Day 125 - 12 May 95 - Page 36


     
     1         "Turner and Karos advised franchisees to have the meat
     2        routinely analysed in labs."  You already mentioned
     3        something like that?
     4        A.  Yes, that is absolutely correct.  We did take samples
     5        of the product at the supplier from time to time, and also
     6        when it came in the back door of the restaurant.  As to the
     7        175, it could have been 175, it could have been more, it
     8        could have been less.  But one of the things that we did as
     9        we saw the need to have more stringent controls was to set
    10        up a competitive situation where those meat suppliers that
    11        were on the up-and-up, that is to say, that those that did
    12        a good job day in and day out, that really adhered to
    13        proper operating practices, those were the suppliers that
    14        got additional business, were authorised as we went into
    15        the frozen programme.
    16
    17   Q.   So there was a process over some years of beginning to what
    18        they call their "police" of many suppliers that you had to
    19        kind of get them to conform to standards?
    20        A.  Well, the policing began at day one.  Our founder, Ray
    21        Kroc, felt it imperative that we do that and, as
    22        I indicated earlier, where we saw violations, we would just
    23        dismiss the supplier.  We saw that this was a system that
    24        was fraught with problems and that we had to go to a better
    25        method and you know what the -----
    26
    27   Q.   If you go on to page 326, the first paragraph:  "By then
    28        the battle between", "by then", I think we are talking
    29        about, effectively, the 70s, I believe -- it comes up?
    30        A.  The paragraph starting with "By then"?
    31
    32   Q.   Yes, "The battle between the titans of fast- food".
    33
    34   MR. JUSTICE BELL:  If you turn back a page it might tell you
    35        what "by then" was.
    36
    37   MR. MORRIS:  "Even by the late 1960s it was becoming apparent
    38        that the fast-food business, especially the hamburger
    39        segment, would develop in another decade into a market
    40        dominated by a few powerful leaders, all of whom could
    41        produce an acceptable hamburger, market it aggressively and
    42        deliver it through a nationwide network of modern stores.
    43        By then", which, presumably, means then the end of the 70s,
    44        "the battle between the titans of fast-food would
    45        increasingly be one of efficiency of supply and the winner
    46        would be the competitor whose suppliers had the lowest cost
    47        production, the highest level of technical expertise and
    48        the greatest desire to innovate".  Is that all OK, as far
    49        as you can -----
    50        A.  Yes, it is; it is very true. 
    51 
    52   Q.   "There was no guarantee that McDonald's could achieve that 
    53        type of dominance by casting its lot with smaller
    54        entrepreneurial suppliers and then attempting to make them
    55        into giants on its own.  When compared to the potential
    56        supplier networks of other fast-food chains, which were
    57        either supplied by the major names in the food processing
    58        business or owned by them, McDonald's supply system did not
    59        seem to hold much promise for becoming the industry's power
    60        house".  This is all comment.  "In fact, that is exactly

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