The CRAZY Truth About McDonald's

McDonald's is the largest restaurant chain in the world with over 40,000 restaurants spread over 120 countries by this point the golden arches are an inescapable site wherever you go and McDonald's has sold well over 300 billion hamburgers but the original McDonald brothers who started the business had their company all but stolen from them because what began as a single drive-in restaurant was soon transformed into a global fast food Empire because of an unrelenting milkshake machine salesman and even though it may appear to be a simple Burger business from the outside McDonald's secretly dominates an entirely different industry completely unrelated to selling fast food at times McDonald's is an inspiring story of an entrepreneur defying all the odds and building an empire but at the same time it's a story of betrayal fraud and countless scandals at one point McDonald's even came face to face with the Italian mafia honestly this is a crazy story so sit back and relax as we journey through the the insane history of [Music] McDonald's in the early 1900s the American landscape was undergoing a massive transformation the Ford Motor Company perfected the mass production of the car and all across the country roads were being paved to make way for it but the introduction of the car did more than change the way Americans traveled it also changed the way they ate in sunny California hundreds of Drive-In restaurants were popping up and customers loved the experience you would drive into the parking lot and be greeted by a waitress at your window a few minutes later your order would be delivered right there you didn't even have to get out the car to spice things up some restaurants even had waitresses deliver food on roller Gates that was the world that the young Richard and Maurice McDonald encountered when they left New Hampshire and moved to California in 1927 but to begin with the two brothers Richard and Maurice or Mac as he was Otherwise Known didn't even think about restaurants they they wanted to start a career in the movie business and so they got jobs pushing film equipment and handling props on movie sets saving up with the hope of someday buying their own movie theater when the Great Depression struck Richard and Matt carefully watched every penny they earned and 5 years later they bought the cheapest theater they could find Unfortunately they got what they paid for and their rundown theater earned them barely enough to survive so after 5 years of struggling to turn a profit with their theater the brothers decided it was time to abandon the movie business and pursue something more ative everywhere they looked the McDonald Brothers saw new Drive-In restaurants popping up and so they figured there has to be money to be made here their first restaurant was called McDonald's barbecue and originally they sold hot dogs it was a tough challenge between learning how to work a grill take and deliver orders and manage a restaurant staff they had a lot on their hands but after two hard years of running their restaurant they were finally ready for something bigger they set up a new shop in an octagonal building on a parking lot in San Bernardino it was bigger in a better location and with new items on the menu on weekends the new McDonald's barbecue attracted over 100 cars at a time and the brothers managed a staff of 20 waitresses while they rushed to make milkshakes and cot dogs ribs pork sandwiches and burgers their cash registers were soon flooded with money by 1948 the brothers had made enough to live in a mansion so their competitors were completely stunned when they did the unthinkable and abruptly closed everything down Richard and Mac had the best restaurant in town but the current operation was driving them crazy first ly their restaurant had become San Bernardino's local teenage hangout spot and was frequently filled with leather jacket wearing customers that brought just as much trouble as they did business secondly it demanded too much of their time and energy in the kitchen and was extremely stressful to run and finally finding qualified Cooks was hard and expensive and so from the outside it looked like the McDonald brothers were just giving up but behind closed doors they were devising a new plan to completely transform their restaurants you see when they looked over their receipts from the last year the brother found that 80% of their revenue was generated exclusively from hamburgers so they went with their gut and cut their menu down to only the essential a hamburger cheeseburger french fries milkshakes and Coca-Cola they then obsessed over Reinventing the process of making a hamburger the brothers traced the outline of their store on their home tennis courts and experimented with different layouts measuring and timing every step carefully when they were done every step at the Burger making process had been streamlined for example instead of having waitresses to serve customers in their cars customers would order at the window another example was having everyone in the kitchen handle only one task whether it was working the grill cooking the fries packaging the burgers or taking orders this meant they didn't need skilled workers to produce quality food and since they only sold Burgers now they could make the food before an order was even placed the orders got fulfilled in around 15 seconds they called their new approach the Speedy service system and it produced delicious hamburgers with the same efficiency that Henry Ford's factories produced cars this kind of assembly line St production was a whole new approach to the restaurant business but it meant that their restaurant was cleaner less hectic and less expensive it also meant that Richard and Ma could sit back from their office and watch the system work its magic however when they reopened McDonald's the Speedy server system did cause some confusion customers would sometimes just sit in their car expecting a waiter to come serve them as the notion of going up to order yourself was totally new but once everyone realized how the new process worked and that they could get their orders within 15 seconds they were hooked the McDonald Brothers had redefined fast food and word of it was spreading in the industry to their competitor's surprise Richard and Mac were happy to Spill the system secrets and they invited anyone in for a full tour of the kitchen for free some of the biggest fast food franchises today like Burger King and Taco Bell got their start by shamelessly copying the Speedy service system