The Very, Very Rich and How They Got That Way (30 page)

Although they started the whole thing, Mac and Dick are clearly not McDonald’s kind of people.

McDonald’s wants people with a driving ambition. Ray Kroc – who has moved up to board chairman and chief executive officer but at 69 remains as active as ever – puts it this way: “Some people reach their level of expectations pretty quickly. We want someone who will get totally involved in the business. If his ambition is to reach the point where he can play golf four days a week or play gin rummy for a cent a point instead of a tenth, we don’t want him in a McDonald’s restaurant.”

Perhaps not even the younger Ray Kroc – certainly not the Ray Kroc who drove back to Chicago cold, disillusioned and broke – could have qualified for a McDonald’s license. Applicants, who must wait their turn on a list several hundred names long, are screened “and only those who look as if they have potential for success are accepted.” But when I asked about the criteria for such selection a company official said there were none. “Basically, we just look for somebody who’s good with people,” he explained. “In that sense we’d rather get a salesman than an accountant or even a chef.”

The company does boast of such franchise holders as a former undersecretary of labor, a member of the House of Representatives from Virginia, a controller in another successful company, a golf pro, a research chemist, a retired air-force colonel, a navy commander and several lawyers, dentists and advertising executives. These may be the cream, but the average McDonald’s owner-operator is older than 35, has worked his way up in another business and has a tidy bank account. The initial cash investment, the company takes pains to point out, is set high “to discourage misfits and those with marginal work records.”

A McDonald’s franchise (plus the lease, equipment and operating capital required to open it) costs between $110,000 and $125,000, depending on the design of the unit and the “frills” (landscaping, seating) the owner wants. Of this, about $65,000 must be in cash; the remainder can be borrowed on the applicant’s credit. The company selects the site and builds the restaurant. When he begins operation, the owner pays McDonald’s 11.5% of his monthly sales (after deducting any sales tax) – 3% of that as a service fee and 8.5% as rent.

This sounds like an expensive proposition, but the record shows that it can be incredibly lucrative. The company says that a well-run restaurant should pay off its original investment in three to five years, then make an annual profit before taxes of 12 to 15%. Since the average store now grosses $430,000 and many make more than $500,000, a moderately good operator should be able to count on $50,000 to $75,000 in annual profits.

Take Bob Jennings, the owner in Joplin, Missouri. Bob grew up in Arkansas and went to Southwest Missouri State College on a football scholarship. After two years in the army he joined the Colonial Baking Company in Springfield, Missouri, working his way up to sales manager in four years. In 1961 a friend named Tom Tucker got a McDonald’s franchise in Springfield and asked Bob to be his manager. When the Joplin franchise became available in 1964, Tom and Bob bought it together. Two years later Bob bought Tom out. Bob has worked hard, serving as his own manager working about 60 hours a week in the restaurant, building its gross from $100,000 to $500,000 a year. Although he is reluctant to discuss his profits, according to the company’s reckoning, this should put him in the $60,000-to-$75,000-a-year-range. Not bad for somebody known around Joplin as “just a good old boy from Arkansas.”

Others have done much better. One of the prime rewards the company holds out for good operators is the opportunity to buy more outlets when they become available. Some operators own four, six or eight restaurants. And that can really pile up the cash. Ray Kroc estimates that 60 to 70 owner-operators are millionaires.

At a recent owners’ convention at the Doral Hotel in Miami Beach the well-dressed wife of one franchise holder came up to Kroc and began reminiscing about the old days, when she used to help out at the french-fry cooker. Suddenly she held out a finger still scarred from hot grease. “I don’t mind
that
, because it made
this
possible,” she said, holding out another finger decorated with a huge diamond ring.

McDonald’s wants go-getters, all right, but it doesn’t want iconoclasts. It wants people who will follow “the system.” Occasionally Kroc’s rhetoric suggests something different. Several years ago he called franchising “an updated version of the American dream,” which gave some people the idea that McDonald’s franchisees were largely autonomous entrepreneurs battling their own way toward the rich prizes of American capitalism. But when I asked him about that phrase the other day he conceded that the stress should be on “updated version.”

