1 00:00:15,410 --> 00:00:30,250 Speaker 1: Pushkin with jerky movements. 2 00:00:30,690 --> 00:00:34,010 Speaker 2: A golden droid walks up to the counter of a 3 00:00:34,050 --> 00:00:38,930 Speaker 2: burger restaurant. He turns to his companion, who's lagging behind 4 00:00:40,170 --> 00:00:45,290 Speaker 2: R two D two harry On says Crepo. At the counter, 5 00:00:45,850 --> 00:00:50,690 Speaker 2: c Trepo asks for a Star Wars poster. The smiling 6 00:00:50,770 --> 00:00:54,490 Speaker 2: young server explains that if he buys a large Coca 7 00:00:54,530 --> 00:01:01,610 Speaker 2: Cola for forty nine cents, the posters free. The year 8 00:01:01,690 --> 00:01:06,090 Speaker 2: is nineteen seventy seven, and Star Wars is a sensation 9 00:01:06,410 --> 00:01:13,610 Speaker 2: in the nation's cinemas. Nowadays, we expect any major movie 10 00:01:13,650 --> 00:01:16,930 Speaker 2: to have a tie in with a fast food chain, 11 00:01:17,130 --> 00:01:20,610 Speaker 2: but in nineteen seventy seven that idea was very new. 12 00:01:21,890 --> 00:01:26,290 Speaker 2: The burger restaurant go on, have a guess. I'm going 13 00:01:26,290 --> 00:01:30,410 Speaker 2: to guess that your guess was McDonald's, But no, the 14 00:01:30,570 --> 00:01:35,610 Speaker 2: advert was for burger Chef. You've never heard of burger Chef. 15 00:01:36,410 --> 00:01:39,050 Speaker 2: For a while, it was almost as big as McDonald's 16 00:01:39,330 --> 00:01:43,570 Speaker 2: and in many ways more innovative. Burger Chef had the 17 00:01:43,610 --> 00:01:48,010 Speaker 2: big Chef before McDonald's had the Big Mac. Burger Chef 18 00:01:48,050 --> 00:01:50,970 Speaker 2: had the fun meal before McDonald's had the Happy Meal. 19 00:01:51,490 --> 00:01:55,690 Speaker 2: When McDonald's introduced the Happy Meal, Burger Chef sued, saying 20 00:01:55,730 --> 00:02:00,690 Speaker 2: they'd ripped off the idea where McDonald's had its clown Ronald, 21 00:02:01,130 --> 00:02:05,130 Speaker 2: Burger Chef had a jocular cartoon chef with a chirpy 22 00:02:05,290 --> 00:02:06,450 Speaker 2: teenage sidekick. 23 00:02:09,170 --> 00:02:10,650 Speaker 1: What a surprise prize. 24 00:02:10,890 --> 00:02:14,010 Speaker 3: Only incredib burgable. 25 00:02:15,810 --> 00:02:18,650 Speaker 2: If you'd wanted to get into the hamburger business in 26 00:02:18,690 --> 00:02:22,170 Speaker 2: the United States in the nineteen sixties, you might well 27 00:02:22,170 --> 00:02:27,450 Speaker 2: have chosen to buy a franchise from Burger Chef, not McDonald's. 28 00:02:29,010 --> 00:02:32,250 Speaker 2: And when Star Wars fans flocked to your restaurant to 29 00:02:32,290 --> 00:02:35,810 Speaker 2: buy large Coca colas, you'd have felt pretty happy about 30 00:02:35,850 --> 00:02:40,890 Speaker 2: that decision. If someone had told you that Burger Chef 31 00:02:41,090 --> 00:02:47,850 Speaker 2: was soon to disappear, you might have found that well incrediburgable. 32 00:02:51,490 --> 00:02:54,370 Speaker 2: In the advert, C three PO and R two D 33 00:02:54,530 --> 00:03:01,970 Speaker 2: two excitedly unroll the poster of themselves. Then a chill 34 00:03:02,050 --> 00:03:08,570 Speaker 2: descends as the sound of heavy mechanical breathing fills the restaurant. 35 00:03:09,490 --> 00:03:14,930 Speaker 2: C three PO glances towards the doorway and sees Darth Vader. 36 00:03:17,410 --> 00:03:19,970 Speaker 1: Says, C three, I think we'd better leave. 37 00:03:24,610 --> 00:03:28,730 Speaker 2: In Star Wars, the Rebel Alliance takes on the Empire. 38 00:03:29,770 --> 00:03:33,690 Speaker 2: It's a story of conflict between two ways of life. 39 00:03:34,410 --> 00:03:39,370 Speaker 2: One side cares about self determination, the other side values 40 00:03:39,410 --> 00:03:45,290 Speaker 2: conformity and control. This is a similar story about burghers. 41 00:03:46,290 --> 00:03:52,050 Speaker 2: On one side is McDonald's, on the other side the McDonald's. 42 00:03:53,250 --> 00:04:23,090 Speaker 2: I'm Tim Harford and you're listening to cautionary tales. San Bernardino, California, 43 00:04:23,330 --> 00:04:26,810 Speaker 2: was a fast growing town in the nineteen forties, fifty 44 00:04:26,810 --> 00:04:29,730 Speaker 2: miles east of Los Angeles on Route sixty six, at 45 00:04:29,730 --> 00:04:33,410 Speaker 2: the edge of the Mohave Desert, on the corner of 46 00:04:33,490 --> 00:04:37,770 Speaker 2: fourteenth and East Streets. Dick and Mack McDonald and a restaurant. 47 00:04:39,370 --> 00:04:43,490 Speaker 2: It was a small, octagonal building with a huge parking lot, 48 00:04:43,810 --> 00:04:48,210 Speaker 2: enough space for one hundred and twenty five cars. Waitresses 49 00:04:48,330 --> 00:04:51,690 Speaker 2: known as car hops shuttled back and forth between the 50 00:04:51,770 --> 00:04:56,370 Speaker 2: cars and the restaurant, taking orders, bringing food, returning the 51 00:04:56,410 --> 00:05:00,490 Speaker 2: empty plates. Dick and Mack served a wide ranging menu, 52 00:05:00,930 --> 00:05:05,210 Speaker 2: but their star attraction was the barbecue ribs cooked over 53 00:05:05,290 --> 00:05:10,530 Speaker 2: hickory chips, specially shipped in from Arkansas. The restaurant did well, 54 00:05:11,290 --> 00:05:15,170 Speaker 2: Dick and Mack bought a house on the hill. Once 55 00:05:15,210 --> 00:05:17,650 Speaker 2: a year, they each paid a visit to the town's 56 00:05:17,810 --> 00:05:21,810 Speaker 2: Cadillac dealer to buy a brand new Cadillac, trading in 57 00:05:21,850 --> 00:05:25,570 Speaker 2: the Cadillacs they'd bought the previous year. These year old 58 00:05:25,610 --> 00:05:28,370 Speaker 2: Cadillacs never had many miles on the clock because the 59 00:05:28,450 --> 00:05:33,050 Speaker 2: McDonald brothers never ventured far from San Bernardino. They liked 60 00:05:33,090 --> 00:05:37,330 Speaker 2: it there. Other people liked it too. The town's population 61 00:05:37,610 --> 00:05:42,370 Speaker 2: was growing quickly and its demographics were changing. There were 62 00:05:42,370 --> 00:05:45,570 Speaker 2: more young families with little kids looking for a friendly 63 00:05:45,650 --> 00:05:49,490 Speaker 2: place to eat. But Dick and mack saw that those 64 00:05:49,650 --> 00:05:54,610 Speaker 2: families weren't eating at McDonald's because it had acquired a 65 00:05:54,690 --> 00:06:02,370 Speaker 2: reputation as a CD teenage hangout. The car hops flirted 66 00:06:02,410 --> 00:06:06,930 Speaker 2: with the customers, and those teenage customers were annoyingly careless. 