The Principles Behind The Rise Of McDonald’s

The ‘Founder’ Ray Kroc’s Lessons For Aspiring Entrepreneurs

When Ray Kroc signed a deal in 1954 with the McDonald brothers, he was a 52 year old, milkshake multi-mixer salesman. The brothers had just 8 restaurants in operation.

When Ray Kroc died in 1984, McDonald’s had 7500 stores across the globe with a combined sales figure of over $8 billion. The brothers were out of the picture, and divested of their namesake company.

Yes, the story of McDonald’s is the microcosmic tale of American capitalism. It’s a story of blood, sweat, and tears; of lawyers, law-suits, and contracts; of finance, greed, and grind. But it’s also a story of individual ambition, hard-work, and success. It’s the story of a man who slowly made his way up the free enterprise ladder of American capitalism, and who finally found incredible success at an age when most people would turn their thoughts towards retirement.

The tale, for all its twists and turns, is told in Ray Kroc’s autobiography Grinding It Out. The book certainly flatters Kroc — he is an expert salesman and story teller after all — and as we will see, it shows only the best side of his complex character. But the book is still valuable. It lays out his beliefs, mistakes, and approach to both business and life, and there are many principles for success a determined student can draw from it.

Thankfully, I have done the work for you, and chosen the three principles I believe are most valuable for any entrepreneur at the start of their journey. Let’s get started.

Learn To Grind It Out

If there is one central idea to Kroc’s autobiography, it is the importance of persistence and hard work — ‘grinding it out’ — to achieve your goals. It’s a fine premise, but a terrible cliché. Everybody knows the importance of persistance and hard work. I challenge you to find me a personal development book that doesn’t extol its virtues.

Yet there is a caveat to his view of ‘grinding’ that sparked my interest. He believes it is not something we ought to, or be able to do, but is rather something we must learn to enjoy. This small shift in perspective blindsided me. He writes:

“Too many young Americans these days don’t get a chance to learn how to enjoy work.”

And

“Many young people emerge from college unprepared to hold down a steady job or to cook or do housework…They should train for a career, learn how to support themselves and how to enjoy work first. Then if they have a thirst for advanced learning, they can go to night school.”

It’s a view of hard work from a completely different era to our own. An era when people stayed at the same job all their life; when people found fulfilment even in the mundane; when people didn’t have a constant fear of missing out, or a sense that the grass is greener elsewhere.

It is in total contrast to the currents of thought Instagram influencers and Tik Tok trend-setters expose us to today. Compare Kroc’s favourite homily to that of the social media mainstream telling you to ‘follow your passion’, or to ‘find the job that doesn’t feel like hard work.’ The affirmation reads:

“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 not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.

My generation has certainly gained in many ways from our refusal to settle for less. But in gaining this, we have lost the secret to persistence, and forgotten that working hard is a skill to be learned. I have not read any other book that has told me I can learn to enjoy work. You are told you should work hard, yes, but if you don’t, it’s probably because the job isn’t your true passion. Or perhaps you’re not determined enough. Or it could be that you’re just not cut out for it, since you can’t do what every other smiling celebrity and posteuring personality tells you is their secret to success.

Some people learn to work hard early in life.They might be brought up under difficult circumstances, or have strictly disciplined parents. Others don’t have that lesson forced on them, and for these people who were never taught how, learning to work hard is a tough and thankless task. And people mistake their difficulty at working hard as their identity, rather than as an undeveloped skill.

So Kroc’s belief that hard work is a capability we can develop with persistence, rather than a trait of character, is refreshing. Yes, his message smacks of the ‘pull yourself up by your bootstraps’ adage, and yes, hard work with neither luck nor leverage does not always guarantee success. But there is a truth in this principle that has been lost on our social media generation, and is one we should recognise in our own lives.

Sell. Sell. Sell.

I have a simple belief. If you have a good product, but do not know how to sell it, you have a bad business. No one cares how fantastic something is if they haven’t heard of it. Where was McDonald’s before Ray Kroc?

