I hadnt seen Joni for five years when we met at the Western Region Operators Convention in San Diego. Truthfully, I didn’t expect to be hit by the same wave of emotion that had bowled me over before. But that’s exactly what happened.
My suite in the hotel had a grand piano and a fireplace and bar. I brought Carl Eriksen along from the Los Angeles office to drive my new Rolls-Royce and tend bar for parties in the suite. He hadn’t bargained to be chaperon for Joni and me but, happily, that’s the way it turned out. I attended a small dinner party the first evening of the convention, and Joni was there with her mother and Rollie. I made sure that Joni sat right next to me: “Rollie, you sit down there at the other end,” I said. Everyone tittered. They thought I was kidding. Little did they know. And when I made my after-dinner speech about how I had attained all I’d ever wanted in life except one thing, little did they suspect that the missing element—all I needed to make life complete—was sitting there at that very table beside me. They probably thought I was referring to some staggering sales record or having Colonel Sanders become a McDonald’s licensee or some such thing.
But Joni knew.
I knew she knew.
And she wasn’t frowning. Man! I felt like a teenager on his first date. As I finished my little talk I could see that everyone was just going to get up from the table and depart—the evening was over. Well, not, by God, if I could help it!
“Come on, all of you,” I announced. “We’re going up to my suite and have some piano music and drinks.”
They all came, including Joni and Rollie. He didn’t stay long even though everyone was having a good time singing and laughing it up. Joni told him she was going to stay for a while. After a couple of hours, she and I were the last ones left except for Carl. He puttered around the place cleaning up and looking uncomfortable. I didn’t want him to stay. But I wasn’t prepared for the kind of stink it might cause if he left; so I told him to hang around. Joni and I talked and talked, and I lost all sense of time. I knew her husband would be madder than hell. But I didn’t care, because Joan told me she was ready now to get a divorce regardless of what her family might say. She was ready at last to marry me, regardless of what gossips might say.
Beautiful!
Sleep was out of the question. Even after Joni left about four o’clock in the morning and Carl stretched out on the couch and was snoring like a buzz saw, I was spinning around like a top out of control. Then I remembered that I had to give the opening address to the convention that morning. I went into the bathroom and looked at myself in the mirror. Ouch! I put some eyewash in my eyes and took some Alka-Seltzer. Then some more eyewash. Then some aspirin. I couldn’t remember what the hell I was going to say at the meeting.
Looking out from the rostrum at that huge crowd of operators as the meeting opened a couple of hours later, I still didn’t know what I was going to say. All I could think of was that Joni and I had agreed that we would meet as soon as possible in Las Vegas, where we would get our separate divorces. I don’t know what I said that morning, but I was told many times afterward that it was the most inspiring talk I ever gave.
Jane and I were supposed to be leaving on a world cruise. Joni had asked me to go through with it and break the news to Jane gently during the three months we would be gone. Okay. I thought I could handle that. But fond as I was of Jane, the more I thought about being away from Joni that long, the more impossible it became. First, I decided I would get off the boat in Hong Kong. Then I changed my mind and made it Acapulco. Then, by God, it was the Panama Canal. Finally, I said to hell with it, I would not go on the cruise at all.
I didn’t want to hurt Jane any more than was necessary, but I had to have a divorce. Immediately! I took care, though, to insure that she would be financially secure. Jane still lives in our Beverly Hills home, and I continue to see some of her relatives who are long-time McDonald’s operators.
I had bought a ranch in Southern California in 1965 with the intention of turning it into a center for McDonald’s seminars and headquarters of the philanthropic foundation I had started the same year. It was a marvelous location, and I built a large lodge that had a spectacular view of the mountains surrounding it. Joni and I were married there, in front of the massive stone fireplace, on March 8, 1969.
At last I felt like a complete person. Now, I told myself, I could take life a little easier and enjoy it. I was finished grinding it out.
But business is not like painting a picture. You can’t put a final brush stroke on it and then hang it on the wall and admire it. We have a slogan posted on the walls around McDonald’s headquarters that says, “Nothing recedes like success. Don’t let it happen to us or you.” I wasn’t about to let it happen to me. Fred Turner was doing a fine job of running the company, as I had known he would, but there were lots of areas that needed my attention.
