The origin story of McDonald’s, titled The Founder, is set to hit cinemas this year. The film is based on the true story of how Ray Kroc, played by Michael Keaton, manoeuvred himself into a position to buy the 1950s fast-food operation from brothers Mac and Dick McDonald, played by Nick Offerman and John Carroll Lynch. Kroc (Keaton) turned the small family burger business into the multi-billion-dollar fast food empire you know today.
McDonald’s: The Origin Story
During the Great Depression in New Hampshire, two young brothers headed west to work in the ‘movies’, but the closest they got was hustling around film sets. Eventually, when they were both in their 30s, they opened a tiny drive-through restaurant in San Bernardino, California. This original restaurant was nothing like the McDonald’s outlets in operation now.
After owning the drive-through restaurant for several years, the McDonald brothers noticed that 80% of their sales were coming from hamburgers. Taking this insight to heart, they closed their doors for three months and overhauled the entire business into a self-service restaurant where customers could place orders at windows. The McDonald’s we know today was born.
They went lean, fired their 20 servers, and downgraded to paper wrappings and cups so they didn’t need to hire a dishwasher. The McDonald brothers then simplified their menu to just nine items, which included hamburgers, cheeseburgers, three flavours of soft drinks in one 12-ounce (350ml) size, milk, coffee, potato chips and pie.
“Our whole concept was based on speed, lower prices and volume,” says Richard ‘Dick’ McDonald. Taking inspiration from Henry Ford’s assembly line production of vehicles, the brothers developed the ‘Speedee Service System’ and mechanised the kitchen of their roadside burger shack.
In the beginning, a 12-person crew specialised in specific tasks, and a large amount of the food was preassembled, which reduced preparation time. The hamburgers were standardised, and if customers wanted something custom, they would have to wait for it.
During this time, Ray Kroc, a Chicago-born businessman, was helping the brothers assess their business opportunities in South Carolina. In the late 1950’s the company expanded into nine locations, and quickly became a leading franchise. Ray Kroc turned the small business into a corporation and quickly bought up the controlling equity in the business.
Building An Empire
Over the next 50 years, McDonald’s expanded from a small operation with roughly ten restaurants into the international juggernaut that it is today. The corporation started by spreading throughout the United States, and once it had saturated this market, it expanded overseas.
McDonald’s restaurants now operate in 118 countries and territories around the world, serving 68 million customers every day through its 36 525 restaurants. It employs approximately 420 000 people.
The restaurant has diversified over the years, offering unique menus to specific locations as well as halaal options in various Islamic countries. This rapid expansion has earned the company praise from business analysts, and success as a globally competitive franchise.
Over the years, McDonald’s has pioneered multiple features of the fast food industry. This franchise can take ownership for introducing the special morning breakfast menu in the 1970’s as part of its innovative food offerings.
Related: McDonalds: Susan Rawoteea
The Real Burger King
Ray Kroc rose from humble beginnings, which included working as a paper cup salesman and jazz musician. Now, he is one of Time magazine’s ‘Most Important People of the Century’ because of his role in building McDonald’s into, arguably, the most famous and successful quick service restaurant in the world.
Back in 1954, Kroc was a struggling Prince Castle Multi-Mixers salesman. He then came across the McDonald brothers’ small hamburger shop in San Bernardino. At the time, the establishment was simple, only serving the basics, which were hamburgers, French fries, soft drinks, and milkshakes.
The brothers revived Kroc’s sales figures by purchasing several mixing machines for their kitchen from him. Curious about why the brothers needed so many mixers, Kroc decided to investigate the purchase further. Once Kroc had discovered the secret behind their ‘Speedee Service System’, he suggested that the brothers expand their presence.
The brothers appointed him as McDonald’s national agent and he began to launch their franchise across the country.
Building A Franchise
In just six years, Kroc bought out the founding brothers for USD2.7 million, and by 1965, there were more than 700 restaurants across the United States. In order to maintain uniformity of quality and service, Kroc developed an innovative franchising model; he would grant a franchisee the right to only one store location at a time.
To ensure the success of his franchise, Kroc established strict standardised operations for all of the McDonald’s outlets, including such things as uniform portion sizes, simplified food preparation, affordable packaging and common ingredients. He also introduced heightened customer service standards, but left the marketing up to each franchise.
Although the initial creation of this concept didn’t come from Kroc, he had the vision to turn a niche restaurant into an empire.
He also insisted on keeping costs down in order to cater to the low-income market, ensuring that everyone could afford a McDonald’s meal.
Establishing A User-Friendly Franchise
Kroc knew that each franchise would essentially rely on the image created by the brand, which led him to standardise both cooking and serving procedures.
