McDonalds reopening
This history of McDonald's is an overview of the original restaurant and of the chain.
Founded by Richard and Maurice McDonald
The McDonald family moved from Manchester, New Hampshire to Hollywood, California in the late 1930s, where brothers Richard and Maurice McDonald ("Dick" and "Mac") began working as set movers and handymen at Motion-Picture studios.[1] In 1937, their father Patrick McDonald opened "The Airdrome", a food stand, on Huntington Drive (Route 66) near the Monrovia Airport in the Los Angeles County city of Monrovia, California[2] with hot dogs being one of the first items sold. Hamburgers were later added to the menu at a cost of ten cents with all-you-can-drink orange juice at five cents. In 1940, Maurice and Richard moved the entire building 40 miles (64 km) east, to West 14th and 1398 North E Streets in San Bernardino, California. The restaurant was renamed "McDonald's Bar-B-Que" and had 25 menu items, mostly barbecue.
In October 1948, after the McDonald brothers realized that most of their profits came from selling hamburgers, they closed down their successful carhop drive-in to establish a streamlined system with a simple menu which consisted of only hamburgers, cheeseburgers, potato chips, coffee, soft drinks, and apple pie.[3] After the first year, potato chips and pie were swapped out for french fries and milkshakes. The carhops were eliminated, making the new restaurant a self-service operation. Richard and Maurice took great care in setting up their kitchen like an assembly line to ensure maximum efficiency. The restaurant's name was changed again, this time to simply "McDonald's," and reopened on December 12, 1948.
In April 1952, the brothers decided they needed an entirely new building in order to achieve two goals: further efficiency improvements, and a more eye-catching appearance. They collected recommendations for an architect and interviewed at least four, finally choosing Stanley Clark Meston, an architect practicing in nearby Fontana.[1] The brothers and Meston worked together closely in the design of their new building. They achieved the extra efficiencies they needed by, among other things, drawing the actual measurements of every piece of equipment in chalk on a tennis court behind the McDonald house (with Meston's assistant Charles Fish).[4] The new restaurant's design achieved a high level of noticeability thanks to gleaming surfaces of red and white ceramic tile, stainless steel, brightly colored sheet metal, and glass; pulsing red, white, yellow, and green neon; and two 25-foot yellow sheet-metal arches trimmed in neon, called "golden arches" even at the design stage. A third, smaller arch sign at the roadside hosted a pudgy character in a chef's hat, known as Speedee, striding across the top, trimmed in animated neon. Further marketing techniques were implemented to change McDonald's from a sit down restaurant to a fast food chain. They used such things as turning off the heating to prevent people wanting to stay so long, fixed and angled seating so the customer would sit over their food promoting them to eat faster, spreading the seats further apart so being less of a sociable place to dine in, and giving their customers branded cone shaped cups forcing them to hold their drink whilst eating which would speed up the eating process.[1] Other companies followed McDonald's strategies to turn their own restaurants into fast food establishments, in the 1950s, including Burger King and White Castle.[citation needed]
In late 1953, with only a rendering of Meston's design in hand, the brothers began seeking franchisees.[1] Their first franchisee was Neil Fox, a distributor for General Petroleum Corporation. Fox's stand, the first with Meston's golden arches design, opened in May 1953 at Central Avenue and Indian School Road in Phoenix, Arizona. Their second franchisee was the team of Fox's brother-in-law Roger Williams and Burdette "Bud" Landon, both of whom also worked for General Petroleum. Williams and Landon opened their stand on August 18, 1953 at 10207 Lakewood Boulevard in Downey, California. The Downey stand has the distinction of being the oldest surviving McDonald's restaurant.[5] The Downey stand was never required to comply with the McDonald's Corporation's remodeling and updating requests over the years because it was franchised not by the McDonald's Corporation, but by the McDonald brothers themselves to Williams and Landon.
Ray Kroc joins the company and expands its franchise operation
In 1954, Ray Kroc, a seller of Prince Castle brand Multimixer milkshake machines, learned that the McDonald brothers were using eight of his machines in their San Bernardino restaurant. His curiosity was piqued, and he went to take a look at the restaurant. He was joined by good friend Charles Lewis who had suggested to Kroc several improvements to the McDonald's burger recipe. At this point, the McDonald brothers had six franchise locations in operation.[6]
Believing the McDonald's formula was a ticket to success, Kroc suggested they franchise their restaurants throughout the country. The brothers were skeptical, however, that the self-service approach could succeed in colder, rainier climates; furthermore, their thriving business in San Bernardino, and franchises already operating or planned, made them reluctant to risk a national venture.[1] Kroc offered to take the major responsibility for setting up the new franchises elsewhere. He returned to his home outside of Chicago with rights to set up McDonald's restaurants throughout the country, except in a handful of territories in California and Arizona already licensed by the McDonald brothers. The brothers were to receive one-half of one percent of gross sales.[1] Kroc's first McDonald's restaurant opened on April 15, 1955, at 400 North Lee Street in Des Plaines, Illinois, near Chicago. The Des Plaines interior and exterior was painted by master painter Eugene Wright, who owned Wright's Decorating Service. Eugene was asked to come up with a color scheme and he chose yellow and white, with dark brown and red being secondary trim colors. Those colors would go on to become the colors of all McDonald's franchises. The restaurant was demolished in 1984. Recognizing its historic and nostalgic value, in 1990 the McDonald's Corporation acquired the stand and rehabilitated it to a modern but nearly original condition, and then built an adjacent museum and gift shop to commemorate the site now called McDonald's #1 Store Museum.
