[Music] [Applause] thank you Hello and welcome History Buffs! My name is Nick
Hodges and today we'll be looking at how one man created the largest fast food franchise in
history. McDonald's! In 1940 Richard and Maurice McDonald, better known as Dick and Mac created
a new style of restaurant in San Bernardino California. It was one where its food could be
made in 30 seconds not 30 minutes. They wanted a steady flow of people coming in and out of the
restaurant and not hanging around limiting the number of potential customers. McDonald's was their
prototype and it was wildly successful. Initially the brothers tried franchising for themselves but
it didn't work out for various reasons. Ultimately they were content with their profitable little
business. That was until a chance encounter with a milkshake machine salesman that changed everything.
The man who became the founder of the McDonald's corporation was Ray Kroc. A relatively successful
but small-time salesman from Chicago who saw something special in how the brothers ran their
restaurant. Seemingly over the hill at 52 years old Ray Kroc transformed McDonald's from a small
town restaurant into a franchise corporation which today has over 37 000 restaurants in 120 countries
worldwide. This is the story of how Ray Crock met the McDonald's brothers and in this review we'll
be looking at how historically accurate the movie is to the real events, by comparing it to the words
of Ray Kroc, the McDonald's brothers and answer the big question. Just how did Ray Kroc revolutionize
American fast food forever? This is the Founder! Before Ray Kroc ever called himself The Founder
he was a salesman. He had a long career selling paper cups and multi-mixers. Machines that can
mass-produce milkshakes and his latest Hard Sell was a five-spindled milkshake machine
that promised to produce more milkshakes at once. Prior to this, drugstore soda fountains
and milkshake bars would use single spindled machines. Limiting the number of customers they
could serve at any given time and on one day in 1954 Ray heard from secretary June Martino, that
a store out in San Bernardino called McDonald's wanted eight multi-mixers. That's 40 milkshakes
per use. Which sounded too good to be true. Kroc was having little success persuading store owners
that they needed the multi-mixer, over the single spindled machines. So to hear that a store out west,
ordered so many... must have been a fluke. In his mind who could possibly need that many machines? How
many customers must they be serving at a time? Kroc had to know! His curiosity got the better of
him and he drove out to San Bernardino to find out himself. When Ray pulled up to the building he
wasn't initially impressed. In his autobiography "Grinding it Out.The Making of McDonald's" he
writes - "There was a smallish octagonal building, a very humble sort of architecture situated on a
corner lot about 200 feet square. It was a typical ordinary looking Drive-In. Then the cars began
to arrive and the lines started to form. Soon the parking lot was full and people were marching up
to the windows and back to the cars with bags full of hamburgers. Eight multi-mixers churning away at
one time began to seem a lot less far-fetched in light of this steady procession of customers lock
stepping to the windows." He spoke with the people in line for burgers and they marveled how their
local McDonald's could offer a hamburger for 15 cents, without needing to wait around or tip car
hops. Ray Kroc was intrigued, he introduced himself to the restaurant's owners Dick and Mac McDonald,
as the man who sold them the multi-mixers and invited the brothers out for dinner to hear their
story [Music] The first ever McDonald's restaurant was a barbecue joint. It opened in 1940 at the
corner of 14th and E Street in San Bernardino California. Like many other restaurants at the time,
it used car hops to take orders and deliver food from the kitchens. But the process was slow. By
the late 1940s Dick and Mac reevaluated their situation. As Ray Kroc later put it, "They were
running hard just to stay in one place." So, the McDonald's brothers took a closer look at what was
selling the most. "So one day Dick has a realization." "He sees that the bulk of our sails are in only
three items. Hamburgers, french fries, soft drinks." "87%." "So, we say to ourselves, let's focus on what
sells and that's exactly what we do." The brothers briefly shut down for renovations, which was a
huge gamble. Especially closing what was a popular restaurant. To try something radically different.
