Ray Kroc | Franchising French Fries

posted in: Business, Mini Biography | 0

Raymond Albert Kroc was born on October 5, 1902 in Oak Park, Chicago. His parents were of Czech descent. He was brought up in the sales industry starting with selling lemonade as a kid in front of his home and working in a grocery store. He learned the restaurant business in Ray Dambaugh’s restaurant. Eventually he became a salesman for the Multimixer milkshake machine that lead him to cross paths with the McDonald Brothers.

Meeting the McDonald’s

Kroc thought the Multimixer would be an instant cash cow. At the age of 37, he was able to obtain the exclusive marketing rights to the milkshake maker. He spent years peddling the product to various businesses and restaurant owners. In the 1950s, there was a sudden decline in the economy and Ray began losing money and customers. Luckily, there was one humble restaurant located in San Bernardino, California that ordered 8 machines. It was a rare order at that time. Intrigued, he traveled to visit this restaurant and found himself in a small burger stand run by Mac and Dick McDonald.

McDonalds

The restaurant offered something new and fresh at that time. It was self service with limited menu including hamburgers, fries, drinks, and of course, milk shakes. Buyers lined up to place orders and received their food in less than a minute. Ray had a feeling that this was yet another cash cow. The possibility of having these restaurants all over America would bring in a truckload of money. He talked to the McDonald brothers about opening branches across the country, but they weren’t interested. Kroc offer to do it for them and the brothers gave him exclusive rights to market and sell the “McDonald’s method.” For each franchise sold, he would receive 1.9% of the gross sales. From that, he still gave the brothers 1.5% of the commission.

In 1955, Kroc opened his first McDonalds franchise in Des Plaines, Illinois. He managed to sell 18 franchises in a year but his profit was not covering his own expenses. He decided to acquire the rights to the Mcdonald’s Method.

He then met Harry Sonnenborne who taught him how to buy and sell real estate. The game plan was to lease or buy all the land where the McDonald restaurants were located. Franchise owners pay Kroc either a monthly rental or percentage of their current sales. By owning the franchises and the land they were built on, Kroc grew his fortune and eventually bought McDonalds for $2.7 million in cash.

Ray though that the original McDonald’s in San Bernardino was included in the sale but the McDonald brothers took a firm opposition. Because Ray Kroc now had the exclusive rights to the name McDonald’s, the brothers were forced to change their restaurant name to The Big M and eventually went out of business. McDonalds continued to be the biggest name in fast food all over the globe.

Networth

Ray Croc was named by Time Magazine as one of the ‘100 Most Important People of the Century’ and died January 14, 1984 at the age of 81. He had an estimated net worth of $500 million at the time of his death. When his wife Joan Kroc died in 2003, her estimated net worth climbed to $1.2 billion. The McDonalds corporation is currently worth over $90 bilion.

Leave a Reply