This process was kept efficient and easy to learn, so that new and unskilled employees could be relied upon to represent the McDonald’s brand statement of quality.
When welcoming a new franchisee to the group, Kroc established a new arrangement, which allowed him to increase his earnings. He would charge a 1.9% commission on a franchisee’s sales, rather than charging a large start-up fee.
If you’d like to learn more about how McDonald’s went from one location in the USA to thousands of sites worldwide, this biopic of the evolution of McDonald’s will delve into the origins of how the fast food empire began, who ultimately started it and who had the vision to turn it into what it is today.
The Founder starring Michael Keaton will open in South Africa in the fourth quarter of 2016. Watch the trailer below – this movie is not to be missed.
The 7th Annual FNB Franchise Leadership Summit
FNB Business remain committed to helping grow this very important sector and are well positioned to provide solutions supporting franchising as it evolves with these themes.
The franchising sector has shown steady growth over the past four years, in a tough economy from contributing an estimated 9.7% to the country’s GDP in 2014 to its recent figure of more than 15%, according to the Franchising Association South Africa (“FASA”) 2018 survey. This trend is expected to continue.
The survey further highlights that 78% of franchisors are optimistic about future growth in their businesses. Around 30% of franchises are now owned by previously disadvantaged South Africans, with one in three franchises turning over more than R20m per annum. This together with the fact that on average a franchise employs 18 staff members (the sector employs more than 370 000 people), makes it clear that as a business model, franchising remains critical to the future of South Africa.
Given the FNB Franchise Leadership Summit theme this year – “the future of the franchising sector”- I thought it would be good to reflect on some of the key trends we are noticing in this very dynamic space…
1. More Multi-Unit Owners, and franchisees owning multiple concepts
What happens once you have mastered the tried and true formula franchises have designed for their franchisees? If you’re like many franchise owners, you start opening another location. And then another. By recreating your success in multiple locations, you can quickly grow your revenues and increase your business’ sustainability.
Many franchisee owners are also opening other, non-competing franchise offerings as they grow their businesses in an effort to diversify earnings.
2. Smaller, more cost-effective franchise models
Among the new frontiers in franchising is the food court losing its legacy as the preferred setting for food franchises, as service stations increase in popularity in the industry. Many brands – including Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres. Looking at new, less expensive alternate locations beyond the shopping malls and strip malls to expand into stand-alone kiosks, food trucks, corporate catering, campuses, sporting events, craft markets, is a major trend.
3. Niche markets
Consumers increasingly prefer local businesses over national brands. Some of the bigger brands are looking for creative ways to tackle this situation by tagging with local businesses and this trend is on the rise. Niche markets are gaining traction. Whether it’s in offering a unique ‘gourmet’ food experience, craft beer or whether it’s in the environmental space of energy saving technology or recycling, these are where many new opportunities are to be found. With the increase in social awareness, social responsibility is a part of any business, small or big.
The current generation of consumer is challenging the role that business plays in society and franchises have wonderful platforms to play a positive role and in so doing win customers.
4. Increased customisation/ personalisation
In a world of increased consumer choice, it is no longer about what you have on the menu, it is now about how your product or service can be tailor-made to what a customer really wants. The success of RocoMamas speaks to this – with 61 franchise outlets their business model clearly responds to the essence of this trend by allowing consumers to create their own burgers, and increasingly consumers want the ability to create their own dining experience.
5. On-demand products/ services
Amazon is a great example of this – same day delivery is becoming the norm in the age of instant gratification – I want it now! Differentiation through delivery remains a big opportunity.
6. The significance of online and social media
Social media is how your customers chose to interact with brands, whether to express anger, inquire or to show appreciation. It is no longer about the question of should a business use social media or not, it is now more about how a business uses social media. Today’s digital-savvy customers are highly choosy about online buying. Some key points to consider:
- You need A Responsive, Interactive and up to date Website
- Customers should be able to view your website perfectly on any device
- Data Analytics is Important – Like it or not, your data is what drives your business
- Seemless and Safe digital payments are critical.
There is no doubt that franchising not only offers viable business opportunities, but also ensures that franchisees are better equipped to weather the tough economic environment. We at FNB Business remain committed to helping grow this very important sector and are well positioned to provide solutions supporting franchising as it evolves with these themes.
Be Your Neighbourhood’s Best Buddy
Ubuntu is a treasured part of South Africa’s heritage – but it could be better applied in parts of the country’s business sector, believes Richard Mukheibir, CEO of Cash Converters.
“Businesses operate most sustainably when they are entrenched in and care about the community that surrounds them,” he says.
