Ray Kroc

• 1. Introduction

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  Ray Kroc took the public address microphone in San Diego on the 9th of April 1974 and criticized his own baseball team. The Padres were about to lose their season opener to the Houston Astros, 9-5, and 39,083 fans were watching. Kroc told them, "I've never seen such stupid ballplaying in my life." The crowd cheered. The man holding the microphone was best known for something far from baseball. He had turned McDonald's into the most successful fast food corporation in the world by revenue. Yet he did not found it, though he is often credited as if he had. How did a salesman of milkshake mixers end up with that credit? What did he change about how restaurants are sold and run? And what did he want once he had built it?

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• 2. From Pianist to Salesman

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  Ray Kroc was born on the 5th of October 1902 in Oak Park, Illinois, near Chicago. His parents were Czech-American: Rose Mary, born Hrach, and Alois, who went by Louis. Alois was born in Horní Stupno, part of Břasy near Rokycany, and later emigrated to America. There he made a fortune speculating on land in the 1920s. The stock market crash of 1929 took all of it.

  At 15, Kroc quit high school against his parents' wishes. When the United States entered World War I, he lied about his age to enlist with the American Red Cross as an ambulance driver. The war ended soon afterward, so his service was brief. Among the fellow trainees he met in Old Greenwich, Connecticut, was Walt Disney.

  Through the 1920s and the Great Depression, Kroc took whatever work he could find. He sold paper cups, worked as a real estate agent, and played piano in several bands.

  After World War II, Kroc found a job selling milkshake mixers for Prince Castle, a maker of foodservice equipment. Then lower-priced mixers from Hamilton Beach undercut the company, and sales plummeted. Kroc grew curious about one customer in San Bernardino, California. Richard and Maurice McDonald had bought eight of his mixers for their restaurant. In 1954 he went to find out why they needed to make so many milkshakes.

  What he found was a hamburger restaurant running with remarkable efficiency and speed. Kroc persuaded the brothers to let him franchise the concept. He served as president of McDonald's from 1955 to 1968, as chairman from 1968 to 1977, and as senior chairman until he died.

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• 3. A Letter to Disney

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  "I have very recently taken over the national franchise of the McDonald's system. I would like to inquire if there may be an opportunity for a McDonald's in your Disney Development." With those words, Kroc wrote to Walt Disney right after finalizing his franchise agreement with the McDonald brothers.

  One account says Disney agreed, but on one condition. The price of fries would rise from ten cents to fifteen cents, with the extra money going to Disney. Kroc supposedly refused to gouge his loyal customers, so Disneyland opened without a McDonald's.

  The writer Eric Schlosser doubts this version in his book Fast Food Nation. He believes some McDonald's marketing executives doctored the retelling. The proposal was most likely returned without approval.

  A rejected letter was a small setback beside the quarrel building closer to home, with the McDonald brothers themselves.

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• 4. Buying Out the Brothers

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  By 1961, Kroc was frustrated with the brothers he had signed up with. They wanted to keep the chain to a small number of restaurants. They also insisted he could not alter things such as the original blueprint. Despite his pleas, they never sent formal letters that legally permitted any changes.

  Kroc bought the company that year for $2.7 million, the figure the brothers named when he pressed them for a price. He went "ballistic" at the amount and asked to pay it in installments. They refused. Debt from expansion made raising the money hard. Harry Sonneborn, whom Kroc called his "financial wizard," found the funds.

  At the closing, Kroc was annoyed again. The brothers would not hand over the real estate and rights to the original San Bernardino location. They had told him they were giving the restaurant, property included, to its founding employees. That restaurant had been renamed the Big M, because the brothers had failed to keep rights to their own name.

  In his anger, Kroc opened a new McDonald's near it, and the Big M eventually closed. He felt no one would want to eat at a chain called "Kroc's." That is why he was adamant about getting the McDonald's name.

  A nephew of the brothers claimed that a handshake deal kept the original 1% annual royalty alive. Nothing beyond that claim supports it. Neither brother publicly voiced disappointment. Richard McDonald reportedly told someone he had no regrets.

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• 5. Uniform Burgers

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  Kroc sold only single-store franchises, in an industry where large territorial franchises were the norm. He understood that exclusive licenses for big territories were the quickest way for a franchisor to make money. But they cost the franchisor control over where a chain was heading. Kroc wanted uniform service and quality at every location, in keeping with his contractual obligations to the brothers. Granting one location at a time gave him some influence over franchisees, especially those hoping to own another store someday.