In many corporations when the top guy moves up it’s to a figurehead role. He becomes chairman of the bored. Not me. I admit that I no longer jump into the fray in administrative sessions and yell and pound on the table. That’s for Fred and his executive staff. I’m content to sit back and listen and play Big Daddy, giving my opinion when it’s asked. However, I am the chief guy when it comes to new product development and real estate acquisition. These are areas for which I have always had a special knack. I always enjoyed them most, so work is even more fun for me now than before I stepped up. I continue to look to the future of McDonald’s and consider new menu items and new property in the light of overall corporate development. What I see in the future is unlimited possibilities for McDonald’s—even more than existed for us ten years after I started the system. And now we have the talent and the financial resources to follow up on every business opportunity that presents itself. Fred has a top management team headed by Ed Schmitt, who became president and chief administrative officer in January 1977. He and his staff understand what makes the cash register ring and how to take care of the customer. That, of course, was always Fred Turner’s strong suit as president. Fred has always been an operations man at heart. In January 1977, Fred was made chairman of the board. The board gave my chair another spin up to senior chairman. It is impossible to foresee what the new opportunities for McDonald’s will be, but they are certain to come as the country grows and new social and economic needs take shape. Change has been our history, and you can’t consider our growth without taking into account the context in which it occurred, an America in which tremendous social changes were taking place.
McDonald’s is vastly different now from the company it was back in the early days, and that’s good. We responded to the social changes of the late sixties by increasing minority hiring, and organizing a program to bring in qualified black women operators. We’ve been a leader in advancing black capitalism. We also have made energy consumption in our stores more efficient than in the average home for preparing equivalent meals. We’re international now. Hamburger U. has a handsome campus with classrooms equipped with the latest teaching aids. Our headquarters has its own modern, eight-story building in Oak Brook, a suburb west of Chicago. Jobs that one of us used to handle in a few minutes of spare time each week have grown into whole departments with hundreds of people on the staff.
Unfortunately, a few of our operators resented the changes. They couldn’t see the big picture from the windows of their individual stores. Their operations hadn’t changed, so why did the company have to change? They longed for the good old days when they could pick up the telephone and talk to Ray Kroc or Fred Turner to get help with their problems. As we became more decentralized, those old-time operators found themselves responsible to district, regional, and zone executives who in many cases were a lot newer to the organization than they were and who had not lived through store openings with them as Fred Turner had or helped them clean up their parking lots as I had. But there was another element in the situation, and that was the fact that some of these franchisees were approaching the end of their twenty-year licenses. Among them was a handful of bad apples who knew that their chances of being granted new franchises were slim. These characters tried to gain company for their misery by forming what they called the McDonald’s Operators Association (MOA). They organized in about 1973 and put out a newsletter full of vicious gossip. Their theme quickly became trite—The company has changed. If you don’t fight back you will be kicked out when your franchise expires, and the company will take over the store. That’s patent nonsense, because we don’t want company-owned stores to ever exceed more than about 30 percent of total units. Moreover, we need good operators. It would be the height of folly to kick out an operator who met our standards of quality, service, and cleanliness, who had established his McDonald’s in a neighborhood, had built up good community relations and a strong spirit among his employees. But MOA’s whisper campaign did stir up apprehensions. Even some of our good operators, who should have known they had no need to worry, had to have continual reassurances that we didn’t intend to buy back their stores. MOA was organized by Don Conley, an early corporation employee, who instead of taking cheap shots at the company should be saying a prayer of thanks to McDonald’s every morning. He was one of the small group who shared in the purchase of Prince Castle Sales from me. But he put up no cash, and all the payments on his note plus interest, which was only about seven percent, were paid from dividends the group received from Prince Castle’s profits. When Prince Castle was sold to Martin-Brower Corporation in less than two years, Conley made a six-figure profit. He then acquired 20,000 shares of McDonald’s stock, which he’s very smug and arrogant about today, since it makes him a millionaire. How ironic that this came, in effect, as a gift from me!
Conley is spiteful, perhaps, because he was fired. Anyhow, June Martino felt sorry for Conley. She worked it so that he was able to buy two fine McDonald’s stores—in lieu of severance pay, perhaps, since we had no real money in those days. At any rate, he got a sweetheart of a deal from us that he repaid with ingratitude.
