Grinding It Out: The Making of McDonald’s by Ray Kroc
Do you know who Ray Kroc is? He’s the founder of McDonalds, but a lot of people don’t know this, because it’s not called “Kroc’s.” He actually got the idea of this restaurant chain from a couple of brothers with the last name McDonald, and that’s how it got its name. The brothers had been working a single restaurant for about 30 years before Ray approached them. And, though the brothers were involved with the business early on, Mr. Kroc paid a pretty penny to get them out of the business, because they didn’t share the same vision. Their vision was retirement, and Ray Kroc’s was much, much bigger.
Don’t get me wrong, I don’t blame the McDonald’s brothers for wanting a payday; I just recognize that that payday only existed because someone with vision like Ray Kroc came along. I think we can all take a lesson from this: If you’re the kind of person who has grand and strategic vision, you should find a partner who is keen on executing on it, and vice versa. If you’re working on your own for a period of time, at least recognize which kind of person you are, and be sure to shore up your weakness.
Oh, and by the way, I don’t eat at McDonalds, but that doesn’t mean I can’t learn a ton from an extremely successful business. And, just keep in mind that, when McDonald’s was founded, we didn’t know all that we do now about nutrition…
But that’s neither here nor there. Here’s a great quote from Ray Kroc, and one that’s consistent with the title of the book: “Luck is a dividend of sweat. The more you sweat, the luckier you get.” I love this attitude, so let me give you one more thing to think about before we dive into the meat of this autobiography. Here’s another quote straight from the book: “People have marveled at the fact that I didn’t start McDonald’s until I was fifty-two, and then I became a success overnight. But I was just like a lot of show business personalities who work away quietly at their craft for years, and then, suddenly, they get the right break and make it big. I was an overnight success all right, but thirty years is a long, long night.”
This is usually the case. There are some rare exceptions, but don’t be deceived by the media: If you want to be successful, play the odds, and the odds say that if you work harder, smarter, and become better than your competition, you will be successful. Take advantage of any breaks you get along the way, but, in the meantime, grind it out.
Let’s take a look at the golden nuggets we’ll go over today. The first two are really smart business moves that Ray took early on and had a lot to do with McDonalds’ success: These are his consideration of conflicts of interest within his business and investment in research and development. The third is a perspective that he has about the relatedness of happiness and achievement.
Starting with conflicts of interest. Now, with my background in public accounting as a CPA, I could talk to you for days about conflicts of interest, but let’s just focus on the specific issue that Mr. Kroc dealt with: McDonald’s was created under the franchise model. This means that someone would buy the right to operate a McDonald’s restaurant. They would receive the brand, processes, and support of corporate, and they would pay a royalty for it.
This is a really cool model for someone new in business, because the operator can benefit from all the infrastructure of a big brand, even if they’re starting out small. When I was 18, I ran a franchise with College Pro Painters, and it was a great introduction into what running a business is really all about.
With a business model like this, however, you can see how it might be easy to want to become a supplier as well. In other words, with all these restaurants popping up, McDonald’s corporate could have decided that it would supply hamburger, buns, cups, and so on to all the restaurants and make a profit in the process.
Kroc decided early on that he couldn’t be a partner with the franchisees and at the same time be a vendor to them. As a vendor, he would want to maximize his sales profits to his customer. As a partner, he would want the highest quality for his franchisees to maximize their profit and his at the same time.
Obviously, this was a smart decision. As partners, everyone was on the same page. Everyone was driving more sales and growth, and everyone was sharing in the success. Plus, future companies who did it the other way had to deal with anti-trust lawsuits and such…
Another theme throughout the book was that Ray recognized he needed to spend money to make money. The best example of this is in research and development. He knew he had to spend money to come up with best practices for his franchisees, because this would ultimately result in higher profit in the future. But there were two, more specific drivers:
First, he wanted his franchises to be set up for success, because, again, they were partners. But he knew he had to come up with practices that were better than what the average franchisee would come up with on his own. Otherwise, they would just say “F corporate, my way’s better.”
Second, he wanted his customers to have the same experience when they went into a McDonald’s in California as if they went to one in New York. He wanted to develop a consistent brand that people could love and count on. He had to get the franchisees to buy in to make this possible.
The final golden nugget is about happiness and achievement. Ray Kroc said that happiness is a byproduct of achievement, and this immediately makes me think of the whole concept of self-improvement. People who set goals, challenge themselves, and achieve those goals are always moving forward in life. At a very basic, evolutionary level, it makes sense that happiness would be a byproduct of this. Our brains are designed to reinforce behavior that encourages survival, food, sex, and other resources.
I did a lesson on the book The Happiness Hypothesis, and Jonathan Haidt goes into detail on how our brains reinforce behavior with the hormone dopamine. The conclusion is that happiness is a result, though fleeting, of success and achievement. So we need to continue to challenge ourselves and do our best to celebrate successes.
The other piece of this puzzle that Ray puts together is the notion that achievement only happens at the risk of failure. He says that this is by definition, and I quote “it is no achievement to walk a tight rope laid flat on the floor. Where there is no risk, there can be no pride in achievement and, consequently, no happiness.”
I’ll leave you with a simple summary today: “persistence.” And one more quote from the book that I hope will leave you thinking: “Press On: Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will note; the world is full of educated derelicts. Persistence and determination alone are omnipotent.” Powerful stuff.
Ok, here’s the exercise for today: 1) Where have you had a conflict of interest? 2) How will you spend money to make money? And 3) Give an example of achievement leading to happiness. Talk about some time in your life where you set a goal, accomplished it, and felt like a million bucks.
Complete those, thanks for watching, and I’ll see you next time!