McDonald's Corp.

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The first McDonald's restaurant was opened in Pasadena, Calif., in 1937 by brothers Maurice and Richard McDonald. In 1954, Ray Kroc, then a salesman, negotiated an agreement with the brothers to open his own McDonald's. Mr. Kroc's first outlet opened in 1955 in the Chicago suburb of Des Plaines. In July 1955, he added a second store in Fresno, Calif. Total annual sales initially were $193,772. By the end of 1956, McDonald's 14 restaurants reported sales of $1.2 million.

In 1960, McDonald's first touted its "All-American menuA hamburger, fries and a shake." The following year, with more than 200 McDonald's restaurants licensed, Mr. Kroc bought out the McDonald brothers for $2.7 million. That same year, the slogan "Look for the Golden Arches" gave sales a big boost. "Look for the Golden Arches" was also McDonald's first jingle and the centerpiece of its first national advertising campaign.

In 1962, the ad campaign theme changed to "Go for goodness at McDonald's," and the fast-food chain replaced "Speedee," its hamburger-man symbol, with the Golden Arches logo. The first McDonald's TV spot aired in 1963, the same year McDonald's introduced its Ronald McDonald spokescharacter. (In 1999, Advertising Age named Ronald to the No. 2 spot on its all-time list of top ad icons.)

In 1965, McDonald's retained D'Arcy Advertising as its agency and began to advertise on network TV. That same year, McDonald's became a public company, selling its shares over the counter; in 1966, the company was listed on the New York Stock Exchange. Also that year, the first McDonald's restaurant with seating opened in Huntsville, Ala.; previously, all McDonald's outlets had been drive-ins.

Between 1965 and 1967, D'Arcy introduced several campaigns, with themes such as "McDonald'swhere quality starts fresh everyday" in 1965; "McDonald'sthe closest thing to home" in 1966; and in 1967, "McDonald's is your kind of place."

McDonald's success in the 1960s was largely due to its aggressive marketing and flexible responsiveness to customers. In 1963, the fast-food chain introduced the Filet-O-Fish sandwich, billed as "The fish that catches people," and in 1968 the Big Mac and the hot apple pie were added to the menu.

Entering the 1970s

In 1970, McDonald's moved its $5 million account to Needham, Harper & Steers, which introduced the highly successful "You deserve a break today" ad campaign in 1971, based on research that showed many families chose McDonald's because of the convenience it afforded. McDonald's sales reached $587 million, earned from almost 1,600 restaurants in all 50 states and four other countries.

In 1999, Advertising Age listed the "You deserve a break today" campaign No. 5 on its list of the top ad campaigns of the 20th century, while the jingle ranked No. 1 on Ad Age's list of best jingles.

The company pioneered breakfast fast-food in 1973 with the introduction of the Egg McMuffin, when market research indicated that customers would welcome a quick breakfast. Four years later, the company added a full breakfast line to its menu.

In 1974, a new ad theme, "McDonald's sure is good to have around," proved only modestly successful. But a year later, the "Two All Beef Patties Special Sauce Lettuce Cheese Pickles Onions on a Sesame Seed Bun" promotion introduced McDonald's most famous effort for the Big Mac.

"We Do It All for You," introduced in April 1975, was another blockbuster ad campaign. That same year, McDonald's opened its first drive-through location; by 1996, drive-through sales accounted for half McDonald's U.S. income.

In 1977, McDonald's President-CEO Fred Turner was named chairman, succeeding Mr. Kroc, who in turn became senior chairman. At the same time, Keith Reinhard, the creative director who had guided the McDonald's campaigns, became president of Chicago-based Needham.

International expansion

McDonald's made a big international push in the last three decades of the 20th century. Once most major European and Asian nations had local Golden Arches, the company set out to increase the number of outlets in each of those nations while continuing to open new sites in other countries. In 1976, the company's 4,000th outlet opened in Montreal with a new ad campaign themed, "You, you're the one." In 1979, the giant fast-food chain introduced advertising using the theme "Nobody can do it like McDonald's can."

The 1980s proved to be a fast-paced decade for McDonald's, as the fast-food chainalready entrenched in the suburbsbegan to focus on urban expansion in the U.S. The early 1980s also came to be known as the era of the "burger wars," as McDonald's and other fast-food chains launched aggressive ad campaigns and slashed prices to take market share away from each other. Although rivals challenged McDonald's, its sales and market share continued to grow.

Innovative promotionssuch as the "When the U.S. wins, you win" giveaways during the 1980 Olympic Games (created by Needham)proved successful. Then, after 11 years at Needham, McDonald's stunned the ad industry by moving its $75 million account to Leo Burnett USA in 1981.

The move undermined the industry's oft-stated belief in the power of outstanding creative. While it was widely believed that Needham had done superior work, Burnett had pursued a different strategy. Realizing that McDonald's was rapidly expanding into other countries, the agency set out to win small pieces of the fast-food chain's business overseas. Using its outposts to show what Burnett could do, the agency operated what its CEO, Jack Kopp, called "strategic encirclement."

In 1981, Burnett revived McDonald's most successful campaign: "You Deserve a Break Today." The following year, the American Marketing Association presented its Achievement Award to McDonald's Corp. for excellence in marketing programs.

"Together, McDonald's and you" was the new ad campaign theme in 1983. In June 1984, the fast-food giant introduced a more response-evoking ad theme: "It's a good time for the great taste of McDonald's."

