McDonald's Corporation



Mcdonald S Corporation 369
Photo by: Viktor

One McDonald's Plaza
Oak Brook, IL 60523
(630) 623-3000
www.mcdonalds.com

One of the last remaining old-style McDonald's restaurants. Reproduced by permission of AP/Wide World Photos.
One of the last remaining old-style McDonald's restaurants.
Reproduced by permission of AP/Wide World Photos.

In more than one hundred countries around the globe, the sight of two golden arches tells hungry diners that a fast, inexpensive meal is just a few moments away. The arches form the shape of the letter "M," which stands for McDonald's, the world's largest restaurant chain. McDonald's perfected the selling of fast food: burgers, fries, and drinks served and eaten quickly. With its stress on quality, service, cleanliness, and value, the company serves as a model for competing restaurant chains, and other service industries. Each day, forty-five million people eat at least one of their meals at "Mickey D's."

The McDonalds and Their Restaurant

Ray Kroc founded the McDonald's empire, but he borrowed many key ideas from the real McDonalds, brothers Richard (died 1998) and Maurice (c. 1902-1971). Known as Dick and Mac, the McDonalds opened their first restaurant in Pasadena, California, in 1937. It was one of many drive-ins popping up in California at the time. At these restaurants, the staff, called carhops, came to the customers' cars, took their orders, and brought out the food. Some carhops used roller skates to speed up the service.

At the first McDonald's, Dick and Mac served hot dogs, not the more common hamburgers, and diners could stay in their cars or eat inside. Business boomed, and the McDonalds opened a larger restaurant in San Bernardino, with burgers added to the menu and no inside seating. By 1948, the brothers were rich, but they also had competition and their costs were rising. The McDonalds shut their store and reopened with a new concept. They wanted to cut costs and lower prices to attract more business.

The brothers fired the carhops; customers now walked up to a window to place their order. The McDonalds also stopped using dishes and glasses and switched to paper plates and cups, so they did not need a dishwasher. Then the brothers made their burgers a little smaller and cut the price from thirty cents to fifteen cents. The burgers came just one way, with the condiments—ketchup, mustard, onions, and pickles—already on them. The focus was on cheap, fast food, not variety. In McDonald's: Behind the Arches, Dick explained, "If we gave people a choice, there would be chaos." Eventually the menu also included French fries and milkshakes. The McDonalds called their new approach the "Speedee Service System." The restaurant's mascot was a small chef with a hamburger for a face; he was later known as Speedee.

McDonald's at a Glance

  • Employees: 212,000
  • CEO: Jack Greenberg
  • Subsidiaries: Italian Restaurant Financing S.R.L; MDC Immobiliaria de Mexico S.A. de C.V.; Restaurant Realty of Mexico, Inc.; Restco Comercio de Alimentos Ltda.
  • Major Competitors: Burger King; Wendy's; Kentucky Fried Chicken; Pizza Hut
  • Notable Menu Items: Big Mac; Egg McMuffin; Quarter Pounder; Filet-O-Fish; Chicken McNuggets; Happy Meal; McSalad Shaker

At first the new McDonald's lost customers, especially the teenagers who wanted carhop service. But as teens stopped hanging out at the restaurant, more families began to come. The United States had just begun its historic "baby boom," as millions of soldiers returning from World War II (1939-45) started families. These new parents and their children would fuel McDonald's growth for decades to come. The families appreciated the restaurant's low prices, and since the kitchen was in full view, they could see that the McDonalds ran a clean operation. Once again, business soared.

Timeline

1948:
Richard and Maurice McDonald open their first fast-food restaurant in San Bernardino, California.
1954:
Ray Kroc takes over franchising for McDonald's.
1955:
Kroc opens his first McDonald's in Des Plaines, Illinois.
1961:
Kroc takes full control of the McDonald's Corporation and opens Hamburger University to train employees.
1963:
Ronald McDonald appears in public for the first time in Washington, D.C.
1965:
First national TV ads appear; Filet-O-Fish sandwich introduced.
1968:
One thousandth McDonald's restaurant opens in Des Plaines; Big Mac introduced.
1971:
First McDonald's opens in Japan, Germany, and Australia.
1979:
McDonald's serves its thirty-billionth hamburger.
1984:
Ray Kroc dies.
1999:
In Chicago, Illinois, McDonald's opens its twenty-five thousandth restaurant.

