Ray Kroc was an American businessman who knew the gains and losses of the business world on a 1st hand basis and was willing to take those risks. He was willing to put his personal home up for a loan to invest in his dream or scheme as his wife would refer to. He saw the Mc Donald brothers establishment as a huge picture of success built completely from American ingenuity. Ray developed bargaining tools from going door to door as a salesman and utilized those skills to communicate effectively to individuals and conveyed his beliefs nationally to those who also were seeking a piece of the American dream. Unfortunately, the McDonald brothers did not realize how savvy Ray Kroc was and in the long run, lost their brand to the powerful corporation He built right under their noses.
The McDonald brothers knew that they had created a powerful adversary in Ray Kroc and were literally outgunned in their dispute for the franchise. At the time, they settled for $2.4 million dollars to be divided equally between themselves. In the major scope of the business and its holdings, this amount was just a peek into the vast capital vault that the McDonalds corporation had stockpiled. They were left with no choice because neither brother could afford to stabilize a long -term court battle and was forced to accept the terms Ray Kroc offered.
The local store franchisees earned revenue from food sales. The McDonald brothers created a system that served customers in under 30 seconds compared to other restaurants who served their guests in 30 minutes. This high-speed system was adopted in all the locations and was reacted by the public as “fast food”. Even they way the food was packaged was new as this was not a traditional restaurant but more of a place your order, pick up to go service.
Under the advisement of Harry Sonnenberg, Ray Kroc purchased the real estate needed to build a McDonalds location. At that point, he became a landlord and was leasing the land to each new McDonalds franchise investor. From his real estate earnings, Ray Kroc’s income grew at an exponential rate. Unless the local franchise owner held enough money to buy the land, location and brand fees, at one time, a substantial portion of their earnings was needed to pay any leasing fees. The remainder is used to pay salaries and restock any necessary materials for their location.
No, I still love McDonalds although it’s not as good as in the past. I feel bad that the McDonald brothers were unable to create a better deal with Ray to ensure a successful and long-lasting relationship prior to him cornering the franchise and its market. The McDonald brothers envisioned a clean family-oriented business, while Ray envisioned a monopoly. It’s unfortunate but in the real world, businesses are divided, sold and stole from their original proprietors daily with money, power and legal influence as the main players on the field.
As Ray said do you know where is the magic in McDonalds, he said the name. The branding was what he fell involve with. The bright golden arches that symbolized the church, so everyone could feel welcomed. At the end everyone could steal the speedy system they have developed. But the name was screaming America. I guess when you fall inlove, you chase your love and fight for it until you conquer it.
As you said in the real world businesses are divided, sold and stolen. Sadly for the brothers, he won. But there are a lot of lessons from this movie we could use in our future so we make better choices.
The brothers made a grave and expensive mistake in giving in to Ray. I know Ray had the money to fight and they did not but that was not enought reason to walk away with the deal they got.
I cannot help thinking about that one percent hand shake deal. Althought at the time it seemed to be such a low percentage, but in 2019 McDonalds had revenue of $21.08 billion dollars. Had that deal been done in writing that one percent stake would give the brothers approximately $210M yearly.
There are many lessons that could be learned from this film and it should be watched by every person who aspires to be an entrepreneur as it shows the good and bad of being in the world of business.
Hi Olive, I agree with your point. The McDonald brothers should have never agreed to the deal. Especially the hand shake deal, which, on occasion, is considered legally inadmissable as proof of an agreeement of terms. Again, being out maneuvered by Ray. I agree, to be an entrepreneur is to be willing to put it all of the line for your goals . Win today, lose tomorrow. The inevitbale question remains, does success bring out the monster in you?
I do think the brother made a great choice in selling. I agree with you if they would have gone to court they wouldn’t have been able to afford court battle and maybe could have been left with nothing. They were happy with their family oriented business and it sucks that Ray ended screwing them over. Plus they ended up missing out on so much money because of a hand shake. It definitely sucks that so many business are stolen all the time.