but by 1954 Richard and Mac McDonald were serving more burgers fries and milkshakes than they ever dreamed possible and it wasn't too much work they lived a simple rewarding life working together in California but little did they know everything was about to change for McDonald's it's time to introduce the real protagonist of the McDonald's story Ray Croc despite coming from very humble beginnings Ray had a lot of ambition even as a young kid whilst his mother was at home giving piano lessons to help out with the finances she ordered him to help out with regular housework but she never caught Ray complaining instead Ry took pride in making beds sweeping the floor and scrubbing the furniture until it shined in his spare time he was taught to play the piano and with unwavering discipline he mastered it from an early age but when he was 15 the United States joined World War one and Ray couldn't bear sitting at home as his fellow Countryman risk their lives so he lied about his age managed to get deployed as an ambulance driver for the Red Cross by coincidence he worked right alongside Walt Disney when Ray returned home he was still in high school but he'd had enough not 6 months later his parents couldn't do much to stop him from dropping out he was determined to make it out on his own as a piano player so he took to the streets to make a living by his talents when he was 20 Ray went against his parents' wishes again and got married he understood that this was a big responsibility though and he had to take care of his wife Ethel so for the first time in his life he decided to get a stable job he found it at the Lily cup company where he sold paper cups since he was energetic and charismatic Ray took naturally to sales by day he scoured the state chasing leads and by night he still played the piano for a radio station when he finally made it home he fell into bed exhausted Ethel did soon become frustrated by the Limited Time Ry had to spend with her though and when she told Ry she was pregnant he knew he had to rethink his strategy the piano got him paid but it would never be enough to support his family instead he cultivated his ability as a Salesman and luckily for him that was the right choice because of prohibition hotels and bars began serving ice cream since they weren't allowed to sell liquor and thus American food service his businesses bought paper cups Like Crazy Ray even found ways for companies to sell more of the products that used his paper cups it was win-win his clients got more revenue and he made more cup sales but in October 1929 the stock market crashed unleashing the Great Depression and the growing economy of the United States came to a sudden stop Ray's boss at Lily cup sat him down in his office and told Ray that he would have to take a pay cut Ray's face turned red I can't accept that he said but as Ray heard his boss explained to him that he didn't have an alternative ative Ray said to hell with it and quit right on the spot but when his wife Ethel found out she felt Ray was betraying her and their newborn baby by quitting a stable job when they were in desperate need of money so Ray went pleading to get his old job back but his relationship to his boss was tainted forever when he returned to his job one of his customers had invented a new milkshake machine he called the multimixer allowing for five milkshakes to be made at once when Ray tasted the delicious new milkshakes it made he saw an opportunity if Lily cup sold the multi mixer as well they would automatic sell more paper cups as the products went together perfectly however when Ray proposed the idea to his boss he ridiculed him saying a paper cup company shouldn't be selling milkshake machines this time Ray had really had enough and quit once again he decided to start his own sales company to sell the multi mixer instead and he wasted no time getting started he was up against a tough economy with a family to feed and had to make money fast despite ad normous adversities Ray worked 14-hour days and entertained potential clients late into the night with a Relentless work ethic and a good product he was soon driving all around the country selling thousands of multi mixers per year and making a decent living but just as soon as his efforts began to pay off America was thrust into World War II because of the war most factories shifted their focus to supplying the Army and multimix weren't getting made anymore Ray was living his worst nightmare he was a Salesman without a product to survive he tried selling a bunch of different products until the Allies declared victory in 1945 but once the war ended the market finally took a positive turn for Ray with the baby boom following the war ice creams became all the rage and so did multimixer Ray began selling them to the biggest franchises in America such as Dairy Queen however this boom also meant that by the 1950s newer and better products were entering the market and the multimixer was falling out of fashion if fre didn't find a winning product soon he could be in serious financial trouble but he then noticed something odd in his records surely it was a mistake a tiny restaurant in a remote Town 60 Mi east of LA had ordered a grand total of eight multimixer restaurant rarely bought more than one what on Earth would they need eight for Ray's curiosity was too much for him to handle he had to see for himself so he took a trip to San Bernardino California Ray arrived early in the morning but at first glance he was not impressed with McDonald's but very quickly the parking lot began to get busier and busier probably 150 people showed up when Ray paid 15 cents for hamburger and received it almost instantly he couldn't believe it everything was clean his Burger was delicious new customers came in every minute and it was a family envir environments Ray had never seen anything like it he introduced himself to the McDonald brothers and they told him all about the operation Ray immediately loved their Speedy service system and he finally understood why they needed eight multimixer to operate this was the most active and most efficient fast food operation he'd seen in his whole career the brothers also told Ry that they were looking for a franchising agent someone to build more McDonald's restaurants like their across the country and find operators to run them the McDonald Brothers enjoyed their simple life running this one store and so they didn't want to do it themselves but knew that if more McDonald's restaurants like this one did open they would also need a lot more multi