67 00:06:07,730 --> 00:06:13,970 Speaker 2: They kept breaking croc and losing cutlery. Dick and mac 68 00:06:14,250 --> 00:06:18,770 Speaker 2: decided to reinvent themselves. They wanted to come up with 69 00:06:18,810 --> 00:06:22,170 Speaker 2: a different kind of restaurant, one that would be more 70 00:06:22,210 --> 00:06:26,170 Speaker 2: attractive for families, one that would need fewer staff to run. 71 00:06:28,050 --> 00:06:32,730 Speaker 2: They analyzed their sales. In their advertising. They'd always made 72 00:06:32,770 --> 00:06:37,290 Speaker 2: a big thing about their Arkansas hickory barbecue, but they 73 00:06:37,330 --> 00:06:41,210 Speaker 2: had to admit that their barbecue ribs weren't actually that popular. 74 00:06:41,970 --> 00:06:49,050 Speaker 2: Mostly they sold hamburgers, so what had they sold only hamburgers. 75 00:06:51,370 --> 00:06:55,250 Speaker 2: Dick and Mac closed their restaurant for three months and 76 00:06:55,370 --> 00:06:59,450 Speaker 2: completely revamped it. Out with the barbecue pit, in with 77 00:06:59,650 --> 00:07:07,610 Speaker 2: specially designed grills optimized for one job, rilling hamburgers. Out 78 00:07:07,610 --> 00:07:11,570 Speaker 2: with the crockery and cutlery, in with disposable paper cups 79 00:07:11,570 --> 00:07:16,170 Speaker 2: and wrappers, out with the car hops. Now customers would 80 00:07:16,170 --> 00:07:18,890 Speaker 2: line up at the windows of the restaurant to collect 81 00:07:18,890 --> 00:07:22,610 Speaker 2: their food themselves, and they wouldn't have to wait long 82 00:07:22,650 --> 00:07:26,530 Speaker 2: for their food because it could all be efficiently pre made. 83 00:07:27,730 --> 00:07:32,450 Speaker 2: Hamburgers with onions, pickles, ketchup and mustard, boxes of fries 84 00:07:32,730 --> 00:07:36,090 Speaker 2: and pop apple pilies. Wash it down with a soda, 85 00:07:36,330 --> 00:07:38,090 Speaker 2: a milkshake or a coffee. 86 00:07:38,850 --> 00:07:39,370 Speaker 3: That was it. 87 00:07:40,210 --> 00:07:46,050 Speaker 2: That was the menu, simple, efficient quick. The brothers put 88 00:07:46,090 --> 00:07:51,090 Speaker 2: up a sign advertising their speedy service system and reopen 89 00:07:51,250 --> 00:07:58,130 Speaker 2: for business. It went disastrously. Sales were just a fifth 90 00:07:58,170 --> 00:08:02,490 Speaker 2: of what they'd been before. Former customers came by asking 91 00:08:02,650 --> 00:08:05,010 Speaker 2: when they'd go back to how the restaurant used to be. 92 00:08:05,810 --> 00:08:09,330 Speaker 2: Fired car hops said, when you do, can I my 93 00:08:09,410 --> 00:08:15,930 Speaker 2: job back? But the brothers persisted and word began to spread. 94 00:08:16,690 --> 00:08:20,970 Speaker 2: The hamburgers were cheap, just fifteen cents, but they didn't 95 00:08:21,050 --> 00:08:26,970 Speaker 2: taste you. They tasted good. The fries were fantastic, And 96 00:08:27,050 --> 00:08:29,890 Speaker 2: this idea of going up to the window to order 97 00:08:30,050 --> 00:08:33,850 Speaker 2: food instead of having car hops take your order. It 98 00:08:33,890 --> 00:08:38,810 Speaker 2: turned out that one particular type of customer loved that idea, 99 00:08:40,130 --> 00:08:45,210 Speaker 2: little kids. An employee recalls how the kids would walk 100 00:08:45,290 --> 00:08:48,610 Speaker 2: up to the window, clutching a handful of coins and 101 00:08:48,730 --> 00:08:52,530 Speaker 2: place their order, feeling all grown up and independent, with 102 00:08:52,650 --> 00:08:55,290 Speaker 2: a quick glance back to the car, where Mum and 103 00:08:55,370 --> 00:09:01,330 Speaker 2: Dad would smile their encouragement. Before long, the parking lot 104 00:09:01,450 --> 00:09:04,490 Speaker 2: was full again. The ques of the windows were long 105 00:09:04,570 --> 00:09:09,970 Speaker 2: and fast moving. Rival restauranteurs started to wonder how the 106 00:09:10,050 --> 00:09:15,930 Speaker 2: McDonald brothers were serving so many customers so quickly. It 107 00:09:15,930 --> 00:09:17,530 Speaker 2: wasn't hard for them to find out. 108 00:09:18,530 --> 00:09:20,010 Speaker 3: The store was all glass. 109 00:09:21,050 --> 00:09:25,490 Speaker 2: We were in a fish ball, recalls Dick McDonald. The 110 00:09:25,570 --> 00:09:30,850 Speaker 2: whole operation was on public view. All that specialized equipment 111 00:09:30,930 --> 00:09:34,610 Speaker 2: that Dick and mac had had custom made for Lazy 112 00:09:34,650 --> 00:09:37,530 Speaker 2: Susan where twenty four buns at a time could be 113 00:09:37,610 --> 00:09:43,090 Speaker 2: speedily dressed with condiments, the ketchup dispenser that squeezed out 114 00:09:43,090 --> 00:09:47,090 Speaker 2: the exact same sized blob of ketchup every time and 115 00:09:47,130 --> 00:09:51,930 Speaker 2: the specialized staff. Two men doing nothing but fry fries. 116 00:09:52,450 --> 00:09:55,490 Speaker 2: Two more doing nothing but make milkshakes on the multi 117 00:09:55,490 --> 00:09:56,330 Speaker 2: mixer machines. 118 00:09:57,410 --> 00:10:00,730 Speaker 3: We couldn't conceal what we were doing, so we would 119 00:10:00,770 --> 00:10:04,050 Speaker 3: talk to anyone who had questions. They would come in 120 00:10:04,130 --> 00:10:07,850 Speaker 3: with paper and pens and copy the layout, and my 121 00:10:08,010 --> 00:10:11,450 Speaker 3: brother and I would la. 122 00:10:12,010 --> 00:10:18,170 Speaker 2: The brothers answered every question, but some people weren't satisfied 123 00:10:18,210 --> 00:10:21,770 Speaker 2: with sketches of the layout and casual conversations with Dick 124 00:10:21,810 --> 00:10:25,530 Speaker 2: and Mack. They wanted more detail, and they'd pay for it. 125 00:10:27,290 --> 00:10:30,690 Speaker 2: Dick and Mack half heartedly put together a package, a 126 00:10:30,730 --> 00:10:35,410 Speaker 2: fifteen page description of their speedy service system, their architect's 127 00:10:35,490 --> 00:10:38,570 Speaker 2: drawings of their building, and a one week loan of 128 00:10:38,610 --> 00:10:42,810 Speaker 2: an employee who knew how everything worked. They'd offer to 129 00:10:42,890 --> 00:10:46,010 Speaker 2: sell you this one off package, but only if you 130 00:10:46,330 --> 00:10:51,650 Speaker 2: absolutely insisted. When one woman asked about it, Dick advised 131 00:10:51,690 --> 00:10:57,650 Speaker 2: her to open a nice little dress shop instead. It 132 00:10:57,650 --> 00:10:58,450 Speaker 2: wouldn't work like that. 133 00:10:58,530 --> 00:10:58,930 Speaker 3: Today. 