Grinding It Out
Page 7
Business recovered after the war, and soon it was better than ever. New soft-mix ice cream purveyors were starting up as franchises, and I was in there pushing Multimixers into this expanding market, to Dairy Queen, Tastee-Freeze, and the rest. I sold a Multimixer to a guy named Willard Marriott, who had just opened a drive-in called A & W Root Beer. His method of operation fascinated me. I considered myself a connoisseur of kitchens; after all, selling Multimixers took me into thousands of them. I prided myself on being able to tell which operations would appeal to the public and which would fail. Willard Marriott looked like a winner to me from the start. I had no more idea than he did back then, though, of what a giant his Marriott Corporation would become in hotels and restaurants. I was spending a lot of time in bars in those days, too. Not as a customer, but as a critic. The whole mixed-drink industry seemed entirely too bland to me. It needed livening up with new drinks that used ice cream. They would be mixed, of course, on a Multimixer. My favorite concoction was brandy or crème de menthe, crème de cacao, or Kahlua with ice cream. The result was a soft custard that could be both an after-dinner drink and dessert. I called the thing the Delacato. One place, the Evergreen, a well-known steak house in Dundee, Illinois, served the Delacato in a champagne glass, to be eaten with a spoon or sipped through a little straw. Obviously, my invention did not alter the nation’s drinking habits, but it was an interesting notion.
My pattern of travel in peddling Multimixers hinged around the restaurant and dairy association conventions. I hit all of their national shows and the larger regional ones as well. I would order a dozen or so Multimixers to be sent to each show by Railway Express from our plant in downstate Illinois. When I arrived, I would display some of them in my own booth and set the others on the counters of the big manufacturers of soda fountains, Liquid Carbonic, Bastion-Blessing, Grand Rapids Soda Fountain, and others. I never left one of those shows without selling all of my samples, in addition to other orders. That’s why I dreaded the last day of any show. I’d have to repack the machines for shipment to the purchasers. I’ve never been handy with tools, and crating those machines was always an interlude spiced with splinters, skinned knuckles, and plenty of profanity. It was worth the irritation, naturally, but I sometimes wished I’d gotten into selling something I could fit in my pocket. My sample case for the Multimixer weighed close to fifty pounds. I had wheels installed on the bottom of it so I could pull it down the street like my little red wagon. But it was a hassle to get it in and out of taxicabs or up a long flight of stairs.
I didn’t bother setting sales goals for Multimixer. I didn’t need any artificial incentives to keep me working at top speed. My estimate of when I was having a good year was when I sold 5,000 units. I have several of those. One year—1948 or 1949—I sold 8,000.
That kind of volume was making my style of operating from outside the office increasingly difficult. I needed more help. But I was reluctant to hire another office worker. It was useless to ask Ethel to come in, she had made that perfectly clear. Yet it didn’t seem to me that the business was strong enough to add another hand. Finally, late in the fall of 1948, my accountant, Al Doty, convinced me that I was going to have to hire a bookkeeper. I respected Al’s judgment. He had been recommended to me by my friend Al Handy at Harris Trust & Savings Bank, and his firm handled my accounting for many years. Anyhow, Al got me going and I put an ad in the papers. I can’t remember how many girls I interviewed, but I’ll never forget the brilliant waif who got the job. There was no question in my mind after we talked for a few minutes that this Mrs. June Martino was the one to hire. She was wearing a faded coat that hardly looked adequate for the December storm that was whipping down the LaSalle Street canyon that day, and she looked as though she’d missed several meals. Yet she had a presence that conveyed integrity and a restless native ability to deal with problems. This was enveloped in a warm, compassionate personality, a rare combination of traits. The fact that she had no bookkeeping experience bothered me not at all. I knew she would master the technical routines quickly. So I told her I couldn’t pay much, but if she was willing to work hard anyhow, I could promise her a bright future. We talked the same language. She did work hard—unbelievably hard—and in less than twenty years she was one of the top women executives in the country, secretary and treasurer of McDonald’s Corporation.