We could have found what operators were involved in MOA and made it tough for them even though their membership lists were secret. But we didn’t care to get involved in spying and intrigue. We refused to sink to their level. All we had to do was wait for their influence to evaporate. The good operators among them would eventually get disgusted with MOA’s negativism. They would realize that while the corporation had grown large and, of necessity, more impersonal, our basic philosophy and our values had not changed.
Mental Snapshot: I am sitting in Frank Cotter’s office in 1954 discussing the licensing agreement he is drafting for me to use in the franchising arrangement I’ve set up with his clients, the McDonald brothers. He is insisting on all kinds of clauses and tortured phrases spelling out the relationship so that I will be able to “control” my licensees. I am getting sick as hell of his prissy niceties. I look out the window and ignore him until he finishes reading.
“Listen, Frank,” I tell him, “you can hogtie these guys with all the ifs, buts, and whereases you like, but it’s not going to help the business one goddam bit. There’ll be just one great motivator in developing loyalty in this operation. That is if I’ve got a fair, square deal, and the guy makes money. If he doesn’t make money, I’m in a peck of trouble. I’m gonna lose my shirt. But I’ll be right out there helping him and doing all I can to make sure he makes money. As long as I do that, I’ll do just fine.”
Back then, of course, I couldn’t foresee an operator owning twenty-five or thirty stores. I couldn’t envision situations in which an operator claimed we were hurting his sales volume by locating another store too close to his. I couldn’t imagine having to deal with a franchise where an operator dies leaving his widow to run the store. (We have widows who are operators today, and they are good ones.) I wasn’t thinking about what would happen when a franchise expired. But the basic philosophy of my statement to Cotter is as true today as it was then. We are an organization of small businessmen. As long as we give them a square deal and help them make money, we will be amply rewarded. I think that MOA has lost any power it ever had, and it will soon vanish. Fred made a fighting speech at our 1976 conventions in Florida and Hawaii, challenging them to come out in the open with any grievances they have or else get out of the way, because we are moving ahead—with them or without them. The silence since then can only mean that MOA is less.
With all these events clamoring to be dealt with, and government agencies such as OSHA making mountains of paperwork for us, some of the things I considered to be of major importance were going much too slowly. One of them was the new architectural look for our restaurants, the brick buildings with mansard roofs, stylish expanses of windows, and inside seating. It’s worth noting that after this new style was adopted and had spread across the country it became the object of much serious discussion in architectural classes. James Volney Righter, who teaches architecture at Yale, says he believes the style “holds great potential in that it links the energy of lively American ‘pop’ forms with functional utility and quality construction. As the taste of the average consumer becomes more sophisticated, pressures are generated which might transform the visual and psychological energy of the American commercial strip into a cultural asset.” He also talks about the “fascinating architectural problem of establishing an image easily identified by and desirable to the customer.” I approved the new design in 1968, and it was to replace all of our red-and-white tile buildings. It was a drastic change in the image we’d established and in which we had a big investment, and Fred and I had to fight like hell to push it through the board of directors.
Brent Cameron, who is in charge of construction for us, is very conservative. Brent was the advocate of the MiniMac building, a scaled-down version of the new McDonald’s restaurant that could be situated in smaller communities, where they might not have enough trade to support a full-sized store. This idea developed from a theory of Luigi Salveneschi’s called “The Monotony Index.” Luigi’s idea was that the higher the level of monotony in a town, the better McDonald’s chances of doing business there. “In big cities with all kinds of shops and restaurants, you are only one of thousands of choices,” Luigi said. “But when you go into areas where there is nothing to do on Sunday afternoon, and people do not know how to spend their free time, your rate of frequency will go up dramatically. And there are literally thousands of areas like this where the monotony index is very high. These are people forgotten by industry and bypassed by superhighways and shopping centers. Yet they are important to us, the heart of America is still there in the boonies.”
So Brent pushed the MiniMac concept. A booklet was published advancing it, and Fred Turner bought it.
