McDonald’s Story Shows Why Branding is Crucially Important in Product Development

Ray Kroc, founder of McDonald’s (MCD), was a branding genius even though he never went to college or received any kind of formal business education.

He was over 50 years old when he developed the McDonald’s fast-food concept and when he died, he was personally worth around a half-billion dollars.  But his success might be traced to a crucial decision he made about branding.

Kroc for many years was a paper cup salesman who spent a lot of time at Wrigley Field watching his beloved Chicago Cubs.  After many years selling paper cups, Kroc had an opportunity to sell a new device called a “multi-mixer,” a machine that allowed a fast-food stand to make a number of milkshakes at once.

One of the biggest customers for his multi-mixers was a hamburger stand in San Bernadino, CA, owned by two brothers, Maurice (Mick) and Richard (Dick) McDonald.  Kroc went out to California and visited this customer and he had his “epiphany.”  He envisioned a chain of hamburger stands all selling hamburgers, french fries, and milkshakes and using his multi-mixers.

It didn’t take Kroc long to figure the money was in food not in the milkshake machines and, without virtually a dime to his name, he put together a plan for a chain of hamburger stands that he would call “McDonald’s” after the San Bernadino founders, Mick and Dick.  He had proposed a partnership with the McDonald brothers that involved the use of the McDonald’s name.

Before the idea was even launched, the two McDonald brothers decided that they were happy running their hamburger stand and didn’t want to get involved in a national hamburger chain.  However, they weren’t about to surrender their name to Kroc and demanded $3 million for the use of their name.

Kroc, who had no money, was in a quandary.  He certainly didn’t need the McDonald’s name to operationally start his franchised chain, but felt there was something special about the name “McDonald’s” and deep down he knew that he needed that brand name to be successful.

So, he somehow begged, borrowed, and stole what was needed to secure the “McDonald’s” name, and the rest – as they say – is history.

As McDonald’s achieved its phenomenal growth and success, the company invested heavily in the protection of the McDonald’s brand name.  Its attorneys filed lawsuit after lawsuit to protect this valuable brand from erstwhile infringers.  Virtually all those lawsuits were won or settled with no damage to the McDonald’s brand.  And, over the years, the McDonald’s brand proliferated to include a variety of products like “Big Mac” and “Egg McMuffin” and its promotional characters like Ronald McDonald.

Fast-food chains have come and gone since Ray Kroc created the McDonald’s concept.  Although McDonald’s has had its ups and downs, it remains one of the world’s most successful fast food operations.  A key to that success is McDonald’s rigorous and unrelenting protection of its brands.

That $3 million that Ray Kroc somehow put together to own the McDonald’s brand is now worth billions of dollars in brand equity.

As a post script, Kroc could never own his beloved Chicago Cubs.  He had to settle for the San Diego Padres.