The Founder is a true story of how Ray Kroc, a struggling salesman from Illinois, met Mac and Dick McDonald, who were running a burger operation in 1950s Southern California. Kroc was impressed by the brothers’ speedy system of making the food and saw franchise potential. Kroc soon puts himself into a position where he is able to pull the company from the brothers and create a multi-billion-dollar empire.
Segment number Person involved Purpose of segment Facts
1 Ray Croc Rays current career Sales and visiting different restaurants
2 Ray, Mac and Dick McDonald Ray first discovering McDonalds Mac and Dick McDonald requested six Prince Castle milk shake machines for immediate delivery.
Ray drove to California to fulfil their order himself.
He found their system of creating 15-cent burgers and fries within 30-seconds inspiring.
3 Ray, Mac and Dick McDonald Brothers tell their story over dinner to Ray. This is a breakdown of how the brothers got their start-up off the ground • remove features which are not necessary for the core product.
• draw out your business model, test and optimise it.
• Focus on the core products
• Learn from failure
4 Ray, Mac and Dick McDonald Franchising McDonald’s
The brothers only wanted a small number of restaurants, whereas Ray envisioned growth in the hundreds across the country.
5 Ray, Mac and Dick McDonald Resistance and Control
Under legal contract, Ray was able to lead the franchising effort of McDonald’s in the Midwest. He agreed to only make changes under the written approval of the brothers, which they never did.
6 Ray Results of expansion Ray recruited only committed, middle-class, husband and wife teams to buy into and follow the McDonald’s formula. This resulted in rapid growth with a demand for more franchises throughout the Midwest.
7 Ray, Mac and Dick McDonald Negotiating When Ray asked to re-negotiate the contract, the brothers were unwilling to share the growing wealth with Ray, keeping him locked into a low profit percentage agreement while he did all the franchising work with high risks involved. He earned a mere 1.4% on every 15-cent hamburger sold.
8 Ray Stealing ideas As Ray expanded the franchise in the Midwest, he began to proclaim himself as the founder of McDonald’s
9 Ray, Ethel and Joan Rays marriage Ray announces that he wanted to divorce his wife.
Ray really wanted Joan, who was already married to one of his investors. They recognized ambition in each other to be a more suitable match.
10 Ray, Mac and Dick McDonald Ending the partnership At a legal meeting in 1961, he bought the business and the rights to the McDonald’s name from under the brothers for $2.7 million. Through a handshake deal, they would receive 1.9% royalty on all McDonald’s proceeds.
The brothers made the mistake of negotiating on behalf of their foundation.
In the end, they never got a cent in royalties from Ray Kroc.
Answers to questions
1. Ray is waiting at a drive in for his food but it is taking long and the order is wrong. The culture he has to struggle with at mealtimes include juke boxes, slow and clumsy service. This is solved by the seamless efficiency of the McDonalds’ Speedee Service System(lightning-quick production-line kitchen), where customers move through fast lines.
2. Ray urges the brothers to brand and expand, rather than innovate. As Kroc watches families eating McDonald’s burgers, he realises the ultimate expression of the American Dream is to sell the Dream itself.
3. In the first McDonalds, the brothers modelled the kitchen like a factory, reduced the size of the menu and brought in paper plates and cutlery so they could get rid of the dishwasher. They installed infrared heat lamps to keep French fries warm and preparing food ahead of rush times. The restaurant offered fast service (30 seconds to get served) and standardized, high-quality and affordable products.
4. The cinema allowed the brothers to gain experience running a business and although the cinemas didn’t succeed they were able to learn from their mistake and find an industry that suited them better. They were able to take what they learned in running the cinema in order to make the McDonalds successful and not make the same mistakes.
6. Persuasion-Ray has the ability to convince others to change the way they think and believe, in particular the brothers. Leadership-Ray had a compelling vision for the future of McDonalds and took risks to reach his goal. Personal Accountability- Ray looked at the obstacles (including people holding him back) as a part of the process of expanding McDonalds and, rather than give up, he was inspired by them. Goal Orientation- Ray was focused on the efforts on meeting his goal.
7. When the brothers opened their first McDonalds walk up store no one walked up to the store window because everyone was used to the drive through experience and not getting food for themselves. This was unusual and new for people which created a problem at first because people had never experienced a walk-up store and were unsure what to do.