Once the Des Plaines restaurant had become operational, Kroc sought franchisees for his McDonald's chain. The first snag came quickly. In 1956 he discovered that the McDonald brothers had licensed the franchise rights for Cook County, Illinois to the Frejlach Ice Cream Company. Kroc was incensed that the McDonalds had not informed him of this arrangement. He purchased the rights back for $25,000 ($235,100 today), five times what the Frejlacks had originally paid, and pressed forward.
Sonneborn model and shift to real estate holdings
In 1956, Ray Kroc met Harry J. Sonneborn, a former VP of finance for Tastee-Freez, who offered an idea to accelerate the growth and investment grade of Kroc's planned McDonald's operation: Own the real estate that future franchises would be built on. Kroc hired Sonneborn and his plan was executed through forming a separate company called Franchise Realty Corp. which was solely designed to hold McDonald's real estate. The new company signed leases and took out mortgages for both lands and buildings, in turn then passing these costs on to the franchisee with a 20-40% markup and a reduced initial deposit of $950.[7][8] The "Sonneborn model" of real estate ownership within the franchise persists to this day, possibly being the most important financial decision in the company's history. McDonald's present-day real estate holdings represent $37.7Bn on its balance sheet, about 99% of the company's assets and 35% of its annual gross revenue.[9]
McDonald's grew slowly for its first three years. By 1958, there were 34 restaurants. In 1959, Harry Sonneborn became the president and CEO of McDonald's. The same year, the company opened 68 new restaurants, bringing the total to 102 locations.
1960s and 1970s
In 1960, the McDonald's advertising campaign "Look for the Golden Arches" gave sales a big boost. Kroc believed that advertising was an investment that would in the end come back many times over, and advertising has always played a key role in the development of the McDonald's Corporation. In 1962, McDonald's introduced its now world-famous Golden Arches logo. A year later, the company sold its millionth hamburger and introduced Ronald McDonald, a red-haired clown designed to appeal to children.
In the early 1960s, McDonald's really began to take off. The growth in U.S. automobile use that came with suburbanization and the interstate highway system contributed heavily to McDonald's success. In 1961 Kroc's conflict over the vision of the company with the founding brothers had grown to an unbearable extent, and he asked them how much money they wanted to leave their business to him entirely. The brothers asked for $2.7 million (about $21.6 million in today's dollars), which Kroc did not have. Harry J. Sonneborn was able to raise the money for him, and Kroc bought the founding brothers out. This purchase laid the groundwork to positioning the company for an IPO and furthering the aim at making McDonald's the number one fast-food chain in the country. The exact process of how the company was sold is not well-recorded; it is depicted as hostile takeover sides Ray Kroc in the movie The Founder but that portrayal is disputed, and interviews of the time speak of a more voluntary transition.[6][10]
In 1965, McDonald's Corporation went public. Common shares were offered at $22.50 per share. By the end of the first day's trading, the price had risen to $30. A block of 100 shares purchased for $2,250 in 1965 was worth, after 12 stock splits (increasing the number of shares to 74,360), over $5.7 million as of year-end market close on December 31, 2010. In 1980, McDonald's Corporation became one of the 30 companies that make up the Dow Jones Industrial Average.
McDonald's success in the 1960s was in large part due to the company's skillful marketing and flexible response to customer demand. In 1962, the Filet-O-Fish sandwich, billed as "the fish that catches people", was introduced in McDonald's restaurants.[11] The new item had originally met with disapproval from Kroc, but after its successful test marketing, he eventually agreed to add it. Another item that Kroc had backed a year previously, a burger with a slice of pineapple and a slice of cheese, known as a "hulaburger", had flopped (both it and the Filet-O-Fish were developed in Catholic neighborhoods where burger sales dropped off markedly on Fridays and during Lent). The market was not quite ready for Kroc's taste; the hulaburger's tenure on the McDonald's menu board was short.
Kroc and Sonneborn had a falling-out over expansion of McDonalds and Sonneborn resigned in 1967; Croc took over the title of CEO and president.[7] In 1968 the now legendary Big Mac made its debut, and in 1969 McDonald's sold its five billionth hamburger. Two years later, as it launched the "You Deserve a Break Today" advertising campaign, McDonald's restaurants had reached all 50 states.
In 1968, McDonald's opened its 1,000th restaurant, and Fred L. Turner became the company's president and chief administrative officer. Kroc became chairman and remained CEO until 1973. Turner had originally intended to open a McDonald's franchise, but when he had problems with his backers over a location, he went to work as a grillman for Kroc in 1956. As operations vice president, Turner helped new franchisees get their stores up and running. He was constantly looking for new ways to perfect the McDonald's system, experimenting, for example, to determine the maximum number of hamburger patties one could stack in a box without squashing them and pointing out that seconds could be saved if McDonald's used buns that were presliced all the way through and were not stuck together in the package. Such attention to detail was one reason for the company's extraordinary success.
