The Untold TRUTH of Burger King

in 1957 when McDonald's was doubling the number of restaurants it opened every year a little-known Florida startup called instaburger was on the brink of bankruptcy and fighting to keep its doors open however this failing business would later become the global fast food Empire Burger King making tens of billions of dollars a year and operating in over a hundred countries around the world the truth of how they achieved this is crazy and involves smashing up their own equipment with an ax Burger King is undeniably an inspiring Underdog entrepreneurial success story there's also a dark twist because the secret to Burger King's success was stolen foreign the year was 1952 and the wildly popular CarHop craze sweeping Across America was reaching its Pinnacle all over the country people were skipping the traditional home-cooked meal to dine out on cheap hamburgers greasy fries and thick shakes delivered to their cars by costumed waitresses and paper hats pioneering the fast food movement was McDonald's a fast food business started by Two Brothers who'd managed to build a hugely popular restaurant thanks to their unique assembly line Style Kitchen which they called their Speedy service system this allowed them to produce large quantities of food very quickly and as crowds of people lined up to buy their hamburgers it was clearly a success however one day a man named Keith Cramer and his stepfather Matthew Burns paid a visit to McDonald's they'd been hearing about its popularity and that this hamburger standard was making a profit of a hundred thousand dollars a year well over a million dollars in today's market and so they wanted to check it out for themselves when Keith and Matthew got to McDonald's lift up to the hype they were so impressed with McDonald's streamlined operation that they began researching how they could achieve something similar themselves as clearly there was a business opportunity to bring this kind of fast food model to other parts of the country because at this point the McDonald's Brothers just had one single store however Keith and Matthew needed a way to figure out how to mass produce food so quickly and during their research they stumbled across two pieces of culinary equipment called Miracle insta machines the first of these was the insta shake machine which turned out four flavors of milkshakes at a rate of roughly six per minute and the second machine was the insta Broiler oven which consisted of an automated conveyor system that employed electric heating elements to cook a continuous stream of beef patties while simultaneously toasting an equal number of hamburger buns after passing through the oven The Toasted buns dropped into a basket while the burgers slid down a shoot into a heated vat filled with ketchup mustard relish and special seasonings the journey from raw beef to Sauce drenched hamburger took just over 90 seconds meaning the Instagram the oven could crank out about 400 Burgers an hour for Keith and Matthew who were concerned more about volume and efficiency than producing a quality product this was the perfect answer to McDonald's Speedy service system they made a deal with the inventor of these insta machines where Keith and Matthew would have the rights to use them in a new restaurant they were creating in Florida which they named insta Burger this was the predecessor to what later became Burger King but initially they used the name instaburger instead as the insta was a direct reference to the insta machines that produced the burgers so quickly so although Burger King today might not like to admit this there's no doubt that Burger King was heavily inspired by McDonald's the whole business was started because Keith and Matthew wanted to try and replicate mcdonald's's fast food Burger business unfortunately for Keith and Matthew the insta Broiler oven they bought to mass-produce Burgers quickly was nowhere near as good as the intricate system McDonald's had created in fact they soon realized the insta Broiler Oven broke down almost every few days it was extremely temperamental and the quality of burgers It produced wasn't exactly that either ironically though if the equipment they bought hadn't been faulty it's quite likely Burger King as we know it today wouldn't exist but we'll get to that first though something strange happened while construction of the first instaburger restaurant was underway in Jacksonville in 1953 Keith and Matthew inadvertently found their first franchisee David Edgerton was actually in the process of becoming a Dairy Queen franchisee when he stumbled across the half-built instaburger restaurant that was still in progress David mistakenly thought the unfinished building was going to become a Dairy Queen and so he stopped in to chat with Keith and Matthew thinking that just like him they were about to become owners of their own Dairy Queen of course Keith and Matthew explained that actually they were building a totally new restaurant chain called instaburger but sensing an opportunity here the instaburger founders began selling David on their burger Concepts they showed him a demonstration of their Miracle insta machines they bought that could produce Burgers so quickly and thankfully this was a day where the machine worked perfectly when David saw this he was amazed he left Jacksonville believing he had glimpsed the future of dining out and he wanted to be a part of it shortly after uh David backed out of his deal with Dairy Queen and contracted with Keith and Matthew to open an Instagram store of his own which would be based in Miami so before the first ever insta burger restaurant had even opened they had a franchisee ready to open a second store but before agreeing the deal David made a key suggestion change the company's name to insta Burger King David even sketched