So whether Kroc the stole McDonald’s from the McDonald brothers, as 2016’s movie The Founder heavily implies, should not detract from Kroc’s legacy as one of the most successful salesmen and franchisers in history. Without Kroc the ‘huckster’, there is no guarantee McDonalds would have become the same great entity it is today. The brothers may have developed a concept, but Kroc built an empire.

Kroc is what Rory Sutherland in his wonderful article would call a ‘Supreme Huckster’ — “In the pantheon of human importance, we always accord high status to the inventor, and low status to the showman. But almost every significant technology has required ten times as much effort in the selling as in the conception.

That is why the second principle I took away from Grinding It Out is a simple one. Sell. Sell. Sell. Learn to sell yourself, your product, and your vision. Be a salesman, in habit if not in job description, because selling yourself is vital if you ever want to get recognised among that faceless milieu of mediocrity. There are many important lessons of selling in the book.

Sell Yourself

Look sharp and act sharp. The first thing you have to sell is yourself. When you do that, it will be easy to sell paper cups.”

And

“That was where I learned that you could influence people with a smile and enthusiasm and sell them a sundae when what they’d come for was a cup of coffee

This is perhaps the easiest and most actionable advice you can ever receive for being a good salesman.The second principle in Dale Carnegie’s How to Win Friends and Influence People is the same. Smile! He advises “Actions speak louder than words, and a smile says, ‘I like you. You make me happy.’” This is why dogs are so popular, Carnegie concludes, because they are always enthusiastic and happy whenever they meet someone new.

Help The Customer

In his Lily Tulip paper cup selling days, one of Kroc’s customers bought his product for serving sauces at their soda fountains. Kroc realised they could profit massively and increase their sales volume by selling drinks and food to people on the go (and coincidentally buy more of his cups in the process.) Yet the buyer could not comprehend paying for cups, covers, and another worker, just to sell to customers who wouldn’t materialise, since they wouldn’t be able to sit down for their food and drink.

Kroc remained convinced. He was so confident, he gave the customer 300 containers with covers so they could try his idea at no cost to themselves. The plan, so it turned out, was a great success, and the customer couldn’t serve their patrons quick enough. The company continued to expand, and every new store they opened meant another new buyer of paper cups for Ray Kroc and his employer.

This reinforced the principle in Kroc’s mind that to be a good salesman, you must sincerely want to help your customer. Even at your expense, help them in any way you can. Because sales is all about figuring out and solving your customer’s problems. Help your customer, and you will inevitably help yourself as a byproduct.

Quality Service Cleanliness Value - QSCV

“If I had a brick for every time I’ve repeated the phrase QSC and V” Kroc writes, “I think I’d be able to bridge the Atlantic Ocean with them.” These four letters are the fundamental foundation of every McDonald’s franchise, and Kroc stressed them over and over again. Every franchisee and manager learned them, and imparted the teachings onto their employees.

At one store, in Knoxville Tennessee, a competitor from a large local chain was severely underselling the McDonald’s across the street. Some lawyers for the franchisee believed that since the chain was illegally sinking prices at just one of their stores across from McDonald’s to drive them out of town, they could have the government step in to halt the malpractice. Kroc disagreed and stressed the fundamentals again, arguing:

“If we can’t [beat the competition] by offering a better fifteen-cent hamburger, by being better merchandisers, by providing faster service and a cleaner place, then I would rather be broke tomorrow and out of this business and start all over again in something else.”

Kroc recognised that while many products are sold on price, that is not the only factor that influences a sale. You will always be able to sell provided your food is of a higher quality, provided your service is easy, fast, and friendly, provided your store and your employees are kept clean and presentable, and provided your customers feel they are getting value for their money. It’s not always about price, there’s QSCV too.