When they reopened they only sold what the people wanted. Burgers, fries, soda and milkshakes. It
wasn't initially successful as people weren't accustomed to having to get out of their car,
walk up to the window and order themselves. But it eventually took off. The success of the
operation was due to Dick and Mac's "Speedy System." An idea they created themselves to speed up the
time it takes to produce burgers. "Orders ready in 30 seconds not 30 minutes." Using homemade machines,
a carefully structured floor plan and good old-fashioned ingenuity, they were able to create
a system that turned cooking into an assembly line process. Every employee had a job and he'd do it with
precision and focus. It was like a choreographed dance and the end result of the performance was
an instant but consistent meal. It was here that Ray Kroc was inspired. As a lifelong salesman he
prided himself knowing when to take a chance at a product. And in the McDonald's Speedy System he
saw opportunity. Ray Kroc knew the brothers were onto something and he couldn't pass this up. Kroc
woke up the next morning, went back to the brothers and pitched an idea - and I quote. "I've been in the
kitchens of a lot of restaurants and drive-ins, selling multi-mixers around the country. And I have
never seen anything to equal the potential of this place of yours. Why don't you open a series of
units like this? It would be a gold mine for you and for me too. Because everyone
would boost my multi-mixer sales. What'd you say?" Now, while the film was pretty accurate in its
portrayal of Ray Kroc and the McDonald's brothers. There are some clear inconsistencies between what
the film shows the audience, how Ray Kroc remembers it and what really happened. In his autobiography
Kroc makes it seem as if the McDonald's brothers weren't interested in franchising at all. He notes
that the brothers just wanted to retire peacefully and even if they were interested, they had nobody
in line to take over and set up a series of franchises. Ray Kroc offers his name and his journey
as the head of the McDonald's Corporation begins. The movie though, sets it up differently.
According to the film Ray Kroc continually pesters the brothers about opening new locations.
"Franchise! "Franchise, franchise, franchise, franchise." "We already tried. Two words: Quality Control. It's
almost impossible to enforce standards from afar. Places were a mess. Filthy kitchens. Inconsistent
menus. Sacramento was selling burritos! To watch your precious creation be mismanaged like that. So,
you put somebody in charge of supervising. We did. So, what happened? He obviously didn't do a great job.
So, you hire someone else. You get somebody better. Look, our energies are better spent making this
place the best it can possibly be. It's better to have one great restaurant than 50 mediocre
ones. Yeah, yeah, yeah I still think they hire the right guy. Ray, we're not interested." This is a bit
closer to the truth. Despite what Dick says in the film, the brothers were interested. Because
they had already set up McDonald's franchises. Sources vary in how many restaurants they opened.
It was at least six but likely closer to eight. The second store the McDonald Brothers opened was
in Phoenix Arizona. It was here they debuted a new architectural design, that would stick around
until Ray Kroc took total control of the company. Neon arches. One on either side of the building. Its intention was to stand out from the crowd and it worked. Ray Kroc wasn't too impressed with
the style but he couldn't deny the brothers their success. A third store soon opened up in Downey
California. To say that the McDonald brothers were not interested in franchising or that they weren't
the founders of the McDonald's that we know today is a falsehood. One of the most problematic things
about the McDonald's origin story, is how they see Ray Kroc as The Founder. Ray Kroc called himself
that and the title of the film takes a hit at his ego. In an interview about the film, director John Lee
Hancock is asked about this hypocrisy. "The title of the movie. You're being a little cheeky?"
"It's intentionally misleading, I would say. Um yeah what's your definition of of a Founder?
Is it someone who has the idea? Or someone who expands the idea? Do you think by calling
himself The Founder he was perpetuating a falsehood or is that how he saw himself? I
think he probably would argue that the latter but I think that probably was the former. I mean
from the way I look at it is you know yeah he was just kind of if nobody ever talked about the
McDonald's brothers that would have been fine with him." Now this is getting close to the truth! The
McDonald's brothers invented the Speedy System and created a small franchise chain. Whereas Ray
Kroc talked them into expanding even further with his help and connections in Chicago. So, was
Ray Kroc the Founder? No. He didn't found the McDonald's name, Speedy System or even the first
franchise. But this didn't stop him from calling his first location in Des Plains Illinois the
first McDonald's store. He called himself The Founder and said that McDonald's was born with
his Des Plains store. Despite knowing full well, that wasn't the case. Many years later, after Ray
Kroc died; McDonald's chairman Fred Turner had this to say in 1991. "This founder business has
become an issue. It's embarrassing for the system, quite frankly. It's embarrassing and it's awkward.