a logo depicting a cartoon King sitting atop a hamburger with an arm wrapped around a giant Shake he left the doodle with Keith and Matthew and suggested they use it for a trademark and Keith and Matthew immediately liked her the word King gave the brand a more premium feel and having a character to associate with the brand made it much more unique than just instaburger so when the first store opened its doors in Jacksonville in April 1953 the restaurant featured a sign that extended 12 feet above the roof with the logo and name David had suggested insta Burger King was officially up and running and for all intents and purposes the future looked bright in fact one year after opening the Jacksonville store Keith and Matthew began advertising for more franchisees I circulating Flyers that claimed insta Burger King was the greatest advancement in Food Service in the last 50 years the pitch even suggested that a twenty thousand dollar investment in a franchise like theirs could pay for itself in just one year and if you've seen one of these flyers at the time you might have believed this really was a great investment opportunity to open one of your own insta Burger King restaurants unfortunately if you had believed that you'd have been wrong and you'd have probably lost a lot of money foreign [Music] service system was undeniably confusing for customers you would order from your car at one window but then had to pay up front before getting the food which was very uncommon at the time you were then given a numbered ticket for each item purchased and then you would take that to a second separate window and collect your items but you often had to then repeat your whole order again the system was quite frustrating for customers who were accustomed to having the food delivered to their cars and pay for it after it was delivered however the two instaburger Founders and their first franchisee David all believed that customers just needed time to adapt to the new system although definitely the system itself wasn't very efficiently designed to begin with but still the much bigger problem was that their insta Broiler machine to quickly make the burgers was agonizingly unreliable often breaking down in the middle of the day and of course the whole selling point of the insta Burger King stores was fast and cheap food but if their ovens kept breaking down and needed to be repaired the food wasn't that fast and it wasn't even that cheap really their burgers were 18 cents whereas their competitors sold similar burgers for 15 cents so the founders Keith and Matthew were not gaining the traction they'd hoped for with their first insta Burger King restaurant in Jacksonville meanwhile David Edgerton instaburger's first franchisee opened his story in Miami on March 1st 1954. but just like the co-founders it was a difficult start for him too because of the unreliable Burger making equipment however David still strongly believed that their fast food dining experience was the future but David also knew that making his fortune in fast food would require a significant number of stores he was never gonna get rich just having one franchise location so he agreed with Keith and Matthew he could handle all of the Miami area and open more insta Burger locations there now you might be thinking how could David afford to be opening more stores if his first one had only just opened and wasn't even going that well and you're right he couldn't afford it David had invested all the money he had into this first small Miami store which wasn't doing particularly great sales numbers yet so with no more capital of his own to invest he needed to bring in a partner David began contacting several well-known restaurateurs all of which decided to pass which wasn't too surprising given David's first store was hardly a big success however one of the restaurant tours he spoke with did recommend David to speak to a man who owned a small local restaurant called the Brickle bridge and it's here that we meet the fourth and final protagonist in our story and arguably the most important person in Burger King's history James McLemore [Music] James McLemore had a rough start in life to say the least he was born in 1926 to a reasonably wealthy family in New York City however his father lost all the family's wealth in the infamous stock market crash of 1929. James's beloved grandfather died shortly after with many believing the family's sudden dark Financial turn caused his health to deteriorate meanwhile James's mother was then committed to a psychiatric hospital or as it was then known an insane asylum James never saw his mother again as children weren't allowed to visit Honestly though maybe that was for the best as this was in the early 30s and those hospitals were like something out of a horror movie remember back in the 1930s one of the prevailing Medical Treatments for mental health conditions was a lobotomy which was literally cutting Connections in the brain as for James since his father lost his job due to the Great Depression they'd moved to James's grandmother's Farm in the countryside diet but a fire ravaged the whole town and his grandmother was forced to sell most of her possessions in order for the family to have enough money to survive despite the Bleak outlook for James's future through hard work he would eventually manage to enroll in Cornell University he arrived there with just 11 in his pocket but graduated in 1947 after learning useful business and management skills and after a series of jobs in the restaurant industry James saved up enough money to start his own restaurant called the Brickle Bridge which he set up in Miami Florida whilst this restaurant was nothing particularly special it had started to make a modest profit however it was at this point that James got introduced to a man named David