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Kroc in 1978
|Born||Raymond Albert Kroc
October 5, 1902
Oak Park, Illinois, U.S.
|Died||January 14, 1984
San Diego, California, U.S.
|Cause of death||Heart failure|
|Resting place||El Camino Memorial Park
San Diego, California, U.S.
|Occupation||Predominant establisher of the McDonald's Corporation|
|Spouse(s)||Ethel Fleming (1922–1961, divorced)
Jane Dobbins Green (1963–1968, divorced)
Joan Mansfield (1969–1984, his death)
Raymond Albert "Ray" Kroc (October 5, 1902 – January 14, 1984) was an American businessman and philanthropist. He joined McDonald's in 1954 and built it into the most successful fast food operation in the world. Kroc was included in Time 100: The Most Important People of the Century, and amassed a fortune during his lifetime. He owned the San Diego Padres baseball team from 1974 until his death in 1984.
Kroc was born on October 5, 1902 in Oak Park, near Chicago, to parents of Czech origin, Rose Mary (Hrach) and Alois "Louis" Kroc. His father was from the village Břasy near Plzeň, Bohemia (now the Czech Republic). He grew up and spent most of his life in Oak Park, Illinois. During the First World War he lied about his age and became a Red Cross ambulance driver at 15, though the war ended and he was not shipped overseas.
With Prince Castle Multi-Mixer sales plummeting because of competition from lower-priced Hamilton Beach products, Ray took note of the McDonald brothers who had purchased 5 of his Multi-Mixers. Immediately after visiting the San Bernardino store, Ray became convinced that the setup of this small chain had the potential to explode across the nation. He offered his services to the McDonald brothers, who were looking for a new franchising agent following the departure of agent Bill Tansey due to health issues. Ray Kroc opened the first restaurant of McDonald's, Inc. in Des Plaines, Illinois. Kroc remained active in Des Plaines until the end of his life, frequently phoning the manager of the store across the street to remind him to clean his restaurant properly. The Des Plaines location boomed, bringing in hundreds of dollars on its opening day. Ray franchised out scores of restaurants to franchisees. The brothers were satisfied with the money they had, and did not feel a need to expand their empire.
Kroc has been credited with making a number of innovative changes in the food-service franchise model. Chief among them was the sale of only single-store franchises instead of selling larger, territorial franchises which was common in the industry at the time. Kroc recognized that the sale of exclusive licenses for large markets was the quickest way for a franchiser to make money. But he also saw in the practice a loss in the franchiser's ability to exert control over the course and direction of a chain’s development. Above all else, Kroc wanted uniformity in service and quality among all of the McDonald’s locations. Without the ability to influence franchisees, Kroc knew that it would be difficult to achieve that goal. By granting a franchisee the right to only one store location at a time, Kroc retained for the franchise some measure of control over the franchisee, or at least those desiring to someday own the rights to another store.
Kroc became frustrated with the brothers' desire to maintain a small number of restaurants. In 1961, he bought the company for $2.7 million - enough to pay each brother $1 million after taxes- plus an annual royalty of 1.9% (when negotiating the contract, the McDonald brothers said that 2% sounded greedy; 1.9% was more attractive).
The agreement was a handshake with split agreement between the parties because Kroc insisted that he could not show the royalty to the investors he had lined up to capitalize his purchase. At the closing table, Kroc became annoyed that the brothers would not transfer to him the real estate and rights to the original unit. The brothers had told Kroc that they were giving the operation, property and all, to the founding employees. Kroc closed the transaction, then refused to acknowledge the royalty portion of the agreement because it wasn't in writing. The McDonald brothers consistently told Kroc that he could make changes to things like the original blueprint (building codes were different in Illinois than in California), but despite Ray's pleas, the brothers never sent any formal letters which legally allowed the changes in the chain. Kroc also opened a new McDonald's restaurant near the McDonald's (now renamed "The Big M" as they had neglected to retain rights to the name) to force it out of business.
