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A Big Question After Watching The Founder

As of this posting (August, 2017), The Founder is finally on Netflix. It's the story of how struggling milkshake-machine seller Ray Kroc came across the first McDonald's in San Bernadino, California, in 1954, which was owned and operated by the real founders, the two McDonald brothers, Dick and Mac. Kroc got in with the brothers, began franchising restaurants, and eventually bought the brothers out for $2.7 million in 1961.

The movie tells the story that the San Bernadino location was the only operating McDonald's in 1959. However, a Time magazine article says there were six McDonald's franchises at the time.

Either way, McDonald's, as a brand, was basically nothing in 1959. How they operated the restaurant was innovative but not complicated. And there was no IP (intellectual property) protection on what they did. You can't patent how your kitchen works or how much you sell hamburgers for. (I'm not talking about selling things you call "Big Macs" or "Egg McMuffins"--that, you can't do.)

There was no reason why Ray Kroc couldn't duplicate everything McDonald's was doing, under a different name, and then grow the business as he did with McDonald's. It would've been perfectly legal. So the Big Question is why didn't he?

Also, not only did he eventually have to buy the brothers out, but for years, Kroc and the brothers had a lot of arguments, and Kroc wormed his way around some early contracts to get leverage on the brothers. And a lot of that $2.7 million was value he created.

The movie gives an unsatisfying answer to the question. One of the brothers does ask Kroc why didn't you just copy us? Ray's answer was that the name "McDonald's" had a wholesome, all-American feel to it. No one would go to a restaurant called "Kroc's".

Okay, not "Kroc's", but what about "Ray's" or "Nick's" or "Fatty's" or "Miller's" or any of a thousand possible names? "The Cheesecake Factory" is a truly awful name, but that hasn't hurt it. I imagine Ray Kroc had the same thought, probably many times, over the years, much too late after he had started growing the McDonald's franchises and was too married to the brand.

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