Edgerton the first franchisee of insta Burger King and David had come to pitch James on the idea of going into business with him to open more of these instable cooking stores now David had only been running his first insta Burger King store for three months at this point but he explained that he had the rights to open more of these stores all across Miami and he just needed a business partner to help him and James was immediately drawn in by the idea of teaming up to open multiple fast food restaurants together not only did David and James both get on really well and were both Cornell graduates both men also agreed that running a single restaurant wasn't the future they wanted but instead the more lucrative path was owning a chain of fast food restaurants and partnering up would be the quickest way to achieve that plus as part of his pitch to James David estimated his first insta Burger King restaurant was generating a profit of 28 of sales a substantial number for such a small operation so James almost agreed to come on board right there on the spots he just asked to take a look at the books to see the profits for himself unfortunately James then discovered that David's strength was neither in accounting nor organization when James asked to see his financial statements David gave James a peach basket stuffed with contracts receipts and outstanding bills not only did this look incredibly unprofessional and unorganized after James went through all the peach scented Financial records himself he discovered that David's belief the store was making a 28 profit was complete be wrong insta Burger King was actually operating at a 56 loss at this point you'd think James would abandon the idea completely go back to his modestly profitable Brickle Bridge Restaurant and forget all about into the Burger King but he didn't James was much more excited by David's pitch of them teaming up to open a chain of insta Burger King stores and so Against All Odds James and David still struck up a partnership in his Memoir James explains that he based this financially questionable decision on the fact that although insta Burger King technically was making a loss this was mostly due to the large initial startup costs and if the store was run well the model did make Financial sense plus more importantly James like David the two are on the same page with everything and shared a similar vision and what David lacked in accounting skills he more than made up for with integrity and hard work true skills James valued extremely highly so the two became business partners James sold his Brickle Bridge Restaurant and invested every penny he had in insta Burger King of Miami his twenty thousand dollars contribution matched David's total investment to that point and made the man 50 50 Partners in the business although remember the business was currently making a loss but it was actually this partnership James and David that would shape their future success of Burger King not the original Founders back in Jacksonville however before they found that success they first had a lot more failures to go through you see you may be tempted to think that these two newly minted Partners would use James's infusion of capital to pay down the debt on their existing Miami outlets and address the Myriad of issues plaguing their operation like the poor quality burgers or the insta Broiler Ovens that kept breaking or even the ordering system that customers were unhappy with but none of that is what they used the money for instead David and James got a bit overexcited about the concept of running multiple stores and thus they leveraged their Capital to open two new locations serving the same mediocre product intermittently prepared on the same faulty insta equipment James later admitted that opening more locations before ironing out their laundry list of operational issues was a critical mistake that pushed the company to the brink of insolence the fact that he and David understood this makes their next move all the more confusing before we get to the next part of the story let's be honest here as much as this video might be making you crave some fast food too much fast food is terrible for your skin which is why I'm pleased to introduce today's video sponsor the Swedish beauty Tech brand foreo now I'll admit I don't know much about skin care but what I do know is that I'm always interested in technology that can help improve my life and foreo has a wide range of innovative devices for home use to help make looking good easier than ever for example their bare microcurrent device practically gives you a mini face lift from home bear is clinically proven to improve skin firmness and reduce wrinkles in just one week in fact 95 of users report after using this for a little while their face looks younger and cheekbones look more lifted so this seems like an ideal gift to buy for anyone who cares about skin care or maybe even for yourself if you're looking for smoother and healthier skin just click the top Link in the description below to check it out now to keep their floundering operation from running out of money James managed to convince Harvey through Hoth a wealthy friend of his father-in-law to invest 65 000 in exchange for half of their business Harvey who moved from Miami after stepping away from his 200 million a year trailer Manufacturing Company could easily afford to risk 65 000 on this New Concept what's baffling though is what David and James did with the investment money they got instead of reducing their debts by paying down their existing loans the partners opened three more locations across South Florida by the end of 1956 into the Burger King of Miami was drowning in debt and saddled with seven tragically unreliable insta Broiler Ovens that produced marginally decent food luckily for David and James their