I was so damned mad I was ready to turn my office on the eighth floor of our new building into a batting cage and let those three guys have it with my cane. I had rheumatoid arthritis in my hip, and the pain of that didn’t help my disposition any. But the reason I hated the MiniMac idea was that it was thinking small. Brent’s plan was to buy enough property for a full-size store and put up a small unit. If it does well, then expand it. It was hard to argue against the program, because it took off very successfully. The initial MiniMac did about $70,000 gross the first month. But after they had built about twenty-two mini-units, some without seating and some with only thirty-eight seats, they finally got tired of my screaming and scrapped the program. And it’s a damned good thing they did, because those minis were converted into regular stores and the majority of them are doing tremendous business. I believe that if you think small, you’ll stay small.
Getting Brent turned around on the MiniMac program provided momentum for our remodeling and inside-seating campaign. I had to keep hammering away though, because in locations where I thought we needed 80 seats, they were putting in 50. Where I thought we needed 140, they were putting in 80.
You can argue both sides of this one. If you put in 140 seats, you may fill them for only an hour and a half at noon. The rest of the day you may have half of them empty. This is typical of a lot of restaurants in downtown locations. If you must cover a lot of empty seats for eighteen or twenty hours a day, the economics don’t work out. But of course, where McDonald’s is concerned, I favor the high side. Fred Turner does, too, and I like his thinking on it, which is that business will expand to tax the facilities provided. In other words, if you have a few extra feet of griddle and an extra fry station, or if you install one more cash register than existing business requires, you’ll be challenged to put them to use.
While I’m talking about Brent Cameron, I should point out that I’ve always considered our conflicts creative. We first started butting heads in California, when he was an area supervisor in Los Angeles. He and Fred usually take the conservative stand on any issue. I’m the liberal, and that always makes for interesting executive meetings.
Some of my detractors, and I’ve acquired a few over the years, say that my penchant for experimenting with new menu items is a foolish indulgence. They contend that it stems from my never having outgrown my drummer’s desire to have something new to sell. “McDonald’s is in the hamburger business,” they say. “How can Kroc even consider serving chicken?” Or, “Why change a winning combination?”
Of course, it’s not difficult to demonstrate how much our menu has changed over the years, and nobody could argue with the success of additions such as the Filet-O-Fish, the Big Mac, Hot Apple Pie, and Egg McMuffin. The most interesting thing to me about these items is that each evolved from an idea of one of our operators. So the company has benefited from the ingenuity of its small businessmen while they were being helped by the system’s image and our cooperative advertising muscle. This, to my way of thinking, is the perfect example of capitalism in action. Competition was the catalyst for each of the new items. Lou Groen came up with Filet-O-Fish to help him in his battle against the Big Boy chain in the Catholic parishes of Cincinnati. The Big Mac resulted from our need for a larger sandwich to compete against Burger King and a variety of specialty shop concoctions. The idea for Big Mac was originated by Jim Delligatti in Pittsburgh.
Harold Rosen, our operator in Enfield, Connecticut, invented our special St. Patrick’s Day drink, The Shamrock Shake. “It takes a guy with a name like Rosen to think up an Irish drink,” Harold told me. He wasn’t kidding. “You may be right,” I said. “It takes a guy with a name like Kroc to come up with a Hawaiian sandwich … Hulaburger.” He didn’t say anything. He didn’t know whether I was kidding or not. Operators aren’t the only ones who come up with creative ideas for our menu. My old friend Dave Wallerstein, who was head of the Balaban & Katz movie chain and has a great flair for merchandising—he’s the man who put the original snack bars in Disneyland for Walt Disney—is an outside director of McDonald’s, and he’s the one who came up with the idea for our large size order of french fries. He said he loved the fries, but the small bag wasn’t enough and he didn’t want to buy two. So we kicked it around and he finally talked us into testing the larger size in a store near his home in Chicago. They have a window in that store that they now call “The Wallerstein Window,” because every time the manager or a crew person would look up, there would be Dave peering in to see how the large size fries were selling. He needn’t have worried. The large order took off like a rocket, and it’s now one of our best-selling items. Dave really puts his heart into his job as a director, now that he’s retired and has plenty of time. There’s nothing he likes more than traveling with me to check out stores.
