McDonald's Success: Process Simplification and Automation

In 1954, a man in his early fifties, not in the best of health, traveled from Chicago to Los Angeles. The following day, he drove about sixty miles toward the Mojave Desert until he reached a small, octagonal building in the corner of a small town. At first glance, the unimpressive structure didn't match his expectations.

?Shortly before eleven o'clock, employees began to arrive dressed neatly in white shirts, smart trousers, and paper hats. This caught the stranger's attention. Next, the workers started bustling around, pushing trolleys loaded with food and drinks into the building. The scene reminded the stranger of ants stirring around a picnic. Soon, cars filled the parking lot, and customers formed queues near the windows.

Impressed by the bustling activity yet still uncertain, the stranger decided to join the line. He started a conversation with the man in front of him, dressed in a seersucker suit. Curious, the stranger asked, "What's the attraction here?"

Have you never eaten here before?" the well-dressed man inquired.

Nope," the stranger replied.

"Well, you're in for a treat. You'll have the best hamburger you've ever tasted for just fifteen cents, and you won't have to worry about tipping waitresses."

Intrigued, the man left the line momentarily and walked around the corner, where he discovered several workers enjoying their hamburgers in the shade.

The stranger was?Raymond Albert Kroc.?Ray Kroc, a determined salesman for Multimixer machines, had a diverse career path. After leaving school, he became a door-to-door salesman and later attempted to serve as a Red Cross ambulance driver during World War I by lying about his age. However, the war ended before he could be deployed. Returning to sales at seventeen, Kroc explored various job roles and even played the piano for extra income. In 1927, he began selling paper cups in Chicago and, in 1938, took on the challenge of promoting a new product: a machine capable of mixing five milkshakes simultaneously. Establishing his own company, Prince Castle Sales, he traveled across the country to sell the innovative "Multimixer."

Following the busy lunchtime period, Ray Kroc introduced himself to the bosses of the drive-in restaurant, Maurice (Mac) McDonald and Richard (Dick) McDonald, and was astounded by the efficiency of their operation. The clarity and effectiveness of the McDonald's brothers' approach captivated Kroc. Their menu was minimal, focusing on nine items, including burgers, fries, and beverages. While other establishments sold hamburgers for thirty cents, McDonald's offered them for fifteen cents, with cheeseburgers costing only four more. The star attraction, however, was the three-ounce bag of French fries, priced at a mere ten cents, coffee at five cents a cup, soft drinks at a dime, or a large milkshake for twenty cents. That was it!

The journey towards their groundbreaking concept was a gradual culmination for the McDonald's brothers. Hailing from a humble background in rural New Hampshire, they arrived in California in the late 1920s armed with high school diplomas. Despite trying their hand at various jobs in the film industry, none proved successful. So finally, in the late 1930s, they established a hot dog stand near the Santa Anita race track in Arcadia, California. Then, in 1940, they ventured into a small drive-in barbecue restaurant in San Bernardino, a burgeoning blue-collar city.

?Although business was thriving, the McDonald brothers became convinced they could achieve even greater success through efficiency. So, in the fall of 1948, they made a bold move: they closed down their restaurant, bid farewell to the carhops, simplified the menu, and embarked on reinventing their food delivery process.

Like Henry Ford, the McDonald brothers succeeded by simplifying their operation and removing unnecessary elements. Streamlining the menu and eliminating servers reduced costs and increased efficiency. Through automation and customer involvement, they significantly lowered labor expenses and achieved impressive sales figures, with one of their small shops generating over $400,000 annually. In addition, they obtained lower ingredient prices through strategic bulk purchasing, leading to increased demand and further cost reductions. Even with limited items, McDonald's had significant purchasing power compared to coffee shops with extensive menus. Recognizing the potential, Ray Kroc saw the opportunity to scale up the operation while maintaining its simplicity, aiming to reduce costs further and expand the business.

