Franchise Story: The McDonald’s story of ‘The Founder’

In the ‘book’ written by Oswaldo Lorenzo, Peter Kawalek and the Bubble Partnerships Ltd and Bubbles Enterpries CIC Director Leigh Wharton there are some great case studies.

This first case study is at the end of the chapter on ‘the entrepreneurial life-cycle’ and is a critic of the lessons learnt from watching the movie called The Founder.

According to Leigh Buchanan, Editor at INC. magazine, The Founder represents the perfect entrepreneur movie. The movie focuses on the work of Ray Kroc, who was not the actual founder of the McDonald’s restaurant chain, but who took over the small, fledgling business established by the brothers Richard and Maurice McDonald. With its origins as a small burger stand in San Bernardino, California, Kroc worked to scale up the business across multiple locations in the USA and ultimately on its modern-day, global footprint.

The brothers McDonald recognised a problem to be solved related to the popular drive-in restaurants of the first half of the last century. In this early mode a car-hop (a waiter or waitress) brought fast food to people in their cars. The process created a lot of waste in in terms of delays to customers, delivery of inexact orders, persistence with products of low demand, and the type of client using the parking area. They created a new model of service which we all now know. Instead of waiting to be served in their vehicles, customers would use a walk up window. The McDonald brothers reduced the items offered and focused on those responsible for 80% of sales. They replaced plates and cutlery with paper wrappers, and they reduced the delivery of meals to 30 seconds after ordering.

Kroc – originally a salesman of milk shake – mixers – noticed the family friendly market positioning of the McDonald experience. This was quite different to many burger bars of the time, but with it Kroc recognised the potential of the new market growth, for new demographics.

One of the finest moments of the finest moments of the movie occurs when the brothers McDonald design and test a proposed new kitchen to enable faster-than-ever delivery. They chalk layouts on the floor of a tennis court and ask employees to simulate activities and motions of food preparation. This is done over many hours until they find the perfect kitchen layout.

Kroc invented nothing. What he did was take the brothers invention and spread it throughout the country. He used a franchise model for this expansion. In this process, Kroc was very loyal to the high standards of product and service of the McDonald brothers, extending from standards of cleanliness to the number of pickles per pasty (a key concern and obsession of the brothers McDonald). Kroc had to deal with many different challenges over the development of the McDonald empire: inappropriate franchisees, high cost of electricity because of ice-cream, tough conversations and disagreements with his partners, financial problems and divorce.

Struggling with these different problems, the film shows a moment of epiphany when Harry Sonneborn, McDonald’s first CEO, explains to Kroc that the way to make money is to buy land in target markets and then lease it back to franchisees. “You’re in the real-estate business”, Sonneborn said.

Somehow, the film conveys mixed feelings about Mr Kroc. On one side, he represents the best of an entrepreneur by developing the customer and the business after the idea was initially tested in San Bernardino. On the other side, he seems to be something of a predator -taking the acclaim of the status of ‘founder’ and pushing the brothers McDonald out of the business.

Click here to order the book in which this story is written.

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