By the late 1960s, many of the candy-striped Golden Arches stores had been modified with enclosed walk-up order areas and limited indoor seating. In June 1969, McDonald's introduced a new "mansard roof" building design featuring indoor seating. The natural brick and cedar shake look mansards were a response to critics who berated McDonald's architecture as too garish. It became the standard for McDonald's restaurants, and franchise holders were ultimately required to demolish older restaurants and replace them with the new design. The first McDonald's restaurant using the "mansard roof" design opened that same year in the Chicago suburb of Matteson.
McDonald's spectacular growth continued in the 1970s. Americans were more on-the-go than ever, and fast service was a priority. In 1972, the company passed $1 billion in annual sales. By 1976, McDonald's had served 20 billion hamburgers, and system wide sales exceeded $3 billion.
The company pioneered breakfast fast food with the introduction of the Egg McMuffin in 1972 when market research indicated that a quick breakfast would be welcomed by consumers. Five years later McDonald's added a full breakfast line to the menu, and by 1987 a quarter of all breakfasts eaten out in the United States came from McDonald's restaurants. In test market locations, such as New York City, McDonald's added a full breakfast line to its menus in 1975.
Kroc was a firm believer in giving "something back into the community where you do business". In 1974 McDonald's acted upon that philosophy in an original way by opening the first Ronald McDonald House, in Philadelphia, to provide a "home away from home" for the families of children in nearby hospitals. Twelve years after this first house opened, 100 similar Ronald McDonald Houses were in operation across the United States.
There was some skepticism in the company's phenomenal growth internationally. When Wally and Hugh Morris approached the corporation in 1974 to bring McDonald's into New Zealand, they were firmly shunned by Kroc, citing a visit to the country and saying "There aren't any people... I never met a more dead-than-alive hole in my life." Persistence by the brothers eventually led to their request being granted in May 1975. They managed to negotiate a deal with the corporation by selling New Zealand cheese to the US to offset the high costs of importing plant equipment. The first New Zealand restaurant opened in June 1976 at Porirua, near Wellington, to much more success than the corporation predicted.[12]
In 1975, McDonald's opened its first drive-thru window in Sierra Vista, Arizona, following Wendy's lead. This service gave Americans a fast, convenient way to procure a quick meal. The company's goal was to provide service in 50 seconds or less. Drive-thru sales eventually accounted for more than half of McDonald's systemwide sales. Meantime, the Happy Meal, a combo meal for children featuring a toy, was added to the menu in 1979. A period of aggressive advertising campaigns and price slashing in the early 1980s became known as the "burger wars". Burger King suggested to customers: "have it your way"; Wendy's offered itself as the "fresh alternative" and launched their "Where's the beef?" campaign. McDonald's sales and market still predominated, however.
During the 1980s, a period of substantial expansion, McDonald's further diversified its menu to suit changing consumer tastes. The company introduced the McChicken in 1980; it proved to be a sales disappointment, and was replaced with Chicken McNuggets a year later (having originally been invented by Rene Arend in 1979). In 1985, ready-to-eat salads were introduced. Efficiency, combined with an expanded menu, continued to draw customers. McDonald's began to focus on urban centers and introduced new architectural styles.
The first McDonald's Express locations opened in 1991. These are smaller-scale prototypes, usually constructed in prefabricated buildings or urban storefronts, that do not feature certain menu items such as milkshakes and Quarter Pounders.[13]
In 1992 Michael R. Quinlan became president of McDonald's Corporation, and Fred L. Turner became chairman. Quinlan, who took over as CEO in 1987, had started at McDonald's in the mail room in 1963, and gradually worked his way up. In his first year as CEO, the company opened 600 new restaurants.
By 1991, 37 percent of system-wide sales came from restaurants outside the United States. McDonald's opened its first foreign restaurant in British Columbia, Canada, in 1967. By the early 1990s the company had established itself in 58 foreign countries, and operated more than 3,600 restaurants outside the United States, through wholly owned subsidiaries, joint ventures, and franchise agreements. Its strongest foreign markets were Japan, Canada, Germany, Great Britain, Australia, and France.
In the mid-1980s, McDonald's, like other traditional employers of teenagers, was faced with a shortage of labor in the United States. The company met this challenge by being the first to entice retirees back into the workforce. Focusing on off-site training, it opened its Hamburger University in 1961 to train franchisees and corporate decision-makers. By 1990, more than 40,000 people had received "Bachelor of Hamburgerology" degrees from the 80-acre (320,000 m2) Oak Brook, Illinois, facility. The corporation opened a Hamburger University in Tokyo in 1971, in Munich in 1975, and in London in 1982.
Braille menus were first introduced in 1979, and picture menus in 1988. In March 1992, combination Braille and picture menus were reintroduced to accommodate those with vision, speech, or hearing impairments.
Clamshell grills, which cooked both sides of a hamburger simultaneously, were tested. New locations such as hospitals and military bases were tapped as sites for new restaurants. In response to the increase in microwave oven usage, McDonald's, whose name is the single most advertised brand name in the world, stepped up advertising and promotional expenditures stressing that its taste was superior to quick-packaged foods.
