Grinding It Out (15 page)

We hired a regular parade of people in the late fifties. We sold them a dream and paid them as little as possible. I don't feel bad about that, because I wasn't making much myself, and those who stayed with us are now very well off, indeed.

Bob Papp was hired as a draftsman to assist Jim Schindler. He later became a vice-president in charge of construction. John Haran came into the company to help Harry with real estate. These added people meant that we needed more space, of course, so we kept moving around in the area where I had had my original two-room office, knocking down walls and expanding.

One day Harry came in and told me he was going to hire a young fellow named Dick Boylan to help him with finances. “He's a lawyer and accountant, and he's our kind of guy, Ray,” Harry said. “Let me tell you what he did. He and his partner, whose name is Bob Ryan, are selling insurance, see? They know they have about as much chance as a snowball in hell of getting to see me with that act. But it happens that they both used to work for the Internal Revenue Service, so they tell my secretary they are from the IRS. Naturally, I think, ‘Holy Christ, what now?' And I call June in to listen to what they have to say. Boylan gives me this kind of sheepish grin and says, ‘With our background of working for the IRS, Mr. Sonneborn, we know we can design an insurance plan that will help you.…' Well, that breaks June up, and I have a hard time keeping a straight face myself.

“Their insurance proposal was pretty good, too. It was a hell of a presentation. June was very impressed, and she's the one who suggested hiring him.”

Dick Boylan is now senior executive vice-president and chief financial officer of the company. Some time after he joined us we also hired his former partner, Bob Ryan, and he's a vice-president and treasurer. I could go on and on listing people who joined us at this time, many of whom are now officers of McDonald's or wealthy operators. One of our fine old-timers, Morris Goldfarb from Los Angeles, said at the 1976 operator's convention in Hawaii that he was certain research would show that Ray Kroc has made millionaires of more men than any other person in history. I don't know about that; I appreciate Morrie's view, but I would put it another way. I'd rather say I gave a lot of men the opportunity to become millionaires. They did it themselves. I merely provided the means. But I certainly do know a powerful number of success stories.

McDonald's doesn't confer success on anyone. It takes guts and staying power to make it with one of our restaurants. At the same time, it doesn't require any unusual aptitude or intellect. Any man with common sense, dedication to principles, and a love of hard work can do it. And I have stood flat-footed before big crowds of our operators and asserted that any man who gets a McDonald's store today and works at it relentlessly will become a success, and many will become millionaires—no question.

There are hazards and pitfalls, of course, just as there are in any small business. And some locations go along for years with a very modest volume. But, almost without exception, these stores will catch on at some point and begin to grow, as Morrie Goldfarb himself can testify. He was one of my very first franchisees. His store on La Tijera Boulevard in Los Angeles opened a year after my place in Des Plaines. I went out to look at his location, and it was excellent. I congratulated him on it. But for some reason it turned out to be a real turtle. Morrie had sold a little restaurant he'd scrimped by with for years to go into McDonald's with his son, Ron. He thought that now he was going to get out of the woods at last. But his previous place had been a cakewalk compared to this. He couldn't build enough volume to hire a full crew, and he and Ron were working their heads off handling two stations apiece all day long.

Morrie called me on the telephone and raised hell.

“Ray, I am averaging $5,000 a month here,” he said. “If I have a real good month it's $7,000. Now that place called Peak's across town is doing $12,000 a month, and they have an inferior location!”

Peak's happened to be a misfit McDonald's, one of the franchises sold by the McDonald brothers before I came into the picture. I suggested to Morrie that he ask the McDonald boys for some guidance. He said O.K., that was a good idea, he'd do it. A few days later he was back on the phone more upset than before.

“This is ridiculous!” he moaned. “I had Maurice and Richard come down from San Bernardino, and they spent most of the day here poking around. They get ready to leave, Ray, and you know what they tell me? They say, ‘You are doing everything just right. All you have to do is continue this way and the business will come.' Hellfire, they were no help at all!”

I told Morrie that I would come out again and see if I could figure it out. It was baffling. I studied that place from every angle without coming up with an answer.

Morrie's volume problem continued for about five years. After he got his equipment paid off he had a little breathing space. Then I moved out and opened our California office. We built a lot of new stores and started a local advertising campaign, and that really got things rolling for Morrie. In 1975, his La Tijera store grossed close to a million dollars. He has torn the old store down now and replaced it with a beautiful new building.

I get furious all over again just thinking about that California situation during the first five years we were in business. It was aggravation unlimited. In many ways it was a parallel to the frustrations I faced at home with my wife. The McDonald brothers were simply not on my wavelength at all. I was obsessed with the idea of making McDonald's the biggest and best. They were content with what they had; they didn't want to be bothered with more risks and more demands. But there wasn't much I could do about it, California was simply too far away for me to deal with effectively from Chicago.

At one point I sent Fred Turner out to report on the McDonald brothers' California operations. He came back appalled at the haphazard situation he'd found. The brothers' own store in San Bernardino was virtually the only “pure” McDonald's operation. Others had adulterated the menu with things like pizza, burritos, and enchiladas. In many of them the quality of the hamburgers was inferior, because they were grinding hearts into the meat and the high fat content made it greasy. The McDonald boys just turned their backs on such poor practices. Their operators refused to cooperate with mine in volume purchasing and advertising. We asked them to contribute one percent of their gross toward an advertising campaign that would benefit our stores and all of them as well, but they would have nothing to do with it. All I could do for the time being was to live with it. I am bitter about the experience; not for myself alone, but for fine operators like Morrie Goldfarb and many others who lost five years' growth as a result.