There ought to be enough credit to go around." The McDonald's brothers are Founders they founded
the concept. Ray Kroc founded the company that developed the concept into the largest Food
Service Organization in the world. So, clearly the assertion that Ray Kroc was the first to
franchise McDonald's is wrong. So, why is he so famous? Was it just sheer ego that propelled him
to be recognized as the founder of McDonald's? Well, not quite. While he certainly suffers from
narcissism, Ray Kroc was able to create a successful franchise. More successful than the
McDonald's brothers. Here was Dick and Mac's problem. They wanted to create McDonald's clones.
Speedy Systems in every restaurant, pumping out the same product with speed and consistency. But it
didn't work for them. As they said in the film, one place was selling burritos! This wasn't what the
brothers had in mind when they opened up their limited many restaurants in 1948. So, this begs the
question. What did Ray Kroc do differently than made his franchising so successful? And that my
friends leads us to Hamburger University [Music] Ray Kroc made it his mission in life to sell
burgers and by the time he finished writing his autobiography in 1976, there were 4,177 McDonald's
restaurants in the U.S and 21 other countries. And they had exceeded 3 billion in sales. Ray Kroc
believed that his success was simply because he knew what Americans wanted. "The American public are
basically, beef eating people and it wears well. It is not... it's not spiced, it's... you can add the
salt and pepper and and ketchup and condiments, and things of that kind. And I've lived quite a
number of years and I know what people like, and they they they happen to like hamburgers and
I can't give them everything they like, but this one thing I sure can give them." Even from the start
Ray Kroc was so confident the American public's appetite for Burgers and Fries; that he banked his
entire life savings, his crumbling marriage and the mortgage of his house on McDonald's being a
success. But not even he could have predicted that the legacy of his future Empire wouldn't
be built on Burgers alone. At first Ray Kroc was thinking small time. He built his first McDonald's
franchise in Des Plaines and then slowly started to expand from there. He got his friends from the
country club to buy in and they built successful franchises throughout the Midwest. But in order
to get their rights to franchise this way, he signed a contract with the McDonald brothers.
In this contract, Ray Kroc was limited by two things. First, he cannot make any changes to the
restaurant, architecture of the building, Speedy System or menu, without consulting the brothers and
getting their agreement in writing first. Second, he earned only 1.9 percent from the gross profits
of all the franchises but 0.5 of that went to the McDonald's brothers. And he quickly learned
that 1.4 percent was enough to break even but not get rich. Now, initially he wasn't thinking of
opening McDonald's restaurants, in order to have the best burger joint in town. He was thinking
of his multi-mixer. The invention that brought him out to San Bernardino in the first place. His
logic was that the more McDonald's stores he opened, the more multi-mixers he could supply them with. He
even said as much in his Auto Biography - and I quote. "I've often been asked why I simply didn't
copy the McDonald Brothers plan? They showed me the whole thing and it would have been an easy
matter. Seemingly to patent a restaurant after theirs. Truthfully, the idea never crossed my mind.
I saw it through the eyes of a salesman. Remember, I was thinking more about prospective multi-mixer
sales than hamburgers at that point. Then, there was the name. I had a strong intuitive sense, that the name
McDonald's was exactly right and I couldn't have taken the name." Things changed when he met Harry
Sonneborn in 1955. The film has us believe that he ran into him at the bank but that's not what
happened. Harry Sonneborn was the Vice President of Tasty Freeze. A soft serve, fast food ice cream
parlor. He had previously bought multi-mixers from Ray Kroc so they were already acquaintances.
Sonneborn quit his job, sold his stock and Ray Kroc hired him. With the two of them working together,
they devised a way for Ray's franchising company to make even more money. And that's when they
formed the Franchise Realty Corporation. What this company did differently, was to take a more
direct role in developing McDonald's restaurants. McDonald's would choose the location and then
convince the proper the owner to lease or sell McDonald's the land. Once the restaurant was
up and running, the franchisees paid McDonald's a monthly fee. That would pay off the mortgage
and other running costs; plus extra to give the McDonald's corporation a greater profit. Nowadays,
this is how most fast food franchises make their money. The benefit of doing it this way, means the
rent and royalties from the franchisees is a much more stable and predictable income. McDonald's can
leverage their position on the market to negotiate deals because it controls the land and long-term
leases. It's almost like a subscription service. Where the subscriber or in this case, "The franchisee"
pays a fixed amount each month to be able to run a McDonald's restaurant. McDonald's charges more than it
needs and profits immensely. But the franchisees don't mind the markup because McDonald's is so
popular. So, they know they're going to make tons of money anyway. So, it's a win-win. In addition
to this new model of franchising, Kroc was still getting 1.4 percent of the gross sales. With
this flood of new income, he could then put money back into the system to open even more
restaurants. The result was a massive expansion of McDonald's profits within a few short years. "You
don't seem to realize what business you're in. You're not in the burger business.
