The Policies That Paid McDonald's Payroll

Ray Kroc was 52 when he called on a busy hamburger stand in San Bernardino, hoping to sell the brothers more milkshake mixers. He left with a franchising deal instead, and opened his first store in Des Plaines in 1955.

For the first eight years he took no salary. Everything the business produced went back into the business, and cash flow was the constant problem.

Banks were not eager to lend against hamburgers. The capital Kroc could reach without asking anyone's permission sat inside two cash-value life insurance policies he had already been paying into for years.

He borrowed against both, alongside bank borrowing, to keep the lights on. No pitch meeting, no committee, no waiting.

It paid people. The salaries of key employees came out of that borrowed cash during the years the company could not yet pay them itself — the exact years those people were building the operating system that made franchising work.

Some of it also went into the early branding campaign that gave the world Ronald McDonald.

In 1957 two men walked into McDonald's selling life insurance. June Martino got Robert Ryan and Richard Boylan in front of Harry Sonneborn, who hired them both.

Ryan became the company's treasurer. Boylan retired in 1983 as senior executive vice president. That is from Love's Behind the Arches, with a page behind it.

Forget the rate of return; nobody can calculate it. The defensible point is simpler and stronger.

At the one stage when no institution would back him, Kroc owned a pool of capital that was liquid, private and available on his own timetable. He had funded it himself, years earlier, without knowing what it would one day be for.