Everything Everywhere Daily: History, Science, Geography & More - The History of McDonald's

Starting point is 00:00:00 In 1940, two brothers opened a small restaurant near Route 66 in San Bernardino, California. After meeting an aggressive milkshake machine salesman, they established a business model that sparked a revolution. What began as a more convenient way to get a quick hamburger soon became a master class in supply chain management and technological innovation. And it transformed into a real estate empire disguised as a humble fast food chain. Learn more about the history of McDonald's and how it became. the most popular brand on earth on this episode of Everything Everywhere Daily. Comprehensive. Witty.

Starting point is 00:00:49 Speculative. Critical. Insightful. Profound. Wide-ranging. Hopefully doesn't take itself too, too seriously. I'm David Remnick, and each week on the New Yorker Radio Hour, my colleagues and I try to make sense of what's happening in this chaotic world.

Starting point is 00:01:04 I hope you'll join us for the New Yorker Radio Hour wherever you listen to podcasts. The thoughtful. Exquisite. Just, you know, real. I'm Alan and I'm Sean and together we host the prancing pony podcast. Every week I explore Middle Earth with Sean or with other co-hosts lately with in-depth analysis and plenty of nerd humor. From The Hobbit to the Lord of the Rings and more, it's a great way for first-timers to experience J.R.R. Tolkien's captivating world. And for long-time fans, it's a deep dive into their favorite stories.

Starting point is 00:01:37 So if you're ready to take the next step into the most beloved world in fantasy literature and become a part of a vibrant active community of listeners, then look for The Prancing Pony Podcast. wherever you listen. One of the most well-known brands in the world began when brothers Richard and Maurice McDonald moved west to California, hoping to make their fortune, initially pursuing careers in the movie business before turning to food service. After a movie theater venture failed,

Starting point is 00:02:07 they entered the food service business in 1937 with small roadside stands near Monrovia, California. Drive-ins were all the rage in Southern California at the time, Fueled by car culture, people loved eating in their cars and waiting for their food from car hops on roller skates. By 1940, they had outgrown their Monrovia location and moved 50 miles east to San Bernardino, establishing a large octagonal building along Route 66. Operating a traditional drive-in, they served a sprawling 25-it-em menu via a team of car hops. The business was doing fine, but the brothers realized that there were efficiencies that could be extracted,

Starting point is 00:02:46 which could revolutionize hamburger sales. In 1948, the brothers decided to close their busy restaurant and begin a costly three-month remodel focused solely on efficiency. To optimize efficiency in streamline operations, they drew chalk outlines on a tennis court behind the building, carefully choreographing staff movements in the style of a factory assembly line. Recognizing that nearly 90% of their sales came from burgers, fries, and soft drinks, they slashed their menu from 25 items down to just nine.

Starting point is 00:03:18 The McDonald Brothers dubbed this the speedy service system. The system involved a new kitchen layout that transformed the kitchen and optimized kitchen speed. Each worker had a specific job, whether running the ketchup and mustard machine or placing the exact amount of onions and pickles on the buns. These changes not only increased speed and efficiency, they also eliminated the need for a highly paid skilled kitchen staff. The new system relied on unskilled labor and replaced the weight staff with a self-service walk-up window. Perhaps the biggest change was eliminating dishes in silverware, which removed the need for dishwashers and further reduced labor costs. The new format served everything in disposable packaging, with hamburgers wrapped in wax paper and soft drinks and fries in paper containers. When the patrons were done, they just threw everything away.

Starting point is 00:04:10 The system cut wait times from as much as 20 minutes down to 20 seconds, which increased foot traffic and by the end of the first year generated as much as $40,000 in profit from just the San Bernardino restaurant. In 1954, a 52-year-old milkshake machine salesman named Ray Kroc received an order that defied all logic. A small hamburger stand in San Bernardino, California, was running eight of his multi-mixers at once, churning out 40 milkshakes at a time. Croc struggled to convince drive-ins to buy one of his machines, let alone eight. An intrigued, Croc drove out to investigate and discovered the speedy service system in full effect. Recognizing the potential of their innovation, he pitched to the brothers on a national franchise

