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The Founder

Success has many fathers, but failure is an orphan. Perversely, the more successful you and I become, the more the haters come out of the woodwork. Just look at Donald Trump or Steve Jobs. Success is a polarizer, and that is a side-effect of success that few expect or are prepared for.

I’ll use the movie “The Founder” as an example. The movie is a somewhat fictionalized version of Ray Kroc and the McDonald’s brothers, all three geniuses in their own right. Both sets of men had failed in previous enterprises, particularly Kroc, who was over fifty before finding success. Prior to that, he had a string of failed ventures for over thirty years after he left the ambulance corp at the end of WWI.

Richard “Dick” McDonald was the true brain behind the McDonald’s concept. Up until the early 1950’s drive-in restaurants usually had large full-service menus, china, and silverware delivered to the car by bell hop. The McDonald brothers revolutionized drive-ins, by serving a limited menu, hamburger, fries and drinks. Doing away with the dishes by wrapping sandwiches in paper and serving the meal in a convenient paper sack, and using paper cups for drinks. And finally by having the customer come to a window to order and receive their meal. The key to making this work was speed. Dick McDonald figured out how to serve a hot fresh meal in 30 seconds from ordering, which was completely unheard of in those days. Dick managed this by renting a tennis court for a full day and drawing the outline of his kitchen on the court. He then experimented with placing stations in various configurations until his team of teenagers was seamlessly moving about in choreographed perfection. Dick McDonald was the Henry Ford of fast food. He then had the kitchen built to those specifications along with a number of self-designed tools such as mustard and ketchup dispensers that could deliver a carefully calibrated mix to the hamburger patty.

Halfway across the country Ray Kroc was toiling unsuccessfully trying to sell shake mixers to restaurants. Not noted in the movie was the fact that a competitor, Hamilton Beach, was taking over the market with a much cheaper shake mixer. Ray was making fewer and fewer sales, and when calling into the office for more sales appointments, he was told that one restaurant had just ordered six of his mixers. Thinking this was a mistake, he called the restaurant personally and spoke to Maurice “Mac” McDonald, the other brother who confirmed the mistake. Mac said he now thinks he needs eight mixers and not six for this single drive-in. Ray Kroc sensed something very unusual and promptly drove half way across the country to San Bernardino, California to see with his own eyes what was going on.

In the movie, the brothers had attempted to franchise to several other locations and the movie presented it as a failure, but in reality, the man who was overseeing that project fell on ill health causing the franchising to wither on the vine. Ray Kroc instantly saw the potential to franchise across the whole country, and here is where the story goes south not due to greed, but simply two different visions.

Ray sold the brothers on contracting with him to franchise their concept. Both were very firm on keeping the system identical and reproducible in all future locations. The brothers found that on their previous try at franchising, the new restaurants quickly departed from the formula that was key to success by adding on all sorts of items to the menu, and not keeping the quality of the product up. Dick McDonald, in particular, was a stickler for following the “speedee system” that he had developed. The brothers even had the first design of the new restaurant with the arches on either side of the building, they were neon pink then, and not yellow, in one of their franchise failures.

Ray went back home to Des Plaines, Illinois to build the first franchised restaurant, and to start selling potential investors on owning a franchise. The McDonald brothers had a goal to reach $1 million dollars and retire. They weren’t interested in spreading a revolutionary dining concept nationwide like Ray did. As the franchise business grew and evolved Kroc found that owning the land on which the restaurant was built and then leasing it to the franchisee, gave him a lot more power to ensure that the franchisee followed the McDonald’s business design. An extra cherry on top was that it allowed him to form his own company to hold that land, separate from his franchise agreement with the brothers, giving him much more power over how the company was run since he was constantly getting delays and push-back from Dick McDonald. While Dick’s perfectionism created the McDonald’s concept, that same perfectionism was a huge hindrance in the growth of the franchise business. Plus, Dick wanted to take a slow and easy approach to building the franchise business.

The movie portrays Kroc as a flawed and ruthless character, but what some call passion, others call ruthlessness. Dick McDonald was just a flawed as a perfectionist with limited vision. Kroc finally offered to buy the brothers out for $2.7 million, above the brother’s original goal, but Kroc gave a story on not being able to sell his investors on the royalties, and that part of the agreement was not in the contract but was a simple handshake agreement. Kroc never gave them the royalties that would have eventually made the brothers billionaires. Kroc was dishonest in this, but the brothers share blame in that they were foolish to accept such a handshake agreement.

The lessons for those of us who are building a system that leads to success are several. First, failure is the price for entry. If you learn and grow from failure, you are better positioned for future opportunities. Kroc, the McDonald brothers, even Donald Trump, have had business failures, but that did not stop them. Secondly, is your vision big enough? Is it bigly (or big league)? It is arguably better to have a vision that is too big, than too small. It is far easier to scale it down as needed than to scale a tiny vision up. Thirdly, if you partner, make sure your partners have a similar vision or you will face enough internal dissent that the venture might fail. The business world is full of partners who eventually parted. Steve Wozniak co-founded Apple Inc., and was the primary designer of the Apple I and II but didn’t last under the force of Steve Job’s fierce vision, and finally pulled out after suffering injuries when a plane he was piloting crashed. Edison and Tesla were another brief partnership that ended on a sour note. Pick well or go it alone.

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