“Let’s face it, things have changed since the old days. The guy whose father had a little grocery store can’t go out today and open a store like that. He knows you just can’t buck the big supermarket chains. You just can’t do it. But this is something you can do. We give people an opportunity to get into business for themselves, without taking the whole risk alone. All we ask is that they follow our way of doing things, the proven way.”

As the man says, let’s face it: McDonald’s isn’t selling food so much as it is a system. The food just isn’t that good. The vaunted McDonald’s hamburger – a machine-stamped 1.6-ounce patty 3.875 inches wide when raw and less when cooked, .221 inches thick, sprinkled with a quarter ounce of onion and covered with splats of mustard and catsup and pickle slice, all resting on a 41⁄2-inch bun – is precious little meat and a lot of what people in Joplin call “fixin’s”. Even if you like it that way, it tastes pretty much like a dozen other fast-food hamburgers. Some of McDonald’s top officials concede that they don’t care much for their own hamburger. “If you don’t quote me,” said one man, “I never eat ’em.”

The french fries are something else. Most operators regard them as their most popular dish. “No question about it, the fry is our ace in the hole,” says Bob Jennings. “That little booger, ole buddy, is delicious.” I consulted a 15-year-old fast-food freak I know, who partially confirmed the judgment: “Yeh, I’d say McDonald’s fries are the best. They’re just a tiny bit crisper than anybody else’s. But not that much better. Most people couldn’t tell the difference.”

If most people can’t tell the difference, then what makes the difference for McDonald’s? At the drop of a spatula, Ray Kroc will cite his formula for success – “Quality, Service, Cleanliness” – and other McDonald’s officials reverentially invoke it, too – usually in shortened form as “Q.S.C.” But, when questioned, most concede that any good company tries to practice “Q.S.C.” Burger Chef, McDonald’s main competitor in the hamburger field, has its “Four Pillars of the Burger Chef Way: Quality, Service, Cleanliness and Courtesy.”

After two weeks of observing the company’s operations, I concluded that what makes the difference for McDonald’s is that McDonald’s people take the hamburger business just a little more seriously than anybody else. They take it very seriously indeed.

Above many executives’ desks in McDonald’s sleek new headquarters at Oak Brook, Illinois, is an embossed scroll bearing Ray Kroc’s favorite homily, “Press On”:

Nothing in the world can take the place of persistence.

Talent will not; nothing is more common than unsuccessful men with talent.

Genius will not; unrewarded genius is almost a proverb.

Education will not; the world is full of educated derelicts.

Persistence and determination alone are omnipotent.

Perhaps nowhere does one sense this deadly seriousness better than at what McDonald’s calls it’s “Hamburger University” in Elk Grove, Illinois. Other franchise operations have their training courses and seminars, but only McDonald’s has a “university” with a 19-day course leading to a “Bachelor of Hamburgerology, with a minor in french fries.”

In early May I attended several days of classes at old HU, a sleek white concrete-and-tinted-glass building surrounded by shade trees and a reflecting pool. Each course is divided into two sections – Basic Operations (attended by all new owner-operators) and Advanced Operations (in which the owners are joined by manager, assistant managers and sometimes a few veteran owners back for a “refresher”).

The first day, I was ushered into a classroom where Basic Operation Class 120 (the 120th in the university’s ten-year history) was about to get under way. Nine new owners sat in three rows under rectangular fluorescent ceiling panels as a young man in a green blazer with the McDonald’s Golden Arches emblazoned on the pocket introduced himself as “Jerry Gorman, your instructor for Basic Operations.” Leading his middle-aged students through a complicated registration form and the affixing of plastic name tags, he had the genial informality of all McDonald’s junior executives, but beneath the smile was a firm no-nonsense air. “All classes do require your attendance,” he told them. “Personal conduct both in and out of class is of utmost importance. We are representing McDonald’s. Keep your manuals and notebooks with you at all times, and watch your conversation in public places. Our competition can pick things up that way, too.”

That afternoon the class convened at a McDonald’s restaurant several hundred feet down the road, which the university uses as a training ground. There, in a basement classroom, the students got their first lecture on “The Burger.” Assistant instructor Paul Robillard told them how to tell when a burger is done (“It starts turning brown around the edge”), how to flip one (“Go with the natural action of your wrist”) and how to scrape the grill (“Get your hip into it”).