  The kitchens ran on the Speedee Service System, an assembly-line method for preparing hamburgers that the brothers introduced in 1948. Kroc kept it and standardized operations so that every burger tasted the same in every restaurant. Franchisees received strict rules on how food was made, portion sizes, cooking methods and times, and packaging. Kroc also rejected cost-cutting such as soybean filler in the patties. Service rules were just as firm. Customers got refunds if their orders were wrong or if they waited more than five minutes.

  At the time of his death, McDonald's had 7,500 outlets in the United States and in 31 other countries and territories. System-wide sales topped $8 billion in 1983. His personal fortune was around $600 million.

  Kroc had a line for his own workers as well: "If you've got time to lean, you've got time to clean." The Jacobin writer Alex N. Press says the phrase has become popular with managers.

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• 6. Owner of the Padres

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  Kroc retired from running McDonald's in 1973 and went looking for a new challenge. He settled on baseball, his lifelong favorite sport. On his yacht in Fort Lauderdale, Florida, he read in the newspaper that the San Diego Padres were for sale.

  Joseph Danzansky, a grocery-chain owner in Washington, D.C., had conditionally bought the team and planned to move it to the capital. Lawsuits tied up that sale. Kroc stepped in and bought the Padres for $12 million, keeping them in San Diego.

  His first season, 1974, was a poor one on the field. The Padres lost 102 games. Still, they drew over one million fans, the usual mark of box office success in the major leagues at the time. Their previous best had been 644,772 in 1972. The San Diego Union called Kroc "above all, a fan of his team."

  In 1979, Commissioner Bowie Kuhn fined Kroc $100,000 for publicly showing interest in the future free agents Graig Nettles and Joe Morgan. Frustrated with the team, Kroc handed operations to his stepson-in-law, Ballard Smith. His explanation was blunt: "There's more future in hamburgers than baseball."

  After his death, the 1984 Padres wore a patch carrying his initials, RAK. They won the NL pennant over the Chicago Cubs, his hometown team, then lost the World Series to the Detroit Tigers. In 1999 the San Diego Padres Hall of Fame inducted Kroc in its inaugural class.

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• 7. Charity and Politics

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  The Kroc Foundation paid for research, treatment and education on conditions including alcoholism, diabetes, arthritis and multiple sclerosis. It is best known for establishing the Ronald McDonald House, a nonprofit that offers free housing to parents near the medical facilities treating their children. In 1973, the American Academy of Achievement gave Kroc its Golden Plate Award.

  Kroc was a lifelong Republican who believed firmly in self-reliance. He staunchly opposed government welfare and the New Deal.

  In 1972 he donated $255,000 to Richard Nixon's presidential campaign. Some critics, notably Senator Harrison Williams, controversially accused him of giving the money to push Nixon toward vetoing a minimum wage bill moving through Congress.

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• 8. Family and Legacy

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  Kroc met Ethel Fleming in 1919 and married her in 1922. They moved to Chicago and had one child, a daughter named Marilyn. The couple divorced in 1961. In 1963 he married Jane Dobbins Green, and that marriage ended in divorce in 1968.

  In 1969 Kroc married Joan Smith, born Mansfield. Her philanthropy grew sharply after his death, backing causes such as peace and preventing nuclear proliferation. When Joan Kroc died in 2003, her remaining $2.7 billion estate went to nonprofit organizations. The Salvation Army received $1.5 billion to build 26 Kroc Centers. National Public Radio received $200 million, because she believed deeply in the power of public radio.

  A stroke in 1980 was followed by a stay at an alcohol rehabilitation facility. Four years later, on the 14th of January 1984, Kroc died of heart failure at a hospital in San Diego, aged 81. He was buried at El Camino Memorial Park in Sorrento Valley, San Diego.

  Mark Knopfler's 2004 song "Boom, Like That" tells of Kroc's takeover of the McDonald's franchise and his Kroc-style business tactics. Kroc also co-wrote the book Grinding It Out, first published in 1977 and reissued in 2016. It became the basis for The Founder, directed by John Lee Hancock, with Michael Keaton playing Kroc. The film takes a critical view of how he treated the McDonald brothers.

  The History channel featured him in the documentary series The Food That Built America. Tim Harford's BBC World Service show 50 Things That Made the Modern Economy covered him in an episode called "Fast food franchise." That episode depicts the boom his franchisee model brought to the fast food industry.

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