1990s
The first McDonald's in Mainland China opened in Dongmen, Shenzhen in October 1990.[14]
McRecycle USA began in 1990 and included a commitment to purchase at least $100 million worth of recycled products annually for use in construction, remodeling, and equipping restaurants. Chairs, table bases, table tops, eating counters, table columns, waste receptacles, corrugated cartons, packaging, and washroom tissue were all made from recycled products. McDonald's worked with the U.S. Environmental Defense Fund to develop a comprehensive solid waste reduction program. Wrapping burgers in paper rather than plastic led to a 90 percent reduction in the wrapping material waste stream.
It took McDonald's 33 years to open its first 10,000 restaurants. The 10,000th unit opened in April 1988. Incredibly, the company reached the 20,000-restaurant mark in only eight more years, in mid-1996. By the end of 1997 the total had surpassed 23,000, and by that time McDonald's was opening 2,000 new restaurants each year, an average of five every day.
Much of the growth of the 1990s came outside the US, with international units increasing from about 3,600 in 1991 to more than 11,000 by 1998. The number of countries with McDonald's outlets nearly doubled from 59 in 1991 to 114 in late 1998. In 1993, a new region was added to the empire when the first McDonald's in the Middle East opened in Tel Aviv, Israel. As the company entered new markets, it showed increasing flexibility with respect to local food preferences and customs. In Israel, for example, the first kosher McDonald's opened in a Jerusalem suburb in 1995. In Arab countries the restaurant chain used "Halal" menus, which complied with Islamic laws for food preparation. In 1996 McDonald's entered India for the first time, where it offered a Big Mac made with lamb called the Maharaja Mac. That same year the first McSki-Thru opened in Lindvallen, Sweden.
Overall, the company derived increasing percentages of its revenue and income from outside the US. In 1992 about two-thirds of systemwide sales came from U.S. McDonald's, but by 1997 that figure was down to about 51 percent. Similarly, the operating income numbers showed a reduction from about 60 percent of sales derived from the US in 1992 to 42.5 percent in 1997.
In the US, the number of units grew from 9,000 in 1991 to 12,500 in 1997, an increase of about 40 percent. Although the additional units increased market share in some markets, a number of franchisees complained that new units were cannibalizing sales from existing ones. Same-store sales for outlets open for more than one year were flat in the mid-1990s, a reflection of both the greater number of units and the mature nature of the U.S. market.
The Extra Value Meal, a burger, fries and drink combination deal, was introduced from 1993, originally as part of a Jurassic Park-themed tie-in.[15]
The company made several notable blunders in the US in the 1990s which hurt stateside profits. The McLean Deluxe sandwich, which featured a 91 percent fat-free beef patty, was introduced in 1991, never really caught on, and was dropped from the menu in February 1996 to make room for the Arch Deluxe, itself an underperforming product. The "grown-up" (and pricey) Arch Deluxe sandwich was launched in May 1996 and the Deluxe Line was launched in September 1996 in a $200 million campaign to gain the business of more adults, but were bombs. The following spring brought a 55-cent Big Mac promotion, which many customers either rejected outright or were confused by because the burgers had to be purchased with full-priced fries and a drink. The promotion embittered still more franchisees, whose complaints led to its withdrawal. In July 1997 McDonald's fired its main ad agency, Leo Burnett, a 15-year McDonald's partner, after the nostalgic "My McDonald's" campaign proved a failure. Several other 1990s-debuted menu items, including fried chicken, pasta, fajitas, and pizza failed as well. A seemingly weakened McDonald's was the object of a Burger King offensive when the rival fast-food maker launched the Big King sandwich, a Big Mac clone. Meanwhile, internal taste tests revealed that customers preferred the fare at Wendy's and Burger King.
In response to these difficulties, McDonald's drastically cut back on its U.S. expansion. In contrast to the 1,130 units opened in 1995, only about 400 new McDonald's were built in 1997. Plans to open hundreds of smaller restaurants in Wal-Marts and gasoline stations were abandoned because test sites did not meet targeted goals. Reacting to complaints from franchisees about poor communication with the corporation and excess bureaucracy, the head of McDonald's U.S.A. (Jack M. Greenberg, who had assumed the position in October 1996) reorganized the unit into five autonomous geographic divisions. The aim was to bring management and decision-making closer to franchisees and customers.
On the marketing side, McDonald's scored big in 1996 and 1997 with a Teenie Beanie Baby promotion in which about 80 million of the toys/collectibles were gobbled up virtually overnight. The chain received some bad publicity, however, when it was discovered that a number of customers purchased Happy Meals just to get the toys and threw the food away. For a similar spring 1998 Teenie Beanie giveaway, the company altered the promotion to allow patrons to buy menu items other than kids' meals. McDonald's also began to benefit from a seven years global marketing alliance signed with Disney/Pixar in 1998. Initial Disney/Pixar movies promoted by McDonald's included A Bug's Life, Monsters, Inc., Finding Nemo and The Incredibles. Perhaps the most important marketing move came in the later months of 1997 when McDonald's named DDB Needham as its new lead ad agency. Needham had been the company's agency in the 1970s and was responsible for the hugely successful "You Deserve a Break Today" campaign. Late in 1997, McDonald's launched the Needham-designed "Did Somebody Say McDonald's?" campaign, which appeared to be an improvement over its predecessors.
