How McDonald's Built its Burger Empire

On this day in economic and business history...

Restaurateur Ray Kroc opened his first McDonald's (NYSE: MCD  ) franchise on April 15, 1955. The hamburger joint had been around since 1948, but it was only after milkshake machine vendor Kroc sought to emulate the McDonald brothers' successful fast-food formula that McDonald's took its current form. The first Kroc franchise wasn't at the level of today's McDonald's stores, with their standardized, rapid assembly-line preparation methods. Potatoes were still hand-peeled and sliced in the store then, and soft drinks were served from syrup barrels. Kroc quickly progressed beyond this level of charming simplicity, and by 1958 he owned exclusive franchise rights and 38 restaurants. True growth was about to begin.

The following year, 68 new McDonald's locations opened, and in 1960 the company began promoting its iconic Golden Arches through a major ad campaign. In 1961 Kroc bought out the McDonald brothers completely and set his sights on becoming America's top fast-food chain. Four years later, the company went public to immediate acclaim, its $22.50 IPO price rising to $30 by the end of the first trading day. Even if you had bought shares at the $30 IPO price, you'd have been highly justified in doing so -- at the end of 2012, one share from the McDonald's IPO had grown into 744 shares worth about $66,000.

Of course, that incredible share-price growth would never have happened if the business of McDonald's hadn't grown like a weed as well. Here's a quick timeline of some of Mickey D's more notable corporate milestones:

  • 1966: Ronald McDonald appears in his first national TV commercial.
  • 1967: The first international McDonald's stores open in Canada and Puerto Rico.
  • 1968: The Big Mac is introduced.
  • 1972: McDonald's passes $1 billion in annual sales.
  • 1975: McDonald's introduces its first drive-through window.
  • 1975: McDonald's starts serving breakfast with the launch of the Egg McMuffin.
  • 1978: 5,000th McDonald's opens in Japan.
  • 1979: Happy Meal debuts.
  • 1983: McNuggets are launched nationwide.
  • 1985: McDonald's joins the Dow Jones Industrial Average (DJINDICES: ^DJI  ) .
  • 1988: 10,000th McDonald's opens.
  • 1990: The first McDonald's opens in Russia.
  • 1996: 20,000th McDonald's opens.

McDonald's shares grew nearly 400% between the time it opened its 5,000th restaurant and the time it opened its 10,000th. The next 10,000 restaurants produced similar stock growth, with another 400% gain between 1988 and 1996. By the time McDonald's 50th anniversary rolled around, IPO investors had earned a staggering 760,000% return on every share, even if they'd bought at the end of Mickey D's first public day, rather than at the very beginning. If you had waited until the Dow gave Mickey D's its stamp of approval, you'd still have vastly outperformed the market: Shares have been at least 34-baggers since 1985.

A legend sinks
The Titanic sank beneath the waves on April 15, 1912, mere days after the start of its first journey. It soon became a symbol -- of hubris, of man's futile battle against nature, of greed, and of doomed ambition, among others. The loss of two-thirds of the ship's passengers shocked the world, leading to new international laws for maritime safety and construction. The pioneering use of radio during the sinking also compelled the development and adoption of radio for transportation, first on ships and later aboard aircraft. The Titanic remains one of the Western world's most popular symbols and has been the subject of multiple films -- notably James Cameron's adaptation, which became the highest-grossing film in history when it was released.

Opening borders
The World Trade Organization was formed in Marrakesh, Morocco, on April 15, 1994. That day, ministers from 109 nations signed a pact that brought more than seven years of difficult negotiations to an end, creating the most ambitious multinational trade framework the world had ever seen. A 26,000-page treaty would only be the beginning of more liberal trade between many of the world's nations, and many experts warned that there was bound to be tension as "more than five billion people compete for their share of the pie," in the words of Peter Sutherland, general director of the GATT (the WTO's predecessor).

The WTO has attracted ample criticism since its creation, and there were many detractors on the day of the pact. The Washington Post noted that "long-standing conflict between rich and poor nations has begun to generate worries about a world economy that is becoming at once more interdependent and more disorderly." There were also many cheerleaders. The GATT noted that the WTO was expected to increase global income by about $235 billion per year, and Sutherland, despite his reservations, said "there are no losers" in the WTO pact. U.S. Vice President Al Gore noted that the output of developed nations would gain roughly 3.5% in value over earlier projections over the course of a decade -- "an extra year's worth of output for free," in Gore's words.

The WTO continues to come under intense criticism to the present day, and it has endured some massive protests, most notably 1999's "Battle of Seattle," which saw more than 40,000 protestors engaged in violent clashes with police. However, the organization continues to work toward a more open world of trade, and today it claims 159 member nations representing the overwhelming majority of global trade.

More on McDonald's
McDonald's turned in a dismal 2012, underperforming the broader market by 25%. Looking ahead, can the Golden Arches reclaim its throne atop the restaurant industry, or will this unsettling trend continue? Our top analyst weighs in on McDonald's future in a recent premium report on the company. Click here now to find out whether a buying opportunity has emerged for this global juggernaut.


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