History Lessons: Take the longer view - McDonald's

Ray Kroc stumbled on the McDonald brothers' San Bernardino burger joint in 1954, and soon negotiated a deal to launch a franchise around the US.

Last Updated: 06 Nov 2012

Unlike most franchisers then and now, Kroc understood the benefit of looking after his franchisees. While the average franchiser was out to get rich quick, slapping large margins on the ingredients they forced licensees to buy, Kroc thought he'd prosper in the long run if he took care of them first. He cut their costs and enforced rigid standards across the board, making their businesses stronger. He charged only $950 for each new restaurant, plus 1.9% of the sales revenue - of which he had to return a quarter to the McDonald brothers. If sales at a branch hit $100k, he'd take home just $1,400. When he bought out the brothers in 1961 for $2.7m, McDonald's had made millionaires of many franchisees. Kroc barely turned a profit, but fast food eventually fed him a $500m fortune. If you want a taste of the bigger stakes, don't chase that quick buck.

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