Our Hot Applie Pie came after a long search for a McDonald’s kind of dessert. I felt we had to have a dessert to round out our menu. But finding a dessert item that would fit readily into our production system and gain wide acceptance was a problem. I thought I had the answer in a strawberry shortcake. But it sold well for only a short time and then slowed to nothing. I had high hopes for pound cake, too, but it lacked glamor. We needed something we could romance in advertising. I was ready to give up when Litton Cochran suggested we try fried pie, which he said is an old Southern favorite. The rest, of course, is fast-food history. Hot Apple Pie, and later Hot Cherry Pie, has that special quality, that classiness in a finger food, that made it perfect for McDonald’s. The pies added significantly to our sales and revenues. They also created a whole new industry for producing the filled, frozen shells and supplying them to our stores.
During the Christmas holidays in 1972, I happened to be visiting in Santa Barbara, and I got a call from Herb Peterson, our operator there, who said he had something to show me. He wouldn’t give me a clue as to what it was. He didn’t want me to reject it out of hand, which I might have done, because it was a crazy idea—a breakfast sandwich. It consisted of an egg that had been formed in a Teflon circle, with the yolk broken, and was dressed with a slice of cheese and a slice of grilled Canadian bacon. This was served open-face on a toasted and buttered English muffin. I boggled a bit at the presentation. But then I tasted it, and I was sold. Wow! I wanted to put this item into all of our stores immediately. Realistically, of course, that was impossible. It took us nearly three years to get the egg sandwich fully integrated into our system. Fred Turner’s wife, Patty, came up with the name that helped make it an immediate hit—Egg McMuffin.
The advent of Egg McMuffin opened up a whole new area of potential business for McDonald’s, the breakfast trade. We went after it like the Sixth Fleet going into action. It was exhilarating to see the combined forces of our research and development people, our marketing and advertising experts, and our operations and supply specialists all concentrating on creating a program for catering to the breakfast trade. There were a great many problems to overcome. Some of them were new to us, because we were dealing with new kinds of products. Pancakes, for example, have to be offered if you intend to promote a complete breakfast menu. But they have an extremely short holding time, and this forced us to devise a procedure for “cooking to order” during periods of low customer count. Our food assembly lines, so swift and efficient for turning out hamburgers and french fries, had to be geared down and realigned to produce items for the breakfast trade. Then, after all the planning and all the working out of supply and production problems, it remained for the individual operator to figure out whether to adopt breakfast in his store. It meant longer hours for him, of course, and he’d probably have to hire more crew members and give the ones he had additional training. Consequently, the breakfast program is growing at a very moderate rate. But I can see it catching on across the country, and I can visualize extensions for a lot of stores, such as brunch on Sunday.
I keep a number of experimental menu additions in the works all the time. Some of them now being tested in selected stores may find their way into general use. Others, for a variety of reasons, will never make it. We have a complete test kitchen and experimental lab on my ranch, where all of our products are tested; this is in addition to the creative facility in Oak Brook. Fred Turner has a tendency to look askance at any new menu ideas. He’ll usually try to put them down with some wisecrack such as, “That may be all right, but when are we going to start serving grilled bananas? We could put a little container of maple syrup on the side, and maybe for dinner we could serve them flaming.” Such sarcasm doesn’t bother me. I know Fred’s thinking, and I respect it. He doesn’t want us going hog wild with new items. We aren’t going to, but we are going to stay flexible and change as the market demands it. There are some things we can do and maintain our identity, and there are others we could never do. For example, it’s entirely possible that one day we might have pizza. On the other hand, there’s damned good reason we should never have hot dogs. There’s no telling what’s inside a hot dog’s skin, and our standard of quality just wouldn’t permit that kind of item.
Some executives have maps of the country with different colored pins indicating their sales outlets. I don’t have such a map. I don’t need one, because I have it all in my mind, and that includes the kind of store on a given location, who the operator is, what kind of volume he’s doing, what his problems are, and so forth. Of course, with 4,000 locations to keep in mind, I can’t keep as current on every store’s operations as a franchisee’s field consultant or his district manager. But I keep in touch through my real estate activities.
