very proud parents to look after her. Pam was almost eight years old and already in third grade. On the day Nancy came home from the hospital with Susie, Lynne went off to school on her first day in first grade. She would be six years old in just a few days. Our two-year-old son, Whit, was still at home and required the constant attention that any active child of that age would demand. The family was in great shape, and the addition of little Susie brought us even closer together. I tried not to let my business disappointment affect our family life. That was the one thing I had to hang on to, and Nancy, as expected, led the way.
While I was facing worries and fears of a business that was in real trouble, Nancy, in her typically energetic and positive fashion, continued to provide a happy and comfortable home for the six of us. How she managed to run a household on my meager salary of $12,500 less taxes is a real tribute to her common sense and frugal nature. She had no help, cooked all the meals, did the shopping, and looked after the house and children. It was a monumental task for any person, and she accomplished all of it with an ease which was uncanny. She always had a way of appearing happy, buoyant, and upbeat to anyone who was around her. This attitude of her was reassuring to me at a time when Dave and I were desperately trying to put the company on a profitable course.
We began calendar year 1956 in terrible financial condition. The opening of the first four Burger King units was driven by our ambitious optimism, but we had used very poor business judgment in a number of different ways. We had spent my entire $20,000 capital contribution and had assumed additional debt, which by this time was threatening to overwhelm us. We had overexpanded in the hope that four restaurants would be profitable. Unfortunately, this wasn’t the way it had worked out. All four of the restaurants were unprofitable, so we had big problems to deal with.
At this point we had to get out and find some capital to support the business. By the spring of 1956, Dave and I had been business partners for over eighteen months, and we were going nowhere. We were dead in the water, and with losses piling up. Sales were flat to negative, and we were struggling to figure it out. The good news was that our spirits remained undaunted. We believed that somehow and, in some way, a magical event would happen to lead us out of the trouble we were in. For the moment, our mission was to save the company. To do this we would need additional investment capital. We began our desperate search.
The Desperate Search for Capital
Inside an early Burger King
As 1955 drew to a close, it was clear to Dave and me that we were in serious financial trouble. Nancy’s father, Dr. Nichol, tried to help us by investing $3,750 for some stock in the company, and he loaned us an additional $10,000 at 6 percent interest. Fortunately, over time, we were able to pay him back, and as a thank you, gave him some stock options which helped his retirement portfolio.
In 1956, with the opening of each new Burger King, we hoped that business would pick up and improve, but that never did happen. Things continued to get worse and the prospects for failure loomed larger. We tried everything in a desperate attempt to figure out what we were doing wrong. It was apparent that most of our problems involved the Burger King system, which we had inherited from Jacksonville’s Cramer and Burns. The Insta- equipment was troublesome, inefficient, and unreliable. As a result, we were unable to maintain the quality of our food and service on a regular basis. Things were just not right. Our menu was acceptable, but it was also a bit ordinary, and very little about it was unique, special, or noteworthy. In retrospect, we were just run of the mill.
The major problem contributing to our low level of sales in South Florida was the fact that we couldn’t get people excited about our system of low prices, a limited menu, and fast service when we were having so many problems with the food we were serving. I was aware that our competitors were generating much higher volumes in units they were operating in states outside of Florida. It was difficult to understand why they were so successful when we were having such a difficult time trying to do the same thing as they were. Everything seemed to be focusing on production problems and the quality and delivery of our food. When Burger King units were opened in other parts of Florida, their disappointing sales were similar to our own. I attributed some of our problems to the fact that the Royal Castle organization in South Florida had won excellent public acceptance and top-notch customer loyalty largely as the result of an effective advertising strategy.
Later on, I came to believe that our initial menu pricing strategy was never on target. Our competitors were selling a small hamburger for fifteen cents, while we were charging eighteen cents. In the markets we served, eighteen cents was not viewed as an exceptional value. I believe that one of our biggest mistakes at the time was staying with our higher-priced hamburger rather than offering one that we could design and sell for fifteen cents.
Fifteen cents was a magic number in those days, and Royal Castle and McDonald’s were living proof of that. It was a small consolation, but the competition, which followed us into the Florida market, fared worse than we did. Golden Point, Henry’s, Red Barn, Burger Castle, Biff Burger, and numerous others came into the market and lasted a short time before going out of business. Even highly successful chains like Hardee’s and White Castle made early attempts to penetrate the market, but all of them were forced to withdraw. Florida was a tough, competitive market, and starting a business like ours was a difficult undertaking for anyone—even those who had the experience, capital, intelligence, and courage to give it a try.
Many families and customers of all ages perceived that inexpensive hamburgers could not possibly be wholesome. We had to work hard to overcome that concern. Another problem was with our pay-as-you-order system. This troubled a lot of new customers and made many of them uncomfortable. In order to understand how customers responded to our self-service system, I often sat in my car, which I would park across the street in order to observe their reactions.
I learned that our system of service, which was new at the time, confused and irritated a lot of our customers. They were very concerned as to whether or not our employees could remember their order once they had paid for it. The Insta- ticket system contributed to the problem.
For control purposes we had set up a system where, after paying for their order, our customers received serially numbered tickets. They would then wait before receiving their food. Customers did not seem to know what the tickets were all about. For example, a customer ordering two eighteen-cent hamburgers received two blue eighteen-cent tickets. An order for ten-cent fries was worth one white “fry” ticket. Red “drink” tickets were issued for soft drinks and so forth. Customers often stared in disbelief upon receiving tickets in exchange for their money. A typical reaction was an incredulous look which I interpreted to mean “Look I paid for food, not tickets, what do I do with these tickets?” To add to the confusion, after paying and receiving tickets, the customer was directed to another window where an employee was supposedly ready to deliver the order. Often it was necessary to ask the customer to repeat the order. This added more pressure to an already difficult situation particularly when the customer couldn’t remember what had been ordered in the first place.
The theater ticket idea was a terrible creation, and it soon became obvious that the entire system had to be changed. We stayed with this Jacksonville system much longer than we should have. We eventually changed it, but not before we had alienated a lot of new, first-time customers.
It was becoming increasingly obvious that Cramer and Burns did not have a grip on the service problems, food quality, or the production problems. We were not giving our customers what they expected, and we were paying a heavy price because of it.
Dave and I decided that if we were going to live with the system, we had to speed it up and eliminate the service confusion. We devised a system, which enabled us to deliver the customer’s food within seconds of their placing an order. We were very sensitive to our customers’ demand for faster speed of service and this became our major focus in developing an improved product delivery system. The success of our business still