134 00:10:59,730 --> 00:11:03,250 Speaker 2: Fast food restaurants are often part of big chains and 135 00:11:03,370 --> 00:11:08,290 Speaker 2: run as franchises, and today's franchising arrangements look very different 136 00:11:08,330 --> 00:11:12,250 Speaker 2: from anything Dick and Mac had imagined their long term 137 00:11:12,330 --> 00:11:17,570 Speaker 2: relationships with mutual obligations, support from head office in exchange 138 00:11:17,650 --> 00:11:21,450 Speaker 2: for a percentage of sales, and strict procedures to protect 139 00:11:21,450 --> 00:11:25,530 Speaker 2: the brand. Dick and Mack had no interest in spreading 140 00:11:25,570 --> 00:11:28,770 Speaker 2: their brand beyond the corner of fourteenth and E Streets. 141 00:11:29,690 --> 00:11:32,490 Speaker 2: They assumed that anyone who bought their package would want 142 00:11:32,530 --> 00:11:36,090 Speaker 2: to put their own spin on their ideas. When one 143 00:11:36,170 --> 00:11:39,130 Speaker 2: man from another state said that he'd call his business 144 00:11:39,250 --> 00:11:41,730 Speaker 2: McDonald's two, Dick. 145 00:11:41,610 --> 00:11:43,690 Speaker 3: Was puzzled, what the hell for? 146 00:11:48,090 --> 00:11:52,490 Speaker 2: One day, a wealthy corporation approached the McDonald brothers with 147 00:11:52,570 --> 00:11:57,010 Speaker 2: a proposal. They wanted to hire Dick and Mac to 148 00:11:57,130 --> 00:12:01,810 Speaker 2: open a chain of McDonald's restaurants all across California. Dick 149 00:12:01,890 --> 00:12:10,290 Speaker 2: and Mac discussed it briefly. They hated the idea. Mack complained, We'd. 150 00:12:10,090 --> 00:12:13,290 Speaker 4: Be on the road all the time in motels looking 151 00:12:13,330 --> 00:12:17,050 Speaker 4: for locations. I can just see one hell of a headache. 152 00:12:18,690 --> 00:12:20,930 Speaker 2: Why bring on the headache when they already had a 153 00:12:21,010 --> 00:12:22,290 Speaker 2: lifestyle they enjoyed. 154 00:12:23,250 --> 00:12:26,050 Speaker 4: We were having a lot of fun doing what we 155 00:12:26,130 --> 00:12:26,890 Speaker 4: wanted to do. 156 00:12:29,330 --> 00:12:32,570 Speaker 2: Sure, a chain of restaurants might make them a fortune, 157 00:12:32,690 --> 00:12:36,530 Speaker 2: but what could they do with a fortune. They already 158 00:12:36,530 --> 00:12:39,490 Speaker 2: earned more money than they could imagine how to spend. 159 00:12:40,210 --> 00:12:43,010 Speaker 2: There's only so often you can buy a new Cadillac. 160 00:12:43,810 --> 00:12:46,450 Speaker 2: They didn't have kids to pass a fortune onto. 161 00:12:47,490 --> 00:12:50,730 Speaker 4: We'd be leaving it to a church or something, and 162 00:12:50,770 --> 00:12:51,890 Speaker 4: we didn't go to church. 163 00:12:55,850 --> 00:13:04,330 Speaker 2: The brothers turned the corporation down. One day in nineteen 164 00:13:04,410 --> 00:13:07,970 Speaker 2: fifty four, a man turned up at the brother's restaurant 165 00:13:08,210 --> 00:13:09,570 Speaker 2: and introduced. 166 00:13:09,170 --> 00:13:12,130 Speaker 1: Himself, Ray Kroc, a. 167 00:13:12,050 --> 00:13:15,810 Speaker 2: Salesman from the multi mixer company that made their milkshake machines. 168 00:13:17,010 --> 00:13:21,570 Speaker 2: Kroc was in his early fifties but brimming with youthful energy. 169 00:13:22,690 --> 00:13:23,770 Speaker 1: Kroc asked them. 170 00:13:24,370 --> 00:13:27,410 Speaker 3: Why don't you open a series of units like this? 171 00:13:28,490 --> 00:13:31,050 Speaker 3: It will be a gold mine for you and for 172 00:13:31,130 --> 00:13:35,610 Speaker 3: me too, because everyone would boost my multi mixer sales. 173 00:13:36,970 --> 00:13:38,410 Speaker 3: What do you say? 174 00:13:40,610 --> 00:13:46,530 Speaker 2: Dick and Mac sighed inwardly. Another proposal they'd have to 175 00:13:46,570 --> 00:13:51,290 Speaker 2: turn down. But Ray Kroc wasn't going to take no 176 00:13:52,130 --> 00:13:57,730 Speaker 2: for an answer. Cautionary tales will be back in a moment. 177 00:14:05,570 --> 00:14:09,410 Speaker 2: All work and no play makes Jack a dull boy, 178 00:14:09,850 --> 00:14:14,330 Speaker 2: so the saying goes. Ray Kroc never understood that saying 179 00:14:15,450 --> 00:14:20,450 Speaker 2: surely work is playing. As a teenager, Kroc recalls in 180 00:14:20,490 --> 00:14:25,250 Speaker 2: his autobiography, Grinding it out. He worked in a grocery store, 181 00:14:25,570 --> 00:14:28,930 Speaker 2: a music store, a drug store, and a lemonade stand. 182 00:14:29,770 --> 00:14:31,690 Speaker 3: I got as much pleasure out of work as I 183 00:14:31,730 --> 00:14:32,930 Speaker 3: did from playing baseball. 184 00:14:34,210 --> 00:14:36,130 Speaker 1: To put it in another way, Kroc says. 185 00:14:36,410 --> 00:14:41,530 Speaker 3: Work is the meat in the hamburger of life. 186 00:14:42,690 --> 00:14:46,170 Speaker 5: Kroc got a job as a paper cup salesman. I 187 00:14:46,170 --> 00:14:48,810 Speaker 5: don't know what appealed to me so much about paper cups. 188 00:14:49,570 --> 00:14:53,090 Speaker 5: Perhaps it was because they were so innovative and upbeat, 189 00:14:53,930 --> 00:14:56,770 Speaker 5: but I sensed from the outset that paper cups were 190 00:14:56,850 --> 00:14:59,010 Speaker 5: part of the way America was headed. 