Kroc stumbled upon an extraordinary untold triumph in San Bernardino. The McDonald brothers had transformed their barbecue establishment into a streamlined assembly-line operation known as the "Speedee service line." While most restaurants of the time offered an extensive menu, the brothers maintained a consistent nine-item selection. Food was prepared and served using automated methods, ensuring prompt delivery of hot meals to customers. The payment was made upon order, and patrons cleared their tables after dining.

While the McDonald's brothers licensed several outlets in California and Arizona, these restaurants deviated from the San Bernardino location original McDonald's concept and quality. Ray Kroc observed that only the San Bernardino store maintained the pure McDonald's operation, as others added items like pizza, burritos, and enchiladas to their menus. In addition, the quality of the hamburgers suffered in these locations, with inferior meat and greasiness due to the addition of hearts and high-fat content.

Kroc envisioned a host of 'pure' McDonald's franchisees. He struck a deal with the McDonald's brothers to franchise their concept. In 1955, he founded the Franchise Realty Corporation and opened his inaugural McDonald's restaurant in Des Plaines, Illinois. In 1960, he changed the name to the McDonald's Corporation. A year later, he bought the business from Dick and Mac McDonald for $2.7 million.

Kroc's primary objective was to transform McDonald's into a vast chain. His first step was to create a universally high-quality product. Then, he developed a standardized system that allowed no room for variation, ensuring simplicity for franchisees while maintaining absolute control and consistency. In his memoir, he dedicated twelve pages to extolling the excellence of McDonald's fries, which he believed surpassed their competitors. He described their preparation as a meticulous process carried out with unwavering dedication, both under the McDonald brothers' management and on a significantly larger scale under his leadership.

?However, perfecting the fries on a large-scale industrial level proved to be a significant challenge for Kroc. When he opened his first franchise restaurant in Des Plaines, Illinois, in 1955, he struggled to replicate the distinctive taste of the McDonald brothers' fries. Despite his efforts, his fries were not on par with those served at the original restaurant in California. Frustrated, Kroc reached out to the brothers for guidance, but they couldn't pinpoint the issue.

?The breakthrough finally came when a Potato and Onion Association researcher inquired about the fries-making process in San Bernardino. Kroc learned that the secret lay in storing the potatoes in open, chicken-wire-shaded bins, allowing ample time for the wind to dry the potatoes and transform the sugars into starch naturally. Then, with guidance from potato experts, Kroc developed a natural curing process using a large electric fan. The result? The fries now tasted identical to those served in the original restaurant.?

?With this victory, Kroc solidified the consistency and quality of McDonald's fries, an essential component of the uniform system he aimed to establish. This system would allow for efficient franchising to thousands of aspiring entrepreneurs while maintaining strict control and unwavering consistency across all McDonald's restaurants. It was a pivotal step in Kroc's journey to turn McDonald's into a global phenomenon.

Like Henry Ford, Kroc recognized that the primary goal of their systems was to offer a good product at an affordable price. They understood that scaling up the operation while maintaining consistency in product and procedure allowed for lower prices. This, in turn, led to increased customer satisfaction, sales, profits, and overall company value. Kroc, for example, maintained the price of McDonald's hamburgers at fifteen cents for nineteen years, emphasizing affordability. Only external factors like inflation prompted a reluctant increase to eighteen cents in 1967.

Who contributed more value - the McDonald brothers or Ray Kroc? Well, It depends on people's perspective. Financially, Kroc made a more significant impact. However, the brothers were the original product, brand, pricing, and system creators. Kroc's addition was a highly successful franchise system that replicated the McDonald's formula on a massive scale. The brothers' innovative use of a production-line system in the service industry was groundbreaking, offering standardized products and efficient automation. Their ability to sell a large volume of high-quality hamburgers and fries at a lower price was a significant achievement.

McDonald Brothers exemplified the power of process simplification and automation, resulting in cost reduction and expanded market demand. By subtracting complexity and implementing assembly-line operations, they halved prices, making fast-food meals accessible to a broader audience. This success story highlights the potential for similar transformations in industries and services that have yet to experience such advancements. Businesses can create economic systems that offer dramatic improvements over existing market models by identifying opportunities for simplification, standardization, and replication.