You're in the real estate business. Land. That's where the money is." This plan worked,
tremendously! Between Kroc's ambition and Harry's financial planning. They created what would
eventually become the McDonald's Corporation. But there was still something else Ray Kroc needed to
make his vision of McDonald's a reality. He needed a way to standardize each and every restaurant. In
the film, once Kroc encourages his golfing friends to open up at McDonald's, he drops by to do some
quality control. What he finds disgusts him. New menu items, rubbish everywhere, people hanging out
and clogging up the car parks and new customers can't get in. "I was by your restaurant today too. Yeah, what about it? What about it? You got Corn on the Cob, you got Fried Chicken. People love fried chicken! Do they? Well, then let them go somewhere where they serve fried chicken." Kroc was starting to see
the same problem the McDonald's Brothers had when they started franchising. There was no way to
supervise quality control from a distance. This is what disenchanted the McDonald's brothers in
their franchising venture. And it was threatening to undo Ray Kroc's plans as well. So, he came up
with a plan. In 1961, in the basement of what Kroc wanted to be a new McDonald's store, was the
first classroom for Hamburger University. "Good good morning class. Good morning, Ronald!" The idea was
the brainchild of Ray Kroc and one of his longtime employees, Fred Turner. Fred Turner first met
Ray Kroc when he wanted to open a McDonald's franchise. Although, that didn't pan out, he did
go to work for Kroc at the Des Plaines store and quickly rose through the ranks to work with Kroc at
the Franchise Realty Corporation. Later renamed the McDonald's corporation. Fred Turner went on to
become the chairman and CEO of McDonald's after Ray Kroc left the post. The two of them solved
the problem of consistency by creating Hamburger University. An intense training course for all
McDonald's franchisees. It taught operators and managers Ray Kroc's core values. Quality, Service,
cleanliness and value. Or as he said time and time again. QSC and V. Ray Kroc later wrote, "We agreed we
wanted McDonald's to be more than just a name used by very different people. We wanted to build
a restaurant system that would be known for food of consistently high quality and uniform
methods of preparation. And that system worked! Operators and managers were trained with Kroc's
core principles and they went out into the field to operate McDonald's under exacting standards.
Failure to live up to the McDonald's system and they'd lose their franchise. This encouraged them
to stick with the Mantra of QSC and V and run the restaurant exactly as Kroc intended. If they
did all, that then their restaurant would be a success. And this is where Kroc excelled the most.
Not in knowing that Americans like burgers not in his salesmanship. Not in convincing Dick and
Mac to let him open up franchises. But because he built a successful franchising operation
based on standardization. This explains why we can go anywhere in the world and expect the same
quality of food in a McDonald's restaurant. The co-writer of Ray Kroc's biography, said it best in
the afterword - and I quote. "His greatest skill was as an instinctive leader who brought entrepreneurs
into a structure that both forced them to conform to high standards equality and service and
freed them to operate as Independent Business People. These franchisees form a system that by
1987, represented more than 2,000 independent companies. The McDonald's system developed a
business momentum that accelerated steadily during its Founders lifetime and continued gaining
velocity after his passing. This is why Ray Kroc called himself The Founder and why everyone
was so quick to agree. He named his Des Plaines store McDonald's number one. Because he saw it as a
separate entity from what he saw in San Bernardino. "The nerve of this guy. What? Guess what he's
calling his Des Plaines store? McDonald's number one What are we then? Could his head get any
bigger?" Yes it could and it did! Because whilst he succeeded in business, it was also
costing him his personal relationships. He married his first wife Ethel in 1922 but their
marriage was strained by Kroc's insistence on throwing everything he had including time and
money into McDonald's. He freely admitted that they became estranged and when someone better
came along, he divorced Ethel and that someone was Joanne. Ray Kroc first met Joanne in St Louis
Missouri at a restaurant. She was the pianist and he fell in love at first sight. Now, whilst the
movie makes it look like her husband was there when it happened, in real life the husband was
at home. Joanne and her then-husband decided to open a McDonald's restaurant after hearing how
successful the business was. Both Ray and Joanne were married but that didn't stop Kroc. He quickly
divorced Ethel and encouraged Joanne to do the same. Unfortunately, for Croc she didn't leave her
husband...yet. "Good things come to those who wait." Kroc did eventually persuade Joanne to leave
her husband and marry him in 1969. But before Joanne, he had also married another woman Jane
Dobbins Green and just listen to what he had to say about his second wife Jane! "Some people are
bachelor's by nature. I am not. I guess I need to be married to feel complete. I was content with Jane,