June came from an improvident German family on the northwest side of Chicago. She and Louis Martino were married shortly before World War II. He was an engineer with Western Electric, and the company wanted to have him exempted from the military draft because he was working on a coaxial cable invention that could be vital to defense communications. One day June took some papers down to the army personnel office that was processing Louis’s classification. When she left, he had been exempted from the service, but she had been sworn in! She was very patriotic and just got carried away. As a WAC she studied electronics at Northwestern University and learned trigonometry and calculus and God knows what else. She had to do it by intensive tutoring, because she had no special aptitude for higher mathematics. But that’s the sort of person she was; no challenge was too big for her. If she didn’t know something, she’d burrow into library books and find out.
June had a couple of children toward the end of the war; then her father and Louis’s mother both became seriously ill. Soon they were $14,000 in debt. They decided to move the whole shooting match, in-laws, kids, and the two of them, to a farm near the Wisconsin Dells. Housing was cheap up there, and they figured they could raise a lot of their own food. Louis planned to get a job in a television repair shop and work the farm, too. A lot of young couples were doing that sort of thing at the time. It may have panned out for a few of them, but many more, the Martinos among them, found they couldn’t make a go of it. Louis couldn’t afford to leave his job to look for work in Chicago, so June came down and stayed with a friend while she haunted the employment agencies. That’s how she happened to walk into my office that bitter cold December day.
A charming thing about June was that despite her solid business sense, she was absolutely innocent about money matters. She also had a remarkable intuition. It bordered on the psychic at times, and she had a childlike faith in it. I saw it work the first day she was in my office. I sent her over to the bank to make a deposit. She had exactly twenty cents, as she explained later, and that was her carfare home. But she passed a Salvation Army band playing on the corner, and something in her heart would not let her go by with that money in her purse. So she tossed the two dimes into the kettle and went on to the bank. When she got back to the office, she was ecstatic.
“Oh, Mr. Kroc, what a wonderful day this is! I got this job, and it’s my little boy’s birthday. He’s still up on the farm, of course, and I was wishing I could buy a present to send him but it seemed impossible.” She then went on to tell me about having only twenty cents to her name and how she’d tossed it into the Salvation Army kettle. As she left the bank, coming back to the office, her heel caught in a sidewalk grating. She looked down to dislodge it, and there, next to her foot, was a twenty-dollar bill! “I went back into the bank and asked the tellers if they had any idea who had lost it. One of them looked at me and said, ‘Lady, I think you really ought to keep it.’ Can you imagine such luck?”
That’s typical of the kind of thing that happened to June. I thought it was good to have a lucky person around, maybe some of it would rub off on me. Maybe it did. After we got McDonald’s going and built a larger staff, they all called her “Mother Martino.” She kept track of everyone’s family fortunes, whose wife was having a baby, who was having marital difficulties, or whose birthday it was. She helped make the office a happy place.
It wasn’t easy to be cheerful about my business in the early 1950s. Al Doty once told me that he liked to have lunch with me because he always learned something about his own business trends. “You seem to be able to see further into the future than the rest of us,” he said. I believe I did. And what I saw ma
de me very unhappy. It was clear that Multimixer’s days were numbered. Liquid Carbonic Corporation’s stockholders had engaged in a big proxy fight. The man who had inherited the presidency was determined to continue the firm’s manufacture of soda fountains out of dedication to employees who had served that division loyally for many years. His opponents wanted to scrap the soda fountain division, because it was losing money. They won. Other manufacturers were cutting back, too. The handwriting was on the wall, and Walgreen’s underscored it when, for the first time, they began pulling soda fountains out of their stores.
The upshot of all this, I knew, was that I had to find a new product. Preferably something that would be as innovative and as attractive as Multimixer had been fifteen years earlier. I thought I had it in a unique folding kitchen table and benches that a neighbor of one of my salesmen had made. The idea appealed to me, so I went out to the man’s home to see it. The table and benches folded up into the wall like an ironing board. It seemed like a great spacesaver for small kitchens. I had Louis Martino construct a model for me. It looked great. I had some reservations about it, but my anxiety to get a new product for my salesmen to market overcame my doubts. I gave it the name “Fold-a-Nook” and had the sample shipped to the Beverly Hills Hotel in California, where I intended to introduce it with a big splash.
