When economists wonder why U.S. productivity has dipped, they present us with a slew of data that can obscure what we are really talking about. So today, let’s just look at McDonald’s.
Located east of Pasadena, the first McDonald brothers’ restaurant opened in 1937. There were three carhops in the parking lot. Dick and Mac made the hot dogs and the shakes and waited on customers who preferred to sit on stools. Their restaurant was clean, it was efficient, and it was a success. They soon had enough money to move to a second, grander location, fifty miles west of Los Angeles in San Bernardino.
Beef and pork sandwiches, ribs, and a barbecue pit laden with specially delivered Arkansas hickory chips were the centerpieces of the San Bernardino McDonald’s. The brothers soon realized, though, that the more “we hammered away at the barbecue business, the more hamburgers we sold . . . [and] my God the carhops were slow. We’d say to ourselves that there had to be a faster way.”
There was. Even though they had to close their restaurant for three months, they decided to redesign its entire operation. Paper instead of china, custom-designed grills, and ten hamburgers to the pound would cut costs and optimize efficiency. Dick designed a portable, rotating tray on which two employees could dress hamburgers as it turned. A newly created ketchup squirter would dispense precisely the right amount each time with a single squeeze. Not only would they serve a limited number of items (hamburgers and cheeseburgers; three soft drink flavors, milk, and coffee; chips; and a slice of pie; and the soon to be added fries and a shake), but also those items would be standardized. Every burger would have mustard and ketchup, onions, and two pickles. And they would charge only fifteen cents a burger, half the going rate.
At noontime, their small parking lot was filled with 150 customers, each willing to stand in line for a hamburger and fries with a shake. It took fifteen seconds to fill each order.
Our Bottom Line: Productivity
For economists, the McDonald’s story is really about productivity. Using land, labor and capital more efficiently, volume soared and per burger cost dropped. Looking below at the current productivity trend, we can humanize the data by thinking of hamburgers.