McDonald’s was founded in 1937, by two brothers, Dick and Maurice McDonald. The first store the brothers owned was built in Pasadena, California and was originally a one window drive-in, serving only hot dogs and milkshakes. The success of this establishment led them to open their second restaurant in San Bernardino, California, where they actually employed twenty or more car hops and other staff with a much broader menu. These restaurants were incredibly successful and by 1948 the brothers had made more money then they had ever dreamed. With their newly found success, the brothers decided to overhaul their operations. After analyzing their operations they noticed that hamburgers were the majority of their sales so when developing their new strategy they decided to cut their menu items to offer only nine items, set up the kitchen to work as an assembly line and implement a self-service restaurant without car hops. They closed their doors for three months to elaborate on their new strategy of “Speedy Service System”. Initially the new strategy was not well received, but by 1952 the brothers we successful again and had signed their first franchise.
The brothers were very successful in the fast food industry from its inception, but they lacked many skills in developing franchises. They did however realize their inadequacy in this area and eventually hired Ray Kroc to become their franchise agent, though not without a stringent contract. Eventually, the McDonald brothers were ultimately squeezed out of the business, and were bought out by Kroc for $2.7 million. In 1961 McDonald’s senior management were able to secure further funding not by just selling the franchises, but also by their real estate operations. McDonald’s would buy land and lease it to their franchisees thus not only making money on the operations end but also on the real estate end. With the brothers out of the existing company and the increasing assets, Ray Kroc and his...
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