How two grocers built – and lost – a Kiwi hamburger empire

The country’s largest restaurant chain by turnover owes it origins to brothers Wally and Hugh Morris. Their Salvation Army background had imbued them with a strong work ethic and a frugality that became legendary.

Between 1967 and 1980, the brothers, who started with an IGA shop at Tauriko, Tauranga, built the no-frills Shoprite chain to 112 supermarkets across the North Island from their base at Northcote, on Auckland’s North Shore. They were assisted by a young accountant, Garry Lloydd, and soon Harry had his wish to expand into the fast-food business, then in its formative stages.

A visit to McDonald’s head office in Chicago in 1974 sealed the deal, despite founder Ray Kroc saying, “We are not going there…There aren’t any people. I cruised into New Zealand on a Saturday and there was no one in the street anywhere, and on Sunday it was even worse.”

But Mr Kroc’s rejection didn’t deter the Shoprite team, nor it seems McDonald’s itself. Approval from Chicago came in 1975 and the first outlet was opened in Porirua a year later.

By then McDonald’s was already a major corporation and imposing its strict protocols and standards – contained in a hefty manual – on laid-back Kiwis was no small challenge. Nor was New Zealand’s economic environment, with tight regulations, compulsory unionism and licensed protectionism against anything from overseas, such as a McDonald’s kitchen, furniture, soda fountain or uniforms.

Cheese swap deal
Importation of the kitchen was permitted for a year but Wally Morris ordered it be cemented into the floor, preventing its removal. He later got around the restriction by arranging a deal through cabinet minister Lance Adams-Schneider whereby a stock of unsold Dairy Board cheese in Germany was bought by McDonald’s in the US, clearing the way for two more kitchens to be imported.

Meanwhile, the food for the restaurants was also an issue, as all of it had to be sourced locally but failed to meet the Americans’ high standards on all scores. The Porirua outlet opened in mid-winter, with snow on the surrounding hills, but the day was saved with a two-for-one Big Mac coupon deal. Thousands turned up in a restaurant that seated only 140.

The next step was the 1976 purchase of the former ASB headquarters in Queen St, Auckland, that owner Kerridge Odeon had planned to demolish. McDonald’s was praised for restoring the building’s heritage features and today it remains the chain’s flagship.

The pressure from America was unrelenting and it took its toll of local management, which also chafed against the more austere Shoprite culture. As the chain expanded, the 1981-82 recession took its toll of joint venture owner Shoprite, leading to the separation of the two businesses.

US takes full control
McDonald’s in the US took full control, with the involvement of local franchise holders, who now own 80% of the business. The deal had to go through more bureaucratic hoops, because of controls on foreign investment.

Mr Lloydd, who died of cancer in 1991, was appointed to head the new structure and set the business on the track that took it, at last count, to 159 restaurants serving a million customers a week and employing more than 10,000 people. Along the way, McDonald’s chose a group of suppliers who had to meet stringent requirements, from french fries and buns through to meat patties and fish fillets. In some cases it took an ownership role to get the product it demanded.

Surprisingly, these relationships are not contract-based. By 2010, McDonald’s was spending $150 million a year on its local food suppliers, who are also shipping $180 million worth of beef, cheese and french fries to overseas outlets.

Today, McDonald’s faces competition on all sides, as well as pressure from public health authorities. It has responded with the development of the specialist McCafés and constantly changing menus, including an endorsement from Weight Watchers.

• Golden Arches Under Southern Skies, by Rosemary Hepozen. Renaissance Publishing. Available at Paper Plus stores for $29.90, with some proceeds going to Ronald McDonald House Charities (NZ)