Lenny's Podcast · What most people miss about marketing | Rory Sutherland (Vice Chairman of Ogilvy UK, author)
Founders · Feb 25The Making of McDonald's: The Biography of Ray Kroc
Kroc franchised it for 1.9% of sales (1.4% after the brothers' cut), then Sonneborn's land-leasing model turned it into a real estate business that grew from a few dozen stores to about 4,000 by 1977. He bought out the brothers for $2.7 million, and half a percent of 1977 sales would have been $15 million a year.
Tips
- Harry Sonneborn told Ray Kroc McDonald's was a real estate business, not a burger business▶ 30:11McDonald's grew from a few dozen stores to about 4,000 by the 1977 book, and about 40,000 today.
- Ray Kroc followed an odd customer signal to the McDonald brothers' stand▶ 0:59He came home from that trip in 1954 with a signed contract to franchise McDonald's.
- Ray Kroc signed a weak contract and acted as his own lawyer▶ 20:11He agreed to 1.9% of franchise gross sales, with half a percent going to the McDonald brothers, leaving him 1.4%.
- Ray Kroc bought out the McDonald brothers for $2.7 million with money from 12 lenders▶ 40:23The lenders made $12 million, the total cost to McDonald's was about $14 million, and Kroc says the half percent would be $15 million a year on 1977 sales of over $3 billion.
- Ray Kroc gave up 22% of McDonald's stock for $1.5 million and built company stores as a safety net▶ 37:00The insurers sold within a few years for $7 to $10 million, but the stake would have been worth over $500 million in 1973.
- Ray Kroc treated advertising as an investment while the McDonald brothers treated it as an expense▶ 38:45After the campaign he said it turned Californians into their parking lots as though blindfolds had been removed.
- Ray Kroc ran McDonald's as a religion, so anyone slowing it down became an enemy▶ 42:57He fired or pushed out his closest partner Harry Sonneborn and longtime executive June Martino as the company grew.
- Ray Kroc demanded perfection in stores and personally cleaned up the details▶ 26:26At the time he was still working full time selling multimixers while building the first store.
- Ray Kroc passed on copying the McDonald brothers because he saw a complete package to sell▶ 22:10He got a signed contract in 1954 for the plan and the name.
- Harry Sonneborn believed McDonald's would outgrow F.W. Woolworth when others thought it was a joke▶ 32:57Kroc also told a lunch companion the company would one day be a billion dollar company, and the man froze mid bite.
- Ray Kroc called himself an overnight success after 30 years of work▶ 36:40He sold paper cups for 17 years and multimixers from 1938 before McDonald's.
- Senra's frame: Ray Kroc got rich by changing how his business worked, not what it sold▶ 4:19Kroc and his wife later donated close to $2 billion to charity after her death.
Acquired · Nov 23
