Tuesday, April 29, 2008

McDonald's Boom

Few businesses are better known -- or more often criticized -- than McDonald's. We often hear that McDonald's makes us fat, or that it offers nothing but dead-end jobs, or that it is a symbol of American economic imperialism.

Of course, McDonald's reputation was not helped by its fiercely competitive founder, Ray Kroc. He once said that if his competitors were drowning, "I'd put a hose in their mouth."

Kroc also said that the corporate decision to own the real estate for a restaurant location and sublet it gave McDonald's a "club" it could use over franchisees, "and by God there will be no more pampering or fiddling with them."

No one ever said business is a gentleman's game. But it is most certainly not evil. In fact, a research paper from a professor at the Wharton School of Business says Ray Kroc's creation is an engine of economic development, spreading valuable business know-how around the world.

You could say McDonald's is not only a great business; it is also a great business school.

The paper, entitled "McDonald's -- Much Maligned, But an Engine of Economic Development," appeared in the Global Economy Journal. The author is Adrian E. Tschoegl, who notes he ate his first McDonald's hamburger in 1960, and still eats at McDonald's several times a year, but "unhappily never bought its shares."

The article's abstract appears below:

"Critics have excoriated the US fast-food industry in general, and McDonald's most particularly, both per se and as a symbol of the United States. However, examining McDonald's internationalization and development abroad suggests that McDonald's and the others of its ilk are sources of development for mid-range countries. McDonald's brings training in management, encourages entrepreneurship directly through franchises and indirectly through demonstration effects, creates backward linkages that develop local suppliers, fosters exports by their suppliers, and has positive external effects on productivity and standards of service, cleanliness, and quality in the host economies."

On a lighter note, Ray Kroc is probably one of only a few successful businessmen whose life and words inspired a pop-music hit song, "Boom Like That," by Mark Knopfler (formerly of the group Dire Straits).

The song made it to the Top 40 in the United Kingdom in 2004. The lyrics tell Kroc's story, often in his own words.

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