McDonald's Worldwide—Past, Present, Future

MR. STALDER:

Distinguished members and guests, ladies and gentlemen: Once my wife and I had a young lad from the United States visit us. He asked us if we could have lunch at McDonald's. My wife said no, and I said we would be eating at home. We had a good roast with beets, apple pie, cheddar cheese, and some tea. At the end of the meal, I asked our guest how he had enjoyed it. He responded, "I still prefer McDonald's, but now I know why you all pray before you eat."

Our guest of honour is "Mr. McDonald's" of Canada. He was born in Chicago forty-five years ago. He graduated from Drake University in Des Moines, Iowa, with a bachelor of science degree, and later from Northwestern University School of Law. Mr. Cohon practised corporate law in the United States from 1961 to 1967, and was the recipient of the alumni distinguished service award from Drake University.

George Cohon moved to Toronto as the licensee of the McDonald's Corporation for eastern Canada in 1968. He expanded McDonald's in eastern Canada at a rapid pace through the years 1968-70. Mr. Cohon was one of McDonald's largest licensees in July 1970, at which time the Corporation acquired his licence agreement. He stayed on as president after McDonald's Restaurants of Western Canada Ltd. was acquired and the present company, McDonald's Restaurants of Canada Ltd. was founded. McDonald's in Canada now numbers 425 units spread from coast to coast. Its sales are approximately $650 million per year and it employs forty thousand people in Canada. McDonald's worldwide activity includes a total of 7,259 units, with sales for 1982 of $7.8 billion. The net profit for this huge organization that year was $301 million.

George Cohon is not ony a businessman, he's dedicated to social, cultural, and public work. His involvement in about thirty worthy organizations covers the Santa Claus Parade, York University, Canada Post Corporation, the Canadian Opera Company, Mount Sinai Hospital, the Jewish community, and the Ontario College of Art. George Cohon truly caters to everyone. Please welcome him to our club.

MR. COHON:

Mr. Chairman, ladies and gentlemen: I've got about fifteen or twenty minutes to talk about the McDonald's Corporation, past, present, and future, worldwide. To give me some idea of what you know about my company, if you've never been to McDonald's in Japan, raise your hand.... If you've never been to McDonald's in Australia, raise your hand.... If you've never been to a McDonald's in Canada, raise your hand. . . . Could I have your name please? ... Fred, I hope you pay attention to what I say.

McDonald's started in the United States in 1955 and has now grown to a very large corporation. It started in Canada in 1967 with the first McDonald's outside Vancouver. The first one in eastern Canada opened in London, Ontario, in November 1968. I remember that restaurant's opening. To tell you the story will give you some idea of what it was like in the early days. We wanted to give some money to a local charity. I was in London and I opened the phone book and phoned the crippled children's organization in London. I said that we were opening a restaurant called McDonald's and I wanted half of the opening day's proceeds to go to the crippled children's organization of London, Ontario. There was a pause and a man came on and said, "Well, we will have to discuss this at our board level. Would you please come to a board of directors meeting?"

Off I went to the board of directors meeting and sure enough it was a full board meeting. I had just moved up from Chicago and the company had given me a fact sheet. I recited my interesting information--we've sold enough hamburgers to go to the moon and back three times; we've sold enough ketchup to fill the Grand Canyon. As I said that, a man at the end of the table (I had thought he was asleep) said, "Have you ever seen the Grand Canyon, son?" I said, "No, sir, I haven't," and he said, "There's not enough ketchup in the world to fill the Grand Canyon." And I got out my fact sheet and looked at it, and it was the Missouri River we could have filled with ketchup. I said, "I'm sorry, I should have said the Missouri River," and he growled, "I don't know if I should accept that from somebody like you."

That was the beginning of McDonald's in Canada. I think the easiest way for me to explain our situation worldwide is to quote a report that was issued by a large security firm two weeks ago. This report described McDonald's in one paragraph. Among other things, it said that the world's largest food service organization is McDonald's; it and its franchises and joint-venture partners operate more than seven thousand fastfood restaurants in the United States and thirty foreign countries and territories. About five thousand of those units are less than ten years old. The company feeds about nine million Americans daily (and, I might add, we feed one million Canadians daily, one at a time). It owns or leases prime real estate sites, it will follow wherever you go, it has a $400 million advertising and promotional budget to play with, and there is no escaping those "McDonald's and You" jingles. It is by far the broadest and deepest management team in the business. In all humility I would agree with that report. McDonald's has never had a down quarter; it is business's greatest success story; it is what every other restaurant company wants to be when it grows up.

When I got involved in McDonald's in 1967, the total sales were $267 million. The sales of the Canadian companies this year will be more than $700 million. The sales of the worldwide organization last year were $7.8 billion. We opened 520 restaurants worldwide last year.