Late 1990s
Following the difficulties of the early and mid-1990s, several moves in 1998 seemed to indicate a reinvigorated McDonald's. In February the company for the first time took a stake in another fast-food chain when it purchased a minority interest in the 16-unit, Colorado-based Chipotle Mexican Grill chain. The following month came the announcement that McDonald's would improve the taste of several sandwiches and introduce several new menu items. McFlurry desserts, developed by a Canadian franchisee in 1997, proved popular when launched in the United States in the summer of 1998. That same month, McDonald's said that it would overhaul its food preparation system in every U.S. restaurant. The new just-in-time system, dubbed "Made for You", was in development for a number of years and aimed to deliver to customers "fresher, hotter food"; enable patrons to receive special-order sandwiches (a perk long offered by rivals Burger King and Wendy's); and allow new menu items to be more easily introduced thanks to the system's enhanced flexibility. The expensive changeover was expected to cost about $25,000 per restaurant, with McDonald's offering to pay for about half of the cost; the company planned to provide about $190 million in financial assistance to its franchisees before implementation was completed by year-end 1999.
In May 1998, Greenberg was named president and CEO of McDonald's Corporation, with Quinlan remaining chairman; at the same time Alan D. Feldman, who had joined the company only four years earlier from Pizza Hut, replaced Greenberg as president of McDonald's U.S.A., an unusual move for a company whose executives typically were long-timers. The following month brought another first, McDonald's first job cuts. The company said it would eliminate 525 employees from its headquarters staff, a cut of about 23 percent. In the second quarter of 1998 McDonald's took a $160 million charge in relation to the cuts. As a result, the company, for the first time since it went public in 1965, recorded a decrease in net income, from $1.64 billion in 1997 to $1.55 billion in 1998.
McDonald's followed up its investment in Chipotle with several more moves beyond the burger business. In March 1999 the company bought Aroma Café, a UK chain of 23 upscale coffee and sandwich shops. In July of that year McDonald's added Donatos Pizza, a midwestern chain of 143 pizzerias based in Columbus, Ohio. Donatos had revenues of $120 million in 1997. In 1999, McDonald's 25,000th unit opened, Greenberg took on the additional post of chairman, and Jim Cantalupo was named company president. Cantalupo, who had joined the company as controller in 1974 and later became head of McDonald's International, had been vice-chairman, a position he retained. In May 2000 McDonald's completed its largest acquisition yet, buying the bankrupt Boston Market chain for $173.5 million in cash and debt. At the time, there were more than 850 Boston Market outlets, which specialized in home-style meals, with rotisserie chicken the lead menu item. Revenue at Boston Market during 1999 totaled $670 million. McDonald's rounded out its acquisition spree in early 2001 by buying a 33 percent stake in Pret A Manger, an upscale urban-based chain specializing in ready-to-eat sandwiches made on the premises. There were more than 110 Pret shops in the United Kingdom and several more in New York City. Also during 2001, McDonald's sold off Aroma Café and took its McDonald's Japan affiliate public, selling a minority stake through an initial public offering.
2000s
As it was exploring new avenues of growth, McDonald's core burger chain had become plagued by problems. Most prominently, the Made for You system backfired. Although many franchisees believed that it succeeded in improving the quality of the food, it also increased service times and proved labor-intensive. Some franchisees also complained that the actual cost of implementing the system ran much higher than the corporation had estimated, a charge that McDonald's contested. In any case, there was no question that Made for You failed to reverse the chain's sluggish sales. Growth in sales at stores open more than a year (known as same-store sales) fell in both 2000 and 2001. Late in 2001 the company launched a restructuring involving the elimination of about 850 positions, 700 of which were in the US, and several restaurant closings.[citation needed]
In 2000, a McDonald's in Dearborn, Michigan in Greater Detroit was the first one in Michigan and the only one east of the Mississippi River to offer halal food for Muslim customers.[16]
There were further black eyes as well. McDonald's was sued in 2001 after it was revealed that for flavoring purposes a small amount of beef extract was being added to the vegetable oil used to cook the french fries. The company had cooked its fries in beef tallow until 1990, when it began claiming in ads that it used 100 percent vegetable oil. McDonald's soon apologized for any "confusion" that had been caused by its use of the beef flavoring, and in mid-2002 it reached a settlement in the litigation, agreeing to donate $10 million to Hindu, vegetarian, and other affected groups. Also in 2001, further embarrassment came when 51 people were charged with conspiring to rig McDonald's game promotions over the course of several years. It was revealed that $24 million of winning McDonald's game tickets had been stolen as part of the scam. McDonald's was not implicated in the scheme, which centered on a worker at an outside company that had administered the promotions.