Back in the days when we first got a company airplane, we used to spot good locations for McDonald’s stores by flying over a community and looking for schools and church steeples. After we got a general picture from the air, we’d follow up with a site survey. Now we use a helicopter, and it’s ideal. Scarcely a month goes by that I don’t get reports from whatever districts happen to be using our five copters on some new locations that we would never have discovered otherwise. We have a computer in Oak Brook that is designed to make real estate surveys. But those printouts are of no use to me. After we find a promising location, I drive around it in a car, go into the corner saloon and into the neighborhood supermarket. I mingle with the people and observe their comings and goings. That tells me what I need to know about how a McDonald’s store would do there. Hell, if I listened to the computers and did what they proposed with McDonald’s, I’d have a store with a row of vending machines in it. You’d push some buttons and out would come your Big Mac, shake, and fries, all prepared automatically. We could do that; I’m sure Jim Schindler could work it out. But we never will. McDonald’s is a people business, and the smile on that counter girl’s face when she takes your order is a vital part of our image.
Finding locations for McDonald’s is the most creatively fulfilling thing I can imagine. I go out and check out a piece of property. It’s nothing but bare ground, not producing a damned thing for anybody. I put a building on it, and the operator gets into business there employing fifty or a hundred people, and there is new business for the garbage man, the landscape man, and the people who sell the meat and buns and potatoes and other things. So out of that bare piece of ground comes a store that does, say, a million dollars a year in business. Let me tell you, it’s great satisfaction to see that happen.
In 1974 The Fourteen Research Corporation published a seventy-five page analysis of McDonald’s growth projected through 1999. It described very neatly our financial position and the kind of real estate development I myself foresee:
The basis of McDonald’s success is serving a low-priced, value-oriented product fast and efficiently in clean and pleasant surroundings. While the Company’s menu is limited, it contains food staples that are widely accepted in North America. It is for these reasons that demand for its products is less sensitive to economic fluctuations than most other restaurant formats.
Until the early 1970s, McDonald’s was expanding almost exclusively in the suburbs. Yet for quite a while it had been spending a great deal on national advertising that was creating a latent, nationwide demand for its product. Thus, the stage was set for the company to diversify and strengthen its expansion program. There are now over 100 stores located in cities, shopping centers, and even on college campuses; most are doing exceptionally well, with many more planned.
We firmly believe that McDonald’s can successfully locate a store almost anywhere there are primary concentrations of population (i.e., suburbs and cities) and secondary concentrations (schools, shoping centers, industrial parks, stadiums, etc.) provided that capital turnover rates meet corporate objectives. It is this “nook and cranny” type of expansion along with continued conventional growth that leads us to project that on average 485 new stores will be added each year (through 1979) to world operations.
Nook and cranny expansion. Exactly! There are countless nooks and crannies throughout the country that are possible locations for us, and we fully intend to expand into them.
What does it take to get a McDonald’s franchise? A total commitment of personal time and energy is the most important thing. A person doesn’t need to be super smart or have more than a high school education, but he or she must be willing to work hard and concentrate exclusively on the challenge of operating that store. The value of our franchises has increased greatly over the years. I started issuing them for $950 back in 1955. Ten years later, when we went public, the average investment was $81,500. These days it takes about $200,000 for the franchise and related expenses—equipment, furnishings, signs, etc.—not counting interest or finance charges on borrowed money.
In the initial interview, the applicant is told what we expect and what the corporation will contribute. If he’s still interested after learning about the kind of personal and financial investment required, we put him to work in a McDonald’s store near his home. He’s assigned to evening or weekend hours that won’t conflict with his present job, and he learns firsthand what’s involved in both crew work and management. If he’s not really suited for our kind of restaurant operation, this is the time to find that out. After this experience and a final discussion with the licensing manager in his area, the applicant puts up his $4,000 deposit and is informed of the market area in which his restaurant is likely to be located. We never promise a specific community. Getting onto the list of registered applicants waiting for a location is harder than it used to be, because we give preference to present operators and to McDonald’s employees who have been with the corporation for ten years or more.
The applicant is advised when a site comes up for him (usually less than two years after his registration), and if he’s still interested after looking over the location, we begin getting him more involved in McDonald’s. We stay in close contact as he arranges to join us, divesting himself of another business, perhaps, selling a home, and looking for a new one in the community where his store is to be located. We now ask him to spend another 500 hours working in a McDonald’s restaurant. He’s also invited to attend orientation and management classes. Then, about four to six months prior to the date his store is scheduled to open, the licensee attends our advanced operations course at Hamburger U. This adds polish to the management skills and operations know-how he’ll need to greet his first customers.