I have often chosen to eat at a McDonald’s for this very reason. The rapid service I will receive today in any of their stores, courtesy of the immediate self-checkout screens, in a bright, perpetually clean environment, will always entice me over waiting in a queue to place my order. Even if it costs more, I still feel I receive good value for money. That’s how you sell a service. That’s how you sell a product.

‘Be in it to the ends of your toes.’

When Ray Kroc spoke to a group of Dartmouth College graduates in 1976, they asked him about the art of entrepreneurship. His reply was centred on one idea — a willingness to take risks:

“You’re not going to get it free, and you have to take risks. I don’t mean to be a daredevil, that’s crazy. But you have to take risks, and in some cases you must go for broke. If you believe in something, you’ve got to be in it to the ends of your toes. Taking reasonable risks is part of the challenge. It’s the fun.”

It helps that Kroc practiced what he preached. At 35 years old, he moved from selling paper cups to starting a business selling milkshake multi-mixers. To do so, he took on debt truly to the ‘ends of his toes’, and after increasing the mortgage on his house, owed $100,000 dollars on the hope of success. Eventually, through perseverance, skilled selling, good products, and undoubtedly good luck, his gamble paid off.

Following this experience, he did the same again when franchising out McDonald’s. He put everything into establishing the Franchise Realty Corporation, the company that would own the land under which the franchises would be run — “my house, my car, you name it”.

And following this, he did it a third time. In 1959, with his personal net worth at $90,000, Kroc borrowed a total of $1.5million from 3 insurance companies for 22.5% of the company’s stock to build ten stores for themselves as a cashflow base for future expansion. I don’t think I even need to tell you whether this gamble paid off or not.

The principle is that when you believe in something, you have to be willing to go all in, ‘to the ends of your toes’. If you’ve done your due diligence, if you are sure of the idea, the numbers, the forecasts, taking a risk to leverage your beliefs, most likely through taking on debt (reasonably and responsibly), may be the best chance you have for achieving real economic freedom.

This isn’t for everyone. Taking on debt does not guarantee business success. If it did, it would inherently not be risky. Taking on risk is stressful, and you can lose everything. While Ray Kroc is a success story, there will be thousands of others who took similar risks, with similar strong beliefs, and similarly positioned businesses, who failed all the same. Luck is an undeniable factor in all of this.

Yet with this being said, there is no achievement without risk. Brands like McDonalds don’t arise every day for a reason. As Kroc writes:

Achievement must be made against the possibility of failure, against the risk of defeat. It is no achievement to walk a tightrope laid flat on the floor. Where there is no risk, there can be no pride in achievement, and consequently, no happiness. The only way we can advance is by going forward, individually and collectively, in the spirit of the pioneer. We must take the risks involved in our free enterprise system. This is the only way in the world to economic freedom. There is no other way.”

Final Thoughts

When someone becomes successful, there will always be critics. Ray Kroc is no different. Before The Founder critically revised the rosy public image of Ray Kroc in 2016, Mark Knopfler wrote a similarly critical song twelve years before, Boom, Like That. In it, Knopfler sings:

Sometimes you gotta be an s.o.b.,
You want to make a dream reality,
Competition? send ’em south,
If they’re gonna drown,
Put a hose in their mouth

Kroc was ruthless against his competition, it’s true. When Knopfler calls him a crocodile, and sings how Kroc’s style was “dog eat dog, rat eat rat,” you’re forgiven for questioning if he’s the right inspiration for young entrepreneurs.

But for every person who lost out to Kroc, so many others gained; his suppliers, his franchisees, his employees. Critics forget this important aspect of McDonald’s rapid expansion. So while I appreciate the greater understanding we have of Kroc the man, ruthlessness and ambition should never be a barrier for studying someone’s principles, and learning from their mistakes and successes.

Grinding It Out is a short and entertaining book. Self-serving though it may be, it deserves a place on any entrepreneur’s book shelf. I hope the principles I distilled from it may guide you in your future endeavours.

OCM

“Nothing can bring you peace but the triumph of principles.” — Ralph Waldo Emerson

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