mixers so he told the brothers to call him if they found someone to help them with franchising McDonald's however for the next week Ray had trouble sleeping his imagination ran wild as he was tormented by a vision of McDonald's potential when he sold a multimixer his client used the same one for 10 years but McDonald sold hamburgers to thousands of people every day he knew he somehow had to get involved in this he called Richard McDonald to ask if they'd found a franchising agent by now they pattern so Ry asked well what about [Music] me when Ray began franchising MD Donald's in 1955 he was 52 years old he had diabetes arthritis and had lost both his gallbladder and thyroid gland and still he worked with the same enthusiasm he had when he was only 18 having struck a deal with the McDonald Brothers to help them franchise Ray was on a mission to put a McDonald in every corner of America and so he founded McDonald's System Incorporated a separate entity to the original restaurant that was run by the McDonald Brothers the contract with the McDonald Brothers stated that Ray's job was to scout new locations to open new McDonald's stores and to find restaurant operators to run them Ray would then train them on how to use the Speedy service system and repeat the process with more stores all across the country the contract also stated that if Ray wanted to make any changes in the store's design or change any part of the Speedy service system he would need to receive written confirmation signed by both Brothers now for every new McDonald's restaurant Ray opened he received $950 up front and the store operator would pay him 1.9% of the revenue the store generated however of that 1.9% over a quarter would go to the McDonald Brothers as a royalty payment so Ray was essentially getting 1.4% of the money each McDonald's store made and at first Ray was thrilled about this partnership but soon he would start to feel he'd got a very bad deal and that his relationship with the McDonald brothers would be much worse than he could have imagined it all began when Ray found a great new spot for his first store near his office in Desplains Illinois and he also found a great new operator to run at the McDonald brothers gave Ray a new design featuring two Golden Archers for the new store but the design didn't include a basement which was absolutely needed for the store to function properly Richard and Mac both agreed Ray should build the basement but they refused to sign anything which the contract clearly stated was required before Ray could proceed since it was necessary Ray went ahead and built the basement anyway but this man he was in breach of the contract unless the brothers could technically sue him at any time once the store open though the Golden Archers became a local attraction Ray arrives at the store every morning to check that everything was ready he would then drive to work at his sales company which he still owned and return every night to clean up any cups or wrappers in the parking lot it wasn't his job to do that of course but R made sure that the quality service and cleanliness in the restaurant was held to his personal standards in just a few months the McDonald's in Illinois was even more impressive than the original McDonald's operated by the McDonald Brothers still Ray's compan McDonald's System Incorporated only got $950 for it plus 1.4% of the store's Revenue so whilst the store's operator was getting rich Ray himself was barely making any money considering all the work he was putting in but it soon paid off in another way the store was so impressive that Harry sunborn the vice president of an ice cream chain called Tasty Freeze decided to suddenly quit his prestigious job and come to work for Ray Tasty Freeze was one of the largest franchises in the country at this point however Ray only had enough money to pay Harry $100 a week less than a quart qu of his salary at Tasty Freeze surprisingly though Harry was so keen on being a part of McDonald's that he accepted Harry's job would be to manage the finances of McDonald's System Incorporated including negotiating loans and devising a way for them to actually make a profit Harry had a lot of experience from Tasty Freeze so in 1959 Ry appointed him as CEO this way Ray could focus on building as many stores as he could without worrying about the financial side of the business something that totally disinterested him in their first year as a Duo they got 18 franchises signed up to run their Ro Donald store nine of them in California however although it was easy to find new operators there it turned out to be incredibly difficult to control them from halfway across America the first few operators didn't have the same appreciation for the Speedy service system that raided and they began experimenting with new products procedures and higher prices it was impossible to enforce quality control not to mention keep any consistency between one McDonald's and the next seeing this initial failure Ray decided it was best to start expanding closer to home but they learned a few key lessons that would shape McDonald's fundamentally firstly they learned the importance of setting a minimum standard of quality in the system they would allow operators to experiment but they could never sacrifice three fundamental pillars quality service and cleanliness second they learned that the best type of operators from McDonald's were the young hungry entrepreneur types one of the best operators was a young Jewish man who tried selling a Catholic Bible to Ray he found it admirable and made him an operator these sorts of franchises were better because they were active operators with a lot of drive and hustle not just owners who wanted a passive income finally Ray learned that if they were going to make serious money it was not going to be from a 1.4% service fee the average McDonald's made around $250,000 each year the that met McDonald's System Incorporated only made about 3,500 per store every year they would soon have to find a better way to monetize but for now all of this experience did give Ray and Harry the confidence they needed to start a mass expansion of McDonald's in its second year however with only 18 restaurants at this point McDonald's was still only one small fish in a massive ocean of comp competitors and the fight to become the next big national chain was going to be [Music] brutal by 1956 McDonald's was already facing a number of worthy competitors partially because of the McDonald Brothers they' revolutionized fast food 8 years ago but they'd welcomed