Meat, Potatoes & Money

In Rockford, Ill., one noon hour last week, a cooked-out housewife packed her three small children into the family car and set her course for a peppermint-striped glass-and-tile structure boasting a huge sign: MCDONALD'S HAMBURGERS. Stepping up to the self-service window, she ordered four hamburgers and milk shakes. Just 41 seconds and $1.40 later (hamburgers, 15-c-; shakes, 20-c-), she was on her way back to her waiting brood carrying an instant lunch.

On the strength of such low-priced assembly-line feeding, Ray A. Kroc, 59, has built his Chicago-based McDonald's Corp. in less than seven years from a paper company on paper with $1,000 in assets into the nation's largest drive-in chain--a string of 294 highway stops stretching from Connecticut to California. The McDonald menu is rigidly limited: besides hamburgers and milk shakes, McDonald drive-ins offer only French fried potatoes (10-c-) and soft drinks (10-c- and 15-c-). But on this limited bill of fare, they expect to ring up sales of $60 million this year, enough to give McDonald's Corp. estimated pretax profits of more than $4,000,000. More McDonald outlets are popping up fast (new openings this week: Albuquerque, Atlanta, and Durham, N.C.).

Music & Mixers. For restless Ray Kroc, the road to drive-in wealth began with a series of detours. After early stretches as a jazz pianist and musical director of Oak Park, Ill. radio station WGES, Kroc spent 17 years selling paper cups and then Multimixer milk-shake makers. One day in 1954 he stopped at a drive-in run by two brothers named McDonald in San Bernardino, Calif. Impressed by their efficient operation, Kroc struck a bargain with the brothers: in return for use of the McDonald name and techniques, he agreed to pay them 0.5% of all future sales of what he already envisioned as a nationwide chain of franchised drive-ins.

Kroc's Chicago friends scoffed, but once they saw the crowds line up to buy at his first stand, 15 of the scoffers took out franchises. Since then, demand for franchises has become so hot that Kroc has increased his price from the original $900 to $12,500, plus a 2.2% royalty on monthly sales. Currently, there is a paid-up backlog of 60 would-be licensees waiting (some for more than a year) for a Kroc-assigned location. Including down payments on equipment, rent and signs (all paid to Kroc), plus working capital, a licensee needs at least $40,000 to sell his first hamburger.

So far, it has been worth the money.

Frank Patton, 41, quit his industrial-equipment sales job four years ago to take the Rockford franchise. His business has increased 10% to 20% every year, last year grossed $210,000 and nearly $40,000 in pretax profits. Among other McDonald licensees are an ex-research chemist, a former Waldorf-Astoria cook, a Chicago detective, and the onetime head of research at Kraft Foods (which supplies a special cheddar for McDonald's 19-c- cheeseburger).

Hamburger College. Before opening for business, licensees must spend 3 1/2 weeks at McDonald's "Hamburger College" in Chicago, where, with the aid of such gadgets as an automatic patty flipper, they master the technique of cooking up to 36 hamburgers at a time. Textbook is the 81-page McDonald's Manual, which specifies every operation in detail, e.g., hamburgers must be locally purchased "commercial" grade chuck (fat content 17% to 20%), formed into 1.6-oz. patties 3 5/8 in. in diameter. Each is to be garnished with 1/4 oz. onions, one teaspoon of mustard, one tablespoon of catsup and a pickle 1 in. in diameter. A third of the manual is devoted to Kroc's fetish: cleanliness. So strict is he about it that he posted a sign by the coffee machine in the home office threatening that "anyone who throws sugar wrappers or empty paper cups on the floor will be fired."

Scorning relaxation despite his mounting fortune--he owns 52.5% of McDonald's Corp. stock, has given the rest to employees--Kroc still spends half his time darting about the country in a company Aero Commander to size up new locations and licensees. To keep his drive-ins from becoming teen-ager jukebox jungles, he tries to build his trade around the station-wagon set. ("We count church steeples, not cars, when we are deciding where to locate.") And despite mounting competition from a score of rival chains that have copied his system, he confidently expects to have 550 drive-ins doing $90 million worth of business by the end of next year. Says he: "What we have attempted to do is eliminate those things that people don't eat. You can't eat a 20% tip, a perfumed finger bowl or a waitress. It isn't the cost of food that has gone up, it's the service. We are in the meat and potatoes business --and meat and potatoes aren't a fad."

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