Starting point is 00:05:00 strategy. Up until that point, Croc had found little success in business, but was incredibly motivated. In April of 1955, Croc opened his first franchised location in Displains, Illinois, founding McDonald's Systems Incorporated. Crock quickly added franchises across the Upper Midwest as the restaurant's popularity expanded in Minnesota, Ohio, and Wisconsin. Crock envisioned a McDonald's empire built on operational uniformity, enforcing strict standards through a rigid franchise manual that replicated the San Bernardino process and dictated

Starting point is 00:05:36 everything from equipment placement to cooking times. Croc's relentless efforts added an astonishing 100 restaurants within five years. However, the rapid expansion quickly exposed several flaws in his contract with the McDonald Brothers. Under the original arrangement, franchisees paid a 1.9% service fee on all sales, of which half a percentage point went to the McDonald Brothers and 1.4 percentage points remained with Croc's company, leaving Croc's business with razor-thin margins. Despite explosive nationwide expansion, Ray Croc found himself financially cornered.

Starting point is 00:06:14 The growing empire he was building was star for cash because of the restrictive terms locked into his original contract with the McDonald brothers. To break free, Croc engineered a definitive split, buying out Richard and Maurice McDonald for $2.7 million, guaranteeing each brother $1 million after taxes. Under the deal, he secured full ownership of the brand name, the patents behind the speedy system, and control of the corporation. According to the McDonald family, when Ray Kroc bought out Richard and Maurice McDonald in 1961, there was an unwritten handshake agreement that the brothers would continue receiving a royalty on future McDonald's sales, often described as half or one percent. That royalty was never put into the written contract and was never paid. Complete ownership didn't solve the immediate cash flow crisis for Ray Kroc.

Starting point is 00:07:08 The breakthrough arrived via financial expert, Harry Sownborn, who introduced Kroc to a real estate model that would become the true engine of McDonald's dominance. Instead of merely collecting meager hamburger royalties, the corporation began purchasing and leasing prime commercial real estate plots, constructing the restaurants, and then leasing them back to the franchisees at a markup. McDonald's locations follow a pattern being situated in high traffic areas, often near highway exits, busy streets, and other attractions. McDonald's became a real estate conglomerate that happened to sell hamburgers, a strategy that transformed the company overnight. It shifted the enterprise from a low-margin food service company

Starting point is 00:07:53 into one of the most secure commercial landlords in the country where guaranteed rental income, not burger sales, became the primary profit engine. By 1961, profits were rolling in as the network grew to 228 locations and generated over $56 million annually. Croc's next transformative step was to take McDonald's public with an initial public offering at $22.50 a share in 1965. By year's end, the corporation had grown to 700 restaurants across 44 states. Franchisee Jim Delagatee introduced a new sandwich at one of the first. of his Pennsylvania restaurants in 1967 and called it the Big Mac. It rolled out nationally in 1968 and became McDonald's most iconic sandwich. By tapping Wall Street Capital and strategically

Starting point is 00:08:45 expanding its menu with mainstays like chicken nuggets and the Egg McMuffin' Breakfast sandwich, McDonald's achieved market dominance, providing the greatest innovation wasn't the hamburger itself, but the financial mechanism built beneath it. To maintain his empire, Ray Kroc knew that he couldn't sit still. He had to uphold rigorous quality standards. Instead of playing short-term corporate hardball, trying to squeeze suppliers, and leaning too hard on franchisees for a quick buck, Croc built his philosophy around what he called the three-legged stool. He looked at the corporation, local franchisees, and farmers as equals. If you break or weaken even one leg, the whole system falls apart. By abandoning the old cut-throat ways of treating vendors as adversaries,

Starting point is 00:09:31 He built a network of long-term partnerships where everyone grew wealthy together. McDonald's partnered directly with multi-generational farming families at companies like Lamb Weston and J.R. Simplot. Rather than buying generic commodities off the open market, McDonald's guided their farmers as corporate agronomists dictated seed selection, soil composition, and precise irrigation schedules. Every single input was engineered to exact physical and chemical specifications. To maintain quality, they bred potatoes for high solid-to-water ratios,