she was a fine lady but it was Joanne I loved and knew I always would. And check this out, the moment
he heard Joanne was reconsidering divorcing her husband to be with him Ray divorced Jane almost
immediately! Now, we never see any of this in the movie. Not sure if it was because of pacing or
some other reason but Jane Dobbins Green is omitted entirely. Instead, Ray goes right from
Ethel to Joanne. And the way he goes about it is cold! All he's willing to leave her is the
car, the house and some insurance policies. But despite McDonald's costing them their marriage
Kroc refuses to share any part of it with her. "I would sooner die, then give her one share
of stock at McDonald's." So, while the film glazes over his personal life, it does do a
good job of showing us his morally dubious side. Which, extends far past his many
wives. With Harry at the helm and a new woman at his side Rey goes after his next
target. The McDonald's brothers themselves. It was around the time when Kroc ditched his wife to be with Joanne that he also
decided that he was done dealing with the McDonald's brothers. At first he had no issue
with his contract. He was happy to sign up for 1.4 percent, having to check in with the brothers
and get a written agreement before making any changes. But very quickly he grew tired of this.
In the film, there's a scene where Joanne comes up with a solution to save money on freezer
costs for McDonald's restaurants. Instead of buying tons of ice cream for the milkshakes,
she finds a powder that supposedly works just as well but doesn't require refrigeration.
Rey is predictably over the moon about this as the freezer running costs are angering his
franchisees. But when he pitches the idea to McDonald's brothers, they're almost offended. "Ray, we
have no interest in a milkshake that contains no milk. Why don't we add sawdust to the hamburgers while
we're at it? Frozen french fries?! You don't want to save a bundle? Not like that! We're talking
about the same great taste. Same great taste, while boosting the bottom line. It's called a
milkshake Ray!" Unfortunately, this didn't happen in real life. There was no such product called
instant mix, like we see in the film. Although, McDonald's did later sell powdered shakes in
late 60s and early 70s but this takes place after the setting of the movie. The filmmakers
tweaked the timeline a little bit to show us Dick and Mac's reaction to the eventual decline
in quality. Subtle changes like these would even see the rise of far out conspiracy theories about
what's actually in a McDonald's burger. The theory goes that, allegedly the beef is bought from a
company called "100% Beef" so they could legally put that on their packaging. Which, is ridiculous
of course but perhaps the shift in milkshake quality, encouraged people to start questioning
other classic McDonald's items. Regardless, Kroc himself spoke about how he was getting tired of
the McDonald brothers. He called them obtuse and unreasonable; but for what it's worth. Dick didn't
feel the same way about Ray. In an interview with the Sun Journal on October 1st 1991, Dick told the
reporter that Ray Kroc was impressive. Aggressive but the type to sell anything. He was upset
that Ray had called himself The Founder but had no ill will against him. After all, Ray Kroc
made the McDonald's name a cultural icon. Ray though, did however swindle the brothers out
of their fortune. In the film, we see a phone conversation highlighting the moment when Ray
Kroc turned against the McDonald's brothers. "I am through taking marching
orders from you. You and your endless parade of no's. You have a profound
misunderstanding of what McDonald's is about! I have a far greater understanding of McDonald's
than you two yokels. You have a contract! You know, contracts are like
hearts. They're made to be broken." At an impasse, Ray Kroc decides he needs to
buy the brothers out and he pressures his lawyer to get McDonald's away from Dick and Mac no matter
the cost. He even childishly tells him "to make the problem go away" now this chronology works well
for a film but in real life it wasn't quite this spontaneous. According to Kroc's own biography,
he negotiated a $2.7 million dollar contract to buy the McDonald Brothers out of their shares
at the enterprise. This deal was to give each brother a million after taxes. As Dick told Ray
that amount was for the rights, the McDonald's name, the San Bernardino store and everything. Ray
Kroc also did a handshake deal. Promising them an annual one percent royalties but he never paid
them a dime after forking over the $2.7 million settlement. At the last minute though, the brothers
decided to keep their San Bernardino store which they gave to their longtime employees to run. Ray,
a proud capitalist who doesn't like to be outdone, decided that since he couldn't take the original
McDonald's, he put them out of business. Ray opened up a new McDonald's across the street from the
old one which had changed his name to the Big M shortly after the contract was signed. It didn't
take long before Kroc put the brother's store out of business …or so he says. In an opinion piece
posted in Time magazine in 1973, Dick McDonald disputed this assertion and said "Ray Kroc
stated that he forced McDonald's from the units we retained in San Bernardino, California.