others into their kitchen creating lots of competitors who copied their system food was no longer unique to McDonald's Ray was trying to open up new McDonald's locations across the country but at the exact same time so were similar franchises like In-N-Out Burger Burger Chef and Burger King even outside of burgers Colonel Sanders was already expanding Kentucky Fried Chicken and KS junor was doing the same with hot dogs with so many fast food franchises fighting for dominance McDonald's was far from being a guaranteed success so how did McDonald's manage to out compete every single one of them the answer it turns out was the genius of how Ray and Harry structured their franchising Empire at the time the most common way to franchise a brick and mortar business was territorial franchising which means selling the exclusive right to operate in a given territory by selling huge contracts for whole areas franchisers would make a lot of money up front before their first St ever opened and it meant they weren't dependent on their restaurant actually succeeding to make a profit this sounds good in theory but in practice it in the interests of the franchise or and the franchise e weren't fully aligned instead of doing this Ray decided to build McDonald's one store at a time if an operator wanted to manage an additional store they would need to prove that their first McDonald's was successful this was slower but it guaranteed superior quality of every store in the long run not just that but traditional franchisers made most of their money by selling supplies to their franchises things like kitchen equipment cooking supplies and even things like the restaurant sign franchisers made quick profits by overpricing their supplies and so they became more focused on selling stuff to their franchisees than actually becoming a successful retailer Ray decided against selling supplies to his franchisees because it turned them into his customers instead of his partners since Ray's company only made money from its 1.4% service fee based on how much revenue each store made it was in his best interest to make his franchisees as rich as he possibly could it was a simple yet bold strategy and it meant that McDonald's System Incorporated interests were fully aligned with the interests of its store operators both of them were trying to make McDonald's stores the best and most profitable they could be as opposed to many other chains where the franchisers just make all their money selling two franchises even in person Ray treated McDonald's operators as equal Partners in his mission both franchisor and franchise benefited from the success of the system as a whole and to everyone work to make McDonald's a success it didn't hurt that Ray was also a very convincing salesman when it came to communicating his unshakable belief in McDonald's future so many franchisees fully bought into his vision but because Ray was essentially selling a system he needed to find the right person to help perfect her luckily Ray already knew the man for the job a young guy named Fred Turner When Ray had first met Fred he was just 23 years old and had been hired to flip burgers in one of their McDonald's stores but from day one Ray saw his own energy and enthusiasm for McDonald's reflected in Fred he was a natural leader with an incredible work ethic so he quickly climbed the ranks of McDonald's and within a few years re named him Vice President of Operations just like Ray Fred was very detail oriented in his new role Fred was responsible for maximizing the efficiency of every procedure in the Speedy service system and before long Fred had basically turned every McDonald's restaurant into a small Factory they took the already successful Speedy service system that the McDonald Brothers had made made it even better and more efficient of course changing the system went completely against Ray's contract with the McDonald Brothers but by this point he was used to getting ignored by them the McDonald Brothers didn't seem to like how quickly Ray was moving with everything and so Ray often just pushed on without them thanks to Ray's franchising plan of treating franchises as his partners and not customers and thanks to Fred's Innovations the franchisees were getting incredibly rich with their stores through sheer Word of Mouth McDonald started earning its Fame more and more people were hearing about this exciting business opportunity to own and operate your own McDonald and so instead of Ray having to look for ambitious entrepreneurs to run their stores they were now coming to him the mcf family as Ray called it was growing but as McDonald's System Incorporated grew so did its operating costs and they still hadn't yet found a better way to make money the McDonald Brothers refused to change anything in the contract so Ray and Harry were barely hanging on with their 1.4% service fee Ray understood you could only get loyalty from your team if you gave it first so he sacrificed his salary to be able to afford paying his growing number of employees for his first eight years Ray didn't collect a single penny the only reason he could support his wife and daughter was because by 1959 his old sales company was still running basically on autopilot Ray was working 80-hour weeks with unrivaled passion at an age where most people were thinking about retirement but he still had two problems to solve firstly his company needed to find a new way to make money or they could never grow to a sustainable scale and secondly there were the McDonald Brothers Ray felt they were a huge pain to deal with and he resented that he was doing all of this work but seeing very little reward himself But ultimately the McDonald's brand still technically belong to them of course Ray was Keen to change that and in doing so it would bring out the very worst of Ray Croc Ray was building a growing number of McDonald's across America but whilst his operators were getting rich his company still hadn't found a way to make a profit the McDonald's Brothers lawyer who Ray called his mortal enemy always advised them to never sign anything Ray asked for so they insisted on the 1.4% service fee that have been agreed in the original contract which made it impossible for Ray to make any real profit without a creative solution thankfully Ry had his financial wizard Harry Harry came up with an idea to create franchise realy Corporation a separate company from McDonald's System Incorporated at first Ray was a little confused why Harry was suggesting they get into real estates but it soon became clear it could be