Blog

Marketing Wisdom from McDonald’s Founder Ray Kroc

Ray Kroc is the person most people have never heard of who built the brand everyone has heard of, McDonald’s  The takeaway from the biography of Ray Kroc for modern marketers in his own words is:

“The two most important requirements for major success are, first, being in the right place at the right time, and, second, doing something about it.”

Who was Ray Kroc?

Raymond Albert Kroc was born to immigrants from Austria-Hungary in Oak Park, Illinois in 1902. In 1917, Kroc, like Walt Disney, lied about his age to serve in the US Army in World War I. Kroc later worked as ambulance driver in the same regiment as Disney.

For the next 35 years, Kroc enjoyed modest success as a paper cup salesman, a jazz musician, a radio DJ, and a pianist. At one point, Kroc worked at a restaurant for room and board to learn the business. This experience enabled him to land a job as a salesman for a multi-mixer milkshake machine company, traveling across the United States to promote the product.

Eventually, Kroc’s mixers faced fierce competition from lower-cost mixing machines. Ray took note of the McDonald Brothers, whose hamburger restaurants were doing well enough that they had purchased eight of his mixers.

This post is part of a 125-page eBook, 24 Marketing Lessons from 24 Business Leaders. Get your free copy by just entering your email below!

The McDonalds advantage

The McDonalds had invented the “Speedee Service System,” which allowed them to serve customers in 5 minutes or less. This was compared to 20 minutes or orders to go out for most of their competitors.

Kroc made a pitch to work for the McDonalds just after their franchising agent had quit because of health issues, giving him the opportunity to sell McDonald’s franchises in all the places he had sold multi-mixer milkshake machines.

The first McDonald’s, however, was opened by Kroc himself, in Des Plaines, Illinois. In an era in which hamburger restaurants might gross $20 to $30 a day, the first McDonald’s franchise earned hundreds of dollars the very first day. Kroc was then able to sell dozens of McDonald’s franchises to other restaurant owners who also became quickly successful, but the McDonald brothers, who owned the company, were not enthusiastic. Through the 1950’s, they told Kroc they had all the money they needed.

In 1961, Kroc was able to persuade the McDonalds to make a deal that gave them $1 million each after taxes, and Kroc took over the company. Kroc retained the Speedee Service System, giving the 1960’s-era McDonald’s restaurants a worldwide reputation for fast service.

Kroc also standardized ingredients, recipes, and cooking procedures so that a McDonald’s burger in Tokyo would look and taste exactly the same as a McDonald’s burger in Tulsa or Tampa or Toronto.

Kroc rejected cost-cutting changes in ingredients, choosing to focus on efficiency to increase profits. As a result, McDonald’s gained a worldwide following. One survey found that more people worldwide recognize the McDonald’s golden arches trademark than the Christian cross. In 2015, McDonald’s franchises 35,000 restaurants in 118 countries, employing 1.5 million people, second only to Walmart.

What Made McDonald’s So Successful?

McDonald’s achieved legendary success by making the transition from sales to marketing, offering reliability and standardization in an era when Americans were just beginning to explore their country.  Kroc rolled out his franchises at about the same time as the federal government started building the interstate highway system. Families that previously would have seldom, or never, traveled more than 20 miles (30 km) from home could now easily take trips to other parts of the USA.

Moving from state to state to find work became much more common, and Americans enjoyed huge jumps in disposable income. The company’s marketing message was just as important as the product itself, and Kroc focused on creating customers for life rather than making single sales.

McDonald’s success depended heavily on offering a reliable product everywhere, but the novelty of the red and yellow signage and the extraordinarily fast service were not to be underestimated was. Children came to associate the golden arches and the familiar red and yellow signage with happy experiences, and childhood memories of McDonald’s continued to drive purchases as baby boomers became adults.

In 2015, McDonald’s serves 68 million customers daily, owns assets in excess of $35 billion, and realizes operating income of $8 billion per year on $28 billion in sales. Providing a reliable, inexpensive product quickly can be a foundation for spectacular success.

The Marketing Wisdom of Ray Kroc

Though we can learn a lot from observing the business of McDonald’s itself, Ray Kroc also gave many interviews and left many memorable quotes that offering insight into his business’s success. Here are just a few:

  • Kroc knew how to create opportunities for himself. After making a pitch to the McDonald’s brothers for nationwide expansion of their restaurants while still selling milkshake makers, the brothers asked who would manage their franchising division. Kroc replied “What about me?”
  • Kroc didn’t try to inspire the McDonald’s brothers to grow their business. He took advantage of the opportunity their disinterest in earning money offered him. As he later told a biographer, “I was obsessed with the idea of making McDonald’s the biggest and the best. They were content with what they had. They didn’t want to take risks and meet greater demands.” Kroc achieved success by caring about his business more than anyone else.
  • Hamburgers weren’t something most people took seriously, but Kroc realized that someone could be tremendously wealthy by being the one person who did. “I didn’t invent the hamburger. I just took it more seriously than anyone else,” Kroc once told reporters.
  • Kroc was all business. After buying the McDonald’s brothers franchise rights, Kroc also wanted to buy their original store, in part to ensure that they could not re-create their methods for a competitor. When the brothers refused to sell, Kroc opened a McDonald’s across the street and drove them out of business. “If any of my competitors were drowning,” Kroc said, not entirely as metaphor, “I’d stick a hose in their mouth and turn on the water.” Kroc gave millions to charity, but he was not sentimental about business transactions.
  • Kroc wasn’t afraid of flooding the market for his products. “I’m not afraid of saturation. I’m aiming to dominate the market worldwide.”