Canada is by far the largest operation of McDonald's outside of the United States. If you took all the countries in the world where there are McDonald's (other than the United States), and you totalled all their sales and all of their profits, the Canadian McDonald's sales and profits would be greater than all of those combined. That won't last forever: there are countries--such as Japan with 250 McDonald's today, and Germany where there are 200 McDonald's, and Brazil, where in Rio there are at present 10 restaurants--where in a few years there will be literally hundreds and thousands of McDonald's restaurants.

It is easy for me to explain why I think we at McDonald's have achieved the degree of success that we have. There was once a company president who was asked to give a speech to a group like this. The president felt nervous and uncomfortable about it, so he hired a professional actor. The actor studied the company and learned all his lines, and then got up and expounded about what a great company his particular corporation was. It's easy to stand up and say that you're number one but it's a lot harder to deliver. I think that McDonald's delivers what we promise. You cannot start a company and in some twenty-five years grow to the size that we have, without actually delivering what you promise.

And we stick to the basics. The basics in McDonald's are what? Well, let me give you an example; there are no cigarette machines in McDonald's. Now with more than seven thousand restaurants in the world, if we just put a cigarette vending machine into each one of those restaurants and formed a subsidiary, that subsidiary would be a giant corporation. We are not in the business of selling cigarettes. There are no pay telephones at McDonald's; we don't want people driving by saying, "Let's go into McDonald's and make a phone call." In an emergency, of course you can make a phone call, but we are in the business of selling wholesome food, quality food, in very, very clean surroundings, giving very, very good service, and at a very reasonable price. Those are the basics of our business. It should be extremely easy for people to imitate the basic tenets of a business like McDonald's. People have tried. competitors will come and competitors will go and McDonald's--because we understand this business and we've grown up in it--will continue to be the largest company of its kind in the world, because the management of our company is the deepest, the broadest, and the best in the business.

McDonald's is not the kind of company that hires people from other organizations and makes them officers. For example, I am forty-five years old. The company started in Canada in 1967, so now I guess we are into our sixteenth year. The average age of the fourteen officers in the company is a year younger than me, forty-four, and their average time with McDonald's is about thirteen years. These are people that started young, started by flipping hamburgers. That's the way McDonald's has been successful.

You know, while I am speaking today to the Empire Club, my wages are being paid by the more than forty thousand Canadians who are out selling our product to the millions of Canadians who want to buy it--all too often we don't get out to look at what's going on in the marketplace. A couple of years ago--and I think this is a good idea for any company, so if it applies to yours, steal the idea--we decided to have a national store day. On a national store day, we close all the head offices of McDonald's and everyone from head office goes out to work. The offices are closed tight as a drum; there is no one on the switchboard, the accounting department is out

working, the construction department is out working, and all the secretaries are out working. If you called up on the phone you would get a recording that said, "To locate the nearest McDonald's, turn to page so and so in the telephone book," because we wouldn't want anyone to call and not know how to get to a McDonald's. That first year we all wore signs to tell people that we were from head office; the signs said, "I am from head office, so help me."

I remember working at a McDonald's on Islington Avenue in Toronto when an airline limousine driver came in and ordered a Big Mac, fries, and a Coke. As I was filling the order, he looked me right in the eye and said, "I hope you do a good job because I am a very good friend of Mr. Cohon, who is the chairman of your company." I said, "How do you know him?" "Well," he replied, "he travels a lot so I pick him up at his house and I drive him to and from the airport." And I said, "What's he like?" He replied, "He's a much younger man than you are." I bought him his lunch! Days such as national store day have evolved to days such as McHappy Day. On McHappy Days, which we've had four times in the last six years, instead of just the head office getting out and working, the mayors of various cities, and other politicians, are asked to come and work for us. We also ask hockey players, baseball players, soccer players, the heads of hospitals, our suppliers, as many people as we can, and then we donate some of that day's proceeds to local charities. We started by raising money for crippled children's organizations across Canada on our first McHappy Day, then we decided to raise money for any children's charity in a particular community. We've raised more than $2 million in the four years that we've had that program and that's something of which I'm very, very proud.

I think that McDonald's is a corporation that sets the standards for corporate responsibility, and I say this because I am proud of it, and because it's the truth. We have days like McHappy Day and we had a day that supported Terry Fox when he was running across the country. McDonald's raised more than any other single group for Terry Fox's campaign. We raised $1.5 million on our Terry Fox fund-raising day to aid his marathon of hope and to help cancer research.