We moved on to Production Control. Jerry Gorman explained that McDonald’s is dedicated to speed – turning out a hamburger, french fries and shake in 50 seconds. But, he said, they are also dedicated to freshness; so any cooked burger unsold for more than ten minutes must be thrown away. Thus, the most difficult job in the restaurant is knowing how to regulate production so no customer has to wait much more than 50 seconds but the restaurant doesn’t get stuck with a lot of stale food. This vital function is performed by the production-control man, stationed near the middle of the counter, who yells instructions to the grill man, the shake man or the fry man. The most complex instructions are for the grill man, who has to be told how many hamburgers, double hamburgers, cheeseburgers and double cheeseburgers to make.

“Our basic run of burgers is 12,” Gorman explained. “But to that the production man must add enough burgers for the doubles he thinks he’ll need. So let’s say he thinks he’ll need six doubles. He yells, ‘12 and six’ and the grill man lays 18 burgers down. The next thing the grill man needs to know is how many of those burgers should have cheese on them. So the grill man will yell, ‘cheese on six and six,’ which means of the six doubles and six regulars I’ve got, how many do you want cheesed? Now, let’s say the production man wants two cheeseburgers and two double cheeseburgers. He’ll yell back, ‘two and two,’ which tells the grill man what he needs to know, unless you get some ‘grills’ – that is, orders for burgers without some of our normal ingredients. The grills come in on slips from the countermen, and the grill man has to deduct the grills from the other totals. Got that?”

Most of the class looked blank. But a big black man in the front row nodded.

“OK,” Gorman said, looking a bit skeptical. “Let’s see. If the calls go this way – ‘12 and four,’ ‘cheese on four and eight,’ ‘two and two,’ and you get two ‘catsup only’ grills, what do you make?”

Most of his students still looked completely bewildered. So was I. But the big black guy shot back calmly, “Two double cheeseburgers, two double hamburgers, two cheeseburgers, four hamburgers and two hamburgers with catsup only.”

Gorman nodded. “You got it.”

For several more hours we practiced the calls. After class I asked Gorman who the big guy was. “Oh, didn’t you know?” he said. “That’s Brad Hubbert, who used to play fullback for the San Diego Chargers.”

Suddenly it all fell into place. I realized what the McDonald’s operation reminded me of: pro football. All those signals, set plays in the huddle, audibles on the line. The mathematical precision. The sheer technology of it all. Even those bulky operations manuals the students carried around like the football “play books” rookies had to memorize at the start of a season. I remembered that Bob Jennings has told me he liked to hire high-school athletes for his crew because “they work best as a team.” Of course. The production-control man was the quarterback; the grill man, the fullback; the fry man and shake man, the running backs; the counter-men, the line; and the customers storming the windows, the opposing team. No wonder Brad Hubbert understood it all.

The next evening, I attended graduation ceremonies for Class 119 at Fritzel’s restaurant in downtown Chicago. The evening proceeded with typical McDonald’s efficiency: 30 minutes for cocktails; 45 minutes for dinner; then a 15-minute ceremony in which Rob Doran, the 24-year-old dean of HU, handed out the 41 parchment diplomas and several awards: the coveted “Archie” for the top man in the class (a plastic disk symbolizing the hamburger nestling in an ebony base shaped like a McDonald’s restaurant) and the “Seminar Awards” (black Parker pens with little Plexiglas windows that flash “Quality”, “Service,” “Cleanliness,” “McDonald’s” when you push the plunger). Promptly at 8:30 P.M. Doran gave the class his parting words – “Be effective” – then announced, “Gentlemen, the bus is waiting.” I had looked forward to celebrating with them in the bars and discotheques that line Rush Street, a few blocks away, but the new graduates obediently trooped into the bus for the ride back to their suburban motel.

Even after the new owners get home to their restaurants, McDonald’s keeps them on a tight rein. The company allows little experimentation with menu or decor. Fred L. Turner, its president since 1968, says, “In an age when so many Americans are on the move, one of our main assets is our consistency and uniformity. It’s very important that a man who’s used to eating at a McDonald’s in Hempstead, Long Island, knows he can get the same food and service when he walks into one in Albuquerque or Omaha. We’ve found a formula that works, and we stick with it.”