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Part A:
Entrepreneurship, Conflict Management & Ethics

1.      A summary of the storyline and
context of the film:

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The Founder is a film based on true events
that took place when McDonalds opened its first store in San Bernardino,
California in the 1950’s. The film follows Raymond Kroc –played by Michael
Keaton- and how he finds success in franchising the McDonalds fast food chain.

film introduces Ray Kroc by portraying him as a failing salesman selling
multi-mixers to make milkshakes. The film shows that Ray Kroc craves something
more than just selling Milkshake mixers and waiting for carhops to give him the
wrong order 30 minutes later at drive-ins.

Kroc meets two brothers, Richard and Maurice McDonald, who purchase 8
multi-mixers from him. The McDonald brothers have developed a fast food
restaurant that provides quick deliveries of milkshakes, hamburgers and French
fries to customers. Ray Kroc suggests the idea of McDonalds becoming a
franchise but the brothers have tried this and seen it fail due to inconsistent

Kroc takes on the way he thinks McDonalds should be franchised and he falls
into a cycle of promoting the idea to his friends that are retired, but after
he saw the product becoming inconsistent; so he posed the idea to younger,
struggling couples.

Ray Kroc made the McDonalds franchises
successful and that resulted in him being sought after; which he boasts about
to his wife Ethel until the expenses are tallied and he sees that the owners
are encountering higher, unexpected costs, particularly from the ice cream and
refrigeration, so he asks the McDonald brothers if they could review his
contract, he is denied.

Ray is called to the bank as his mortgage is
past due, but this is overheard by Harry Sonneborn, a financial consultant for Tastee-Freez, who
requests to review Ray’s books. Sonneborn realizes that the real opportunity is
in providing real estate to the franchisees.

Ray incorporates a new company, Franchise
Realty Corporation, and attracts new investors. This move upsets the brothers
and encourages Ray: he increasingly defies them by circumventing their authority
and providing powdered milkshakes to all franchisees. Ray also divorces Ethel,
she gets all his assets except any shares in his business.

Ray renames his company to The McDonald’s
Corporation and demands to be released from his contract and buy the brothers
out, the news of which sends Mac into diabetic shock. Ray visits him in the
hospital and offers a blank check to settle their business.

brothers agree to a $2.7 million lump sum payment, ownership of their original
restaurant in San Bernardino, and a 1% annual royalty. The McDonald brothers
are forced to take their name off the San Bernardino restaurant and Ray opens a
new McDonald’s franchise across the road from the original restaurant to put
the brothers out of business.

film closes in 1970 with Ray preparing for a speech in which he praises himself
for his success in his mansion with his new wife, Joan. The epilogue reveals
that the brothers were never paid their royalties which could have been
approximately $100 million a year.

review and opinion on the film:

2.1.The entrepreneurial successes and shortfalls of the McDonald
Brothers and       ray Kroc:

Curiosity: Curiosity is an important characteristic to
get new ideas. Due to Ray Kroc’s curiosity to investigate the business that
ordered 6 multi-milkshake mixers from him, he was able to hear the McDonald’s
story. Therefore Ray Kroc’s curiosity is an entrepreneurial success.

To be
successful, an entrepreneur must be able to deconstruct and reinvent his
or her business to ensure that the business is satisfying the needs of
customers efficiently to make a profit. The McDonald brothers where able to
recreate their diner so that it would enable them to deliver food faster, with
a high-quality efficiently. The brothers were able to deconstruct the
traditional diner, they did this when they drew the layout of the kitchen on
the tennis court multiple times. Once the model was perfected, the layout was
designed to fit the kitchen with custom utensils which ensured high-quality
food. This is a success for the McDonald bothers on their entrepreneurial

In order for
an entrepreneur to be successful he must be competitive. The McDonald
brothers where a competitor in the fast food industry of the 1950’s because
they had an idea that no one else had. Due to the uniqueness of their idea,
they were able to hold a competitive advantage over drive-in diners of the
time. The brothers wanted to maintain their competitive edge by not dropping
the standard of food they were producing by franchising the business. This made
the McDonald brothers successful because of how they conducted the business and
their morals of what they wanted the McDonald’s name to be.

contracts carefully: a well
negotiated contract can create a defence and add to a business’s competitive
advantage. Initially, Ray Kroc had agreed to a complex contract that stipulated
that all decisions had to go through the McDonald brothers. However, instead of
putting this down on paper that the deal was 1% royalty to the McDonald
brothers. Ray Kroc offered the brothers a handshake deal on this term. The
McDonald brothers failed to see that the handshake deal would put them at a
disadvantage because they would lose that part of the deal. Due to how badly
this deal was conducted, this is seen as a shortfall on the McDonald brother’s
side because of their negligence in not understanding what was required for the
deal to be successful.