After finalizing the agreement with the McDonald Brothers, Kroc sent a letter to Walt Disney. (They had met as ambulance attendant trainees at Sound Beach, Connecticut.) Kroc wrote, "I have very recently taken over the national franchise of the McDonald's system. I would like to inquire if there may be an opportunity for a McDonald's in your Disney Development". According to one account, Disney agreed under stipulation to increase fries from ten cents to fifteen cents allowing himself the profit. Kroc refused to gouge his loyal customers leaving Disneyland to open without a McDonald's restaurant. Others believe that this is a 'happy ending' retelling of the Disney Story by some McDonald's marketing executives. Most probably, the proposal was returned without approval.
Kroc maintained the assembly line "Speedee Service System" for hamburger preparation, which was introduced by the McDonald brothers in 1948. He standardized operations, ensuring every burger would taste the same in every restaurant. He set strict rules for franchisees on how the food was to be made, portion sizes, cooking methods and times, and packaging. Kroc also rejected cost-cutting measures like using soybean filler in the hamburger patties. These strict rules also were applied to customer service standards with such mandates that money be refunded to clients whose orders were not correct or to customers who had to wait more than 5 minutes for their food. However, Kroc let the franchisees decide their best approach to marketing the products. For example, Willard Scott created the figure now known internationally as Ronald McDonald to improve sales in the Washington, D.C. metropolitan area. Ray Kroc is used as an extensive example in George Ritzer's sociological writings.
By the time of Kroc's death, the chain had 7,500 outlets in the United States and 31 other countries and territories. The total systemwide sales of its restaurants were more than $8 billion in 1983.
In 1974, Kroc decided to retire from being CEO of McDonald's. While he was looking for new jobs, he decided to get back into baseball, his lifelong favorite sport, when he learned that the San Diego Padres were for sale. The team had been conditionally sold by founding owner C. Arnholt Smith to Washington grocery-chain owner Joseph Danzansky, who planned to move the Padres to Washington. However, the sale was tied up in lawsuits when Kroc purchased the team for $12 million, keeping the team in San Diego. In Kroc's first year of ownership in 1974, the Padres lost 102 games, yet drew over one million in attendance, the standard of success in the major leagues during that era. Their previous top attendance was 644,772 in 1972. The San Diego Union said Kroc was "above all, a fan of his team". On April 9, 1974, while the Padres were on the brink of losing a 9-5 decision to the Houston Astros in the season opener at San Diego Stadium, Kroc took the public address microphone in front of 39,083 fans. "I’ve never seen such stupid ballplaying in my life," he said. The crowd cheered in approval. In 1979, Kroc's public interest in future free agent players Graig Nettles and Joe Morgan drew a $100,000 fine from Commissioner Bowie Kuhn. Frustrated with the team, he handed over operations of the team to his son-in-law, Ballard Smith. "There's more future in hamburgers than baseball," Kroc said.
After his death the Padres in 1984 wore a special patch RAK. They would win the NL Pennant that year.
Kroc's foundation supported research and treatment of alcoholism, diabetes, and other diseases. He established the Ronald McDonald House foundation. He was a major donor to the Dartmouth Medical School.
In 1978, the 76-year-old Kroc suffered a stroke. He was required by doctors to take medication for his condition, and since it could not be used with alcohol, he had to enter AA rehab. He died of heart failure at a hospital in San Diego, California, on January 14, 1984 at the age of 81. He left a widow, Joan. His previous marriages, to Ethel Fleming (1922–1961) and Jane Dobbins Green (1963–1968), ended in divorce. He was buried at the El Camino Memorial Park in Sorrento Valley, San Diego.
In popular culture
Ray Kroc's acquisition of the McDonald's franchise as well as his 'Kroc-style' aggressive business tactics are the subject of Mark Knopfler's 2004 song "Boom, Like That". Michael Keaton is set to play him in a movie about his life and the foundation of McDonalds called The Founder directed by John Lee Hancock (who also directed the Walt Disney semi-bio movie, Saving Mr. Banks).
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