The facts are that we took the name off the building and removed the Arches immediately
upon the closing of the sale of our company. To Kroc and Associates in December 1961. Ray was
also being, facetious when he told your reporter that he drove us out of business. My brother and
I had retired two years previous to the sale and were living in Santa Barbara, California. We had
turned to the operation of the San Bernardino unit over to a couple of long-time employees
of ours who operated the drive-in for seven years. Ray Kroc was always a great prankster
and probably couldn't resist the temptation to needle me. I am sure that he knows that if
there had not been any McDonald Brothers he would probably still be selling milkshake machines."
So, despite wrapping things up nicely for a movie the truth is that Kroc didn't run them out
of business. Because they were already done. Even so, now that McDonald's was his he started to
implement the changes he could never make before. Such as introducing the Filet o' Fish in 1965
when a Cincinnati operator was having a hard time getting Catholic customers to dine in on Fridays.
Traditionally a day when Catholics don't consume meat or at least Burgers. Then in 1968 he oversaw
the Big Mac and the hot apple pie. Two staples that are still in the menu today. He also changed the
architecture of the building, created new uniforms and opened up an even larger Hamburger University.
He also got rid of the neon arches on either side of the building and introduced The Golden Arches
we know today. Was it necessary progress? Probably. A company that doesn't change with the times is
likely doomed to fail but it was a fundamental change to the McDonald's Speedy System and one
he could only make, once he bought the brothers out. However, we can hardly dispute the results.
McDonald's today is the biggest franchise and most popular fast food chain in the world. So, Ray
Kroc did something right. He made some morally dubious choices along the way and saw himself
as something more grandiose than what he was. But he was certainly successful. Unfortunately,
for Ray Kroc his success changed him. One of his business partners, who had been with him
from his multi-mixer days, June Martino was sidelined along the way. In his autobiography, he
just casually writes that at some point he had to ask June Martino to retire. Although, he gives
no legitimate reason why. He called her part of "the old regime" and once Harry Sonneborn resigned
in 1967 due to ongoing disputes with Ray Kroc, it seems The Founder just wanted to clean up house.
Regardless of loyalties. Fred Turner though, got to stick around. Ray Kroc worked for McDonald's
until his death in early 1984. Whilst, he wasn't running the company he was still helping
out at whatever capacity he could. He was certainly dedicated to the company he created;
and his legacy lives on in the restaurants that are still around today. Overall the film is a
relatively accurate portrayal of the man who considered himself The Founder of McDonald's. It
only glossed over a few parts of his life and in dealing with the McDonald's brothers but managed
to portray just how his persevere as a businessman made all the difference. Even if it did
fundamentally change him as he became successful "Now, I know what you're thinking. How the heck
does a 52 year old, over the hill milkshake machine salesman - build a fast food empire
with 1,600 restaurants in 50 states, five foreign countries with an annual revenue of -
in the neighborhood of $700 million dollars? One word - Persistence! I'd like to give a shout out
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there's novpn.com forward slash history Buffs well that about wraps it up my name is Nick Hodges
and thanks for watching mystery Buffs and remember if you like the show help the channel grow if you
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until then I'll see you next time [Music] foreign [Music]
