RAYMOND KROC – DETERMINED ENTREPRENEUR WHO PROVED PERSISTENCE ALWAYS PAYS

Raymond Albert Kroc was born to parents of Czech origin in Illinois, USA, on October 5, 1902. As a child, he took piano lessons and displayed his developing business instincts through such ventures as opening a lemonade stand and working at a soda fountain.

Kroc participated in World War I as a Red Cross ambulance driver, lying about his age to begin serving at 15. Following the end of war, he explored a number of career options, including pianist, musical director and real estate salesman. Eventually he settled down as a salesman for the Lily-tulip Cup Company, paper cup manufacturer, rising to the rank of Midwestern sales manager within three years.

Kroc’s business dealings connected him with an ice cream shop owner, who had invented a machine capable of generating five milkshake batches at the same time. Kroc successfully negotiated the exclusive marketing rights for him throughout the USA.

He left Lily-tulip and spent the next 17 years focussing on selling these “multimixers” to soda fountains around the country. In 1954, one of his clients, a drive-in restaurant named Mcdonald’s in San Bernardino, California, had bought eight of his machines.

Kroc wanted to know what kind of restaurant needed to be able to make 40 milkshakes at a time. He found a small operation offering a nine-item menu of hamburgers, fries, milkshakes and fruit pies. Kroc suddenly realised that the concept and design of this small chain had the potential to expand across the country. The restaurant was clean, mechanized and the staff professional.

Mcdonald’s was owned by two brothers, Dick and Mac Mcdonald. They were not interested in the risk involved in setting a nationwide franchise operation. Kroc persuaded them to let him become their agent, selling franchises for a fee of US $ 950 and a licensing fee of 1.9 percent of revenues, of which 0.5 percent would go to the Macdonald brothers.

In 1955, Kroc opened his first franchised Mcdonald’s in Des Plaines, Illinois. By 1959, he had sold 102 franchises. In 1961, he got the Mcdonald brothers to sell their interest in the company for US $ 2.7 million. Kroc had to mortgage the company to raise the money from investment banks.

Two weeks later, Kroc discovered that his buy-out did not include the brothers’ original Mcdonald’s restaurant, which had been renamed The Big M. He offered a good price but they refused.

With no alternative, he opened a new Mcdonald’s just round the block and within two months put the original restaurant out of business. Unfortunately, Kroc again had got his figures wrong. His 1.4 percent fee of revenues barely generated a profit for him after expenses.

Kroc realised he urgently needed a management and financial advisor. He managed to pull out finance “wizard” Harry J. Sonneborn from a highly-paid position in a franchise chain to work for him. Sonneborn devised a scheme to build real estate into the Macdonald’s franchise package: the company would buy or lease land and sell this on to franchisees at a healthy markup. Franchisees entered a 20-year lease and paid a minimum fee or a percentage of sales, whichever was greater.

Profits from the real estate element of the franchises began to generate healthy profits. By 1963, the one billionth Mcdonald’s hamburger had been sold – a figure displayed on the front of every outlet. Mcdonald’s went public in 1965, making Kroc himself a multimillionaire. Sonneborn became Mcdonald’s Corp.’s first President.

He began to spend an unprecedented one percent of sales on national advertising. By 1972, there were 2,200 Mcdonald’s in the USA, with US $ 1 billion turnover. Kroc also embarked on a programme of international expansion.

Kroc died in 1984. And by that time, the chain had 7,500 outlets in the USA and 31 other countries and territories. In end-2016, the company had 36,899 outlets serving 68 million customers per day in 120 countries.

The Kroc Foundation supports research, treatment and education about various medical conditions, such as alcoholism, diabetes, arthritis and multiple sclerosis. It is best known for establishing a non-profit organisation that provides free housing for parents close to medical facilities where their children are receiving treatment.

“IF YOU WORK JUST FOR MONEY, YOU’LL NEVER MAKE IT, BUT IF YOU LOVE WHAT YOU’RE DOING AND YOU ALWAYS PUT THE CUSTOMER FIRST, SUCCESS WILL BE YOURS,” KROC ONCE SAID