the solution to all their problems up until this point McDonald's store operators would pay rent to whoever owned the land beneath their store but now raised new company franchise realy would buy the property and lease it out to the McDonald's store operators this put Ray and Harry in a powerful position for a few reasons firstly it gave them a degree of freedom from the McDonald Brothers as a separate company franchise realy wasn't subject to the original contract Ray had signed with them second it gave Ray and Harry more control over their franchisees they could enforce quality standards as conditions in their lease agreement for example if an operator was not keeping their store clean franchise realy had the right to terminate the lease on their property thirdly owning the land finally gave Ray and Harry a way to make some decent money instead of rent the store operator would pay a flat monthly fee or 8.5% of the store's Revenue whichever was higher add to that the 1.4% service fee they were already getting and you have some serious cash flow finally franchise realy asked for a security deposit from its operators to build the store and they could use that money as a down payment on the land without spending a dime of their own this gave franchise real D assets on its balance sheet something that was immensely helpful when negotiating with banks and getting access to more funds for expansion it was a brilliant plan but the real beauty of it was how it once again aligned the interest of McDonald's with its franchises whilst 8.5% of your Revenue go into franchise realy sounds like a lot in reality it just meant that Ry had yet another reason to ensure their franchisees became extremely rich the more money an operator made the more money Ry and his companies made now that they had a winning formula thanks to getting into the real estate business Ray and Harry could sense that they were on the brink of something extraordinary with McDonald's by 1960 McDonald's Had 228 restaurants in operation and slowly but surely they were buying up all the land beneath them however it was also around that time that Ry was introduced to Joan Smith who happened to be the wife of a McDonald's franchisee Ry met her when she was The Pianist at a restaurant and they had an instant connection and ended up playing the piano and singing together unlike Ray's wife eel Jan shared his passion for business and they talked at length about what McDonald's could become after spending more time with her Ray very quickly fell in love with her her and before long he filed for divorce with Ethel and proposed to Joan instead Joan had fallen for Ray as well but she was married with a family at the time so she told him she'd have to think about it while she did Ray set out to do something he'd wanted to do for quite a while he needed to finally get rid of the McDonald Brothers before we get to the next chapter it's time to answer one of the questions I get most how do we make these videos for magnetes media and how can you create highquality videos yourself on a budget well for years now I've been using story blocks who are today's awesome sponsor story blocks is a curated stock library with everything you need to create high quality videos all in one place they have over a million video clips templates songs sound effects images and more and with assets from story blocks you don't have to worry about copyright issues getting demonetized or spending ages to find what you're looking for because you can easily search their library to find exactly what you need and know that you're legally covered to use it like this song right now that's from story block and where is a lot of stock footage you have to paper clip with story blocks you can download as much as you want with just one lowc cost subscription honestly it's been a game changer for my channel and if you make any kind of videos I think it will be for you as well so to get started with unlimited stock media downloads at onet Price head to story blocks.com magnates or click the link in the description there are two sides to this story there's the official story and a much darker one told by the McDonald Brothers you see by improving on the Speedy service system without their written permission Ray had violated his contract with the brothers more times than he cared to count and this meant they could technically sue him at any time they were always unpredictable when it came to legal matters and so Ray decided to act before they had chance to ruin his plans he called them up and declared that he wanted to buy them out of McDonald's completely Ray told them to name their price and call him when they knew a few days later the phone rang but when Ray heard the number his draw dropped to the floor $2.7 million that gives a million for me a million for mac and 700,000 for Uncle Sam Ray thought about it for a while this was everything he wanted he'd get the McDonald's name the original store in San Bernardino and the rights to everything McDonald's related so he'd be fully in charge but he had no idea where to get $2.7 million sure things have been going well for Ray with this new real estate strategy but $2.7 million in 1960 is roughly the equ valent of $28 million today even for an upand cominging business that's a lot of money but Ry knew this was his chance so he agreed to the deal thankfully Harry had some powerful contacts on Wall Street so Ray was able to borrow the cash it meant taking on a lot of debt but Ray was so confident in the future of McDonald's he felt certain he'd make it back however the brothers suddenly decided that they didn't want to give up their own McDonald's store but they still insisted Ray paid the same price Ray was Furious and it looked like the whole deal may fall apart but eventually it was agreed that the brothers would keep their store as long as they renamed their restaurant to the Big M so it was technically not associated with the McDonald's brand by now Ray hated the brothers with a passion but at least it seemed the deal was done but here is where the story splits into two paths the official story is the deal went well and the McDonald brothers were soon showing off their million dooll check to their friends and family however Richard McDonald tells a different story according to him a key part of the deal was that the brothers wanted to keep the 0.5% royalty they'd received all this time Ray claimed that if this was written into the contract insurance companies would charge him too much so Ry supposedly agreed to pay the royalty out of his