It is one of the most American brands in the world. Right up there next to Coca Cola (KO) - Get Report , Mickey Mouse and the Yankees there are the golden arches. Operating over 30,000 restaurants in over 100 countries, McDonald's is arguably the most successful restaurant in the entire world.
And it all started with a hot dog stand.
Founding of McDonald's
Brothers Maurice and Richard McDonald started the first McDonald's (MCD) - Get Report restaurant in 1948 by converting their drive-through barbecue restaurant into a burger and milkshake joint. Located in San Bernardino, California, the restaurant was actually the brothers' second venture into the food industry. Their first was a hot dog stand that the pair owned near the Santa Anita track.
The original McDonald's focused on its burgers, fries and shakes, selling them for half the price and in half the time of competing restaurants. It did this by changing the way that a hamburger shop operated. Instead of relying on waiters and waitresses, the McDonald brothers installed a self-service counter. Instead of cooking each meal to order, they prepared their burgers ahead of time and kept the food warm under high-powered heat lamps.
Readers might recognize this as the basic design of the modern fast food restaurant, but at the time it gave McDonald's an overwhelming edge against its traditional competitors.
This format eventually brought the McDonald brothers to the attention of kitchen appliance salesman Ray Kroc who supplied the restaurant. Impressed by their business model, Kroc bought the rights to begin franchising McDonald's restaurants nationwide, although at the time the brothers had already licensed a small number of franchise restaurants in Arizona and California. In 1955 Kroc formed the McDonald's Corporation and Kroc opened his first franchised restaurant in Des Plaines, Illinois.
While Maurice and Richard McDonald created the first restaurant and its food service business model, arguably it is Kroc who founded McDonald's as the world now knows it. He took the individual restaurant from its San Bernardino location and turned it mass-market. By 1961, Kroc had bought out the founders entirely and ran the company himself.
In doing so, Kroc made himself the most successful traveling salesman to ever pack a suitcase.
Timeline of McDonald's
Arguably one of the most impressive elements of McDonald's corporate history is how little modern history it has. During its first decades, McDonald's worked to establish its business model and brand. Since that time it has found an approach that works. The company's modern history is noteworthy specifically for its relatively few items of note. McDonald's has continued its rapid growth for nearly 70 years and, while it has gained and lost customers, new restaurants have opened at a steady pace.
To a degree that few other businesses can claim, the McDonald's approach can be described as "if it ain't broke, don't fix it."
- 1937 - The McDonald brothers start their hot dog stand, getting into the food service business as a team.
- 1940 - They open their barbecue restaurant in San Bernardino, the world's first McDonald's restaurant. There is no current information on whether they sold barbecue rib sandwiches, but we would like to think they did.
- 1948 - The McDonald brother turn their restaurant into a hamburger and milkshake restaurant, and in the process are credited with inventing the modern service model of fast food. In later memoirs the brothers would credit their process to Henry Ford, saying that they modeled their restaurant around his assembly lines in Detroit.
- 1953 - McDonald's opens its first franchise restaurant in Phoenix. While not a focus of Maurice and Richard McDonald, they did open multiple restaurants in Arizona and California during the company's early years.
- 1954 - Ray Kroc, a traveling appliance salesman, visits the McDonald's restaurant to discover why a small hamburger shop needs as many milkshake machines as it does. He buys the rights to franchise McDonald's restaurants across the country.
- 1955 - Kroc opens his first franchised restaurant, arguably the first restaurant of the modern McDonald's company, in Des Plaines, Illinois.
- 1956 - Kroc and Harry Sonnenborn develop a financial model in which McDonald's would own the land on which its franchisees build their restaurants. That model continues to this day, and is often considered one of the most significant financial decisions the company has ever made.
- 1959 - Kroc names Sonnenborn the first CEO of the McDonald's company.
- 1961 - Kroc buys out the McDonald brothers for $2.6 million (approximately $22.3 million in 2019 equivalent). The brothers keep their original restaurant, renamed Big M. Kroc later opened a competing McDonald's nearby that drove them and the first-ever McDonald's out of business by the end of the decade.
- 1962/63 - McDonald's launches its two most recognizable logos: the golden arches and Ronald McDonald.
- 1965 - McDonald's launches its public stock.
- 1967 - Kroc pushes Sonnenborn out and takes the position of CEO himself. Meanwhile, McDonald's opens its first international restaurant in Canada.
