What we can learn from the Big Mac?

BIG Macs mean big profits - so it might not come as a surprise that McDonald's is one of the biggest companies on the planet.

But just how much is McDonald's worth and how much does it rake in every day?

According to the latest figures, McDonald's is worth a whopping $175.5billion - about ￡133billion.

It features as the 13th most valuable US brands of 2021, with a brand value - what someone would pay for it if it were for sale - of $155billion.

This is a 20% increase on the previous year, according to?Statista.

In 2021, McDonald's generated a staggering $23.2billion in worldwide revenue.

But did you know, this brick and mortar startup does not owe much of its success to its founders but to a salesman?

A salesman, named Ray Kroc.

He mortgaged his house at AGE 52 and risked losing EVERYTHING for one shot.

Here is his fascinating story:

Ray Kroc never saw much success.

He had to lie about his age at 15 to serve in the World War.

He lived paycheck to paycheck most of his life.

Ray Kroc mainly worked in sales, he worked as a paper cup salesman for Lily Tulip Cup Company. (Some of his other jobs to help make ends meet included pianist and DJ on a local Oak Park, Illinois radio station.) He transitioned from a successful career selling paper cups into working as a traveling milkshake machine salesman (Ray Kroc Documentary). The McDonald brothers, who owned a small restaurant chain based out of San Bernardino, California, became clients of Kroc's in 1954 after they had purchased eight Multimixers, which sold at $150 a piece (a hefty price back then).

The five-spindled milkshake machine promised to make five shakes at a time. "This little fellow came in with a high voice," recalled Richard McDonald in a 1991 interview. "He says, 'My name is Ray Kroc.' My brother and I were impressed with him. He was a very aggressive guy. That's the type it takes to sell anything."?-Sun Journal

At age 50 he was selling milkshake mixers, door to door.

A regular restaurant could do with 1 mixer.

Ray got an absurdly large order of 8 mixers for a single location.

Why would someone need to mix 40 milkshakes at a time?

Upon his first visit in 1954, Kroc was blown away by the low prices and effectiveness of the restaurant's operation, which had been put in place by its owners, brothers Richard and Maurice McDonald.

In particular, Kroc was amazed by how quickly the restaurant could fulfill a customer's order. This was partially due to the fact that they focused on just a few items (burgers, fries and drinks) and had a chain of employees working together to prepare each order. The restaurant was drawing attention, especially after making the cover of?American Restaurant Magazine?in 1952.

Initially, Kroc envisioned how much money he could make if there were hundreds of McDonald's across the country, each equipped with eight of the milkshake machines (Multimixers) that he sold.?-McDonalds.com

"In those days, nobody had eight Multimixers in one business," recalled Kroc. "So, I went out there, and I was amazed. They were serving hamburgers for fifteen cents, french fries for ten cents and milkshakes for twenty cents, and basically that was the menu. And I said, 'That's for me.'" He flew out to Los Angeles and then drove to see the restaurant the following morning

? Only burgers, fries, and shakes on the menu

? No plates served and no waiters to serve

Yet, the place had a massive waiting line.

McDonald's made its food on a supply belt and delivered it in 2 minutes.

The store owners called it the 'Speedee System'.

Ray sensed an opportunity!

Kroc proposed that he work as a franchising agent in exchange for a very small slice of the profits. The previous franchising agent, Bill Tansey, quit due to health issues. In 1955, Kroc founded the Franchise Realty Corporation (a predecessor of the McDonald's Corporation), which helped to facilitate the restaurant's expansion while giving Kroc a healthier return on his efforts. It should be noted that franchisees are responsible for creating some of McDonald's most well-known menu items, including the Egg McMuffin, the Big Mac and the Filet-O-Fish.

Richard and Mac McDonald had already sold more than 20 franchises and opened eight restaurants themselves by the time they met Ray Kroc. In 1954, Kroc got wind that the brothers were looking for help expanding, so he offered to buy the U.S. franchise rights.

? He mortgaged his house at the age of 52 to take a loan

? Opened 18 new outlets in the very first year - a fantastic start!