own income but that the deal would have to be done on a handshake basis rather than being official the brothers were nervous to take Ray at his word but they reluctantly agreed trusting that he wouldn't screw them over but Richard McDonald claims that when it came time for Ray to pay up the royalties the brothers were owed he refused never paying them a single penny given how successful McDonald's went on to become that 0.5% of all revenue Vue would have been worth billions of dollars however since the agreement wasn't on paper there was nothing the brothers could do and they could never prove that the deal ever happened this way now it's entirely possible that Ray did make this handshake deal and then just completely backstabbed them knowing they could never prove it but many who have looked into the story of McDonald's believe that Richard's story is nothing but a myth either way a few things are certain 7 years of arguing with the McDonald Brothers had cemented Ray's hatred for them and he definitely did want revenge as soon as Richard and Max signed that piece of paper to transfer all ownership of McDonald to Ray he told one of his employees I'm normally not a vindictive man but this time I'm going to get those sons of Ray's first order of business after negotiating the buyout was to open a McDonald's store a block away from the store owned by the brothers which they'd had to rename to the Big M Ray's intention for opening that store was purely to run them out of business it was cruel they weren't doing any harm by keeping their single store as a passion project but it worked the big hem couldn't compete with a McDonald's right next to it and so the brother's dream of wanting to keep their store was shattered Ry also went about rewriting history by this point Ray and Harry had Consolidated McDonald's System Incorporated and franchise realy Corporation into a single entity the McDonald's corporation Ray called himself the founder of McDonald's and advertised his first franchise in Illinois as McDonald's number one essentially erasing the McDonald brothers and their original store from the company's history with the brothers out of the way Ray then got the call he'd been waiting for it was Joan the woman he left his wife for but she didn't sound excited Joan said her mother was disappointed that she was even considering leaving her husband and Joan's daughter told her that if she got a divorce she could forget that she even had a daughter as a result Joan told Ry she couldn't marry him Ry put the phone down and sat in silence staring blankly at the floor he'd finally got the McDonald's business to himself but the love of his life was now gone at that moment Ray decided it was time to throw himself into the business even more which meant things were about to get crazy by 1961 the McDonald brothers were out of the way and so there was nothing stopping Ray from transforming McDonald's into everything he dreamed it could be Ray wanted an aggressive marketing campaign to cement McDonald's as a household name but with only 228 stores across the country most Americans had never even heard of McDonald's National advertising campaign would be Overkill the team decided that the best way to promote McDonald's would be locally with the help of their franchises it was a gamble for sure selecting the right franchisee to run a restaurant was hard enough and now they were trusting them with McDonald's image but Ra's personal preference in franchises were the young entrepreneurial types and this became one of McDonald's strengths because they were always experimenting with new ideas on how to improve their own restaurants for example one operator wanted to use TV advertising to get children interested in his McDonald's he found a local show called Bozo circus and when it came time for the Bozo character to promote McDonald's the actor was a spectacular salesman and the local McDonald's was soon flooded with kids when the TV show was canceled though they were left without their biggest promoter but realizing how successful targeting children had been McDonald's created a new mascot Ronald McDonald's and they made him a staple of every single McDonald's along with the whole cast of characters including the Hamburglar and Grimace McDonald's would later double down on this strategy further by introducing the Happy Meal which included a toy and thus helped get new customers hooked on McDonald's from an early age it was only in later years that many would come to question the ethics of so aggressively targeting children with their fast foods but still individual McDonald's operators like this one were responsible for creating other Innovations like the Big Mac the drive-thru and plays and that was The Duality of Ray Croc whil he was very keen to ensure the same consistent quality of experience at every McDonald's he also encouraged his franchises to use their own creativity McDonald would then choose the best among these local experiments and Implement them into the system as a whole so every other restaurant would benefit too for many companies growing larger can offer mean less Innovation but for McDonald's every new operator came with fresh new ideas to bring to the table so as more stores began to Market themselves across the country eventually McDonald's did begin to get national attention at this point Ray figured the next logical move was taking McDonald's public on the stock market something no other fast food company had done by 1965 and the timing was perfect America was in the thick of one of the most generous bull markets in history So within weeks of going public McDonald stock Rose over 6 % in value Ray was now a multi-millionaire as was Harry who' been with Ray pretty much from the start however it wasn't all plain sailing for the McDonald's team in the 60s Harry had felt McDonald's needed to slow down its aggressive expansion due to fears of an upcoming recession but they main competitor Burger King did the exact opposite in 1967 Burger King opened over 100 restaurants and by the next year Burger King was only 100 total restaurants away from surpassing McDonald's seeing that McDonald's could lose its spot at the top of the fast food industry Ray demanded they ignore the warnings and resume the expansion campaign immediately in truth tensions between Ray and Harry had been starting to grow for a while they had very different perspectives and often saw things very differently whilst Harry was technically the CEO Ray was the company president and owned the majority of company stock so he could