191 00:15:01,250 --> 00:15:04,930 Speaker 2: After a long, hard day of pounding the streets selling 192 00:15:05,010 --> 00:15:09,210 Speaker 2: paper cups, Ray Kroc wanted to do only one thing 193 00:15:10,090 --> 00:15:13,690 Speaker 2: more work. He spent his evenings in the studio of 194 00:15:13,770 --> 00:15:17,890 Speaker 2: his local radio station, working as a piano player until 195 00:15:17,930 --> 00:15:24,810 Speaker 2: two am. Kroc's wife never got to see him. She 196 00:15:24,930 --> 00:15:28,810 Speaker 2: wasn't happy. When he describes this in his book, you 197 00:15:28,850 --> 00:15:33,050 Speaker 2: can almost hear his begrudging tone as he responds to 198 00:15:33,130 --> 00:15:34,930 Speaker 2: a prompt from his ghostwriter. 199 00:15:35,890 --> 00:15:38,410 Speaker 3: Looking back on it now, I guess it was kind 200 00:15:38,410 --> 00:15:39,010 Speaker 3: of unfair. 201 00:15:40,370 --> 00:15:42,850 Speaker 1: But in the next breath, he's justifying himself. 202 00:15:43,610 --> 00:15:46,810 Speaker 3: I was driven by ambition. I hated to be idle 203 00:15:46,890 --> 00:15:52,810 Speaker 3: for a minute. 204 00:15:50,850 --> 00:15:53,730 Speaker 2: Kroc had chosen a fast growing industry. 205 00:15:54,530 --> 00:15:57,890 Speaker 3: The ten years between nineteen twenty seven and nineteen thirty 206 00:15:57,930 --> 00:16:02,010 Speaker 3: seven were a decade of destiny for the paper cup industry. 207 00:16:04,530 --> 00:16:08,010 Speaker 2: Still, though, there's always a chance that an even better 208 00:16:08,130 --> 00:16:12,650 Speaker 2: opportunity will come along. In the course of selling paper cups, 209 00:16:13,130 --> 00:16:18,770 Speaker 2: Kroc encounters the multi mixer. This is going to be huge. 210 00:16:19,130 --> 00:16:23,250 Speaker 2: He has to get into the milkshake machine business. He 211 00:16:23,370 --> 00:16:27,010 Speaker 2: quits his steady job at the paper cup company. His 212 00:16:27,130 --> 00:16:28,690 Speaker 2: wife isn't happy. 213 00:16:30,170 --> 00:16:33,730 Speaker 4: You're thirty five years old and you're going to start 214 00:16:33,730 --> 00:16:35,410 Speaker 4: all over again as if you were twenty. 215 00:16:36,490 --> 00:16:38,690 Speaker 3: You just have to trust my instincts. 216 00:16:39,530 --> 00:16:43,570 Speaker 2: He neglects to mention that he's mortgaged their house so 217 00:16:43,610 --> 00:16:46,850 Speaker 2: he can buy into the multi mixer company. When she 218 00:16:46,970 --> 00:16:49,810 Speaker 2: finds out, she's furious. 219 00:16:50,930 --> 00:16:52,490 Speaker 3: She couldn't seem to handle. 220 00:16:52,250 --> 00:16:57,530 Speaker 2: It, Crock recalls sounding slightly bemused. He tells her that 221 00:16:57,850 --> 00:17:00,890 Speaker 2: obviously she'll have to come and work for him in 222 00:17:00,930 --> 00:17:03,970 Speaker 2: the multi mixer business to give him the best chance 223 00:17:04,010 --> 00:17:08,690 Speaker 2: of making it a success. Absolutely not, she says. 224 00:17:10,050 --> 00:17:13,930 Speaker 3: I felt betrayed. I just couldn't believe she led me 225 00:17:13,970 --> 00:17:14,490 Speaker 3: down like that. 226 00:17:17,610 --> 00:17:21,570 Speaker 2: Kroc throws himself into the task of selling multi mixers. 227 00:17:22,530 --> 00:17:26,970 Speaker 2: People are amazed at his energy. At trade events, He's 228 00:17:27,050 --> 00:17:31,810 Speaker 2: up until three am schmoozing clients, then appears at breakfast, 229 00:17:32,050 --> 00:17:35,330 Speaker 2: bright eyed and bushy tailed, eager for a new day. 230 00:17:36,330 --> 00:17:40,770 Speaker 2: What's his secret, they ask? He tells them, I sleep bizarre. 231 00:17:40,770 --> 00:17:48,810 Speaker 2: As I work. In the early nineteen fifties, Kroc notices 232 00:17:48,850 --> 00:17:51,890 Speaker 2: that he's getting more and more calls from people who 233 00:17:51,890 --> 00:17:55,130 Speaker 2: want to buy multi mixers because they've seen them being 234 00:17:55,250 --> 00:18:00,530 Speaker 2: used at a Hamburger joint in San Bernardino. Kroc is intrigued. 235 00:18:01,170 --> 00:18:05,410 Speaker 2: What's so special about this place? He flies out to 236 00:18:05,450 --> 00:18:12,050 Speaker 2: California to investigate. McDonald's isn't yet open when he arrives 237 00:18:12,130 --> 00:18:16,770 Speaker 2: and parks up, and his first impression is underwhelming. It's 238 00:18:16,890 --> 00:18:21,930 Speaker 2: just a small, ordinary, octagonal building. He watches from his 239 00:18:22,130 --> 00:18:24,970 Speaker 2: hired car as the employees file in. 240 00:18:26,130 --> 00:18:30,890 Speaker 3: Are men dressed in spiffy white shirts and trousers and 241 00:18:31,050 --> 00:18:32,090 Speaker 3: white paper hats. 242 00:18:33,650 --> 00:18:38,850 Speaker 2: I like that, He watches as the parking lot fills 243 00:18:38,930 --> 00:18:43,010 Speaker 2: up and long queues form of the window. More and 244 00:18:43,250 --> 00:18:48,370 Speaker 2: more intriguing, Kroc gets out of his car and strikes 245 00:18:48,410 --> 00:18:52,530 Speaker 2: up conversations with the customers. He approaches an attractive young lady, 246 00:18:53,130 --> 00:18:55,370 Speaker 2: a strawberry blonde, and. 247 00:18:55,330 --> 00:18:59,370 Speaker 3: Asks, how often do you come here? Anytime I'm in 248 00:18:59,410 --> 00:19:03,450 Speaker 3: the neighborhood, and that's as often as possible because my 249 00:19:03,690 --> 00:19:06,250 Speaker 3: boyfriend lives here. 250 00:19:06,850 --> 00:19:10,370 Speaker 2: Kroc gets the hint she's a sumed he's a clumsy, 251 00:19:10,490 --> 00:19:14,450 Speaker 2: middle aged pickup artist that he doesn't mind the brush off. 252 00:19:15,250 --> 00:19:18,810 Speaker 3: It was not her sex appeal, but the obvious relish 253 00:19:18,970 --> 00:19:22,530 Speaker 3: with which she devoured the hamburger that made my pulse 254 00:19:22,610 --> 00:19:25,450 Speaker 3: begin to hammer with excitement. 255 00:19:26,850 --> 00:19:30,610 Speaker 2: Kroc peers into the fishbowl, watching the men in their 256 00:19:30,650 --> 00:19:38,810 Speaker 2: spiffy white shirts at work. He's enchanted, so simple, so efficient. 257 00:19:40,010 --> 00:19:43,970 Speaker 2: That night, Kroc lies in bed in his hotel. 