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Amazing Business Story: Ray Kroc’s

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The story of Ray Kroc’s breakthrough in business is similar in many respects to that of Sam Walton’s. Raymond Albert Kroc is the founder of McDonald’s corp.; one of the largest and most successful fast-food corporations on the planet.

Ray was born on October 5, 1902 to Austria/Hungarian parents in Oak Park, near Chicago. Rumor has it that when he was still a child, his father took him to see a Phrenologist (someone who specializes in the study of bumps on the outside of the skull; they usually claim to be able to tell someone’s character or future from these readings), who revealed that Kroc will have a future in the food-service industry.

Ray, like many other entrepreneurs, began working at a very early age; he owned a lemonade stand in front of their apartment and worked in different grocery stores. When he was 15, he lied about his age to enlist as a Red Cross ambulance driver during World War 2, but he never got a chance to serve because the war ended shortly after.

By the time he got back he no longer had the patience for school so he dropped out to take a job as a salesperson for Lily-Tulip Cup Co. He was a natural; young, ambitious and willing to work for long hours, he quickly rose to become the company’s top salesperson. During those years he also tried his hands in a number of trades. It was while selling cups that he met Earl Prince, the man who invented a milk shake-mixing machine called Multimixer.

By 1935 Ray left selling cups and obtained exclusive marketing rights to the Multimixer, for the next thirteen years Ray will transverse the length and breadth of the country marketing and selling Multimixers. It was while selling Multimixers that he met two brothers, Richard and Maurice MacDonald. The brothers had ordered for eight of his machines at a period when sales were going down and no one seemed interested in buying Multimixers again. Ray had been intrigued by the order and had travelled to California to see what the buyer needed eight of his machines for.

The MacDonald’s restaurant was unlike any Ray had ever seen before, aside from the fact the restaurant had a short menu, it was self-serving, had no indoor seating and meals were produced in an assembly line fashion that enabled customers to place their orders and receive their meals in less than a minute. Ray was highly fascinated by this method and offered to be the franchising agent for the brothers, they agreed, and gave him exclusive rights to sell the MacDonald’s method all across the country.

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Ray opened his first MacDonald in April 1955, and used it as a base for selling MacDonald’s franchise to scores of eager franchisees. Ray’s new venture was successful. But there were problems, and this is where Ray Kroc’s story overlaps with that of Sam Walton’s. The brothers were satisfied with the money they were making and didn’t feel any need to expand or perform any changes in their original formula. Ray became frustrated with the brother’s attitude and decided he wanted the company for himself.

So in 1961, Ray bought out the brothers for $2.7 million. But their transaction wasn’t without hitch. Ray felt the brothers dealt him a bad hand and promised to get back at them, which he did by opening a MacDonald’s restaurant near The Big M (the brothers newly named restaurant) and forced them out of business.

With the brothers out of the way Ray was now free to run the company as he liked. By 1963, barely two years after he took full ownership Ray had sold three billion burgers and opened his 500th store.  By 1965, he owned more than 700 restaurants in 44 states. In April of 1965, the company went public, it was the very first fast-food company to do so; shares were $22 at opening but rose quickly to $49. He opened his 1,000 restaurant in 1968 and in 1971 he moved into Europe. At the time of his death on January 14, 1984, a new MacDonald was opening on average every 17 hours.

Ray was known as a man of quality and standard who had great regard for customer satisfaction. He wanted a burger sold in London to taste exactly alike and be of exact quality to that made in any other MacDonald in any part of the world, so he developed a 75 page manual that detailed every aspect of running a MacDonald restaurant. Even the method of preparing a hamburger and its weight was listed (Hamburgers were to be exactly 1.6 ounces, served with a quarter ounce of onion, a teaspoon of mustard and a tablespoon of ketchup). Everything was in so much detail no additional interpretation was needed.

There are more than 25,000 McDonalds in operation worldwide.

Three Lessons from Ray Kroc

There is nothing wrong in drifting:

Ray tried out his hands in a lot of ventures; he was a paper cup salesman, a pianist, a jazz musician, a band member, a radio DJ, and a Multimixer sales man. He never discovered his niche of success until he was 50! Many people, particularly young people, find themselves in similar scenarios, drifting from one career to another or from trade to another, not really sure where they want to pitch their tent. I have also done my fair share of drifting.

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There is nothing wrong in drifting as long as you learn one or two things from your travels. It was during his drifting that Ray learnt so much, not only about catering management, but about business generally. So immediately he saw the MacDonald’s method he instantly recognized its money-making potential. That was why it took him less than a year, after he took full ownership, to transform the company into a major player in the fast food business; Ray simply knew what he was doing. There is nothing wrong in drifting for a while, as long you are learning a thing or two from your travels.

Pay attention to your customers:

Many businesses, both startups and experienced, make the grievous mistake of neglecting their customers and paying too much attention to the competition. This is an extreme waste of effort that would cost you more than it will benefit you. Ray, just like Walton and Dell, paid strict attention to customer service standards, and made mandates such as ‘money can be refunded to clients whose orders were not correct or to customers who had to wait for more than five minutes for their food’.

Also, Ray ensured that the meals offered were affordable enough that even a low income earner could buy at MacDonald. A wise business individual will know that customers are the lifeline of his business, and toying with customer satisfaction is tantamount to making holes in your boat while at sea.

How can I be different:

The second point in 5 ways of developing a business idea is think of a service rendered, think of a better way to provide that service. When Ray began working and eventually took over MacDonald there were other fast-food restaurants, convenience stores, hot dog stands in existence, but it was Ray that had the shrewdness of delivering the service to the customers in a most unique way. Although he inherited part of his method from the MacDonald’s brothers, he was able to re-brand it in a way that made it practicable in not just one stand, but all across the globe.

Ray Kroc’s biography courtesy: Wikipedia, Entrepreneurs.com, the biography channel.

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