On McDonald’s – Behind The Arches

I recently finished reading McDonald’s – Behind The Arches by John F. Love.

As best summarized on the back cover of the book – “McDonald’s is the story of an American business success, a company that proved the value of hard work, ingenuity, trial and error, and gut instincts. In McDonald’s: Behind the Arches, business writer John F. Love tells the astonishing story of the people, and the strategies, the innovation and the brilliance that turned a single hamburger stand into a multibillion-dollar corporation that has influenced the very culture of America – and now the world.”

An exceptional business read, with countless lessons in business, management, leadership and sourcing. These lessons are inter-weaved within a great story about the start and growth of one of the most recognizable brands in the world. A must read!

Below are excerpts from the book that I found particularly insightful:

1- “Few outside McDonald’s understand that Ray Kroc’s brilliance is found in the way he selected and motivated his managers, his franchisees, and his suppliers. He had a knack for bringing out the best in people who worked with him. To be sure, Kroc’s success with McDonald’s is a story of his own entrepreneurship. But it is more. He succeeded on a grand scale because he had the wisdom and the courage to rely on hundreds of other entrepreneurs.”

2- “The fundamental secret to McDonald’s success is the way it achieves uniformity and allegiance to an operating regimen without sacrificing the strengths of American individualism and diversity. McDonald’s manages to mix conformity with creativity.”

3- “Essentially, the approach Kroc took in franchising was the same as he took in selling food service supplies: his success was based on finding a way to make his customers successful with his product. As simple as it sounds, it was a revolutionary idea in the rapidly expanding food franchising business, and Kroc’s notion of a fair and balanced franchise partnership is without question his greatest legacy.”

4- “In short, Kroc assembled and tolerated one of the most diverse collections of individuals ever to occupy the top management of an american corporation. And even today, the practice of recruiting extremely individual managers is a McDonald;s trademark, one almost completely hidden by the chain’s legendary operational uniformity.”

5- “In fact, McDonald’s greatest impact on American business is in the areas that consumers do not see. In their search for improvements, McDonald’s operations specialist moved back down the food and equipment supply changed…They changed the way farmers grow potatoes…they altered the way ranchers raised beef…Indeed, no one has had more impact than McDonald’s in modernizing food processing and distribution in the past four decades.”

6- “McDonald’s also encouraged closeness with vendors by giving them enormous incentives to upgrade their operations. It did so by demonstrating early on that it could be just as loyal to suppliers that met its standards as it was tough on those that did not.”

7- “What converted McDonald’s into a money machines had nothing to do with Ray Kroc or the McDonald brothers…Rather, McDonald’s made its money on real estate and on a little-known formula developed by Harry J. Sonneborn.”

8- “The free exchange of Zien’s promotional ideas set a precedent that remains a key principle in McDonald’s marketing today: that all franchisees are partners, and what one develops to improve his or her local operation is provided freely to all operators to improve the system’s performance, with no royalty going to the franchisee, who discovered the concept.”

9- “…for most of its history, dedication to new products resided with certain product-oriented franchisees who stubbornly pushed their inventions on company managers who were not easily sold on them.”

10- “He (Kroc) had built not a company but a system of independent companies all pursuing the same goal, each dependent on the other. Indeed, the synergy that was developing between all the parts of McDonald’s was so different and unexpected that Kroc himself was only beginning to grasp the significance of it.”

11- “The packaged foods companies belatedly discovered that there was an enormous difference between the management of manufactured foods sold to grocers and foods prepared and sold directly to customers at a fast-food outlet. In the former, manufacturing is centralized and more easily controlled, and the sale to the consumer is indirect and depends highly on branded advertising. In the latter, production is decentralized and difficult to control, since each store is a self-sustaining production unit. Furthermore, the sale to the consumer is direct and depends highly on local service.”

12- “But McDonald’s reliance on nearly captive suppliers for technological breakthroughs goes beyond new products. Indeed, it was suppliers – driven by the prospect of increased McDonald’s business – who played the key role in organizing McDonald’s supply lines and making its distribution system one of the most advanced in all of retailing.”

13- “…McDonald’s Americanization of the global food service industry is one of the most promising developments in U.S. trade relations. McDonald’s, after all, is exporting what has become the centerpiece of American industry – the service sector.”

14- “More important, however, Fujita’s success made it clear to McDonald’s that to succeed in retailing abroad it needed a partnership that could give McDonald’s a home grown flavor in each foreign market without deviating from the fundamentals that made McDonald’s work in the United States.”

15- “The company was not only a good target for environmental activists because it was large, but the fact that it had outlets in virtually every U.S. community of any size made McDonald’s accessible to picketers and protesters everywhere, in some cases for issues that the company was not remotely involved in.”

Regards,

Omar Halabieh

McDonald’s – Behind The Arches