258 00:19:43,690 --> 00:19:51,050 Speaker 3: Room, visions McDonald's restaurants dotting crossroads all over the country 259 00:19:51,170 --> 00:19:52,770 Speaker 3: paraded through my brain. 260 00:19:56,370 --> 00:19:59,850 Speaker 2: The next day, he approaches the McDonald brothers with his pitch. 261 00:20:01,010 --> 00:20:03,570 Speaker 3: I've been in the kitchens of a lot of restaurants 262 00:20:03,770 --> 00:20:08,570 Speaker 3: selling multi mixures, and I have never seen anything to 263 00:20:08,690 --> 00:20:13,610 Speaker 3: equal the potential of this place of yours. Why don't 264 00:20:13,610 --> 00:20:16,770 Speaker 3: you open a series of units like this? It would 265 00:20:16,770 --> 00:20:19,490 Speaker 3: be a gold mine for you and for me too, 266 00:20:20,370 --> 00:20:24,890 Speaker 3: because everyone would boost my multi mixer sales. What do 267 00:20:24,930 --> 00:20:25,490 Speaker 3: you say. 268 00:20:28,370 --> 00:20:34,690 Speaker 1: Silence? Kroc is puzzled. Has he said something wrong? 269 00:20:36,170 --> 00:20:41,770 Speaker 2: Mac McDonald points to a house on a nearby hill. 270 00:20:41,970 --> 00:20:45,050 Speaker 4: See that big white house with the wide front porch. 271 00:20:45,770 --> 00:20:49,570 Speaker 4: That's our house, and we love it. We sit out 272 00:20:49,650 --> 00:20:52,450 Speaker 4: on the porch in the evenings and watch the sunset 273 00:20:52,650 --> 00:20:54,330 Speaker 4: and look down on our place here. 274 00:20:55,090 --> 00:20:55,890 Speaker 3: It's peaceful. 275 00:20:56,690 --> 00:20:59,770 Speaker 4: We don't need any more problems. We're in a position 276 00:20:59,810 --> 00:21:03,450 Speaker 4: to enjoy life now, and that's just what we intend 277 00:21:03,490 --> 00:21:03,810 Speaker 4: to do. 278 00:21:07,570 --> 00:21:13,170 Speaker 2: Krook is totally throne. He can't comprehend what the brothers 279 00:21:13,170 --> 00:21:13,690 Speaker 2: are saying. 280 00:21:15,250 --> 00:21:20,730 Speaker 3: Their approach was utterly foreign to me. It took me 281 00:21:20,810 --> 00:21:22,970 Speaker 3: a few minutes to reorganize my thinking. 282 00:21:24,370 --> 00:21:29,450 Speaker 2: Once he's reorganized his thinking, Croc suggests they get someone 283 00:21:29,450 --> 00:21:37,970 Speaker 2: else to open restaurants for them. Maybe, they say, but who, well, 284 00:21:39,610 --> 00:21:48,530 Speaker 2: what about me? That year nineteen fifty four, two thousand 285 00:21:48,610 --> 00:21:53,090 Speaker 2: miles away in Indianapolis, another pair of brothers were cooking 286 00:21:53,170 --> 00:21:57,450 Speaker 2: up an idea for a restaurant chain. Frank and Don 287 00:21:57,610 --> 00:22:02,970 Speaker 2: Thomas's family business made fast food equipment, the Easy Way 288 00:22:03,010 --> 00:22:07,850 Speaker 2: frozen custard machine, the Sanny served milkshake machine, and the 289 00:22:08,010 --> 00:22:12,290 Speaker 2: Insta broiler, which flame grilled hamburgers on a conveyor belt. 290 00:22:13,170 --> 00:22:16,970 Speaker 2: They decided to demonstrate their machines to potential customers by 291 00:22:17,010 --> 00:22:21,770 Speaker 2: opening a showcase restaurant. Word got around that the burgers 292 00:22:21,770 --> 00:22:25,690 Speaker 2: and milkshakes in this showcase restaurant were the best in town. 293 00:22:27,090 --> 00:22:29,850 Speaker 2: Trade customers came by to check out the equipment, but 294 00:22:29,970 --> 00:22:33,770 Speaker 2: were even more impressed by the queues of eager locals. 295 00:22:35,010 --> 00:22:38,410 Speaker 2: Just like the McDonald brothers, the Thomas Brothers discovered that 296 00:22:38,530 --> 00:22:42,530 Speaker 2: many wannabe fast food entrepreneurs were in the market for 297 00:22:42,610 --> 00:22:47,890 Speaker 2: a complete restaurant concept. They didn't just want equipment, they 298 00:22:47,890 --> 00:22:52,130 Speaker 2: wanted restaurant plans and working procedures, even a brand name. 299 00:22:53,290 --> 00:22:56,570 Speaker 2: But Thomas's got to work on a concept they could franchise. 300 00:22:57,410 --> 00:23:09,210 Speaker 2: They called it Burger Chef Ray Kroc drives away from 301 00:23:09,250 --> 00:23:13,050 Speaker 2: San Bernardino with a signed contract with the McDonald brothers 302 00:23:13,090 --> 00:23:16,610 Speaker 2: in his pocket and joy in his heart. 303 00:23:17,570 --> 00:23:20,890 Speaker 3: I was fifty two years old. I had diabetes and 304 00:23:21,050 --> 00:23:24,650 Speaker 3: incipient arthritis. I had lost my gallbladder and most of 305 00:23:24,690 --> 00:23:28,930 Speaker 3: my thyroid gland, but I was convinced that the best 306 00:23:29,730 --> 00:23:30,370 Speaker 3: was ahead of me. 307 00:23:33,090 --> 00:23:36,010 Speaker 2: Kroc tells his wife that he's agreed to set up 308 00:23:36,010 --> 00:23:45,410 Speaker 2: a Hamburger chain. He's starting all over again again. She's incandescent. 309 00:23:47,210 --> 00:23:50,130 Speaker 2: I had no time to bother with emotional stress. Though 310 00:23:51,130 --> 00:23:54,890 Speaker 2: I had to find a site for my first McDonald's. 311 00:23:56,770 --> 00:24:00,330 Speaker 2: It wasn't a headache for Ray Kroc to schlep around 312 00:24:00,330 --> 00:24:05,050 Speaker 2: the country, sleeping in motels, assessing the market potential of 313 00:24:05,210 --> 00:24:06,370 Speaker 2: various crossroads. 314 00:24:06,690 --> 00:24:08,090 Speaker 1: He adored it. 315 00:24:09,170 --> 00:24:14,690 Speaker 3: Finding locations for McDonald's is the most creatively fulfilling thing 316 00:24:14,930 --> 00:24:16,650 Speaker 3: I can imagine. 