McDonald's also had to increasingly battle its public image as a purveyor of fatty, unhealthy food. Consumers began filing lawsuits contending that years of eating at McDonald's had made them overweight. McDonald's responded by introducing low-calorie menu items and switching to a more healthful cooking oil for its french fries. McDonald's franchises overseas became a favorite target of people and groups expressing anti-American and/or anti-globalization sentiments. In August 1999 a group of protesters led by farmer José Bové destroyed a half-built McDonald's restaurant in Millau, France. In 2002 Bové, who gained fame from the incident, served a three-month jail sentence for the act, which he said was in protest against U.S. trade protectionism. McDonald's was also one of three multinational corporations (along with Starbucks Corporation and Nike, Inc.) whose outlets in Seattle were attacked in late 1999 by some of the more aggressive protesters against a World Trade Organization meeting taking place there. In the early 2000s McDonald's pulled out of several countries, including Bolivia and two Middle Eastern nations, at least in part because of the negative regard with which the brand was held in some areas.
Early in 2002, Cantalupo retired after 28 years of service. Sales remained lackluster that year, and in October the company attempted to revive U.S. sales through the introduction of a low-cost Dollar Menu. In December 2002, after this latest initiative to reignite sales growth failed and also after profits fell in seven of the previous eight quarters, Greenberg announced that he would resign at the end of the year. Cantalupo came out of retirement to become chairman and CEO at the beginning of 2003.
Cantalupo started his tenure by announcing a major restructuring that involved the 2002 quarterly loss, which included the closure of more than 700 restaurants (mostly in the United States and Japan), the elimination of 600 jobs, and charges of $853 million. The charges resulted in a fourth-quarter 2002 loss of $343.8 million, the first quarterly loss in McDonald's 38 years as a public company. The new CEO also shifted away from the company's traditional reliance on growth through the opening of new units to a focus on gaining more sales from existing units. By 2003, with Ray Kroc's McDonald's Corporation nearly 50 and the McDonald's fast food restaurant concept itself old enough to qualify for AARP membership, the brand had perhaps become too familiar and sales figures stalled. Analysts, management, owners, and customers alike recognized that the aged chain required revivification. The question in need of solution was: How should McDonald's reinvent itself without losing its core values and maintain relevance in the marketplace? To that end, several new menu items were successfully launched, including entree salads, McGriddles breakfast sandwiches (which used pancakes in place of bread), and white-meat Chicken McNuggets. Some outlets began test-marketing fruits and vegetables as Happy Meal options. It was quickly determined that focus on customer experience was key in reversing the slippage. Then, a new global marketing campaign was adopted which was designed around the notion of the "Rolling Energy" phase. Launched on September 29, 2003, the campaign began featuring youthful images, hip music, and pop culture celebrities touting the tagline, "I'm lovin' it". Next, James R. Cantalupo was called back from retirement to head the corporation and its efforts to recapture golden luster. His plan was to keep things simple with a focus on the basics like customer service, clean restrooms, and reliable appealing food (not unlike Ray Kroc's mantra of QSC and V: Quality, Service, Cleanliness, and Value). In addition to the basics he determined to position the company with a more modern coherent image in order to foster a McDonald's "experience" for customers. More than an advertising campaign he and his team approved sweeping new architecture for McDonald's restaurants, the first major overhaul since 1969 when the now universally recognized signature double mansard roof became standard. In fact, Mr. Cantalupo personally approved abandonment of the ubiquitous and familiar mansard in favor of what became the "Forever Young" prototype topped with its swish eyebrow. This was the first global campaign in McDonald's history, as the new slogan was to be used in advertising in more than 100 countries. It also proved to be the first truly successful ad campaign in years; sales began rebounding, helped also by improvements in service. Cantalupo did not live to see the fruits of his labor and he died in 2004 just as his modern vision for McDonald's was getting underway. Nonetheless he had set things into motion causing a paradigm shift for the company resulting in a refreshed image without a dilution of brand identity.
In December 2003, for instance, same-store sales increased 7.3 percent. Same-store sales rose 2.4 percent for the entire year, after falling 2.1 percent in 2002. Also, in that month, McDonald's announced that it would further its focus on its core hamburger business by downsizing its other ventures. The company said that it would sell Donatos back to that chain's founder. In addition, it would discontinue development of non-McDonald's brands outside of the United States. This included Boston Market outlets in Canada and Australia and Donatos units in Germany. McDonald's kept its minority investment in Pret A Manger, but McDonald's Japan was slated to close its Pret units there. These moves would enable the company to concentrate its international efforts on the McDonald's chain, while reducing the non-hamburger brands in the United States to Chipotle and Boston Market, both of which were operating in the black.
McDonald's continued to curtail store openings in 2004 and to concentrate on building business at existing restaurants. Much of the more than $1.5 billion budgeted for capital expenditures in 2004 was slated to be used to remodel existing restaurants. McDonald's also aimed to pay down debt by $400 million to $700 million and to return approximately $1 billion to shareholders through dividends and share repurchases. Cantalupo also set several long-term goals, such as sustaining annual systemwide sales and revenue growth rates of 3 to 5 percent. In a move to both simplify the menu and make its offerings less fattening, McDonald's announced in March 2004 that it would phase out Super Size french fries and soft drinks by the end of the year.
