KnowledgeTrak: Ray Kroc and why business systems matter in any industry…

The purpose of a business system is to provide a structure that enables a company to create competitive advantages and capitalize on them.

Ray Kroc may not have pioneered the first hamburger chain when he started a franchise under the McDonald’s brothers in 1955, but he did pioneer the American hamburger chain as we now know it. The key to McDonald’s success—the gold in those globally recognizable arches—was and is a successful business system that allowed McDonald’s to capitalize on efficiency and customer service. Kroc recognized the value of the McDonald’s system in a way the McDonald brothers did not; to him, it was a blue print for expansion.  He purchased the rights to the company in 1961 and quickly replicated McDonald’s success—one store at a time. With Kroc at the helm, it took less than a decade for McDonald’s to become the nation’s largest fast food chain. By the 1970’s, Ray Kroc had taken McDonald’s to the international stage, making it the largest in the world. Today, McDonald’s is second only to Subway in size—operating over 35,000 locations worldwide.

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For the petroleum marketing industry (especially the retail side of it), having an effective business system in place can help you realize the gains that Kroc did with his system at McDonald’s. The scale may be different, but the value is the same, and IT. IS. BIG.

What is the value of a business system?

Widespread Efficiency:

Great business systems eliminate the inefficiencies that slow down operations and harm customer service. With a simple menu, and clear directions for how to prepare and serve it, Kroc grew an empire out of the idea that efficiency would lead to profitability. Great business leaders in any industry must ask themselves, “How can we be more efficient?” and “How can we turn that efficiency into success?”  From the perspective of our industry, it is worth examining the time you spend on processes that can be simplified such as BOL reconciliation, fuel tax reporting, or inventory counting.

Effectively Trained Work Force:

In our last blog, we highlighted the importance of investing in your employees. Employees are valuable, which is why they are expensive to retain and replace.  No system can ever completely eliminate the risk of turnover; what an effective business system can do, however, is limit the dangers of it. Becoming system dependent, rather than staff dependent, will bring consistency to your operations.  The system you implement will create the standards for how your business is supposed to perform, and your employees will become responsible for meeting those standards. Your system will teach them the best practices to perform their duties correctly and operate your business as efficiently as possible. Your employees will intuitively understand their roles, as well as the roles of others, naturally cross-training the entire staff. Having a robust business system will standardize more than just your operations; it will standardize your training, as well.

Meaningful Customization:

The irony regarding a business system creating mass standardization is how easy it becomes to see and implement the changes that need to be made on the micro level—e.g. a sales region or specific store.  The amazing thing is that this can be done without sacrificing the culture and standards that have been made by the system. The McDonald’s example of this is the ability to cater to local taste while still meeting the same efficiency and service requirements expected at each restaurant. From the perspective of our industry, meaningful customization could be as powerful as making sure you have the 1) right quantity of inventory 2) at the optimum price 3) for every item/item category 4) in every store, to maximize inventory turn and inside sales profitability.  Even in our industry, the examples of this principle are endless.  We could just as easily apply it to retail and wholesale fuel operations.

Success Replication:

Efficiency in business allows you to focus on what makes your business model unique, and what helps you deliver value to you customers. An effective business system provides you with the tools and the infrastructure to quickly replicate your success, just as Ray Kroc did with McDonald’s. What if you built a brand so well-known that when customers enter into your stores, they don’t just hope for clean floors, good lighting, and excellent customer service—they have come to expect it! Standardization, combined with your competitive advantage, allows your operations to flourish.

In closing, we would like to reiterate that there is no substitute for the things a great business system can do. When examining your operations, ask yourself, “Do I have an effective system in place?” and most importantly “Is there a way my business can perform better?” Ray Kroc built the McDonald’s Empire with a business system at its foundation. We live in a remarkable world filled with technology and innovation that Kroc could have never fathomed. Indulge yourself to imagine what having an effective business system in place can give you the power to build today.

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