The 2016 movie The Founder is packed with useful insights into the business world. It draws open the curtains and takes you behind the scenes, revealing the secrets to how Ray Kroc turned McDonald’s into one of the biggest fast food restaurants in the world.
As of 2018, McDonald’s serves over 69 million people daily across 37, 855 outlets. It operates in more than 100 countries. It is also the second-largest private employer in the world, with 1.7 million employees. And all this grew from a single Hamburger stand in San Bernardino, California.
How did Kroc do it?
Before Ray Kroc discovered McDonald’s, he was a struggling salesman who spent several decades of his professional career selling milkshake machines and paper cups.
Then one day, in the 1950s, he got a call from a faraway restaurant which ordered 6 of his milkshake multi-mixers. No single restaurant had ever ordered such a large quantity. Curious, he decided to go see things for himself. That was when he met the owners of the restaurant – the McDonalds brothers, Dick and Mac.
In those days, fast food restaurants took a lot of time to serve your order. When the order finally arrived, it will be different from what you asked for.
Ray was impressed with the brothers’ speedy system of making and serving food and suggested creating a franchise. And that was how it all started. He later pulled the ownership rights for McDonald’s from the brothers, turning McDonald’s into a multi-billion dollar empire.
What was the secret to his success? Let’s find out:
Ray Kroc was frustrated on many occasions. Things didn’t always go in his favor. But not for once did he give up. As the franchise agent of the McDonald’s brothers, his revenue generation and cost saving ideas were frequently being denied or delayed. The contract terms also didn’t favor him and he was almost bankrupt and about to lose his home.
Rather than give up, he tolerated the frustration until he found a way to gain control over the terms and conditions of the business.
It’s often easy to give in to tough situations. But with the power of persistence, you can create a path for success.
Some entrepreneurs overlook the importance of an outstanding brand name and logo. This shouldn’t be the case. Consider this – the McDonald’s Golden Arches is one of the company’s greatest selling points, along with the name “McDonald’s”. This tells you the importance of branding.
After Kroc bought the brand from the brothers, one of them asked him why he didn’t use the secrets of how they run their restaurant to start his own. After all, they showed him how the speedy system works as well as the formula to cooking McDonald’s hamburgers. Why choose to stick with their brand? Ray Kroc said it wasn’t all about the speedy system. He might as well have started his own restaurant but wouldn’t go far. It was the name “McDonald’s”. It commands power.
Never underestimate the power of a good brand name and logo.
3. Be innovative and solve consumer problems
All it takes to succeed in business is to provide what consumers need. Once you have that, you won’t have to convince them to buy. Instead, they’ll seek you out. In other words, the right product creates demand.
The McDonalds brothers brainstormed and developed an efficient system which enabled them to cook and serve good food at low cost and lightning-fast speed, without compromising quality. They did things differently from other fast food restaurants that existed at the time. Their innovativeness attracted customers in droves. Despite the long queues, people were willing to wait.
4. Adopt a working system
The good fortune of McDonald’s started with the invention and reinvention of the Speedy system.
As a firm, you can’t deliver a consistently positive experience, become profitable, nor achieve growth and scale your business without an efficient system of operation. The great brands rely on these. It’s not enough to create a selling product or service. You also need to create a working system or adopt an existing one.
5. Find the right partners
When Ray Kroc’s franchising idea was approved by the McDonalds brothers, he sought out franchisees amongst the wealthy people he knew. To his great disappointment, they failed to maintain standards. This made him go for middle-class individuals instead, who were hardworking, disciplined, ambitious, and willing to follow due process.
The way your business is run determines your legacy and brand image. It’s important to partner for the right reasons and with the right people.
6. Seek expert advice and fresh perspectives
At a point, Ray Kroc was hardly able to make ends meet on the 1.5% commission he was receiving from the McDonald’s brothers.
Things began to turn around for him when he eliminated the constraints imposed by the terms of the contract. This was after he met a financial expert who made him realize that he was actually in the real estate business, and not just the fast food business. He could buy up the land on which his franchisees operate. The advice also helped him gain more control over the franchisees he selected. By owning the land, he could evict them if they failed to keep the standards set for McDonald’s restaurants.
There are ideas that may never occur to you without insight from an expert or fresh perspectives from people you trust.
7. Carefully negotiate contracts and always put agreements in writing
Never give room for sentimentality in business. Negotiate favorable deals and make sure everything is in writing.
At the beginning of the movie, Ray was eager to get the show on the road and agreed to certain terms that restricted his operations eventually, and yielded little returns for him. Luckily, he found a way to change the terms later on.
After he bought McDonald’s, he offered a handshake deal when the brothers demanded royalties. They were later denied those rights as they couldn’t prove the deal ever happened.
8. Choose a spouse with like ambitions
Ray Kroc’s wife had little interest in his business endeavors. This later led to divorce as he found another woman who shared his drive and ambition.
Don’t get married for the wrong reasons. Marry someone who can help you build your dreams.