the war would end before he saw any action, there he would meet another son of Illinois who also lied about his age, Walt Disney. 

After the war Ray would begin a 30 year journey of odd jobs and entrepreneurial endeavors.  He would do a spectrum of jobs from selling paper cups and Florida real estate, to being a DJ for a local radio station to playing piano.  Eventually he would find his niche.  In 1938 he formed a company, Prince Castle Sales and began knocking on restaurant doors and selling a blender that could make multiple milkshakes simultaneously.  While the road from there to history was a rocky one, it was the Multimixer that would lead Ray Kroc to his destiny.

That destiny emerged in 1954 in San Bernardino, California.  Kroc drove to the Golden State, having to see what exactly was going on with a company that had purchased eight of his Multimixer blenders.

What he saw changed his life and that of much of America.  The McDonald brothers’ simple hamburger restaurant was doing spectacular business.  Immediately Kroc knew there was something more here than just a restaurant. 

Kroc approached the brothers and after becoming familiar with their business he brought up franchising.  The brothers had tried franchising previously but the decidedly mixed results left them leery.  But in Kroc they saw passion and energy and potential.  He signed a contract to franchise McDonald’s restaurants across the country and the rest is history.

The next year he opened his first franchise in Des Plaines, Illinois, not far from Chicago.  From there Kroc would cris cross the country opening restaurants at a rapid pace.

There were a number of keys to Kroc’s success.  One was that McDonald’s wasn’t just selling burgers; it was selling an experience – fast, affordable, and consistent. Based on the brothers’ experience, McDonald’s offering was revolutionary, featuring a limited menu, a focus on quality and speed (their “Speedee Service System”), and a family-friendly atmosphere. Indeed, to that end Kroc prohibited juke boxes as well as pinball and cigarette machines from being put into any McDonald’s location. He also said that because they were focused on serving families, they would look for churches when considering locations rather than traffic.    

Another was Kroc’s focus on shying away from college graduates to become franchisees. Too often Kroc had seen successful businessmen take a franchise and operate it as an afterthought, with the result being a decline in cleanliness, efficiency, quality and sales.  Kroc preferred to have hard charging men – they were all men initially – from all walks of life, who had a burning desire to become successful and who would put in the hard work to make it happen.   

But possibly the single biggest factor in the success of McDonald’s wasn’t the burgers or even the delicious French fries, but rather some far more pedestrian, real estate.  Restaurants are notorious for being money losers and even the best restaurants can be challenged financially.  A large part of that is real estate.  Kroc’s brilliance was recognizing, after being convinced of such by finance wiz Harry J. Sonneborn, that the key to success was in Kroc owning the land upon which McDonald’s restaurants sat. 

That genius stroke is what gave McDonald’s the financial foundation to grow into the largest restaurant company in the world.  Rather than individual restaurants and franchisees having to negotiate with real estate agents and local banks to secure the desired land, McDonald’s Corp would handle all of the real estate aspects of every restaurant and the franchisee would sign a lease agreement (one that could be tough and expensive, but dependable) with McDonald’s.  With its financial clout and eventual real estate prowess eventually McDonald’s would come to be known as the most sophisticated company in the world for identifying and exploiting potential restaurant real estate opportunities. 

As Kroc’s and McDonald’s success grew he and the McDonald brothers came to loggerheads over how fast the company should grow and other issues.  In 1961, when the company had over 200 restaurants Kroc bought the brothers out for $2.7 million – a number sufficient such that each brother would have $1 million after taxes.  The financing for that buyout would eventually cost Kroc $14 million.

Once in complete control of the company, Kroc would lead McDonalds to extraordinary growth.  By 1970 the company would have over 1,500 locations and would soon be opening more than one a day.  And Kroc’s focus on selecting hands on motivated operators resulted in a growth in the systems menu, with the Big Mac, Filet o’ Fish and Egg McMuffin all coming from franchisees in the 1960s.  By the time Kroc stepped down from McDonalds in 1973 the company had over 2,000 restaurants in a dozen countries stretching from Japan to El Salvador to Germany.  In retirement he would spend the rest of his life as the owner of the San Diego Padres baseball team and heavily involved in charitable activities, primarily through the Kroc Foundation, the organization that created the Ronald McDonald House charities. 

Ray Kroc died in 1984 at the age of 81 with a fortune of $600 million.  The company he built would by 2022 be doing over $22 billion a year in revenue, would serve almost 1% of the world’s population every day and would employ 1 out of every 8 Americans at some point over their lives.   For a guy who started out as a high school dropout doing door to door sales, he certainly left his mark on the world.