When Kiwi battlers Wally and Hugh Morris brought McDonald’s to New Zealand in the mid-seventies, it took all the ingenuity they possessed to balance the demands of a draconian economic environment and McDonald’s super-strict standards. Was New Zealand ready for McDonald’s? And was McDonald’s ready for New Zealand?
It was a grand vision. Having already established a supermarket empire, the Morris brothers set about building their McDonald’s empire in the same way – on the smell of a greasy napkin. They did things the “Kiwi way” rather than the way McDonald’s head office necessarily wanted them to, not only because the protectionist economy of the Muldoon era meant they had to constantly work around import laws and other restrictions, but because they were always strapped for cash.
It very nearly ended in disaster.
Photo: Minister of Consumer Affairs Margaret Shields serves her two nephews at McDonald's first New Zealand restaurant in Porirua (National Library of New Zealand)
Here are 10 things you probably don’t know about McDonald’s first five years in New Zealand:
1. Unbelievable though it seems today, no one had heard of McDonald’s in New Zealand
Gary Lloydd, the man who was to lead McDonald’s in New Zealand for many years, somehow completely missed spotting a single McDonald’s store while he and his wife were holidaying in California in 1973, and when he was later asked to run the New Zealand operation, his wife asked, “What’s McDonald’s?”
2. Ray Kroc had to be persuaded that New Zealand wasn’t a “more dead- than-alive hole”
It took two Kiwi battlers, Wally and Hugh Morris, two years and repeated trips to McDonald’s headquarters in Chicago to persuade McDonald’s, and especially irascible founder Ray Kroc, that New Zealand wasn’t the “more dead-than-alive hole” he’d experienced on an earlier visit here.
3. The brothers had to protect themselves from protectionism by concreting the kitchen units to the floor
In an attempt to get around New Zealand’s strict import laws in the seventies, which required the McDonald’s kitchen specially imported from the United States to be re-exported in twelve months’ time, Wally Morris concreted the kitchen cabinets and appliances to the floor in the first New Zealand McDonald’s store.
4. The brothers were so tight they wouldn’t buy telephones for the stores
Wally and Hugh Morris believed in pinching pennies to the extent that they wouldn’t purchase what they saw as “unnecessary overheads”, including telephones in their stores. If a store managers or staff needed to use phones, they had to use pay phones.
5. They were so overcommitted they had to “rob Peter to pay Paul”
Committed to opening six McDonald’s restaurants in two years, Wally Morris had to find a lot of cash quickly, so he kept pumping out new Shoprite supermarkets, which being little more than no-frills warehouses cost much less to set up than a restaurant and produced low margins but loads of much-needed cash.
6. Wally used ingenious ways to pay for the new McDonald’s restaurants
The kitchens which had to be imported from the United States were expensive and had to be paid for using overseas funds, so the ingenious Wally came up with the solution of brokering a deal to sell New Zealand cheese to McDonald’s USA, using his share to offset the cost of the kitchens and creating a whole new export market for New Zealand which today is estimated to be worth more than $300 million.
7. There was a cultural clash between the Morris’s two businesses
The cultures of Shoprite and McDonald’s couldn’t have been more different. The Shoprite culture was all about austerity, selling groceries at the lowest possible prices in a stripped-back no-frills environment employing as few service people as possible, whereas the famous McDonald’s culture of QSCV – “quality, service, cleanliness and value” – meant employing enough staff members to provide the QSC. The Morris brothers knew this, but couldn’t afford much McDonald’s marketing which meant sales were too lacklustre to enable them to afford to employ sufficient staff either.
8. It was tough finding local supplies that met McDonald’s exacting standards in “she’ll be right” New Zealand
In fact, it often proved to be a nightmare – as James Bull, a potato grower based near Bulls, found out when he was handed 257 pages of specifications for manufacturing McDonald’s shoestring fries and asked to produce the perfect fries (and it turned out we didn’t even have the right type of potatoes growing here).
9. “You can stuff your apple pies, I’ve had enough, get somebody else”
That was the response from Digby Sykes, the owner of a medium-sized bakery in Rotorua, when he received an order from Gary Lloydd for a large quantity of apple pies which were “golden and sort of bubbly on the outside”, but Digby ended up producing 20 million pies a year for McDonald’s.
10. The spiral had to collapse eventually
As we’ve seen, the early McDonald’s was dependent on cash injections from Shoprite and suppliers who were prepared to wait up to six months to be paid, but the spiral couldn’t continue indefinitely. It all came to an end when recession hit at the end of the seventies and suppliers refused to supply Shoprite unless they were paid on the 20th of the month following. The Shoprite team found itself in a $500,000 hole that despite Wally’s best efforts they couldn’t dig themselves out of. Shoprite went into receivership and McDonald’s head office realised the chain would collapse in New Zealand unless they stepped in. They paid Wally enough to settle his debts and live comfortably, but although they employed many of the members of his management team, including Gary Lloydd and his brother Hugh, they declined to take on Wally.
And so ended the story of a real Kiwi battler, a man of vision and ambition. We would like to pay tribute to the man, not because we admire all his methods, but because in our opinion New Zealand needs more entrepreneurs who are not afraid to dream big and work hard to turn their dreams into reality.
The background for this article came from a book we recommend, Golden Arches Under Southern Skies by Rosemary Hepozen. The book was commissioned by McDonald’s in 2010 to celebrate their 35th anniversary in New Zealand and it is a credit to McDonald's that they were happy for the author to take a "warts and all" approach, providing some valuable lessons for anyone involved in franchising.