replace Harry if he needed to and after the expansion argument he nearly did but luckily it didn't come to that as Harry stepped down from the company voluntarily and Ray took over a CEO himself but one day while giving a speech to a group of operators Ray saw that Joan was in the crowd the woman who'd broken his heart years ago Ry worked into his speech that he'd now achieved all he ever wanted in life except one thing the crowd was confused what he meant but Ray was staring right at Joan as he said it to get her close Ray called for an Afterparty in his suite by the end of the night Ray and Joan were the only ones left singing old favorites at the piano Joan told Ry that this time she didn't care what anyone told her she was getting a divorce from her husband and wanted to marry Ry instead now for 15 years Ray's entire life had been consumed by McDonald's and it had paid off but now that he was starting a new marriage with the woman he'd been chasing for years he wanted to finally think a bit less about the business for a man as driven as Ray this certainly didn't mean he would retire it just meant he would only think about McDonald's while he slept and up to about 5:00 p.m. and then keep the evenings reserved for Joan while Ray would remain the public face of McDonald's for many years he wanted to name a new driven CEO to lead the company forward and that responsibility fell to Fred Turner the young fry cook had picked out and promoted to Vice President of Operations all those years ago he'd become like the son Ry never had and after shadowing Ray for years Ray felt Fred was ready to take over a CEO and whilst Ray had left big shoes to F it's fair to say Fred delivered the first challenge Fred toon was expanding McDonald's globally none of their competitors had been able to succeed outside of America yet and even Ray had tried to expand McDonald's into the Netherlands Canada and the Caribbean however their original mistake was trying to adapt their menu to the local culture and it failed horribly when Fred tried breaking McDonald's into Japan he knew he had to take a different approach instead of changing the menu he left it intact but like in America he left marketing to the locals and it worked the Japanese people loved the authentic McDonald's experience in fact they admired its Japan likee efficiency the same strategy worked in other countries as well and McDonald's became one of the main exporters of American culture since they recruited locals to operate the restaurants and Market the brand the world received them with open arms next on Fred's List was putting expansion into to high gear Fred had climbed the ladder at McDonald's all the way from Burger flipper to CEO so he understood the business from all angles when he was younger he perfected every aspect of operations from finding the right temperature to cook fries in to the Way employees spoke to customers now though Fred was optimizing the process of finding a franchisee and opening a new store and it's fair to say he succeeded with Fred a CEO there was no escaping McDonald's new stores were being built across the world faster than even Ry had ever dreamed was possible by 1974 they were opening more than 500 restaurants every year and the number only kept growing only a few years before Burger King had equaled McDonald's in terms of yearly growth but Fred broke McDonald's into the global market and more than tripled the number of stores Burger King was that far behind and McDonald's was fast becoming one of the largest and most iconic companies in the world however now that McDonald's was a global conglomerate it was up against a new and dangerous caliber of challenges as the international face of fast food McDonald's was about to face some of the worst scandals in its history because of its enormous size McDonald's became a target for public humiliations and much much [Music] worse McDonald's began running a competition where Monopoly stickers were attached to many of its products if you found the right stickers you could win prizes most of these were simple items like a free Big Mac or soda but there were also a small smaller amount of high value prizes you could win like cars Vacations or even the grand prize of a million dollar it was a fun Lottery that definitely helped increase sales of McDonald's but it just so happened that a former policeman and a member of an Italian crime family managed to rig the entire game and steal millions of dollars you see McDonald's Had hired an impartial third party company to manage the promotion so that McDonald's themselves would not have any control over who actually won the prizes the chief of security for this third party company was a former cop called Jerome Jacobson who was responsible for Distributing the winning stickers to stores Across America when Jerome was transporting the winning stickers they were already in an envelope with a tamperproof seal and he was accompanied by a chaperone So in theory there was no way he could steal them however due to a mistake with their supplier one day Jerome received some of these tamperproof seals to his personal address instead of the company address Jerome realized that he could essentially open the sealed envelope containing the winning stickers switch them for different low value stickers then reseal the envelope you using these tamperproof seals he'd received thus leaving no evidence behind that he' just stolen the winning pieces he simply had to go to the bathroom so that the shaon with him couldn't see what he was doing and make the swap over there and come out as if nothing had happened now of course even though he was able to steal the stickers Jerome couldn't just redeem the winning stickers himself that would be extremely obvious he'd stolen them so he started selling them to people he knew for example he sold one winning sticker to his brother-in-law and another to his local butcher in exchange they gave him a cut of the prize money once they'd redeemed it at the McDonald's store where Jerome was supposed to have delivered it Jerome made some good money from this however the operation went to a whole new level when Jerome met an Italian mobster called Jerry Columbo Jerome and Jerry struck up a partnership where Jerry would sell the tickets to his Connections in the Columbo crime family and their Associates so Jerome began stealing more and more winning McDonald's Monopoly stickers gave them to Jerry who would then sell them off to his Network and for years McDonald's and the general public were completely unaware that millions of