In the 1960s, the 1970s, the 1980s, and the 1990s, "no loitering" had been McDonald's motto. Ray Kroc had decreed upon the origins of his version of the chain that pay telephones, jukeboxes, and vending machines of any kind were forbidden at McDonald's restaurants. The goal had been to quickly serve customers and not force them to stay in the restaurants any longer than it took them to eat a hamburger. Along that line of thinking, dining areas were designed with minimalist hard plastic tables and chairs which were more often than not bolted in place. Thus customers consumed their fast food in scant comfort without dillydally allowing room for the next hurrying customers.
With the new "Forever Young" design (adopted in 2006), the first major redesign since 1969, McDonald's turned a new page for itself. New and remodeled restaurants feature dining zones with "distinct personalities". Most of them offer three sections or zones. A linger zone was designed to accommodate people who were inclined to dawdle and socialize while sitting comfortably on armchairs or sofas using free wifi access. Another zone offers counters and stools for patrons in a hurry who might just grab and go. The third and perhaps most important zone is the one for families or groups where seating arrangements can be reconfigured to meet a variety of needs. Harsh colors and hard plastics have been replaced with custom earth tones and flexible, padded, fabric-covered booth-seating, all in hopes of engaging diners to loiter and perhaps spend more money. In addition to architecture and furnishings, the McDonald's menu has been tweaked to offer a larger variety of what the corporation refers to as more healthy food.
McDonald's franchises are required to follow the directions of the parent company and perhaps more than a few have complained about the Forever Young changes. First, customers needed to recognize the mansard buildings and identify McDonald's with them—a new look may initially generate some degree of confusion. The next objection is cost: as of 2008, a newly built swish-brow store was said to cost upwards of $1 million and renovation of an existing unit to meet the new standards as much as $400,000. With a large percentage of sales from drive-in business, franchises could argue that the expensive interior redesign is unwarranted for their bottom lines.
2010s
In May 2010, McDonald's redesigned its US website to a sleeker, HTML 5 friendly interface. Along with those changes, McDonald's also introduced new advertising material to its website, including the unveiling of new pictures used exclusively for in-restaurant ads, television commercials, print advertising, and online advertising, which consist of more realistic pictures of its products, which are now up close and face the camera instead of facing left or right.
In July 2011, McDonald's announced that their largest pop-up restaurant in the world would be built on the 2012 London Olympics site. The temporary restaurant contained over 1,500 seats and was half the length of an American football field. Over 470 staff were employed serving on average (during the 2012 Olympics) 100,000 portions of fries, 50,000 Big Macs and 30,000 Milkshakes.
In January 2012, the company announced revenue for 2011 reached an all-time high of $27 billion, and that 2,400 restaurants would be updated and 1,300 new ones opened worldwide.[17]
In the middle of the decade, the restaurant began to suffer from declining profits.[18] In response, McDonald's began to offer a limited selection of its breakfast menu all day starting in 2015.[19] At first, the launch was unpopular with franchisees who claimed that the changes caused service to slow down.[18] However, the plan paid off with CNBC reporting that the company's fourth quarter earnings "easily topped analysts' forecasts".[20]
Timeline
1937: Patrick McDonald opens a food and drinks stand called "The Airdrome" on historic Route 66 (now Huntington Drive) near the Monrovia Airport in Monrovia, California.
1940: Brothers Richard and Maurice McDonald move The Airdrome building 40 miles (64 km) east to San Bernardino, California, where they open the first McDonald's restaurant, near U.S. Route 66, at West 14th St and 1398 North E St., on May 15. Its menu consisted of 25 items, mostly barbecue. As was common at the time, they employed around 20 carhops. It became a popular and highly profitable teen hangout.
1948: After noticing that almost all of their profits came from hamburgers, the brothers closed the restaurant for several months to remodel it and implement their innovative "Speedee Service System", a streamlined assembly line for hamburgers. The carhops are fired, and when the restaurant reopens it sells only hamburgers, milkshakes, and french fries. At 15 cents, the burgers are about half as expensive as at standard diners, and they are served immediately. The restaurant is extremely successful, and its fame spreads by word of mouth.
1952: The brothers hire Southern California architect Stanley Clark Meston to design a replacement for the San Bernardino stand which is to have even greater efficiency and a more eye-catching appearance. Meston and his assistant Charles Fish deliver the Golden Arches design.
1952: The brothers begin to franchise their restaurant. The first franchisee is Neil Fox.
1953: Fox's McDonald's opens in May in Phoenix, Arizona at N. Central Ave and Indian School Road. It is the first to feature the Golden Arches design.
1953: The third McDonald's restaurant, franchised to Roger Williams and Burdette Landon, opens in Downey, California at the corner of Lakewood Blvd and Florence Avenue. Today it is the oldest McDonald's restaurant still in operation.[21]
1954: Entrepreneur and milkshake-mixer salesman Ray Kroc becomes fascinated by the McDonald's restaurant during a sales visit, when he learns of its extraordinary capacity and popularity. Others who had visited the restaurant and come away inspired were James McLamore, founder of Burger King, and Glen Bell, founder of Taco Bell. After seeing the restaurant in operation, Kroc approaches the McDonald brothers, who have already begun franchising, with a proposition to let him franchise McDonald's restaurants outside the company's home base of California and Arizona, with himself as the first franchisee. Kroc works hard to sell McDonald's franchises.