“Ubuntu means we are people through our interactions with each other and I firmly believe that a people-centred approach like that should be a strong thread in sound business development.”
Embedding yourself in the community is also good for business – as long as you authentically and truly work at being your neighbourhood’s best buddy, he says.
“Be about helping people get on with life, about making their lives easier,” he advises. “We always encourage new franchisees to take a fresh look at the neighbourhood where they are setting up so that they can be active participants and not just providers or suppliers.”
Corporate social responsibility applies some of this thinking but, says Mukheibir, if it is a “parachute drop”, one-off activation in a community, this is far less convincing than sustained communication and cooperation.
Cash Converters places such emphasis on this that it is a major focus of the strategies implemented by the company’s Local Area Marketing Manager Juan Botha. This approach enables each franchise in the group to be in touch with its neighbourhood through social and other local media challenges, giving them added strengths locally while being supported by the advantages and professionalism of national and international 21st-century business systems.
“All franchises and chains are aware that branches represent the company on the ground,” says Mukheibir. “But Juan opened our eyes to the importance of being good neighbours and not just another store along the street.”
If you are a neighbour buddy by acting as a central, participating and unifying figure in the community, your neighbourhood will in turn work for you. You can build awareness by sponsoring local events such as food festivals, cycling races or trail runs, especially if you can offer part of your own site as a venue, for example.
Related: Cash Converters Franchise Listing
You will establish real, long-term partnerships, though, by working consistently with community gatekeepers, from schools and welfare groups to gyms and conservancies. Adopt a community project and encourage staff to give their time and effort and this will generate goodwill that will be reflected back at you.
Such activities are about a lot more than column inches in community media, says Mukheibir. Building good relationships with communities can enhance your brand’s reputation, he believes. But being your neighbourhood’s best buddy can also make an important contribution to social cohesion.
“Plenty of people hark back to the good old days of mom-and-pop stores when everybody in the neighbourhood looked out for each other,” he says. “It’s not just nostalgia to want to rebuild that in our society – it makes sense.
“We all need to contribute to the safety and stability of our neighbourhoods, whether we are individuals or businesses. The season of goodwill is fast approaching – why not see what difference your business can make in your neighbourhood by then?”
Clean Out, Clean Up – And Win Big With Cash Converters!
Spring is on the way and Cash Converters is celebrating the season of renewal with a bigger than ever Spring Clean Sale – and this year it gives you two very different opportunities to cash in.
From 24 August to 2 September, you can help Cash Converters spring clean all its stores nationally by snapping up discounted items across all their different product categories. Then in the second phase starting on 3 September, Cash Converters returns the favour by giving away R200 000 over 20 days! A total of 100 customers will win cash prizes in this Spring Clean Special Draw of R10 000 per day from 6 to 25 September. To enter, all you need to do is sell Cash Converters an unwanted item that you have decided to spring clean.
Sorting through your cupboards for items that are in good condition but rarely used and that you are ready to sell could put you in line to be one of the lucky winners of a fistful of cash that will make your budget stretch further or give you a head start for early Christmas gift buys. If you have not yet managed to act on this year’s resolution to declutter your space, here is an excellent incentive to make good on that goal.
Many of us have items crowding our homes that turned out to be bad buys, were unwanted presents or are outdated for our needs. Trading in these items can help you trade up to something that suits you better – as well as giving you the chance to be one of the lucky cash winners!
Get ready to cash in on:
- Spare phones, computers or cameras
- Unused power tools or exercise equipment
- Unwanted jewellery and watches
- Unnecessary kitchen appliances and electronic goods
- Surplus gifts or inherited items
“Essentially, we are paying you to spring clean!” says Richard Mukheibir, CEO of Cash Converters. “Even if you are not fortunate enough to be one of our daily cash-prize winners, you will be cashing in on items you do not need. That is a welcome boost to anybody’s wallet with petrol prices and the VAT increase still eating away at our income.”
Apart from all the excitement around the opportunity to win big, the outcome is win-win for everybody, says Mukheibir. Whatever you choose to trade in for cash in hand could well become the treasure that somebody else has been looking for. He believes the Spring Clean process also has an important message for South Africans.
“We are specifically running this promotion during Heritage Month because it helps enable a key change in mind-set that we need to entrench if we are to live sustainably on our beautiful planet,” he says.
“It has been estimated that the City of Johannesburg’s landfills will be full in just six years’ time, for instance. But enabling items you do not need to have a second, useful life, or astutely buying quality second-hand items you do need, is taking action on the reuse, recycle, repurpose message of our times. That makes you one of the savvy consumers who are doing what they can to save our planet for future generations.”
Related: Cash Converters Franchise Listing
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