fortunes were about to change thanks to the most unlikely of events you see one day during the middle of a busy lunch shift James and David heard the Familiar clattering of the insta broilers conveyor belt grinding into a halt this once again meant the machine had broken down and would be out of action whilst it was repaired thus losing them customers and revenue David had only just recently fixed the machine and he was fed up he grew so angry with it he grabbed a hatchet from his toolbox and literally smashed the Machine James was somewhat amused given he hated the machine too for all the problems it caused them but he was also concerned that their operation would be down until a replacement oven could be built and shipped from California David however had no intention of paying for another malfunctioning Miracle machine and instead vowed to build a better one with help from a local mechanic the engineering minded David kept his promise and began trying to customize one of their insta Broiler machines to create something better that was more reliable after three weeks of almost continuous trial and error they finally made a breakthrough David successfully created a New Flame Broiler instead that employed gas not electricity to cook the burgers not only did this invention prove infinitely more reliable than the old machines had been but by making the broiler run on gas David inadvertently created the broiled flavor that would become Burger King's signature tastes still to this day the fact that their burgers are flame grilled is a key part of their marketing so that impulsive decision to smash their old Burger making machine with a hatchet had forced David to spend time creating something better and he'd succeeded their new flame broiled machine was a big Improvement that helped the company make more money since now they could reliably produce large quantities of burgers on a consistent basis Without The Machine breaking however it wasn't this alone that changed their fortunes it was actually a controversial discovery that would catapult the company to success foreign David and James's new machine to make the burgers was much more reliable and with things going well they went to pay a visit to Jacksonville to see the original insta Burger King Founders turns out things were not going so well for Keith and Matthew they were still puzzled where insta Burger King was failing as a concept and had wrongly come to the conclusion that their location was to blame for their poor sales numbers the solution they came up with was to purchase a movable prefabricated stainless steel building for their next restaurants the idea was that if sales weren't sufficient wherever they set up shop they'd simply pick up a move someplace else where they might fare better this was the reason David and James had driven up to have a look to see if this idea was something they should incorporate for the insta Burger Kings in Miami that they ran but after sitting outside the stainless steel store for two hours the restaurant failed to attract a single customer literally nobody bought anything so James decided to go for a walk around the local area and just a block away from the shiny new insta Burger King James discovered a rundown burger stand with a line of customers queuing up around the building intrigued he decided to join the queue himself and whilst waiting he noticed that nearly everyone was ordering a whole bag full of Hefty Quarter Pounder Burgers served on five inch buns topped with lettuce tomatoes pickle onion and mayonnaise the burgers were much bigger than what insta Burger King and competitors like McDonald's sold James purchased two of the giant sandwiches and headed back to give one to David as well after finishing but David and James agreed it was the best burger they'd ever had on the drive back to Miami James suggested to David they needed to make a burger just like that for their own stores and James even said he had the perfect name for her the Whopper a name that would convey the large size of their new burger James also suggested adding signs to their stores the advertised insta Burger King as the home of the Whopper David liked the idea too and agreed to give it a shot now this was actually quite a risky move as they were going to judge 37 cents for their Whopper burger whereas other competitors like McDonald's charged us 15 cents for their burgers so suddenly focusing so heavily on this Whopper burger was a Gamble fortunately it was a gamble that paid off the whopper's quarter pound Patty mountain of toppings and signature flame broiled flavor made the sandwich an instant hit and provided David and James with the niche they'd been searching for since 1954. finally they had something to distinguish their brand of course James had technically got the idea from copying a small little burger shop in Florida and it could definitely be argued that all of insta Burger King's success was really built on Stolen ideas firstly Keith and Matthew had copied the fast food concept from McDonald's then David and James had copied this new signature Whopper product from a different Burger chain but then again in business it's often the execution that matters not the idea and within months of becoming the home of the Whopper insta Burger King of Miami saw an astonishing increase in sales and for the first time in years things were truly looking up for David and James they had the improved Burger making equipment which was more reliable a popular product a niche in the market and regular returning customers however whilst it's the Burger King of Miami was finally turning a profit keitha Matthew use original Burger King of Florida continued to struggle years of combating faulty equipment and a lack of direction from them as company Founders put them in a difficult financial situation