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Monday, March 19, 2018

Was Ray Kroc a real founder, an Entrepreneur?

Ateneo Professor on Entrepreneurship



Ray Kroc


Ray Kroc biography

Last Saturday, this post had the opportunity to watch the movie The Founder which was about the life story of Ray Kroc, the legendary founder of McDonald's

He was  considered a founder but did not actually start anything. He was a milkshake salesman who saw the speedy and efficient operations of MacDonald operated by the brothers with same surname:  Dick and Mac.   But we attributed him to be a founder because:

1. He got the burger chain across USA by franchising.  But he did not earn money on this idea.  He mortgaged his house and got measly $100 per establishment because the  franchise fee was only 1%

2. Somebody a CPA or finance man Harry Sonneborn, who later became the first President who overheard him at the bank suggested that he was in the wrong business. The real business is in real estate:   ie that he buys the land finance the building where the McDo would rise.  and leases this to the franchisee. On day one even while the business has not started, he  earns

In No. 1, he earns only when the store opens.   In this new business model, his venture becomes bankable because he will have real properties to mortgage to the bank to finance his expansion, which when acquired piles up his landholdings which increases his networth. The business is a real estate play.

3. The McDonald brothers did not progress because:

      1.  They were afraid to take risks.  By force of habit, and complacency, they wanted to conduct business the way it was, until now and in the future.  They did not want to take risk.  While Ray wanted to use the powdered milk to save on costs, the McDo brothers disagreed.

     2.  Ray Kroc took the initiative to change the business model eventually buying out the  brothers

4.  Ray Kroc succeeded and eventually became a billionaire (in $) because:

     1.  He had a vision;  he saw great potential in the McDo burger;  He talked about the Golden Arches -
          the golden opportunity.

     2.  He  took risks and  even mortgaging his house to finance his franchise dream

    3.   He had an eye for great talents:   the bible salesman, the other guys he meet at various meeting

    4.  He  was willing to listen to new ideas and was humble enough to listen to advice

   5. H e understood the value of brand.  "You know the secret of McDonald?"  he asked one of the McDo
       brothers after he  paid them say $3M-  and the latter said no.  "You do not know?  The name.  The first
       time he visited the store, he knew it would be a success because of the name.  It was very American.

       Kroc is not.   It sounds like European or Czech  (He was Czech native)

       He even told them of their backwardness.

  6.  He  took the lead and quarreled with the  McDo brothers even cutting short a telephone conversation.

      He was not afraid to let the other guy know what he wanted.  and say No.  One of the secrets of success

One last thing:  He  believed in the  value persistence and  determination

He maintained close relationship with Walt Disney and Ernest Hemingway.   He died at age of 81 of heart attack.  They had 7,500 stores valued at $8 billion.   and was worth $500 million.

They have 37,000 stores in 100 countries worldwide

Lessons learned:
1.  The quotes we learn, the  self improvement lessons we take are more important than PHP.   Armed with only Calvin Coolidge admonition on determination, Kroc put up  the McDo empire.

2. Practice leadership which should come from #1.

3.  Surround yourself with skilled and professional staff;

4.  Know what you want and have a vision.

5.  Learn salesmanship and be a great one.

6.  Innovate and learn. Continue learning