All the top developers and builders I’d invited for the occasion came and sipped cocktails in the elegant room I’d rented. They admired the fresh flowers and praised the hors d’oeuvres. The party was a terrific success, but “Fold-a-Nook” was an enormous flop. I got not a single order.
I might have pursued that project, disappointed though I was at the lack of response in California, but I learned that unbeknown to June Martino and me, the salesman who had put me onto the thing was conspiring with my secretary to pirate the “Fold-a-Nook” from me. I fired both of them on the spot. Their rejoinder was to copy the “Fold-a-Nook” and bring it out under another name. That man had been a fellow worker and golfing companion since Lily Tulip Cup days; I had loaned him money for the down payment on his house. So I took no pleasure in the fact that they later went broke. By the same token, however, I couldn’t listen for a moment when he called later to plead for a chance to get into McDonald’s. A good executive does not like mistakes. He will allow his subordinates an honest mistake once in a while, but he will never condone or forgive dishonesty.
It was not long after the “Fold-a-Nook” fiasco that I became intrigued by the stories of the McDonald brothers and their operation that kept eight Multimixers whirring up a bucket brigade of milk shakes out there in sunny San Bernardino. “What the hell,” I thought, “I’ll go see for myself.” So I booked my fifty-two-year-old bones onto the red-eye special and flew west to meet my future.
6
In the early 1930s in Southern California there developed a remarkable phenomenon in the food service business. It was the drive-in restaurant, a product of the Great Depression’s crimp on the free-wheeling lifestyle that had grown up around movie-happy Hollywood. Drive-ins sprouted in city parking lots and spread along highways and canyon drives. Barbecue beef, pork, and chicken were the typical menu mainstays, but there was an endless variety in service approaches as feverish operators hustled to outdo one another. Aspiring starlets worked as carhops, glad of an opportunity that would help them pay the rent and exhibit their charms at the same time. The drive-in operators cooperated by competing to see who could come up with the most exciting carhop costume. One of them had his girls zooming around his parking lot on roller skates.
Into that strange scene came my future mentors in the hamburger business, the McDonald brothers, Maurice and Richard, a pair of transplanted New Englanders. Maurice had moved out to California in about 1926 and got a job handling props in one of the movie studios. Richard joined him after he was graduated from West High School in Manchester, New Hampshire, in 1927. Mac and Dick worked together in the studio, moving scenery, setting up lights, driving trucks, and so forth until 1932, when they decided to go into business for themselves. They bought a run-down movie theater in Glendora. It provided a very sparse living, and Mac and Dick perfected the art of squeezing the bejesus out of every penny. They sometimes ate only one meal a day, and often that was a hot dog from a stand near their theater. Dick McDonald recalls that watching the owner of that hot dog stand, who had one of the few places in town that seemed to be doing any business, was probably what gave him and his brother the idea of going into the restaurant field.
In 1937 they talked the owner of a lot in Arcadia, near the Santa Anita racetrack, into putting up a small drive-in building for them. They knew nothing about food service, but they had a man who was experienced as a barbecue cook, and he showed them the ropes. Obviously, they picked it up pretty fast. Two years later they were scouting around the railroad town of San Bernardino looking for a location for a bigger barbecue operation. A fellow named S. E. Bagley from the Bank of America got them started with a $5,000 loan.
The San Bernardino restaurant was a typical drive-in. It developed a terrific business, especially among teenagers. But after World War II, the brothers realized they were running hard just to stay in one place. They weren’t building volume even though their parking lot was always full. So they did a courageous thing. They closed that successful restaurant in 1948 and reopened it a short time later with a radically different kind of operation. It was a restaurant stripped down to the minimum in service and menu, the prototype for legions of fast-food units that later would spread across the land. Hamburgers, fries, and beverages were prepared on an assembly line basis, and, to the amazement of everyone, Mac and Dick included, the thing worked! Of course, the simplicity of the procedure allowed the McDonalds to concentrate on quality in every step, and that was the trick. When I saw it working that day in 1954, I felt like some latter-day Newton who’d just had an Idaho potato caromed off his skull.