Kroc Launches the McDonald's Chain

In 1954, a salesman named Ray Kroc visited the McDonalds in San Bernardino. Kroc sold Multimixers, machines that mixed five milkshakes at a time. He was amazed to hear that the McDonalds ran eight Multimixers at once. After he saw the McDonalds's operation, Kroc knew they had developed a new restaurant concept that could be repeated across the country. The McDonalds had already opened ten other stores, including two in Arizona, but Kroc convinced the brothers to let him use his selling skills to make the chain even bigger. In his autobiography, Grinding It Out, Kroc wrote, "Here was a complete package, and I could get out and talk up a storm about it."

Customers lined up in front of the first McDonald's hamburger stand in San Bernadino, California, in 1948. Reproduced by permission of AP/Wide World Photos.
Customers lined up in front of the first McDonald's hamburger stand in San Bernadino, California, in 1948.
Reproduced by permission of AP/Wide World Photos.

Kroc and the McDonalds became partners in a franchise business. Kroc would find franchisees, or people willing to pay to use the McDonald's name and its methods. The franchisees bought a license to run a restaurant for twenty years, then the partners could take over if they chose. The franchisees also paid a percentage of their restaurants' total sales to Kroc and the McDonalds. The franchised stores would form a chain of McDonald's that stretched across the United States.

On April 15, 1955, Kroc opened his first McDonald's, in Des Plaines, Illinois, and sold $366 worth of food. He wanted it to be a model for all the franchised restaurants to follow. The building had one large arch on each side, a feature of most McDonald's for years to come. Kroc used the McDonald brothers' assembly-line approach to cooking food. Certain chefs did just one job over and over, such as grilling burgers or making shakes. Some food was made before customers arrived, so they would not have to wait long once they ordered. Kroc also copied the equipment used in the original

Richard "Dick" McDonald stands in front of a McDonald's restaurant in Manchester, New Hampshire. He and his brother Maurice pioneered the quick-service restaurant that evolved into McDonald's. Reproduced by permission of AP/Wide World Photos.
Richard "Dick" McDonald stands in front of a McDonald's restaurant in Manchester, New Hampshire. He and his brother Maurice pioneered the quick-service restaurant that evolved into McDonald's.
Reproduced by permission of AP/Wide World Photos.
McDonald's kitchen. Some of the machines had been specially designed for the restaurant. Kroc, like the McDonalds, wanted to produce food as fast and cheaply as possible. His motto was "Quality, Service, and Cleanliness" (QSC). Later, he added "Value" as well.

Dominating the Industry

The first franchised McDonald's opened in California in 1956. The same year, one opened in the Midwest. One of Kroc's goals was to ensure that each restaurant served exactly the same food, but he ran into a problem with the French fries. At the original San Bernardino restaurant, the potatoes used for the fries sat in wire baskets. The California air helped dry them out and improved their taste. The Midwest McDonald's fries, however, did not dry out before cooking. To improve the taste, Kroc cooked them twice—the potatoes were briefly fried, then allowed to dry before their final cooking. McDonald's is still famous for its tasty fries.

By 1960, the company had more than one hundred restaurants. Kroc and the McDonalds owned some, but most were franchises. In addition to paying a franchise fee and part of their profits, franchisees also paid the company rent on the land where the stores sat. This income eventually earned more money for the McDonald's Corporation than selling food.

During the 1960s, McDonald's saw many changes. Kroc became the sole owner in 1961, paying the McDonalds $2.7 million for their share of the business. The same year, the company opened "Hamburger University" at its Oak Brook, Illinois, headquarters to train employees. In 1962, McDonald's golden arches replaced Speedee as the restaurant's main symbol, and ads told customers to "Look for the golden arches."

Kroc believed in advertising heavily and in targeting children. In 1965, the company introduced a new mascot, a red-haired clown named Ronald McDonald, who became a frequent and friendly face in television commercials. The company was one of the first restaurants to run TV adds, and it spent millions of dollars to promote new products and to create a wholesome image. An ad launched in 1971 featured one of the most famous advertising slogans ever: "You deserve a break today."

McLibel

One McDonald's lawsuit led to some of the company's worst publicity ever. In the so-called "McLibel" trial of 1994 to 1996, the company sued two English citizens, David Morris and Helen Steel. They were accused of libeling McDonald's, deliberately spreading false information about its practices. Among other things, McDonald's was supposedly guilty of selling unhealthy food, destroying rain forests in South America to raise cattle, and mistreating its workers. The company did win, but the judge ruled that some of the statements about McDonald's were true, including the company's role in the cruel treatment of animals killed for meat. The McLibel trial confirmed some people's view of McDonald's as a huge corporation determined to do anything to increase its profits.

