A Milkshake-Machine Salesman Bought McDonald's From Its Inventors for $2.7 Million

Ray Kroc was a 52-year-old traveling salesman in 1954, working for the Prince Castle company selling a six-spindle milkshake machine called the Multimixer. He went to San Bernardino, California, that summer because a small drive-in there had ordered eight of his Multimixers. Most restaurants ordered one. Some ordered two. Eight implied that whoever was running the place was selling more milkshakes simultaneously than seemed possible.

The restaurant belonged to Richard and Maurice McDonald — "Dick" and "Mac" — two New Hampshire-born brothers who had reduced the standard hamburger-stand menu down to nine items and engineered the kitchen for assembly-line speed. Customers ordered at a counter, got food in under a minute, and ate it in their cars or off paper plates outside. The McDonald brothers had even given the system a name, the Speedee Service System, and were building a tidy local fortune. Kroc, watching the lunch rush, saw something they apparently didn't: a national franchise.

Kroc convinced them to let him handle franchising in 1955 on a 1.9% royalty arrangement. He opened his first store in Des Plaines, Illinois, that April. Over the next six years he and the brothers fought repeatedly over expansion strategy, brand control, and accounting. In 1961, Kroc finally asked them to name a buyout price for the entire concept — name, system, the original San Bernardino store. The brothers, by Kroc's account, said $2.7 million; Kroc reportedly went "ballistic" but agreed. The deal closed and Kroc had, by his own description, just bought a small American chain. McDonald's now operates roughly 41,000 restaurants in 100 countries. The brothers received their lump sum, a handshake, and (allegedly) no ongoing royalty; the original San Bernardino store stayed open under their name and was crushed by a Kroc-franchised McDonald's down the street.