eventually Keith and Matthew followed in their franchisees footsteps and started flame grilling the burgers instead of using the insta machines but it was all a little too late Keith and Matthew didn't have the same success with their stores and ended up defaulting on their loans so whilst insta Burger King in Miami was flourishing the original instaburger in Florida was going out of business thanks to the new changes made by David and James by 1959 their miami-based insta Burger King stores destroying massive uptick in sales and people around the country took notice tourists and businessmen visiting South Florida recognized the company's potential and often inquired about opening franchises in other parts of the country at the time however David and James weren't authorized to sell Outlets outside of their South Florida territory which is the region they'd agreed on with Keith and Matthew however 1959 was also the year that Keith and Matthew defaulted on their loans this meant the person who'd given them the loans a guy called Ben Stein took control of insta Burger King now Ben knew very little about the fast food industry and didn't particularly want to run the business so James realized this was an opportunity he asked Ben if him and David could become the owners of both the national and international franchise rights of the company and in exchange Ben would get 15 of all the money they made without having to do any work So basically David and James would run everything and have control of the company and Ben would get 15 of whatever money they brought in the deal worked for both parties and the contract was signed later that year in 1959 meaning David and James now finally had full control of insta Burger King's operations in Truth for years they had been the ones leading the company anyway because even though Keith and Matthew deserve some credit for originally starting the business it was David who came up with the name and better burger cooking equipment and it was James who would come up with their most popular product another significant brand changes and so the whole time it was really this Duo that had turned the Chain's fortunes around but now that they've made this deal David and James made the critical leap from being the franchisee to the franchiser meaning they would be the ones selling stores to other people all over the world and officially they would be the ones making the big decisions about the direction of the company in fact one of the first changes was to drop the word insta from the Chain's name completely since they were no longer using those old temperamental insta machines anyway and thus the company officially became simply Burger King home of the Whopper and now that they were fully in charge of the business David and James set their sights on becoming the top fast food franchise in the country which meant somehow keeping Pace with the growth of McDonald's in 1962 Burger King opened seven new stores and posted an after-tax profit of 73 058 by comparison McDonald's opened 107 new locations and turned a profit of 439 310 clearly there was a big gap to make up but by 1965 Burger can close that Gap to two to one and was on Pace to net three quarters of a million dollars the following year James estimated that they were roughly three years behind McDonald's in scale but as far as growth they were matching the pace that the industry leader had set and by some metrics such as new store openings they were even gaining ground James got excited thinking they might actually be able to catch McDonald's in a few years and become number one then everything changed in April 1965 McDonald's went public with an initial stock price of 22.5 a share by the end of the day the stock value hit 30 by the end of a month it reached 49 a share and continued to climb fairly steadily for the next three decades today a thousand dollar investment in mcdonald's's IPO would be worth over six million dollars and that doesn't include the dividends it would have paid over five plus decades but basically the huge success of McDonald's on the stock market meant the Sprint for Supremacy between Burger King and McDonald's was over before it even really started at least that's how everyone outside of Burger King saw it James on the other hand believed they just needed the right partnership to help them compete with McDonald's someone with a lot of resources and sure enough in 1967 the Pillsbury company one of the world's largest food producers approached Burger King about a merger James was immediately very eager to strike a deal because he believed Pillsbury would either take the company public or Finance the exponential growth required to keep Pace with McDonald's his business partner David on the other hand and felt Burger King would be better off staying the course and remaining independent rather than relinquishing any control to another company then again David also knew that James who was 41 at the time was feeling pressure from his wife Nancy to dedicate more time to his family and so by making a deal with a big company like Pillsbury it should mean James and David had more support to run the business and thus free up a bit more of their time after all they'd been working non-stop on this company for years so for that reason David could see the Merit of this merger having said that the deal that Pillsbury put forward required James to stay on as president and CEO for at least five years his salary would increase from 32 500 per year to 67 500 per year the equivalent of around 600 000 today and he would be granted full autonomy to continue running Burger King as he saw fits more importantly though Pillsbury verbally agreed to Grant Burger King access to its considerable resources this meant that James could assign others to handle some of the travel and day-to-day operations