Interesting article from the Smithsonian (3,000 words; about 15 minutes) captures the origin story of McDonald’s. For those teaching entrepreneurship, this makes for fascinating reading. I identified five important takeaways for aspiring founders (why not assign the reading and see what takeaways your students get from the reading?):

• Entrepreneurs have desire to determine their own fate vs. working for someone else: “Squeezing citrus was hardly the aspiration of two brothers named McDonald from frosty Manchester, New Hampshire. They’d watched as their father had been kicked to the curb after 42 years of employment at the G. P. Crafts shoe factory, told he was too old to be of use any more. Just like that, his working days were done. The indignity of his dismissal impressed upon his children the urgency of taking control of their own futures in order to avoid such a fate.

• Start-up businesses are inherently challenging and a high percentage fail. In the case of the McDonald brothers, starting a theater in the midst of the Great Depression wasn’t a recipe for success: “The 750-seat Mission theater was situated just down the block from City Hall, on the tree-lined thoroughfare of Foothill Boulevard. The brothers recast the venue with an optimistic new name. But the Beacon faltered during those lean years of the Depression, and the brothers were perennially behind on their bills. They even buried some silver in the backyard as a hedge against bank closures. The only person who seemed to be making any money was the proprietor of a root beer stand named Wiley’s. And so, after seven years in business, Dick and Mac sold the theater in 1937 and shifted industries from entertainment to food service.

• In highly competitive businesses, such as the roadside restaurant business in the 40s and 50s, having a competitive edge (a way for your business to stand out) is critical to long-term success. The McDonald’s chose low prices as their edge and streamlined their operations to achieve them: “In the face of this success, in 1948, Dick and Mac made the bold, perhaps foolish, decision to step back and reassess, closing their doors for a hiatus. Dick and Mac asked themselves how they could prepare hamburgers, fries and shakes as efficiently as possible. How, they wondered, could they streamline operations for maximum profit? How could they distinguish themselves from the other drive-ins? How could they speed up service?

• Innovation often involves stealing ideas from other industries and applying them to your own. The McDonald’s found inspiration for their “assembly line” operations from the housing industry (which stole their “radical” ideas on homebuilding from the auto industry: “In their quest for answers, they drew inspiration from East Coasters named Levitt. This enterprising family applied Ford’s Model T–like assembly-line logic to building homes on New York’s Long Island,  where housing was needed in abundance to fill the rapidly expanding suburbs. The McDonald brothers’ goal was to mimic this prefab mentality in the preparation and serving of food: “Levittown on a bun.”

• Luck often plays a role in the success of business ventures. In the McDonald’s case, the new restaurant concept flopped initially but then… (you know the rest of the story): “Customers roundly despised it. Some drove into the lot, only to peel off when no carhop appeared. Others lamented the loss of the old, longer menu and the inability to customize. The brothers took to having employees park in front of the restaurant, so the place didn’t look so dead. All to no avail. The facelift was a disaster. Four months in, a miraculous turnaround occurred, for no particular reason. Cabbies came, then construction workers, then kids, and, soon, lines of hungry customers began to crowd the counter, and the presence of those customers attracted others.”

__________

Check out NGPF’s new lesson on Entrepreneurship!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

More posts by Tim