8. The brother’s overnight success took 30 years
10. Ray’s franchising experiences in Illinois mirrored that of the brothers. He saw mismanagement and inconsistent standards practiced at the burger joints run by the wealthy investors who were fellow golfers from the country club. To correct that, Ray recruited only committed, middle-class, husband and wife teams to buy into and follow the McDonald’s formula. This solved his dilemma. The change propelled rapid growth with a demand for more franchises throughout the Midwest.
12. Ray was to get control over the business, and in exchange the brothers were to keep their original store, get paid $2.7 million and receive in perpetuity 1% of revenues. But at the last minute, Ray told Mac and Dick that the 1% royalty could not be in the document because of the negotiations with some new investors; but that his was his verbal commitment to them. They shock hands on this. Ray then set up a new store across the road from the brothers and the brothers had to shut down. They never saw the 1% royalty and all they seem to have made was the $2.7 million. The handshakes deal did not necessarily get honoured because not everything was put down in the contract and that was the major flaw.
Ethics is described as an individual’s moral judgements about what is right and wrong. Decisions taken within an organisation may be made by individuals or groups, but whoever makes them will be influenced by the culture of the company.
Unethical behaviour is an action that falls outside of what is considered morally right for a person, a profession or an industry. The importance of business ethics reaches far beyond employee loyalty and morale or the strength of a management team bond.
Ray acted in an unethical manner when he opened a new store across the roads from the brothers and put them out of business. He did not honour his word in the handshake deal which undercut the brothers and he did not do the right thing.
Management is described as the act of allocating resources to accomplish desired goals and objectives efficiently and effectively; it comprises planning, organizing, staffing, leading, and controlling an organization. The purpose is to accomplish a goal.
In the Film we can see how the brothers use the management functions of planning, organizing, leading, and controlling to improve their business and introduce the Speedee service system. Ray manages the business and plans to execute a plan to expand it in order to reach his goal for McDonalds.
Responsibilities of business managers involve overseeing operations and helping employees reach their top productivity levels. A business manager may also be called upon to supervise or train new employees. The two brothers in the film work together to improve the efficiency and speed at which their food is made. They train staff and work on remodelling the kitchen to ensure the best performance.
Is defined as the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. Entrepreneurship is characterized by innovation and risk-taking. Entrepreneurs are ambitious and are always working to achieve higher levels of greatness. Since there’s no limit to what they can achieve, entrepreneurs constantly find themselves growing and achieving more than they ever imagined. When obstacles get presented in front of them, they find a way to work around then to get to their goal.
As serial entrepreneurs, the McDonalds went from being owners of a failed movie theatre to selling hot dogs, then earned local success with their burger joint. This shows us that the brothers took risks and didn’t let failure hold them back.
Entrepreneurs take the idea and execute on it. In the film we see how Ray takes his idea of expanding McDonalds and executes it to make this idea a reality.
Entrepreneurs are important because they create jobs and change. Entrepreneurs dream big so some of their ideas will make worldwide change. In this case McDonalds has spread across the world and is well known by everyone today.
Entrepreneur traits include:
• Personal Accountability.
• Goal Orientation.
• Interpersonal Skills.
• Risk takers
• High levels of energy
In the film we can see real life examples of unethical behaviour, management of a business and entrepreneurship see how management of business can be difficult and that it’s not easy to start a business. We learn from the brothers that a lot of hard work and processes goes into a business. For example, the brothers spend hours rearranging their kitchen for the best productivity and it takes them 30 years of hard work and dedication to become a success.
Skills needed to be a successful entrepreneur and also shown in the film. We learn that we need to be focused on our end goal and to always take risk in order to get there. People who are standing in the way of your goal should never stop us from reaching it. We need to have skills to lead and motivate people in order to be successful.
We know that we need to make decisions keeping in mind our integrity and know what the right thing to do is, however this is not always the case. Ray acts in an unethical manner when he undercuts the brothers and doesn’t honour his handshake deal. Situations like these are present in the business world today and is important to be aware of. It also teaches us that we shouldn’t trust everyone when it comes to business and we should always look after our businesses for our best interest.
The Founder is about how McDonalds was expanded by Ray Croc and how it was pulled away from the brothers who originally started the business. The brothers buy a cinema in 1929 which fails however it allows them to learn from their mistakes and make McDonalds a success over 30 years. We see how the McDonald brothers were more concerned about the quality of their product and the customer experience by introducing McDonalds’ Speedee Service System, while Ray was more concerned about making money by growing the business.
We see the realities of starting a business and the hard work that goes into it. Scenarios in the business world are also shown such as the risks that Ray takes in order to reach his goal and unethical behaviour.