All of this preparatory work and training helps insure success for the small businessman who gets a McDonald’s franchise. And it doesn’t stop there. We stay right in there helping him through our system of field representatives.
It’s all interrelated—our development of the restaurant, the training, the marketing advice, the product development, the research that has gone into each element of our equipment package. Together with our national advertising and continuing supervisory assistance, it forms an invaluable support system. Individual operators pay 11.5 percent of their gross to the corporation for all of this, and I think it’s a hell of a bargain.
Art Bender, my first franchisee, says he’s sometimes asked why he doesn’t just start his own restaurant instead of paying a percentage of his gross to McDonald’s. After all, he helped teach Ray Kroc the business; he could make it on his own easily.
“I might have a successful restaurant,” Art says, “but I’d have to think what it would cost me as an individual to buy the services I get from the corporation. The name itself is worth a lot, of course. National advertising with Art’s Place? No way. Then there’s purchasing power, Hamburger U. training for my managers, product development … how could I do all that alone?”
* * *
Our development in urban areas has been challenging, because it represents an entirely different kind of real estate situation. There also are all kinds of social and political currents swirling around in a big city that you don’t have to deal with in suburbia. Occasionally activists of one kind or another have tried to use an attack on McDonald’s to advance whatever cause they were pushing. We are a convenient symbol of establishment business. Our development in New York City, for example, was characterized by snobbish writers as some sort of sinister plot. Here was Daddy Warbucks dressed up like Ronald McDonald setting out to milk money from an unsuspecting populace. What these fanatics actually opposed was the capitalist system. Their political cant held that to be successful in the context of free enterprise, a business must be morally corrupt and guilty of all kinds of shabby business practices. I feel sorry for people who have such a small and wretched view of the system that made this country great. Fortunately, their hysterics rarely make much of an impression on residents, who welcome the clean and wholesome kind of operation McDonald’s runs. They realize that our stores can help upgrade their community. There are rare circumstances in which a neighborhood genuinely feels that McDonald’s would not be in keeping with its character. This happened in the posh Lexington Avenue area of New York City, and we withdrew. It cost us a lot of money, but we sure don’t want to locate in an area where people don’t want us—that makes for a losing business proposition. But if any of the aristocratic residents of Lexington Avenue think McDonald’s can’t be a tasteful, refined, and socially uplifting operation, a visit to Water Tower Place in Chicago might change their minds. Our neighbors in this ultramodern Michigan Avenue building include the classiest names in retailing. Our store there does a tremendous business, even though we have to explain to an occasional mink-furred dowager that, like it or not, she has to go to the counter and order her own hamburger, we have no table service.
It was wonderful to see all these changes taking place in McDonald’s and to be part of them. However, I was finding it increasingly difficult to keep up. Some days I could hardly get around because of the way arthritis was warping my hip. Yet pain was preferable to idleness, and I kept moving despite Joni’s urging that we settle down on our ranch. She really loves it there. So do I. But there were a lot of things I wanted to do that could not be accomplished from an easy chair.
For one, I wanted to own the Chicago Cubs, the baseball team I had been rooting for since I was seven years old. In 1972 the time seemed ripe and I tried to make an offer, but Phil Wrigley wouldn’t even talk to me. He sent word that if the club was for sale, I was the sort of person he would like to have buy it—but it wasn’t for sale. That made me madder than hell, because Wrigley is just sitting on that team. He hasn’t done a damn thing to improve them, but he won’t give them up and let someone else do it. It’s idiotic. The message he sent me indicated that he might change his mind one of these days, but I sure as hell wasn’t going to sit around waiting for that to happen. I just forgot about the whole thing. I wasn’t even considering going into baseball when I was flying out to Los Angeles to meet Joni early in 1974 and read the sports stories about the impending sale of the San Diego Padres. I thought to myself, “My God, San Diego is a gorgeous town. Why don’t I go over there and look at that ball park?” I’ve always admired Buzzy Bavasi, who was running the team, and the whole thing sounded very appealing. So I got in the car with Joni at the airport and told her that I was thinking of buying the San Diego Padres. She looked at me quizzically and said, “What on earth is that, a monastery?”