317 00:24:17,330 --> 00:24:20,890 Speaker 2: Are there schools and churches nearby? He hangs out in 318 00:24:20,970 --> 00:24:22,810 Speaker 2: local shops? What are the people like? 319 00:24:24,290 --> 00:24:25,370 Speaker 1: At two a m. 320 00:24:26,010 --> 00:24:30,330 Speaker 2: He sifts through the garbage of rival Hamburger joints. By 321 00:24:30,450 --> 00:24:33,410 Speaker 2: counting the empty meat boxes, they'll get a sense of 322 00:24:33,450 --> 00:24:38,810 Speaker 2: how much business they're do. Kroc obsesses over fast food 323 00:24:38,890 --> 00:24:45,450 Speaker 2: manushie fries, He decrees must be precisely nine thirty seconds 324 00:24:45,490 --> 00:24:50,650 Speaker 2: of an inch thick beef patties must not exceed nineteen 325 00:24:50,770 --> 00:24:51,570 Speaker 2: percent fat. 326 00:24:52,810 --> 00:24:56,850 Speaker 3: Is it any more unusual to find grace in the 327 00:24:56,970 --> 00:25:01,890 Speaker 3: texture and softly curved sill web of a Hamburger bun 328 00:25:02,250 --> 00:25:07,050 Speaker 3: than to reflect lovingly on the colors in a butterfly's wing? 329 00:25:10,250 --> 00:25:19,090 Speaker 2: Well, yes, Ray, it kind of is. Kroc works obsessively 330 00:25:19,210 --> 00:25:24,810 Speaker 2: to recruit franchisees. He opens hundreds of McDonald's restaurants, but 331 00:25:24,890 --> 00:25:31,650 Speaker 2: he's only just keeping ahead of Burger Chef. In nineteen 332 00:25:31,730 --> 00:25:36,130 Speaker 2: sixty seven, the Thomas Brothers decide to cash in. They 333 00:25:36,210 --> 00:25:40,490 Speaker 2: sell Burger Chef to a mega food conglomerate. The new 334 00:25:40,610 --> 00:25:45,770 Speaker 2: owners have big ambitions to leave McDonald's in the dust. 335 00:25:47,970 --> 00:25:58,970 Speaker 2: Cautionary tales will be back in a moment. Burger Chef's 336 00:25:59,050 --> 00:26:04,050 Speaker 2: new owners promptly commission a snazzy new logo to refresh 337 00:26:04,090 --> 00:26:08,450 Speaker 2: the brand's identity. They introduced the fun Meal and a 338 00:26:08,450 --> 00:26:12,850 Speaker 2: whole cart of kid friendly cartoon characters to interact with 339 00:26:12,930 --> 00:26:18,970 Speaker 2: their jocular Chef and his teenage sidekick. There's the Witch, Cackleberger. 340 00:26:22,490 --> 00:26:25,250 Speaker 4: You that traffic over the airport was murder? 341 00:26:25,490 --> 00:26:26,690 Speaker 3: Or what brings you in tonight? 342 00:26:26,770 --> 00:26:27,410 Speaker 1: Cackle Berger? 343 00:26:27,770 --> 00:26:39,090 Speaker 2: Yeah, the Vampire count Fang BURGERA. 344 00:26:36,170 --> 00:26:37,090 Speaker 5: I'm happy? 345 00:26:37,570 --> 00:26:38,610 Speaker 1: What're you going to forget? 346 00:26:38,770 --> 00:26:40,730 Speaker 4: At Burger Shape. 347 00:26:40,410 --> 00:26:44,970 Speaker 2: And the Magician the Great Burgerini. Then came the Star 348 00:26:45,050 --> 00:26:51,890 Speaker 2: Wars posters. Burger Chef seemed to be on top of 349 00:26:51,930 --> 00:26:55,810 Speaker 2: its game, but other decisions the new owners had made 350 00:26:56,130 --> 00:26:59,930 Speaker 2: were putting Burger Chef on course to hit disaster in 351 00:27:00,090 --> 00:27:06,570 Speaker 2: under twelve parsecs. Those posters were covering up the writing 352 00:27:06,610 --> 00:27:17,010 Speaker 2: on the walls. Why did McDonald's succeed and Burger Chef fail. 353 00:27:18,050 --> 00:27:22,250 Speaker 2: There isn't one simple answer, but a big part of 354 00:27:22,290 --> 00:27:25,810 Speaker 2: the story involves the tension at the heart of the 355 00:27:25,850 --> 00:27:30,530 Speaker 2: franchising relationship and the heart of the Star Wars movies, 356 00:27:31,450 --> 00:27:37,050 Speaker 2: between the individual's urge for self determination and the organization's 357 00:27:37,130 --> 00:27:47,610 Speaker 2: desire for control. In his book An Introduction to Franchising, 358 00:27:48,410 --> 00:27:53,210 Speaker 2: Leicester Business School lecturer Robert Webber calls the franchising relationship 359 00:27:53,650 --> 00:27:57,530 Speaker 2: a kind of halfway house between being an employee and 360 00:27:57,610 --> 00:28:03,290 Speaker 2: a fully standalone business. Like any entrepreneur, a franchisee puts 361 00:28:03,330 --> 00:28:07,010 Speaker 2: their own money on the line. In the nineteen sixties, 362 00:28:07,170 --> 00:28:10,650 Speaker 2: buying a McDonald's or a Burger Ship franchise would have 363 00:28:10,690 --> 00:28:14,530 Speaker 2: cost you around ten thousand dollars. That's about one hundred 364 00:28:14,530 --> 00:28:18,410 Speaker 2: thousand in today's terms, a lot of money, and that's 365 00:28:18,450 --> 00:28:21,130 Speaker 2: before you make all the other investments in setting the 366 00:28:21,130 --> 00:28:25,730 Speaker 2: restaurant up. A franchisee is going to be highly incentivized 367 00:28:25,770 --> 00:28:29,570 Speaker 2: to work hard to get that money back, much more so, 368 00:28:29,730 --> 00:28:34,770 Speaker 2: perhaps than a salaried corporate employee. It's easy to see 369 00:28:34,850 --> 00:28:39,330 Speaker 2: why chains like McDonald's and Burger Chef latched onto franchising 370 00:28:39,370 --> 00:28:44,770 Speaker 2: as a quick way to grow. Franchisees brought money and motivation, 371 00:28:46,650 --> 00:28:49,970 Speaker 2: But what's in it for the franchise e. That's no 372 00:28:50,170 --> 00:28:54,810 Speaker 2: mystery either, says Robert Webber. The greatest benefit to any 373 00:28:54,930 --> 00:28:59,810 Speaker 2: hopeful franchisee is that the business model and commercial concepts 374 00:29:00,170 --> 00:29:04,730 Speaker 2: have been tried and tested. We've seen what would be 375 00:29:05,050 --> 00:29:09,930 Speaker 2: entrepreneurs wanted from McDonald brothers and the Thomas brothers. Information, 376 00:29:10,770 --> 00:29:14,530 Speaker 2: What equipment should I buy? How should I organize my workers? 