To be
successful, an entrepreneur must select the right business partners. The
partners should provide some form of value to the business. To expand McDonald’s,
Ray Kroc wanted to have multiple franchise owners who would follow his
guidelines of discipline, automation and standards. The first set of
franchisees he selected were rich and had their own way of thinking which made
it difficult for Ray Kroc to make them implement things in their branches that
he wanted. Eventually, he realised that if he selected the right individuals,
they would follow what he wanted; he successfully learnt that if he selected
hard-working couples from the middle-class he would have franchises that followed
his guidelines.

2.2.The Professionalisms, ethics and effective business practice scenarios
in the film:

It was wrong
of Ray Kroc to want to change the milkshake formula and make the milkshakes
from powder but he was trying to cut the cost of refrigeration to stop the
business from going into debt. What Ray Kroc did was try to undermine the
McDonald Brothers by making the franchises stop using ice cream to make
milkshakes because it was very expensive to pay for the storage of the ice
cream, so he asked the franchises to change over to the powder formula.
However, Ray was trying to prevent debt that he couldn’t afford due to the
percent of what he earned through every franchise. This is questions whether or
not the McDonald Brothers were fair in what they paid Ray Kroc, thus
questioning whether Ray Kroc was ethical when he tried to implement powdered

handshake deal. The handshake deal is a scenario that questions the ethical
intentions of Ray Kroc and whether what he did was just towards the McDonald
Brothers. Long term, Ray Kroc robbed the McDonald brothers of their royalty
which could have amounted to possible millions today. However, it is debateable
that if Ray Kroc had not made that handshake deal, McDonald’s would not be
where it is today.

The next
point questions professionalism and ethics. Ray Kroc tells Joan Smith that he
founded McDonalds, which he didn’t. It was unethical because ray Kroc is lying
and misleading the Smiths’ into what the will get when they become a franchise
of the McDonalds brand. The lie also questions Ray Kroc’s whether or not Ray
Kroc has integrity and is trustworthy.

In the film,
one of the franchises Ray establishes loses its way and starts selling fried
chicken. This is not an effective business practice because it could have
changed the way customers thought of the brand and what the brand had to offer.
The franchisee was trying to cater to its customers by offering them what they
wanted, fried chicken. Perhaps the franchisee thought that he would make a
higher profit by offering customer what they wanted.

When Ray
Kroc opens his new business, franchise realty. He makes a suspicious move
because he threatens the contract that he has with McDonald brothers. The move
gives Ray the courage to defy the brothers’ authority. This is an example of
and unethical business practice because Ray put his contract with the brothers
at risk when he did this as he would be cutting them out of some money. It can
be debated that Ray was looking out for himself and his franchisees by owning
the land instead of renting it.

2.3.The skills used to manage conflict in the film:

The accommodating
approach: The McDonald brothers used this approach at conflict management with
Ray Kroc when they let him have his way. The brothers should not have let Ray
Kroc have his way at the time because it led to him taking advantage of them.
Instead, they should have applied a more cooperating approach to satisfy the
demands of both parties and this would have showed Ray that they were willing
to listen to what he had to say.

The competing
method of conflict management is seen when Ray Kroc confronts one the
chains that starts selling fried chicken instead of hamburgers. This is
possibly the best way that the situation could have been handled because had
Ray taken any other approach, other franchisees would have made their own
changes to their stores and Ray would be overrun by his franchisees.

When Ray
Kroc asked the McDonald brothers to review his contact and he was denied, the
McDonald Brothers took an approach that avoided conflict. This was not the most
effective way to handle the situation as it resulted in defiance from Ray. The
McDonald brothers should have taken a more compromising approach as it
would have ensured that both parties would have been satisfied with the results
through a common middle ground.

The conflict
of the blank cheque. When Ray Kroc gives the McDonald brothers a blank cheque,
he challenges them. The McDonald brothers should have adopted a competing
method of conflict management as it could have helped them earn their 1%
royalty if they had. Instead the McDonald brothers chose to avoid conflict and
this gave Ray the upper hand and he did a gentleman’s agreement.

Nearing the
end of the film, the McDonald brothers are forced to remove their name from the
San Bernardino store while Ray Kroc opens a McDonalds opposite the brothers’
store. The McDonald brothers were unable to compete with the store opposite
them and so they avoided conflict. This could have been the best approach at
the time because the brothers would have been tired of seeing Ray Kroc and so
they gave up. They should have reinvented themselves and taken a competing approach
towards the store on the other side of the road.




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