1955: Ray Kroc founds "McDonald's Systems, Inc." on March 2, as a legal structure for his planned franchises. Kroc opens the ninth McDonald's restaurant in Des Plaines, Illinois, in suburban Chicago on April 15.
1955: Ray Kroc hires Fred L. Turner (later CEO and Chairman) as a grillman in his store in Des Plaines.
1957: The original restaurant in San Bernardino is rebuilt with a golden arches design.[1]
1958: First New England location opens in Hamden, Connecticut.
1958: McDonald's worldwide sells its 100 millionth hamburger.
1958: First Tampa Bay Area location of McDonald's opens in Tampa, Florida.
1959: First Hawaii location opens in Honolulu.
1959: First New York location opens in Buffalo.
1959: The 100th McDonald's restaurant opens in Fond du Lac, Wisconsin.
1959: McDonald's begins billboard advertising.
1960s
1960: First Massachusetts location of McDonald's opens in Boston.
1960: First Alaska location opens in Juneau.
1960: Kroc's company is renamed "McDonald's Corporation".
1960: First Oregon location opens in Portland
1961: The McDonald brothers agree to sell Kroc business rights to their operation for $2.7 million, a sum that Kroc borrows from a number of investors, including Princeton University; Kroc considers the sum extreme, and it strains his relationship with the brothers. In a handshake agreement, the brothers would also receive an overriding royalty of 1% on the gross sales. At the closing table the brothers told Kroc that they were giving the real estate and rights to the original unit to the founding employees. Kroc closed the transaction, then refused to acknowledge the royalty portion of the agreement because it wasn't in writing. The brothers keep their original restaurant, but in an oversight they fail to retain the right to remain a McDonald's franchise. It was renamed "The Big M", while Kroc drives it out of business by opening a McDonald's just one block north; he attended the opening in person. Had the brothers maintained their original agreement, which granted them 0.5% of the chain's annual revenues, they or their heirs would have been collecting in excess of $100 million per year today. Had Kroc adhered to the handshake agreement, these royalties would now be over $200 million a year.
1961: Hamburger University opens in the basement of the Elk Grove Village, Illinois, McDonald's restaurant. First Bachelor of Hamburgerology degrees were awarded to a graduating class of 15.
1961: The first Idaho location opens in Boise
1961: The first McDonald's in Georgia opens in Doraville.
1962: McDonald's first national magazine ad appears in Life magazine.
1962: The first McDonald's restaurant with seating opens in Denver, Colorado.
1962: Market research shows that people identify McDonald's primarily with the golden arches;[1] in response, the Speedee character is dropped and the Golden Arches logo is introduced.
1963: One of Kroc's marketing insights is his decision to advertise McDonald's hamburgers to families and children. Washington, D.C. franchisees John Gibson and Oscar Goldstein (Gee Gee Distributing Corporation) sponsor a children's show on WRC-TV called Bozo the Clown, a franchised character played by Willard Scott from 1959 until 1962. After the show was cancelled, Goldstein hires Scott to portray McDonald's new mascot, named Ronald McDonald. According to Scott, they wanted to pay him in stock, but Scott decided to take the money. Scott, looking nothing like the familiar appearance of any McDonaldland character as is known today, appeared in the first three television advertisements featuring the character. After changing the character's first name to "Ronald" and replacing Scott with a new actor, and giving him the more familiar red, white, and yellow clown features, the character eventually spreads to the rest of the country via an advertising campaign. Years later, an entire cast of "McDonaldland" characters is developed.
1963: The Filet-O-Fish is introduced in Cincinnati, Ohio, in a restaurant located in a neighborhood dominated by Roman Catholics who practiced abstinence (the avoidance of meat) on Fridays. It is the first new addition to the original menu, and goes national the following year, with fish supplied by Gorton's of Gloucester. See also Lou Groen
1963: McDonald's sells its one billionth hamburger.
1963: First Washington state location opens in Tacoma
1963: The 500th McDonald's restaurant opens in Toledo, Ohio.
1964: McDonald's issues its first annual report.
1964: First Rhode Island location opens in Warwick, Rhode Island.
1965: McDonald's Corporation goes public. Common shares are offered at $22.50 per share. By the end of the first day's trading, the price rises to $30.
1965: Third New England location opens in Windsor, Connecticut.
1967: The first McDonald's restaurant in a territory of the United States opens in San Juan, Puerto Rico.
1967: The first McDonald's restaurant outside the United States opens in Richmond, British Columbia.
1967: The chain's stand-alone restaurant design which is still most common today, with mansard roof and indoor seating, is introduced.
1968: The Big Mac (similar to the Big Boy hamburger), the brainchild of Jim Delligatti, one of Ray Kroc's earliest franchisees, who by the late 1960s operated a dozen stores in Pittsburgh, Pennsylvania, is first introduced in the Pittsburgh market in 1967, before going system/nationwide a year later, following its great local success. The Hot Apple Pie is also introduced this year.
1968: The 1000th McDonald's restaurant opens in Des Plaines, Illinois.
1969: McDonald's begins building new mansard roof locations in the United States to replace the double arch-styled drive-in locations that had been the company's standard design since the 1950s. The first mansard roof McDonald's restaurant opens that same year in Matteson, Illinois.
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