In 1956, four businessmen from Kewanee, Illinois, Gus "Brick" Lundberg, Robert C. Wenger, Paul White and W.K. Davidson set out to start one of the first McDonalds. Robert Wenger and Paul White had been in the Army with Dick McDonald, one of the McDonalds brothers and co-founder of McDonalds, at Camp McCoy, Wisconsin.
Paul White's family had been asked to finance what became Kewanee Industrial Washer. At this point in time, restaurants had employed workers to clean dishes. What Mr. White was financing was the invention of the first restaurant industrial dishwasher which revolutionized the restaurant industry.
Paul White and Robert Wenger decided to try to jump start the washing company by traveling to California and show at a restaurant industry convention. There they met again their old friend from the military Dick McDonald. By this time, McDonald and his brother had started the first McDonalds and had just sold the franchisee rights to Ray Kroc and suggested that they travel to Des Plaines, Illinois to visit him there.
White and Wenger contacted their friend Brick Lundberg who was known for his dynamic personality and leadership skills to get their new McDonalds plans up and running. They then joined with W.K. Davidson, a prosperous Kewanee restauranteur for the financial backing that they needed and they were well on their way.
The four were promised the territory of Central Illinois and opened a McDonalds in Champaign, Illinois. Lundberg had graduated from the University of Illinois in Champaign and knew just the right location. The new restaurant opened and struggled until Lundberg joined forces with another friend, Ken Andris. Andris and Lundberg had what it took to get the location going and before long, the Champaign McDonalds turned into a powerhouse. in this clipping from the Urbana Courier newspaper dated 7/1/1956, the Urbana McDonald's which was started by the founders of Sandy's is pictured. Two of the men in the picture are from the city's Association of Commerce and the other is the location's manager. Note the McDonald's trademark arches and compare them to Sandy's trademark wooden beams in Sandy's pictures. The threat which Sandy's posed to McDonald's is clearly seen in the Moline, Illinois Sandy's location page (located by clicking the locations icon). On page two of the Moline page, on can see the heated advertisement battle which went on between Sandy's and Ray Kroc of McDonald's during this lawsuit time period.
Meanwhile, Ray Kroc was struggling to sell franchises from his Des Plaines location. The Kewanee businessmen had to reveal their earnings to Mr. Kroc to prove the 2% franchise fee that they were paying to him. He now had what he needed to launch McDonalds as we know it today. He had a McDonalds that was making money thus proving to potential franchisees that his business was an incredible success. He would send people interested in McDonalds to Kewanee to check out the figures for the Champaign location (Lundberg and the rest were extremely loyal to Kewanee, their hometown and kept their business local).
The four businessmen tried to open their next McDonalds in Decatur, Illinois. They may have had an agreement with Mr. Kroc to open this location as well as other Illinois locations and were distraught to find that it had already been sold to another franchisee. The four next purchased land and were pouring their savings into a building which was to become a McDonalds on Sheridan Road in Peoria, Illinois. After much expense, they were told after apparently being promised the Peoria location that Peoria had already been sold to another franchisee as well. This breaking of the original agreement made them angry and they decided to start their own drive-in, calling it Sandy's thrift and swift which implies speedy service.
This breaking with McDonalds resulted in a lawsuit that went on for years until it was settled with the four giving the Champaign location back to McDonalds. The lawsuit was based on the four signing the McDonald's agreement in which they could not open a similar competitive restaurant in Illinois or in adjoining states. Mr. Lundberg and the others during the early 1960's were opening locations as Sandy's in other states as well as in Illinois. The lawsuit was covered by the associated press: 1/19/65 The Illinois Supreme Court today allowed a rehearing of its November ruling that McDonald's hamburger chain could not prevent operation of Sandy's, Inc. in Peoria. The case involved a dispute over whether the operations of Sandy's in Peoria had violated terms of a franchise agreement with McDonald's in Urbana. McDonald's chain contended that the franchise prohibited the establishment of the same kind of business in Illinois or adjoining states. The Supreme Court said in its November Decision that to enforce the restriction against a similar hamburger business in Peoria, ninety miles away would be "an oppressive restraint of trade." The Peoria Courier wrote about the lawsuit in this article;
The Illinois Supreme Court today held that McDonald's hamburger chain cannot put Sandy's out of business in Peoria. It held that a restriction in the McDonald's franchise agreement perhaps could be applied in the Urbana area where the Illinois McDonald's corporation was formed but that it couldn't be extended 90 miles away. To enforce the restriction against a similar drive-in hamburger business that far away would constitute an "oppressive restraint of trade" the high court ruled. The court also held that there was no trade secret involved in the operation of McDonald's. In its ruling, the Supreme Court upheld a Peoria Circuit Court's dismissal of the suit brought by McDonald's to halt the operation of Sandy's in Peoria. The Appellate Court had reversed the Circuit Court's dismissal. McDonald's had sought to enjoin the operators of Sandy's , Inc. from operating their drive-in restaurants in the City of Peoria on grounds that the operators had utilized McDonalds' trade secret. McDonald's also held that Sandy's had violated the Urbana franchise agreement prohibiting the establishment of a competitive business within Illinois or any contiguous state. The individual defendants, C. Paul White Jr., Robert Wenger, Gust Lundberg and W.K. Davidson and others who now operate Sandy's executed a franchise agreement in December of 1955 on behalf of McDonald's of Champaign-Urbana, Inc. a corporation they intended to form. McDonald's, a California firm had the exclusive right to grant such a franchise and as a consideration for it was to get a percentage of the gross receipts. The agreement provided in substance, the high court said, that the people getting the franchise agreed that information about the operation which they received from McDonald's constituted trade secrets and would remain confidential. The agreement also provided that there would be no right to duplicate the restaurant operation nor use any of the information except in the restaurant franchised by them. There was also the agreement not to operate a similar business in Illinois or any adjacent state. In 1957, the four men sought a franchise from McDonald's to open a restaurant in Peoria. When they were told that a franchise in Peoria had been promised to someone else they organized Sandy's Inc., the court held. The first question the high court ruled on was that of the trade secret. The court held that a planned process, tool or machine which could be known only to the owner could be involved and that since the layout and method of food preparation were readily seeable by even the general public, no trade secret was involved. Enforcement of this part of the agreement would also constitute an unreasonable restraint of trade, the court held. Secondly, the court ruled that an agreement which would keep the defendant from engaging in a competitive business in the Chambaign Urbana area might be a reasonable restraint since McDonald's had a finanacial interest at stake but that it couldn't be enforced outside the market area of the Urbana location without unreasonable restraint.