In our business there are two kinds of attitudes toward advertising and public relations. One is the outlook of the begrudger who treats every cent paid for ad programs or publicity campaigns as if they were strictly expenditures. My own viewpoint is that of the promoter; I never hesitate to spend money in this area, because I can see it coming back to me with interest. Of course, it comes back in different forms, and that may be the reason a begrudger can't appreciate it. He has a narrow vision that allows him to see income only in terms of cash in his register. Income for me can appear in other ways; one of the nicest of them is a satisfied smile on the face of a customer. That's worth a lot, because it means that he's coming back, and he'll probably bring a friend. A child who loves our TV commercials and brings her grandparents to a McDonald's gives us two more customers. This is a direct benefit generated by advertising dollars. But the begrudger has a hard time appreciating this—he wants to have his cake and eat it too.

Harry Sonneborn was not a begrudger. He was always willing to spend money to make money. But he liked things neat and theoretically functional; so he was mad as hell at me back in 1957 when I hired a small public relations firm on a retainer of $500 a month. The outlay was an insult in Harry's mind, considering the financial sacrifices he and June were making; the fact that I couldn't tell him exactly what the outfit was going to do for us really threw him into a regular fit. He was justified. But, on the other hand, so was I. That firm, Cooper and Golin, now Golin Communications, is still with us today, and they deserve a lot of the credit for making McDonald's a household word.

There is another characteristic of the begrudger that I have seen appear from time to time. It is a negative outlook that's easy to see in attitudes toward competition. The begrudger regards competition with envy. He wants to learn their secrets and, if possible, undermine them. He'll often go out of his way to give the competition a bad name.

Fortunately, we don't have too many begrudgers in the McDonald's organization. Their style doesn't suit ours, and they don't stay around long. But I have had people with us who seriously proposed that we plant spies in the operations of our competition. Can you imagine? Next thing we'd learn that Ronald McDonald is a double agent! My response to that kind of claptrap has always been that you can learn all you ever need to know about the competition's operation by looking in his garbage cans. I am not above that, let me assure you, and more than once at two o'clock in the morning I have sorted through a competitor's garbage to see how many boxes of meat he'd used the day before, how many packages of buns, and so forth.

My way of fighting the competition is the positive approach. Stress your own strengths, emphasize
quality, service, cleanliness, and value
, and the competition will wear itself out trying to keep up. I've seen it happen many times. Joe Post, whose Springfield, Missouri, McDonald's I mentioned earlier, is a fierce competitor. His success has bred any number of fast-food imitators in the area (it's worth noting in passing how our competition rides on the coattails of our real estate research by locating near our stores, oftentimes right next door). Joe has knocked them out, one after another, not by copying them or by planting spies in their operations, but simply by giving the public the old McDonald's QSC and V.

Competition has from time to time planted spies in our stores. One very prominent franchisor once got hold of a McDonald's operations manual. Word was that he intended to use it to expand his drive-ins to include hamburgers and french fries. My attitude was that competition can try to steal my plans and copy my style. But they can't read my mind; so I'll leave them a mile and a half behind.

A good example of this was the situation we faced with our 200th unit, which was opened August 30, 1960, in Knoxville, Tennessee, by a former marine corps major named Litton Cochran. There was a competing hamburger operation a few doors away, part of a large Southern chain, and the day Litton opened his McDonald's his competitor announced a special—five hamburgers for thirty cents. They kept it up for a solid month. Litton wasn't selling any hamburgers, but he was showing a profit because many of the folks who got hamburgers “to go” from the competition were coming to his place for soft drinks and french fries. Litton figured he'd hang in there, the competition couldn't afford to keep it up for long, and his business would pick up as soon as the guy next door backed down. Instead, the competition got tougher. It advertised a new special—10, 10, and 10—hamburger, milk shake, and french fries for ten cents each!

Litton was really staggered by that one. He was president of the Knoxville Marketing and Sales Executives' Club, and some of his associates there were outraged by his competitor's tactics. One of them, a lawyer, told Litton that it was a clear violation of federal trade regulations since this one store in a chain was being used to drive him out of business by cutting prices. The lawyer offered to go to the government and initiate action against the competitor.

It was with this sad story that Litton Cochran appeared in my Chicago office wondering what he should do.

I am sure this big ex-leatherneck may have heard more abrasive language in the course of his marine career, but I think he'll admit that he's never had a more sincere chewing out than I gave him that afternoon.

“Litton, you are getting your ears beat down, and it's not right,” I said. “We can agree on that. But I'm going to tell you something I feel very strongly about. The thing that has made this country great is our free enterprise system. If we have to resort to this—bringing in the government—to beat our competition, then we deserve to go broke. If we can't do it 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.”

I could see that my words had made a positive impression. Litton told me later that he could hardly wait to get back to Tennessee and get cracking in his store. I never heard another word from him about problems with competition, which is pretty good considering that he now owns ten McDonald's in Knoxville! He's president of the national alumni association of the University of Tennessee, where he often lectures on marketing, and I'm told he gives a dynamite talk on the virtues of our free enterprise system.

 

10

Art Trygg was the bosom companion of my late fifties. He had been on the staff of Rolling Green Country Club, where I often ate dinner in those days. I hired him to write a newsletter for our operators, but he soon became my valet and chauffeur as well. We were like boyhood chums. And I needed Art's gruff good humor and sympathetic ear at dinner, because a powerfully distracting new force had swept into my life—I was in love!

Her name was Joni Smith. She lived in St. Paul.

I had gone to the Criterion restaurant up there to meet the owner, Jim Zien, who was interested in becoming a McDonald's franchisee. I found myself having a hard time concentrating on our dinner conversation, however, because of the classy organ music in the background. It set my pianist's spirit twitching and dancing in time to its sprightly rhythms. Finally Jim took me over to introduce me to the organist.