- 1974 - The first Ronald McDonald House opens.
- 1984 - Kroc dies.
- 1990 - McDonald's opens a restaurant in Pushkin Square, Moscow. Given the cultural status of the restaurant, this is seen as a symbolic moment in the end of the Cold War. According to the restaurant's website, it served more than 30,000 Russian citizens on the first day.
- 1993 - The company opens its first McCafe, McDonald's attempt to run a coffee restaurant, in Australia.
- 1996 - McDonald's has entered an era of rapid growth. From 1988 - 1996 the company doubles its number of restaurants, opening location number 20,000 this year.
- 1998/1999 - McDonald's as a corporation begins to aggressively expand past its traditional business model. It acquires companies including Chipotle (CMG) - Get Report and Boston Market, although it would later divest itself of these holdings.
- 2000 - By the end of the 1990s, McDonald's has opened more than 11,000 restaurants outside of the U.S.
- 2013 - In another symbolic moment, McDonald's opens its first restaurant in Vietnam.
- 2015 - In an effort to create new energy around its brand, McDonald's launches its all-day breakfast menu. This has largely been regarded as a failure, as it generally regarded as splitting an existing customer base rather than bringing new customers into the restaurant.
McDonald's has been the target of a number of high-profile lawsuits during the company's lifetime. Most notably was the infamous "coffee lawsuit" of the early 1990s.
In 1994 Stella Liebeck sued the company after spilling a cup of their coffee that gave her third degree burns across her legs and thighs. McDonald's had heated the coffee to over 190 degrees, causing injuries that hospitalized Liebeck and led to more than $20,000 in medical bills. The company refused to pay for Liebeck's treatment. It instead offered $800 in compensation, ultimately leading to the lawsuit.
More consistently, McDonald's has been the subject of concerns about the health impact of its food. Critics consistently point to the chain as a symbol of American issues with obesity, and argue that its drive toward low-cost, low-quality meals has contributed substantially to this problem. Arguably the high point of this bad press came with the 2004 documentary "Super Size Me," in which the film maker Morgan Spurlock ate nothing but McDonald's meals and always accepted a cashier's offer to "super size" his meal. (This referred to a now-discontinued practice of offering customers one size bigger than large, known as "supersize.")
Spurlock's film focused on the dramatic ways in which eating only McDonald's food affected his health, including warnings from his doctor that this diet could kill him. Over the course of his month-long experiment he gained nearly one pound a day.
Critics of this movie have pointed out that it only shows what happen when you abuse a product. McDonald's in particular responded to Spurlock's film by arguing that it does not recommend that people eat there every day in the way shown.
In recent years McDonald's has been one of many fast food restaurants targeted by the labor movement for its business and hiring practices. The Service Employees International Union has led multiple strikes against fast food locations around the country, frequently including McDonald's restaurants. This became known as the Fight for Fifteen, a push to raise the national minimum wage to $15 an hour.
While McDonald's has not taken an aggressive stand on the issue, it has slowly begun rolling out automated ordering kiosks at some of its restaurants. Then, in 2019, it acquired the artificial intelligence company Apprente. This acquisition is generally seen as a signal that McDonald's intends to further emphasize a low-employee, high-technology and self-service business model to cut down on costs.
Considering that the McDonald brothers opened their hamburger restaurant by firing all 20 of their waitresses in favor of self-service, a move which allowed them to offer hamburgers for only 15 cents apiece, this would represent nothing new.
While McDonald's stock has fluctuated over the course of 2019, the year has shown a general trend of overall growth. The share price moved from $176 at the beginning of the year to a high of $221. Over several months prices have fluctuated within 20 points, but have not dipped below $200 a share since early June.
Arguably more important, this takes place in a context of strong historic growth. McDonald's has shared in the stock market's boom in the years since 2009, and in the past 15 years has seen a significant growth in share price.
In January 2004 the company's stock traded for approximately $25 per share. The years since then have seen that grow nearly tenfold.
Much of that growth has occurred in the past five years. In late 2015 McDonald's corporate stock had spent several years trending at or just below $100 per share. Starting in 2016 the price began a steady climb. Despite some dips, most noticeable in early 2018 when shares lost nearly 20 points of value, in the past four years McDonald's corporate stock has doubled in value to its current prices of $200 - $220.
At the time of publication, the author was long McDonald's.