dollars of prizes were in fact going to organized criminals for Jerome everything was going perfectly up until Jerry Columbo died in a car accident with his main partner in crime now gone Jerome cut ties with the Columbo family and many suspect this was ultimately Jerome's undoing you see in the year 2000 the FBI got an anonymous tip to look into the McDonald's Monopoly Prize winners when they did the FBI noticed that some of the winners were related they didn't have the same surname but it was still a very odd coincidence so they dug deeper and found that even though the prizes had been claimed all across the US the majority of winners seemed to be actually living in Jacksonville clearly something was going on there were millions of dollars at stay here so the FBI contacted the heads of McDonald's who wanted to stop the game immediately when they heard the news but instead the FBI convinced them to run the promotion one final time so they could do an undercover operation and thus when the next million-dollar winner claimed his reward a man named Michael Hoover the FBI approached him pretending to be a film crew and asked him some questions about which store he'd got the winning sticker from of course he hadn't actually got the sticker from a McDonald's store he' got it from Jerome but right after the undercover agents left Michael made a phone call in which he mentioned Jerome's name and literally said they bought it all of them so he was bragging about how his lies had worked completely unaware he hadn't really spoken to a film crew but instead undercover FBI agents who had wiretapped him and were now hearing everything he was confessing over the phone the FBI now had concrete evidence and they swooped in in total 50 people were convicted in association with the scam with the main leader Jerome pleading guilty and having to pay back all the millions of dollars he'd stolen along with a three-year jail sentence however Jerome had run this scam from 1988 to 2001 and by the time they were caught by the FBI McDonald's had already paid out $24 million to illegitimate winners not just that because the big prizes had been paid out to scammers real McDonald's customers had missed out on the prizes so McDonald's gave away around $25 million to random customers to try and make up for this they also paid 16.6 million in IL legal settlements in total the scammers cost McDonald's over 65 million but the real losers were all the customers who'd been participating in the contest hoping to win prizes unaware they couldn't possibly win them as most of the big prizes were being illegally given to the mafia and their connections this fraud was undoubtedly a huge controversy for McDonald's however just a couple of years later the company would be involved in an even bigger scandal [Music] in 2004 Morgan Spurlock released his documentary supersize me at the time several people were suing McDonald's claiming their food made them overweight and caused them health problems but none of them could prove McDonald's was really to blame as they obviously ate food other than McDonald's as well when Morgan learned about these cases he challenged himself to eat only McDonald's every day for a month that meant breakfast lunch and dinner and if an employee offered to superp siiz his meal he'd take the largest possible option from the menu Morgan knew eating only McDonald's would have some strange effects on him but he underestimated the challenges true health risks today there's a widespread understanding that eating fast food can be detrimental to your health fast food usually contains lots of sugar saturated fats and preservatives so most health professionals agree that it's better to avoid fast food not surprisingly Morgan's 1month McDonald's binge worried his doctors by the end of 30 days Morgan put on 27b his cholesterol and blood pressure were through the roof and he felt depressed for a good portion of the challenge there were scenes of him vomiting after eating a full super siiz option meal and he even developed serious heart complications all within the span of a month after the documentary aired the public image of McDonald's was never the same 6 weeks after the documentary was released McDonald's removed the super size option from the menu they even started the Go Active Campaign which promoted healthier options and exercise McDonald's claimed these decisions were not influenced by the documentary but the damage was already done super siiz me portrayed McDonald's as junk food and the reputation stuck to them and it is interesting to look at the data here in the 1960s when McDonald's Had merely 228 restaurants Americans obesity rate stood at just 133% whereas today more than 40% of Americans are obese over three times what it was 60 years ago and many correlate the rise of fast food chains like McDonald's with the global Trend towards obesity now of course it's important to note that this is influenced by a wide range of factors and fast food is only one of many contributing elements and ultimately consumers choose what they eat but there's no doubt that as the largest fast food chain in the world and the one who perfected it the story of fast food is closely tied with the story of McDonald's but that certainly hasn't stopped McDonald's success with a market cap of over $200 billion today it's one of the 50 largest companies on the planet what's interesting though is that every year the company has its annual Founders Day events a celebration to honor Ray Croc not the McDonald's brothers who really started the company but whil they were the true Founders it's also true that the business would never have been as big as it is without Ray Croc it was Ray who constantly wanted to keep expanding whilst the brothers wanted an easier more relaxed life besides while Ray and the brothers did grow to hate each other that's nothing compared to what happened with the owner of KFC and you can click here to watch that story next I'll see you there cheers

Channel: MagnatesMedia

Views: 1,686,853

Keywords: Business story, Business stories, Mcdonalds story, history of mcdonalds, mcdonald's history, mcdonalds movie, story about mcdonald's, mcdonalds documentary, business origin story, business documentaries, business stories, stories about business, business movies, business movie, mcdonalds ray kroc, mcdonalds origin story, how did mcdonalds start, mcdonalds, McDonald's, mcdonalds business, mcdonald brothers, story of mcdonalds, story of mcdonald's

Id: MhspjNiER9Q

Length: 45min 20sec (2720 seconds)

Published: Mon Nov 13 2023