377 00:29:15,050 --> 00:29:21,050 Speaker 2: That kind of guidance is worth paying for. Dick and 378 00:29:21,250 --> 00:29:25,130 Speaker 2: mac McDonald assumed that everyone who bought information from them 379 00:29:25,170 --> 00:29:27,370 Speaker 2: would want to use it in their own way, give 380 00:29:27,410 --> 00:29:30,730 Speaker 2: their restaurant its own name, experiment with their own menu. 381 00:29:31,730 --> 00:29:36,570 Speaker 2: Ray Kroc's vision of franchising was completely different, as one 382 00:29:36,650 --> 00:29:40,970 Speaker 2: early franchisee found out when Kroc visited his store and 383 00:29:41,130 --> 00:29:45,130 Speaker 2: snapped at an employee to clean his fingernails. Don't you 384 00:29:45,330 --> 00:29:49,410 Speaker 2: start telling my help what to do, the franchisee told Kroc, 385 00:29:49,850 --> 00:29:53,330 Speaker 2: or I'll tell you what you can do. Kroc was 386 00:29:53,850 --> 00:29:58,490 Speaker 2: furious the way he saw it, his franchisees weren't just 387 00:29:58,730 --> 00:30:04,290 Speaker 2: buying information, they were buying reputation, and the only way 388 00:30:04,330 --> 00:30:08,970 Speaker 2: to maintain reputation was to make sure every single franchise 389 00:30:09,130 --> 00:30:15,770 Speaker 2: z was upholding the same standards. In his book McDonald's 390 00:30:15,770 --> 00:30:21,170 Speaker 2: Behind the Arches, John F. Love writes that Kroc demanded 391 00:30:21,330 --> 00:30:25,210 Speaker 2: much more control over the system than other franchisers did. 392 00:30:25,770 --> 00:30:28,890 Speaker 2: If you bought a McDonald's franchise, you'd be sent to 393 00:30:29,050 --> 00:30:33,570 Speaker 2: Hamburger University, where you'd be drilled in French fry thickness 394 00:30:33,650 --> 00:30:39,370 Speaker 2: and beef patty fat content, though possibly not bun silhouette appreciation. 395 00:30:40,730 --> 00:30:44,890 Speaker 2: After that, you'd get regular visits from Kroc's henchmen, who'd 396 00:30:44,930 --> 00:30:49,170 Speaker 2: make sure you were following every instruction in the hundreds 397 00:30:49,170 --> 00:30:55,250 Speaker 2: of pages of the operating manual. For example, pick up 398 00:30:55,450 --> 00:30:59,170 Speaker 2: McDonald's litter within a two block radius of the store. 399 00:31:00,250 --> 00:31:04,370 Speaker 2: One franchisee who'd been neglecting this duty had a Kroc 400 00:31:04,530 --> 00:31:08,250 Speaker 2: henchman march into his office with an armful of empty 401 00:31:08,290 --> 00:31:09,850 Speaker 2: cups and wrappers. 402 00:31:10,570 --> 00:31:11,530 Speaker 1: He dumped them on the. 403 00:31:11,490 --> 00:31:15,970 Speaker 2: Franchise's desk and yelled, how can you let this stuff 404 00:31:16,010 --> 00:31:21,290 Speaker 2: go on your neighbor's lawn. That's the sense in which 405 00:31:21,330 --> 00:31:26,450 Speaker 2: franchisees are more like employees than other entrepreneurs. If you're 406 00:31:26,490 --> 00:31:29,810 Speaker 2: running an independent business, nobody's going to nag you about 407 00:31:29,850 --> 00:31:34,770 Speaker 2: how often you mop your floor. In setting up its 408 00:31:34,930 --> 00:31:41,890 Speaker 2: operating system, says John Love, McDonald's displayed no particular genius, 409 00:31:42,010 --> 00:31:49,650 Speaker 2: just tenacity. They developed standards and enforced standards. As logical 410 00:31:49,730 --> 00:31:53,850 Speaker 2: and basic as that sounds, it was a revolutionary concept 411 00:31:53,930 --> 00:32:00,530 Speaker 2: in food franchising. McDonald's achieved a consistency of service that 412 00:32:00,730 --> 00:32:08,890 Speaker 2: no franchised system had ever before attained. At Burger Chef, 413 00:32:09,250 --> 00:32:14,010 Speaker 2: when the new owners proudly unveiled their snazzy new logo, 414 00:32:14,410 --> 00:32:18,330 Speaker 2: they expected the franchisees to pay to change the signs 415 00:32:18,330 --> 00:32:22,970 Speaker 2: on their restaurants, but their franchise agreements didn't say they 416 00:32:23,050 --> 00:32:23,370 Speaker 2: had to. 417 00:32:24,330 --> 00:32:25,930 Speaker 1: Some did, some didn't. 418 00:32:27,010 --> 00:32:31,250 Speaker 2: Then the new owners announced the new interior design concept 419 00:32:31,850 --> 00:32:36,450 Speaker 2: and asked the franchisees to refit their restaurants. Some did, 420 00:32:37,250 --> 00:32:42,890 Speaker 2: some didn't. Then they changed the logo again. At one point, 421 00:32:43,090 --> 00:32:47,770 Speaker 2: Burger Chefs around the country had four different designs of 422 00:32:47,930 --> 00:32:54,530 Speaker 2: sign and restaurant. Ray Kroc had understood the vital importance 423 00:32:54,730 --> 00:33:06,090 Speaker 2: of consistency and conformity. Burger Chef had not In nineteen 424 00:33:06,170 --> 00:33:10,570 Speaker 2: eighty two, the new owners of burgersh Chef sold off 425 00:33:10,650 --> 00:33:16,810 Speaker 2: the struggling chain to Hardy's. A few stubborn franchisees persisted 426 00:33:16,850 --> 00:33:20,370 Speaker 2: with their version of the Burger Chef brand. The last 427 00:33:20,690 --> 00:33:28,010 Speaker 2: closed their doors in nineteen ninety six. Burger Chef's demise 428 00:33:28,290 --> 00:33:33,410 Speaker 2: shows the biggest downside of buying a franchise. As lecturer 429 00:33:33,490 --> 00:33:37,970 Speaker 2: Robert Webber puts it, the individual franchisee will have virtually 430 00:33:38,330 --> 00:33:43,370 Speaker 2: no power over the most important policy decisions that will 431 00:33:43,410 --> 00:33:48,490 Speaker 2: influence his or her business. Those decisions might be brilliant, 432 00:33:48,770 --> 00:33:52,170 Speaker 2: like the Star Wars tie in, or they might be stupid, 433 00:33:52,410 --> 00:33:58,330 Speaker 2: like the multiple rebrands. Buying a franchise, says Weber, is 434 00:33:58,410 --> 00:34:02,530 Speaker 2: like getting married after a short courtship. But if it 435 00:34:02,650 --> 00:34:06,770 Speaker 2: is a marriage, it's not an equal one. The individual 436 00:34:06,890 --> 00:34:12,650 Speaker 2: franchisee has a hat as much decisions as Missus Kroc. 437 00:34:18,330 --> 00:34:18,570 Speaker 3: Ray. 438 00:34:18,770 --> 00:34:24,410 Speaker 2: Croc's obsession with conformity was driving McDonald's to new heights, 439 00:34:25,330 --> 00:34:30,330 Speaker 2: but Kroc faced a constant source of frustration. The contract 440 00:34:30,450 --> 00:34:33,890 Speaker 2: he had signed with Dick and mac McDonald had been 441 00:34:33,930 --> 00:34:38,010 Speaker 2: so impressed with their San Bernardino restaurant, so eager to 442 00:34:38,050 --> 00:34:41,170 Speaker 2: get the rights to franchise it. He hadn't thought the 443 00:34:41,250 --> 00:34:45,970 Speaker 2: contract through. It said, he needed the brother's written approval 444 00:34:46,090 --> 00:34:49,370 Speaker 2: for major decisions, and they could never be bothered to 445 00:34:49,410 --> 00:34:52,970 Speaker 2: provide it. They were too busy admiring the sunsets. 