- What makes Ray Kroc and the brothers different from each other?
What made Ray Kroc different from the brothers was that he was able to make a franchise out of the McDonald’s restaurant. What the brothers lacked was having a real-world view of what business is like. The brothers were very smart about designing a restaurant but did not know how to expand since they had tried before but failed due to the fact that they did not know how to manage more than one restaurant. In the film, we see that the brothers established 5 restaurants, 3 in Southern California, 1 in Sacramento, and 1 in Phoenix, and did not plan to expand anymore due to quality control. They saw that these restaurants were not sanitized and had an inconsistent menu. Furthermore, after this realization, the brothers saw that having 1 great restaurant was better than 50 not great ones.
But this is where Ray Kroc separates himself from the brothers, Ray knew having 1 great restaurant would not be enough to make an empire. Ray knew what steps had to be put in place in order for this to happen. Ray went out to the banks and asked for loans to lease land and build restaurants. He found the right people to manage the restaurants, made the restaurants open 7 days a week instead of only on Sunday, and went out to recruit people to hire. The brothers would not be able to achieve this simply because they did not know how, they were not specialized in marketing like Ray was. Ray also had his own secretary in his other multi-mixer business called “Prince Castle” where she would help him negotiate deals, handle calls with possible business partners, sponsors, etc. This was a big help and a time saver for Ray since he was managing more than 1 restaurant, as the brothers only managed 1.
- Do you think the McDonald’s brothers did the right thing by selling out to Ray Kroc? Did Ray Kroc give the brothers a good deal?
I believe the brothers did the right thing by selling out to Kroc. As big as McDonald’s has gotten, they knew that if Ray re-sings they would not know how to keep up with all of the other McDonald’s restaurants. This would later cause bankruptcy and a lot of stress to the brothers, especially to Mac, since he has diabetes, and the doctor told him if he continues to have stress he will develop kidney failure. Also, when negotiating the sell-out contract, Ray promised the brothers royalties of $2.7 million and 1% of the company’s profits in perpetuity.
In my opinion, Ray Kroc gave the brothers a terrible deal. Regarding the 1% of the company profits in perpetuity, royalties, and the check, Ray agreed to the deal but on a handshake basis, which means only in good faith. Which as we have seen in the film Ray is not a faithful person, Ray is the Pure definition of what a businessman should do to get to the top, and it was lying and working behind the back of the brothers. I’m sure nobody would like a business partner like Ray. Furthermore, Ray was unable to prove the handshake deal where the brothers never received their royalties and the 1% profits in perpetuity, and instead of the $2.7 million dollar check, the brothers received a $1.3 million dollar check instead. I truly feel awful for the brothers, especially Mac, who was such a positive, pleasant man who had so much trust in Ray and gave him second chances, only for everything to backfire on him. All Mac wanted was for his brother Dick to have accomplished his dream.
- How did the local store franchises make money?
The local stores make money by establishing carhops where cars will pull up to the restaurant and pick up their food. This would attract a lot of attention since their “speedy system” was easy for people to adapt to. Customers’ food was placed in a bag from which they can easily dispose to the garbage can after they are done eating.
- How did Kroc make money? How was that different from the franchises, running the local stores?
After Kroc saw that McDonald’s was almost out of capital due to the monthly cost of all stores(especially the manufacturing of the ice cream-making machines) and the 1.4% cut of his contract with the brothers, he saw that he needed to renegotiate his deal in order to break even or more. But the brothers declined his demand. So Harry J. Sonneborn, the vice president and a real estate representative from “The Tastee Free Corporation” gave great advice to Kroc on how he could make money. Harry noticed that the restaurant was on leased land. Harry told Ray to buy the leased land and later flip the deal by leasing the land that he owns to the restaurants. This gave Ric two things, one was a steady revenue stream and the other was greater capital expansion, as stated by Harry in the film.
This was very different from the franchises run by the local stores because the local stores had to pay monthly fees to the lease owner, mainly being banks or whatnot, but in Kroc’s case, Kroc was the bank where he was getting the lease money from the restaurant. This would help Ric a lot by having enough revenue to expand even more nationwide.
- Does this film change your view of McDonalds?
This does not change my view of McDonald’s at all. This can be expected from every major multinational billion-dollar business. For example, Facebook was mainly started by a group of 5 individuals, including Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes. Now the only remaining founder in the business is Mark Zuckerberg. The film “ The Social Network” explains how this happens. I recommend it to anyone who has not seen this film. It’s a very good one. So to conclude, this does not change my view on Mcdonald’s at all since this would be expected from any business person who had the same vision as Ray Kroc.