The opinion was written by Justice Byron House and was unanimous with Justice Walter Schaefer taking no part in the consideration or the decision of the case. McDonald's original suit, filed in 1958, was dismissed in Circuit Court in Peoria in 1962. The 2nd District Appellate Court overruled that decision in January of this year and the case then went to the Supreme Court.
Sandy's exploded across the midwest and other states becoming the first fast food restaurant in many communities until 1972 when it merged with Hardees. By this time, the classic drive-in buildings were wearing old and some franchisees were not updating them to indoor seating which was crucial to keep up with the now exploding fast food industry. This coupled with the fact that the company headquarters was located in Kewanee, Illinois which only had one bank to borrow from for expansion led to coming financial trouble with the chain. Brick Lundberg saw this and came back from retirement to encourage Sandy's franchisees to allow Hardees to buy them out for the good of the company. Originally the plan was just a merger with both companies keeping their names.
Hardees had the finance needed to take the company nationwide. As a result, whatever plans to keep the companys seperate were ended forever and by the end of 1973, with the encouragement of Lundberg, 90% of the franchise had switched over to the Hardees label. The Sandy's owners had a choice to keep their Sandy's name and some did so as late as 1979! (Muscatine, Iowa is believed to be the last Sandy's). They could keep the name but were on their own for anything they possibly needed which eventually meant the complete end of the chain. Around the time of the buyout, Brick Lundberg, the heart and soul of the company was stuck with illness which most likely changed the outcome of plans and agreements which were part of the original merger.
The following is a historical document written by Sandy's Jack A. Laughery to all stockholders. It is an incredible read and reveals a small period of time in which Sandy's was still going to exist, giving hope to every Sandy's fan! It also reveals the beginning of Hardee's rise to be a giant in the fast food industry.
Gentlemen: Enclosed with this letter are three very important documents. The first is our new sales brochure showing the maxi and mini and the financial information that is important to you. The second is a record telling you the progress of Sandy's through October 1971. The third is a press release announcing a merger agreement in principle between Hardee's Food Systems, Inc. and Sandy's Systems, Inc. The press release, I am sure, will leave some unanswered questions in your mind. Therefore, I would like to make several comments concerning this proposed merger.
For the past few years, it has become increasingly apparent to us that it would eventually be necessary for Sandy's to either merge with another firm or make a stock offering to the general public. This necessity was brought about due to a need for additional capital for expansion of our company-owned units and home office staff and the desire to make the stock of Sandy's Systems, Inc. marketable for the present shareholders. This topic has been discussed with many owners and managers in the past, both individually and at regional meetings.
Some months ago there developed a mutual interest between Hardee's Food Systems and Sandy's Systems to complete a merger. It was initially felt by both firms that we were in a very ideal position in that we did not, at this time, compete with each other. We were both strong on a regional basis -- they primaily in the East and we primarily in the Midwest. It was also obvious to both of us that if we did not complete a merger in the very near future that we would be competing eventually, in various areas.
The last paragraph of the enclosed release is probably the most important to you. It reads as follows: "Following the merger, the two restaurant chains will continue to be operated under their establised names." In other words, Hardees will stay "Hardee's" and Sandy's will stay "Sandy's". In our very early discussions it was agreed that Sandy's will expand in the areas in which they are now located and Hardee's will expand in their respective areas.
The second sentence of that last paragraph reads that: "The preliminary plan is to continue the franchised unit and company-owned unit expansion of BOTH chains without significant changes in management or operating format." The combination of Hardee's development and company-owned stores and not significantly change the top level management of either chain. Because the agreement, at this point, is one of principle only, there are a great many details that must be worked out for the merger to be completed, hopefully in Januraly of 1972. naturally, we feel at this time that the merger will be completed, but there is a possibility that because of differeneces of opinion, we may come to an impasse and therefore not complete the merger.
Assuming completion, we will immediately schedule several owners' meeting in the month of Januray throughout the country to enable you to personally meet the management of Hardee's Food Systems. The specific dates of the owner's meetings will be announced pending completion of the merger. Following that series of owners' meetings, we will have managers' regionial meetings in the late Januray and early February. The managers' regional meetings will be conducted regardless of the outcome of the merger.
The advantages of this merger, we strongly feel, will be quite significant. For the first time in our industry, two very strong regional chains would come together to form a large national chain. In total this merger would represent some 526 units. The expansion program in 1972 could total some 200 units. We are enthusiastic about it! This proposed merge would result in the combination of growth and development that would make Sandy's and Hardee's a very dominant force in the fast food industry.
Sincerely,
Sandy's Systems, Inc.
Jack A. Laughery
President
December 2, 1971