Although McDonald's was not the only fast-food chain, it became the largest and most successful one. Customers appreciated Kroc's QSCV approach. The company took advantage of changing lifestyles, placing restaurants in growing suburbs and along the interstate highways that crisscrossed the country. By 1968, McDonald's had one thousand restaurants, and sales reached $1 billion in 1972. Throughout its growing years, the company added new menu items. In 1965, it introduced the Filet-O-Fish sandwich, and three years later the Big Mac appeared. In 1973, McDonald's brought the fast-food concept to breakfast, selling its first Egg McMuffin.

Success Abroad, Trouble at Home

By 1970, McDonald's had restaurants in all fifty states and a few in Canada and the Caribbean. Foreign operations exploded during the 1970s and 1980s, as the company expanded into Asia, Australia, South America, and Europe. Kroc counted on the expertise of local companies to help them adapt McDonald's food and service to other lands. By 1992, almost 40 percent of the company's sales came from overseas.

At home, however, McDonald's began to face some problems. In 1976, a false rumor spread that the company added worms to its meat. Some press stories criticized the quality of the food and the way the company kept track of its finances. During the 1980s, McDonald's also faced stiff competition from Burger King and Wendy's, two other fast-food chains that specialized in hamburgers. In addition, fast food was expanding to include other foods, such as pizza, sandwiches, and Mexican dishes.

Many of McDonald's new menu items were suggested by franchisees. Lou Groen of Cincinnati pushed for adding a fish sandwich, and the Big Mac was created by Jim Delligati of Pennsylvania. One of Ray Kroc's ideas for a new sandwich was the hulaburger. This hamburger with cheese and a pineapple slice flopped.

Even with these concerns, McDonald's kept opening new restaurants and adding new menu items. It also continued to advertise heavily and to appeal to children. In 1979, the company introduced Happy Meals, which packaged a burger, fries, and soda in a colorful cardboard box. Later Happy Meals included toys not available in any store. Thousands of restaurants added outdoor playgrounds and indoor playscapes. McDonald's also placed restaurants in new locations, such as inside airports, museums, and gas stations. By 1995, McDonald's controlled 42 percent of the hamburger fast-food market.

There are few major cities on the globe without at least one McDonald's restaurant. Reproduced by permission of AP/Wide World Photos.
There are few major cities on the globe without at least one McDonald's restaurant.
Reproduced by permission of AP/Wide World Photos.

More Problems

In 2001, McDonald's continued to grow—and face problems. Expensive new equipment designed to improve food quality did not boost sales as hoped. The Federal Bureau of Investigation (FBI) investigated a crime ring that stole prizes used in McDonald's contests. Vegetarians were upset to learn that the company used a beef product to flavor French fries. In France, Jose Bove, a farmer who had earlier been arrested for destroying part of a McDonald's restaurant, staged another protest. Bove is one of many Europeans who think McDonald's threatens the jobs of local farmers and offers poor-quality meals. At his trial in 2000, Bove told reporters, "The fight is going on all over the world … against bad food."

Despite its troubles, McDonald's remained the top fast-food restaurant in the world. In 2001, the company had more than twenty-nine thousand restaurants, with more than half of these outside of the United States. It bought more beef, pork, and potatoes than any other U.S. company, and it spent more on advertising. The company planned to open as many as one thousand new stores each year and expand several new restaurant chains it acquired during the 1990s—Boston Market and Chipotle Mexican Grill.



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User Contributions:

1
Greg Enginger
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Nov 19, 2006 @ 12:12 pm
Where and when was the first McDonalds opened in Cincinnati, Oh? What was the cost of a simple hamburger? Where was the McDonalds on Glenway Ave in the chain of events? 1st, or 2nd, or 3rd, etc.,etc???
2
isaac ogbu
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Aug 25, 2007 @ 8:08 am
Mcdonald has tried to open new restaurants around the globe with the exception of possible areas like Nigeria in West Africa. Why is it so? I would wish that the company could come to Nigwria to open a restaurant as it does in other countries.

Thanks and I look forward for your comment on this.

Isaac Ogbu
3
Report this comment as inappropriate
Sep 5, 2010 @ 1:13 pm
As an ex-insider, once responsible for food quality throughout much of Latin America and the Caribbean, I am amazed that few people realize how healthy McDonald's food is in relation to what the people in many countries eat for lunch. When I was developing Brazil, businesses rejected McDonald's because the food did not contain enough calories!

The sanitation in the average restaurant in Latin America was less than 1% of what McDonald's brought to the market.

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