McDonalds Behind the Arches is a great read. For its time, McDonald’s was more of a show business than a restaurant. Come visit our stores and enjoy the experience was the main takeaway. There were a few other models that were starting to become commonplace in small town America and Ray Kroc wanted in on the action as he was a supplier to many restaurants prior to getting the sales rights to McDonalds. Ray Kroc and his team built the first franchise that was truly a machine with operational prowess at the corporate office and entrepreneurial drive and spirit at each franchise’ door. This was a groundbreaking model at the time, mainly, because no one had built a model that was about making the franchisee the money and most all other franchises had given the franchiser the big payoff at the time of franchising and with the sale of regional rights to the chain, limiting the potential growth. The regional rights meant that there would be no competition for a franchise owner. McDonald’s Ray Kroc was all about helping the franchisee make his money first and was in the spirit of growing the biggest chain, which was the only model that worked for him. It also would not have made him profitable to stay small. Instead of building his personal fortune on the success of the store, he built it through ownership of the land that the McDonald’s franchisee sat on.
Early on, when Ray Kroc tried to get the McDonald’s brothers to give him the sales rights to it, the McDonald’s gave him a bad deal. But Ray did not care. Only after he had put in many years building his franchisees wealth and was at a breaking point was he able to pay off the original owners, not necessarily to change the model, but to guarantee control over what and how it continued to grow. Ray Kroc was all about building McDonald’s as an icon in American fast food and new that if he made franchisees successful, he would figure out a way to be successful.
The show and tell model that McDonald’s built in the beginning with the fast method of delivery was extended to their advertising with Ronald McDonald and the golden arches. They were the engineers of the advertising coop and used the local shop advertising methods and recommendations to test other markets. When corporate tried to engineer the right advertising ideas, it usually backfired. Ray was dependent on the store owners and used that as a testing ground for other markets. They fed off of their store’s ingenuity and understanding of their specific market. The store owner always had the final say in what advertising ran in their local area.
This model was truly an industrialized, post war model. Financing and building as many stores as quickly as possible was the name of the game. This is not my preferred model for growing a business as I am not a wheeler and dealer. But, this is a fascinating read nonetheless. One of the most interesting business books and important for anyone interested in entrepreneurship to read and understand some of the types of competitive environments you may or may not be cut out for.