So I asked Dick McDonald—when he wondered aloud who they’d get to open a lot of similar restaurants for them—“What about me?” The response seemed to surprise him and his brother momentarily. But then they brightened and began discussing this proposal with increasing enthusiasm. Before long we decided to get their lawyer involved and draw up an agreement.
In the course of this conversation I learned that the brothers had licensed ten other drive-ins, including two in Arizona. I had no interest in those, but I would have rights to franchise copies of their operations everywhere else in the United States. The buildings would have to be exactly like the new one their architect had drawn up with the golden arches. The name, McDonald’s, would be on all of them, of course, and I was one hundred percent in favor of that. I had a feeling that it would be one of those promotable names that would catch the public fancy. I was for the contractual clauses that obligated me to follow their plans down to the last detail, too—even to signs and menus. But I should have been more cautious there. The agreement was that I could not deviate from their plans in my units unless the changes were spelled out in writing, signed by both brothers, and sent to me by registered mail. This seemingly innocuous requirement created massive problems for me. There’s an old saying that a man who represents himself has a fool for a lawyer, and it certainly applied in this instance. I was just carried away by the thought of McDonald’s drive-ins proliferating like rabbits with eight Multimixers in each one. Also, I was swayed by the affable openness of the McDonald brothers. The meeting was extremely cordial. I trusted them from the outset. That trust later would turn to bristling suspicion. But I had no inkling of that eventuality.
The agreement gave me 1.9 percent of the gross sales from franchisees. I had proposed 2 percent. The McDonalds said, “No, no, no! If you tell a franchisee you are going to take two percent, he’ll balk. It sounds too full and rounded. Make it one and nine-tenths, and it sounds like a lot less.” So I humored them on that one. The brothers were to get .5 percent out of my 1.9 percent. This seemed fair enough, and it was. If they had played their
cards right, that .5 percent would have made them unbelievably wealthy. But as my Grandpa Phossie used to say, “There’s many a slip twixt the cup and the lip.” Another aspect of the agreement was that I was to charge a franchise fee of $950 for each license. This was to cover my expenses in finding a suitable location and a landlord who would be willing to build to our specifications. Each license was to run for twenty years. My contract with the McDonalds was only for ten years. That was later amended to ninety-nine years.
I’ve often been asked why I didn’t simply copy the McDonald brothers’ plan. They showed me the whole thing and it would have been an easy matter, seemingly, to pattern a restaurant after theirs. Truthfully, the idea never crossed my mind. I saw it through the eyes of a salesman. Here was a complete package, and I could get out and talk up a storm about it. Remember, I was thinking more about prospective Multimixer sales than hamburgers at that point. Besides, the brothers did have some equipment that couldn’t be readily copied. They had a specially fabricated aluminum griddle for one thing, and the set-up of all the rest of the equipment was in a very precise, step-saving pattern. Then there was the name. I had a strong intuitive sense that the name McDonald’s was exactly right. I couldn’t have taken the name. But for the rest of it, I guess the real answer is that I was so naive or so honest that it never occurred to me that I could take their idea and copy it and not pay them a red cent.
I was elated with the deal I’d struck, and I wanted to tell someone about it right away, so I dropped in to visit Marshall Reed, my former secretary at Lily Tulip Cup. Marsh had served in the army during World War II. He went back to selling paper cups for a time after the war, but then he married a wealthy widow and retired to California. He was glad to see me, as always, and we had an interesting talk about my new venture. Since I was committed to it, he didn’t tell me what was really on his mind until years later: “I thought you’d gone soft in the head … was this a symptom of the male menopause?… I asked myself, ‘What is the president of Prince Castle Sales doing running a fifteen-cent hamburger stand?’” Good old Marsh. He’d never step on another man’s happiness.