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It was the “coolest” hangout in 1940s San Bernardino, with teenage cruisers filling the vast parking lot at McDonald’s drive-in on E Street every night. But such customers (usually adolescent boys with revving engines and blaring car radios) tended to loiter, spend little money and flirt with the cute carhops. The McDonald brothers—Richard and Mac—sought families rather than rowdy kids, so they temporarily closed their lucrative southern California business and worked on a new approach.
While McDonald’s offered over two dozen menu items—including tamales, chili and PBJ sandwiches—about 80% of their sales came from burgers, fries and drinks. When the brothers restarted their restaurant, they offered only the items that most customers wanted.
The New McDonald’s
In December 1948 McDonald’s reopened to an initially befuddled clientele. Paper cups and plastic utensils had replaced familiar silverware and plates. With no place to sit, customers now had to stand in lines. Polite young men (not comely young women) quickly dispensed food items and handled cash. In the kitchen each worker repeatedly performed one specific task.
The new prices were low, low, low. Burgers cost 15 cents (4 cents more for a cheeseburger), milkshakes ran 20 cents, fries and sodas were a dime each, coffee a nickel.
Soon North E Street often became gridlocked, and McDonald’s service-window lines sometimes numbered 200 customers at once. Money flowed in as if a cash dam had burst. By 1953 the McDonalds were netting $100,000 a year when the minimum hourly wage was 75 cents. Richard, his wife and the still-single Mac shared a 25-room San Bernardino mansion complete with a tennis court. Each year they bought three new Cadillacs.
Then one day in 1954 an aggressive restaurant-supply salesman in Chicago named Ray Kroc noticed an unusual order on his desk. A California burger joint had ordered eight of his Multimixers—capable of whipping up 48 milkshakes at once—for just one location.
One location? Huh?
The curious Kroc, always looking for the Big Payoff in the business world, journeyed to San Bernardino and sat in his car for hours in the McDonald’s parking lot as a tide of customers ebbed and flowed. Kroc later told Time magazine, “I said to myself, ‘These guys have got something. How about if I opened some of these places?’”
Seeing a golden opportunity, Kroc envisioned McDonald’s as a global fast food giant. He strong-armed the brothers into a deal, offering to pay them a rock-bottom rate of 0.5% of all future sales. In April 1955 Kroc opened his first McDonald’s in Des Plaines, Illinois. Over the next five years he created a chain of 228 franchised restaurants. In 1961 he bought out the McDonald brothers for $2.7 million in cash.
His golden opportunity had arrived in the form of the Golden Arches.
Ray Kroc, always determined that nothing—absolutely nothing—would stand in his way of amassing wealth, once proclaimed, “If any of my competitors were drowning, I’d stick a hose in their mouth and turn on the water.”