How many of you have heard about Ronald McDonald houses? Ronald McDonald houses are houses close to children's hospitals where parents of children from out of town who are being treated for cancer or other life-threatening diseases, can stay while their child is being treated. Instead of the parents having to stay in a hotel they can stay in a house, thereby maintaining some semblance of order and family life in a very tough situation. The houses have around twenty-six or twenty-seven bedrooms, a central eating area, a central entertaining area, and they are "a home away from home" where the children can come and visit with their parents. There are Ronald McDonald houses in Montreal, Halifax, Toronto, and in Vancouver and Winnipeg there are houses under construction, and there will soon be one in Ottawa. There are forty-two Ronald McDonald houses all around the world where McDonald's has put in the initial money.

Ronald McDonald houses are run by concerned parents and by hospital administrators- by citizens. It is interesting to talk about the number of hamburgers we've sold and the dollar profit and the sheer size of McDonald's, but it is nice to know that over one hundred thousand families stayed at these houses last year alone. When McDonald's does things like that, we are putting back into the community part of what we take out in profits.

Now I will tell you what McDonald's restaurants are like in other parts of the world. Has anyone really seen a McDonald's in Japan? ... In Japan there are over two hundred--approaching three hundred--McDonald's restaurants. In every country we go to we have a local partner, a citizen of that particular country. In Japan, 50 per cent of McDonald's is owned by a Japanese partner. When he opened up he could not sell french fries; for some reason the Japanese did not like our french fries. I remember him saying, "Don't worry. I know they'll like the french fries. We have to teach them what french fries are. French fries are good, they are wholesome, we will just teach them that and they'll like them." Now there are more french fries sold in the average McDonald's in Japan than there are in any in North America.

If you were to look at McDonald's in Hong Kong or in Australia, or anywhere in Europe, you would be amazed by the acceptance level. We just opened in Kuala Lumpur in Malaysia, we have just opened in Manila in the Philippines, we are going to open next year in Taiwan. There are parts of the world where McDonald's hasn't gone yet, but give us time!

One part of the world where we may be some day is the Soviet Union. I have been to that country seven times trying to figure out if it's feasible for McDonald's to open there. In 1976, when the Olympics were held here, we worked hard to get into Russia for the 1980 Olympics, but it didn't work out. People ask, how many McDonald's restaurants can you put in a country? How many can you put into the United States? You are at seven thousand, will you get to ten thousand? Will you get to twenty thousand? Ray Kroc, our founder and chairman, had a great answer when he was asked that question. He would say, "You're asking about saturation. Saturation is for sponges. When you drop some water and you want to soak it up, you take a sponge. How could I conceive today where McDonald's might be in ten, twenty, thirty, forty years from now?" And I think he was right.

To give you an example, McDonald's today is in the downtown core of the major cities across Canada. We never used to be. We used to count church steeples and station wagons. If we saw a lot of churches or temples and a lot of station wagons and a school with mobile classrooms, meaning the school was overflowing, that would be a good place to put a McDonald's. But we decided that people not only live in communities, they work in communities and they go to and from work and they travel and they visit theme parks and amusement parks; why don't we see how McDonald's does in those areas? So now there is a McDonald's at 999 Yonge Street, which is around the corner from here, and there is a McDonald's at 239 Yonge Street which did so well that Eaton's decided to open a big store across the street from it. And I could go right on up Yonge Street--there are fourteen or fifteen McDonald's on Yonge Street all the way up to Richmond Hill and Thornhill and Newmarket.

At the Metro Zoo, one of the best zoos in the world, McDonald's has an exclusive contract--to feed people of course. There are five McDonald's restaurants at the zoo. There are also McDonald's restaurants on a riverboat in St. Louis, in a hospital in Columbus, in an airport in Miami, and an airport in Singapore. So when we are asked where we can continue to put McDonald's, I don't think we have too much of a problem. We are going to continue to expand. These are tough times in Canada and in the world, but McDonald's in Canada, a corporation that now employs about forty-three thousand people, in the last year added four thousand people, and no one has lost his or her job. You can see that McDonald's is a growth company and we are going to continue to be a growth company.

When we came to this country we used to buy everything from the United States. We now buy 98 per cent of our product--in Canada and we are aiming at 100 per cent. That's important; that's good for the Canadian economy. When I came to this country I was an American citizen; I'm now a Canadian citizen and very proud of it. And as a new Canadian, one thing I don't want is Americans giving us any trouble.

The last thing I want to talk about is Ronald McDonald. Ronald McDonald is the clown that we use in our promotion and advertising. There were a couple of surveys done a while ago by a Toronto newspaper that tell you how well this advertising and promotion has worked. Children, five to nine years old, have a 98 per cent awareness level of both Santa Claus and Ronald McDonald. In response to the question, "Who is Sir John A. Macdonald?" 70 per cent of the children said that he owned a restaurant chain. I guess that's not too good for Canadian history, but it is funny to laugh about. When the paper asked me for a quote, I said, "That means we only have 30 per cent to get."

The appreciation of the audience was expressed by Peter Hermant, Past President of The Empire Club of Canada.