Though he had earned nice commissions as a paper cup salesman, his relationship with his wife Ethel?and daughter Marilyn was strained as a result. He put everything he had into work, leaving little time for his family. Ethel had opposed his decision to start selling milkshake machines, believing he was giving up a good job and was too old to start a new career.

His obsession with work only intensified after he met the McDonald brothers.

He and his wife Ethel divorced in 1961.

As he successfully unleashed the true franchising potential of the chain, Ray Kroc introduced standardization, automation and discipline.

Franchise owners were carefully selected for their work ethic and ambition.

They attended "Hamburger University" in Elk Grove, Illinois where they were put through a training course, earning certificates in "hamburgerology with a minor in french fries."?

Ray was so eager to see the restaurant expand, he had made a hasty deal with the brothers. As Ray sold the franchises, the brothers made a lot of money for doing nothing.

Leaving him with less than 2% of profits.

Restaurants were making sales but Ray was still broke.

This was when he met Harry Sonneborn, who changed McDonald's main business model

"McDonald's should be in the real estate business, not the fast-food business", Harry told Ray.

What does that mean?

It involved creating a real estate company that would buy up (or lease) the land on which all McDonald's would be located. Then, franchisees would pay Kroc a monthly rental fee for the land or a percentage of their sales, whichever was greater.

What does that mean?

? They purchase the land for all McDonald's franchises and then lease it to franchisees

? Franchisees would pay rent or a percentage of their sales, whichever was greater

? This GUARANTEED a profit for Ray.

Kroc started the Franchise Realty Corporation in order to execute the plan.

Money started rolling in but the McDonald's brothers were not happy with Ray's aggressive scaling.

Kroc became president in 1955. He continually clashed with the brothers and bought out all of Dick and Mac McDonald's shares six years later in 1961.

So Ray bought them out for $2.7 Million.

Now, he was in 100% control!

HE WAS AN OWNER

Fast Forward >>

? He opened 700+ restaurants in 44 states by 1965

? Stock price went from $22 to $49 in a week after they went public in 1962

? When Ray died in 1984, a new McDonald's was opening EVERY 17 HOURS

Kroc was 52 when he found success with McDonald's. When teased that he was an overnight success at the age of 52, Kroc reminded people of the long road it took to get there, "I was an overnight success alright, but 30 years is a long, long night."?

Mcdonald's laid the playbook for quality control in franchises .

A McDonald's burger's dimensions, cooking time, sauces, flavoring amount are all precisely mandated.

A Big Mac from Alaska tastes the same as one from Alabama.

McDonald's also laid the real-estate first business model that most franchises use today.

It invented food on a supply belt, AKA 'fast food'.

McDonald's today -

? Serves about 2.3 Billion burgers a year

? 39,000 restaurants across 120 countries ? 4th largest employer in the world

? The largest toy distributor in the world (accidentally)

Here's a McDonald's world map

So what can we take away from this, today?

Ray wasn't a founder, unlike what we are told or the title of the film about him suggests, he was an Acquisition Entrepreneur.

Featured snippet from the web

Simply put, acquisition entrepreneurs?apply their business-building smarts not to a fresh startup, but to buying and growing existing businesses with new technology and processes.

The type of innovation most relevant to?acquisition entrepreneurship?involves leveraging an existing business model and serving existing customers in new ways.

They took a company and added tech ( the actual founders) and he took that and added even more with processes and the right leverage.

So this is where my thesis comes in.

My Thesis: In the future, all small and medium businesses will be tech-enabled and I am thinking why are we not investing in the founders who are leaving their businesses today to resign.

Why are we not buying them and using technology and systems to make them even more profitable, securing jobs and making more people owners - just like Ray!

Conventional businesses + a new way to own them + Technology and systems = MASSIVE opportunity

Great Resignation meets Great Retirement Plus Web3 tools.

Alternative investments will become normal in the future, we see this with Dwell.fi and companies like Fundrise ($5B valuation), Masterworks, Franshares, Vinovest etc.

Fractionalized alt ownership will normalize and the infrastructure needed to support it will balloon.

That's it, folks. I hope this was useful.

If you enjoyed it, please share.

I write about the ideas, trends and ways we can take advantage of the time we are in, the ownership economy, web3 and our future and how we can all profit from it!

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