Starting point is 00:10:05 age them in standard controlled atmosphere storage to normalize natural sugar levels and partially fried them before flash freezing. This process ensured that every French fry from coast to coast at McDonald's would be of similar quality. To standardize burger quality, corporate engineers designed individual quick freezing methods for their beef patties that locked in juices. Even condiments and packaging followed straight, specifications. Ketchup was formulated with custom sugar levels to meet exact taste and texture

Starting point is 00:10:36 requirements. By taking total control over everything from farming to processing in its supply chain, McDonald's ensured uniformity, providing the first model that illustrated the true benefits of restaurant standardization. McDonald's didn't just conquer the food supply chain. It figured out how to wire itself straight into American culture. Early fast food market, relied on simple highway billboards pointing motorists towards cheap burgers. In 1971, McDonald's launched its first national marketing campaign, announcing their slogan, You deserve a break today.

Starting point is 00:11:12 The jingle was catchy and psychologically effective, tapping into the rigors of the modern work week and validating a quick burger run. McDonald's also realized that to bring in families, they needed to market to children, so in 1963, they introduced a character named Ronald McDonald. With the introduction of Happy Meals in 1979, children discovered the packaged toys inside and began begging their parents for more trips to McDonald's. By 1994, McDonald's had more than 15,000 locations in nearly 70 countries and had just sold its 100 billionth hamburger. Although they stopped counting over 30 years ago, it's estimated that they have now sold approximately 1 trillion hamburgers worldwide.

Starting point is 00:11:58 McDonald's became the world's most recognized brand, and in foreign countries, having a McDonald's signaled economic development. In fact, Thomas Friedman, author of the 1999 book The Lexus and the Olive Tree, noted that no two countries with the McDonald's had ever fought a war at that time. By the dawn of the 21st century, decades of aggressive expansion collided with the nationwide focus on obesity. Morgan Spurlock's 2004 documentary Super Size Me highlighted the issues. In his documentary, Spurlock pledged to eat three meals a day at McDonald's, agreeing to a supersized meal whenever he was asked. The results were even worse than expected. By the end of the month, Spurlock had gained nearly 25 pounds, and medical testing revealed

Starting point is 00:12:43 skyrocketing cholesterol levels alongside severe liver dysfunction attributed to fatty liver disease. Although the experiment was extreme and very unrealistic, the public relations damage was profound. public outcry forced McDonald's to overhaul its entire brand strategy. Gone were supersized options, and the franchise welcomed healthier options such as salads, raps, fruit, and yogurt. Franchises subsequently introduced another major innovation by eliminating front-counter personnel entirely. Lobbys were transitioned to self-service digital kiosk, app-based ordering, and data-driven loyalty systems, drastically lowering front-of-house labor expenses. Much like the original choreographed workplace designed on a tennis court,

Starting point is 00:13:28 today's some McDonald's kitchens use automated robots to work even faster. When I was traveling around the world, I used to visit McDonald's in every country I visited, not out of love for their food, but because every McDonald's was pretty much the same, except small things were often different. In India, for example, they don't serve beef, only chicken. In Europe, they'll often sell beer.

Starting point is 00:13:51 In Australia and New Zealand, they served burgers with fried egg and beetroot, and in Italy, I had cheese croquettes. The waves in which each McDonald's was different really stood out in what was otherwise a very similar experience. And they also had free Wi-Fi. The history of McDonald's is about much more than hamburgers and fries. It's a story of how a small California drive-in transformed food service through speed, standardization, and relentless attention to efficiency.

Starting point is 00:14:21 And along the way, McDonald's became both a symbol of American culture and one of the most recognizable countries on earth. Its influence can be seen not only in fast food, but in supply chains, advertising, and the way modern businesses scale. For better or for worse, few companies have done more to shape how the world eats, buys, and thinks about fast food. The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Austin Otkin and Cameron Kiefer. Research in writing for this episode was provided by Joel Hermanson. My big thanks go to everyone who supports the show over on Patreon.

Starting point is 00:15:03 Your support helps make this podcast possible. And I also want to remind everyone about the community groups on Facebook and Discord, as this is where everything happens outside of the podcast. As always, if you leave a review on any of the major podcast apps, You too can have it run in the show.

Everything Everywhere Daily: History, Science, Geography & More - The History of McDonald's

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