Ray Kroc's legacy

Ray Kroc died on Jan. 14, 1984, and five years later was elected posthumously to the Advertising Hall of Fame in recognition of special contributions to the advertising industry and the community at large. In 1999, Advertising Age put Mr. Kroc at No. 26 on its list of the top ad people of the century.

In 1990, the ad campaign theme, "Food, folks and fun," was introduced. But that same year, substantial pieces of McDonald's business began to return to what was then DDB Needham Worldwide.

In 1993, McDonald's switched its "tweens" advertising account, targeting youths 8 to 13 years of age, from DDB Needham Worldwide to Burnett. The latter began promoting an after-4 p.m. menu and special price programs. In line with a larger advertising trend of targeting the lucrative market of (then middle-aged) baby boomers, McDonald's launched campaigns in the 1990s aimed at more mature consumers. In 1995, the chain introduced the "Have you had your break today?" tagline.

McDonald's international operations continued to play an increasingly important role in the company's financial fortunes. In 1995, 7,030 restaurants in 89 countries produced sales of $14 billion. In addition, formerly communist nations began welcoming McDonald's restaurants, with restaurants opening in Moscow in 1990 and in Warsaw in 1992. McDonald's also began operations in Beijing in 1990.

McDonald's did experience some high-profile marketing stumbles in the mid-1990s. The most notable slip occurred in 1996, when the company spent $200 million to introduce the Arch Deluxe sandwich in a campaign aimed at adults. The series of ads featured Ronald McDonald looking and acting adult, grooving to disco, shooting pool and wearing a business suit. The Arch Deluxe sandwich promotion failed to reverse stagnant domestic sales, however, and critics warned the effort put at risk the franchise's favorable positioning with kids.

In 1996, McDonald's boasted nearly 20,000 restaurants in 101 countries and signed a 10-year contract with the Walt Disney Co. to make it McDonald's primary promotion partner. In addition to the failed Arch Deluxe, McDonald's introduced the Crispy Chicken Deluxe, the Fish Filet Deluxe and the Grilled Chicken Deluxe in 1996, and in 1999 it added bagel sandwiches to the menu.

Marketing changes

In 1997, McDonald's embarked on an ambitious plan to transform itself into a more nimble local competitor. In July, the company reorganized into five geographic divisions, each with its own management team, to move the process of decision-making closer to the company's local U.S. restaurants. Funds from McDonald's nearly $600 million annual advertising budget were redirected from national to local efforts, so that where 75 of every ad dollar had been earmarked for network TV campaigns in 1996, only about 50 went to net TV in 1999.

Also in 1997, McDonald's again switched ad agencies in an effort to revive faltering markets, giving lead status on its account back to DDB Needham Worldwide, Chicago, after 15 years at Burnett, which continued to handle McDonald's children's advertising.

The "My McDonald's" campaign was introduced in 1997; "Did somebody say McDonald's?" followed in 1998. Company insiders, Wall Street analysts and franchise owners noted that these changes, along with the increased emphasis on local marketing, made the fast-food giant a stronger player in the highly competitive $100 billion U.S. fast-food market.

By 1999, McDonald's began focusing on "can't miss" promotions aimed at children and families. Promotions included a campaign highlighting the chain's signature Big Mac sandwich and a Teenie-Beanie Babies tie in. The latter was McDonald's third offer of the plush toys; this promotion, while targeted at children, proved popular with all ages and became an annual occurrence.

More recently, McDonald's has been facing off against different kinds of challenges. It introduced the McFlurry to counter Dairy Queen's successful Blizzard, but other, more direct rivals continue to challenge McDonald's for market share. The fast-feeder has countered by introducing new menu concepts, such as its Diner in McDonald's program, as well as diversifying into other fast-food businesses, such as its Chilpotle Mexican Grill, Donato's Pizzeria Corp. and Boston Market units.

After getting pounded in 2002 with quarter after quarter of sales and profit declines, the company in December 2002 posted its first quarterly earnings loss since becoming public. The fast-food giant ousted Chairman-CEO Jack Greenberg, replacing him with James Cantalupo, who a year earlier had retired after serving as president-chief operating officer of its international unit. Mr. Cantalupo scaled back many of the aggressive growth plans set in place under Mr. Greenberg and launched a back-to-basics food and service approach while championing better-for-you menu additions and a two-year global marketing calendar. On April 19, 2004, Mr. Cantalupo died of an apparent heart attack while attending a franchisee meeting. He was succeeded by President and Chief Operating Officer Charlie Bell, who assumed the title president-CEO and vowed to carry out Mr. Cantalupo's plans.

In 2003, following a global agency competition, McDonald's named Heye & Partner, a Germany-based sub agency of DDB Worldwide, to lead its new worldwide ad campaign using the "I'm lovin it" theme. It ushered in a new agency model where roster shops competed for assignments on a project basis. Sales soared, and the burger behemoth shocked the investment world with its surprisingly speedy turnaround. At its peak, same-store sales in the U.S. rose 20.1% in February 2004, but the marketer planned for sales trends to soften.

In December 2003, McDonald's consolidated its global media with Omnicom Group's OMD without a review, cutting Publicis Groupe's media agencies, Starcom and Zenith Optimedia, and a handful of smaller shops.

In 2003, McDonald's was the No. 16 national advertiser in the U.S., with spending of $1.37 billion, an increase of 2.4% over the previous year, according to Advertising Age. U.S. sales were $6 billion, up 11.4% over 2002, and worldwide sales were $17.1 billion, up 11.3%.

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