leaving him a little more time with Nancy and their children so the deal was agreed until Pillsbury absorb Burger King and its 247 restaurants for 18 million dollars the deal also resulted in James David and the other investor Harvey owning 10 of the century-old Pillsbury company this was a huge corporation and meant on a personal level all three of them became very wealthy nevertheless the deal was not quite the perfect partnership David and James had hoped for as it soon became apparent that Pillsbury had no intention of letting the company operate completely autonomously like they'd initially suggested they became quite actively involved in decisions Burger King was making as a result on August 21st 1969 David actually resigned from Burger King and the Pillsbury company he remained in the restaurant business for the next half century developing New Concepts and investing in other franchises including several competitors to Burger King James on the other hand stayed with Pillsbury for longer and kept pushing them to either take Burger King public or restructure their franchise model to more closely resemble McDonald's unfortunately the hillsbury's board was unwilling to take the same risks that Ray Kroc had with McDonald's in fact Pillsbury felt Burger King's growth had been too Rapids allowing their franchisees to become overly independent as a result they chose to pump the brakes and slow growth until the franchisee situation was resolved for context in 1968 the year after the merger with Pillsbury McDonald's opened 109 restaurants was Burger King opened 108 but by 1972 McDonald's was opening a new store every day whilst Burger King's number dropped to 91. disappointed with the slower growth approach Pillsbury was taking with the company James stepped away after his contractual five-year commitment although he would remain a consultant and brand ambassador for Burger King until his death in 1996. at the time of James's retirement in 1972 the number of Burger King restaurants in operation around the globe had nearly tripled from what he and David sold to Pillsbury just five years earlier so there's no doubt that the company had continued to be successful but pillsbury's plans for steady growth didn't quite match the huge ambition and expansion plans James and David had had and to be fair to Pillsbury there was a reason for their caution by expanding quickly mm Burger King hadn't been able to carefully monitor all of their franchise locations and as a result the experience you got in one Burger King store was very different to that in another Burger King store and Pillsbury wanted to make everything more consistent so they began a plan called operation Phoenix and it all began when they managed to poach a high-ranking executive from McDonald's a guy called Donald Smith who would go on to initiate several key changes to Burger King using lessons he'd learned from his time at McDonald's for example Burger King began buying more of the land that Burger King stores were built on so they could lease this to franchisees thus giving Burger King more control and creating an important new Revenue Source Donald Smith also broadened the menu created new store designs and helped standardize the look and feel of all Burger King restaurants the changes were undeniably successful and helped set a solid foundation for future growth however since the Pillsbury merger in 1967 ownership of the Burger King corporation has passed between numerous different investment firms some of which did push for faster expansion for example in 2002 tpg captain tall purchase Burger King for 1.5 billion dollars and took the company public in 2006. the stock sale generated 425 million dollars in Revenue the record for an IPO of a us-based chain restaurant in 2009 its best year ever Burger King posted revenue of 2.54 billion dollars from 12 078 Outlets worldwide over the next decade that number climbed over nineteen thousand then in 2010 3G Capital purchased a 31 stake in Burger King for 3.26 billion eventually merging the company with Canadian Coffee House giant Tim Hortons to form restaurant Brands International which is the current parent organization of Burger King at the moment estimates of Burger King's present value vary widely between about 7 and 10 billion dollars however was Burger King's owners and parent company has changed many times over the years there is no denying that the foundation of this fast food Empire was laid by James and David's Relentless determination still to this day decisions they made back in the 50s like the introduction of the Whopper have played a pivotal role in helping the company expand into so many new locations whilst the original co-founders deserve some credit to it was really James and David that transformed the company from a failing restaurant into a success by gambling literally all of their money on the business and going all in on air but there is one company that made a much bigger gamble have you heard the insane story of FedEx and how the founder quite literally bet the company's remaining money in a casino to try and save the business from bankruptcy if you haven't yet seen this you're going to want to check it out right now by clicking the thumbnail on screen I hope you enjoyed the story of Burger King and I'll see you in the FedEx video in just a second cheers

Channel: MagnatesMedia

Views: 1,833,781

Keywords: Burger King, burger king, burgerking, Burger king story, burger king history, the story of burger king, history of burger king, how burger king became successful, burger king business, burger king empire, business, money, marketing, businesses, companies, company, company stories, business stories, business documentary, BURGER KING, MAGNATESMEDIA, Foreo

Id: W8faexXg3fo

Length: 31min 15sec (1875 seconds)

Published: Mon Mar 06 2023