446 00:34:53,970 --> 00:34:57,130 Speaker 3: The McDonald brothers were simply not on my wavelength at all. 447 00:34:58,090 --> 00:35:01,850 Speaker 3: I was obsessed with making McDonald's the biggest and the best. 448 00:35:03,210 --> 00:35:09,050 Speaker 3: They were content with what they had. 449 00:35:09,090 --> 00:35:12,650 Speaker 2: Besides, he has no choice but to buy the McDonald 450 00:35:12,770 --> 00:35:16,730 Speaker 2: brothers out of their contract. He asks them to name 451 00:35:16,810 --> 00:35:21,650 Speaker 2: their price. Dick and Mac discuss what their contract is worth. 452 00:35:22,890 --> 00:35:25,730 Speaker 2: It gives them the right to half a percent of 453 00:35:25,810 --> 00:35:29,890 Speaker 2: all McDonald's revenue, and at the rate McDonald's is growing, 454 00:35:30,290 --> 00:35:34,250 Speaker 2: the sums involved are soon going to be vast. In 455 00:35:34,330 --> 00:35:38,090 Speaker 2: a few years, they might have who knows five million. 456 00:35:39,570 --> 00:35:40,890 Speaker 2: Mac says to Dick. 457 00:35:41,650 --> 00:35:44,090 Speaker 4: What the hell can we do with five million that 458 00:35:44,130 --> 00:35:45,330 Speaker 4: we can't do now? 459 00:35:46,770 --> 00:35:50,130 Speaker 2: The brothers decide to ask Ray Kroc for a round 460 00:35:50,410 --> 00:35:54,730 Speaker 2: million dollars each after tax. That's about ten million in 461 00:35:54,770 --> 00:35:57,650 Speaker 2: today's money, and far less than they could have got 462 00:35:57,730 --> 00:36:02,930 Speaker 2: if they'd stuck with their contract. Later, Dick McDonald is 463 00:36:03,050 --> 00:36:08,690 Speaker 2: asked if he regrets selling up, not at all, He shrugs. 464 00:36:09,130 --> 00:36:12,610 Speaker 3: Would have wound up in some skyscrapers somewhere with about 465 00:36:12,890 --> 00:36:17,010 Speaker 3: four ulcers. 466 00:36:17,050 --> 00:36:21,450 Speaker 2: Dick and mac McDonald cared about money, but they only 467 00:36:21,490 --> 00:36:25,650 Speaker 2: cared up to a point. Dick remembers struggling through the 468 00:36:25,690 --> 00:36:30,130 Speaker 2: Great Depression and thinking to himself, how marvelous it would 469 00:36:30,130 --> 00:36:34,330 Speaker 2: be never to have to worry about making rent. Having 470 00:36:34,370 --> 00:36:39,730 Speaker 2: achieved that, the brothers cared more about sunsets and cadillacs 471 00:36:40,210 --> 00:36:43,650 Speaker 2: and the freedom to do what they wanted with their restaurant. 472 00:36:44,570 --> 00:36:48,130 Speaker 2: They looked at their community changing and decided to take 473 00:36:48,170 --> 00:36:53,450 Speaker 2: a risk on reinventing themselves. They dreamed up new ideas 474 00:36:53,530 --> 00:37:02,690 Speaker 2: that were so successful they changed the world. The McDonald 475 00:37:02,730 --> 00:37:06,810 Speaker 2: brothers succeeded on their own terms, but in the world 476 00:37:06,930 --> 00:37:10,850 Speaker 2: they helped create. It's become much harder to do what 477 00:37:10,970 --> 00:37:15,610 Speaker 2: they did. Open a restaurant with an experimental concept today, 478 00:37:15,810 --> 00:37:19,370 Speaker 2: and you have to compete with the finely honed operations 479 00:37:19,410 --> 00:37:25,330 Speaker 2: of multiple franchising juggernauts who've all learned lessons from McDonald's. 480 00:37:26,570 --> 00:37:31,450 Speaker 2: According to figures quoted by Robert Webber, independent businesses are 481 00:37:31,690 --> 00:37:37,490 Speaker 2: ten times more likely to fail than franchises. It might 482 00:37:37,530 --> 00:37:42,650 Speaker 2: be romantic to open your own dream restaurant. The pragmatic 483 00:37:42,730 --> 00:37:53,010 Speaker 2: choice is marrying Ray krop. Just as Ray Kropp is 484 00:37:53,050 --> 00:37:56,610 Speaker 2: about to sign the deal buying Dick and Mac out 485 00:37:56,610 --> 00:38:02,210 Speaker 2: of their contract, he notices something missing. The deal doesn't 486 00:38:02,210 --> 00:38:07,690 Speaker 2: mention the brother's original restaurant in San Bernardino. Surely that 487 00:38:07,770 --> 00:38:12,250 Speaker 2: must be included. Oh no, say Dick and Mac. We've 488 00:38:12,290 --> 00:38:15,530 Speaker 2: already promised to give that to two of our loyal employees. 489 00:38:17,170 --> 00:38:26,370 Speaker 3: Oh a goddamn Ratten Trick, I screamed like hell about him. 490 00:38:26,410 --> 00:38:29,970 Speaker 2: Once the deal is signed, the old employees, of course, 491 00:38:30,130 --> 00:38:32,850 Speaker 2: can't call their restaurant McDonald's anymore. 492 00:38:33,570 --> 00:38:37,130 Speaker 1: They give it a new, unique name, The Big. 493 00:38:37,130 --> 00:38:43,010 Speaker 2: M Ray Kroc opens the McDonald's right across the street 494 00:38:44,290 --> 00:39:02,490 Speaker 2: and drives them out of business. This script relied on 495 00:39:02,570 --> 00:39:06,410 Speaker 2: John Love's book about McDonald's Behind the Arches and John 496 00:39:06,490 --> 00:39:10,890 Speaker 2: McDonald's book about Burger Chef Out. For a full list 497 00:39:10,930 --> 00:39:16,730 Speaker 2: of sources, visit Timharford dot com. Cautionary Tales is written 498 00:39:16,770 --> 00:39:20,130 Speaker 2: by me Tim Harford with Andrew Wright, Alice Fines, and 499 00:39:20,210 --> 00:39:24,090 Speaker 2: Ryan Dilly. It's produced by Georgia Mills and Marilyn Rust. 500 00:39:24,690 --> 00:39:27,410 Speaker 2: The sound design and original music are the work of 501 00:39:27,530 --> 00:39:31,610 Speaker 2: Pascal Wise. Additional sound design is by Carlos san Juan 502 00:39:31,850 --> 00:39:36,810 Speaker 2: at Brain Audio. Bend A Dafhaffrey edited the scripts. The 503 00:39:36,850 --> 00:39:41,250 Speaker 2: show features the voice talents of Genevieve Gaunt, Melanie Guttridge, 504 00:39:41,530 --> 00:39:47,250 Speaker 2: Stella Harford, Oliver Hembrough, Sarah Jupp, Massaa Munroe, Jamal Westman 505 00:39:47,490 --> 00:39:51,050 Speaker 2: and rufus Wright. The show also wouldn't have been possible 506 00:39:51,090 --> 00:39:54,810 Speaker 2: without the work of Jacob Weisberg, Greta Cohne, Sarah Nix, 507 00:39:55,130 --> 00:40:00,090 Speaker 2: Eric Sandler, Carrie Brody, Christina Sullivan, Kira Posey, and Owen Miller. 508 00:40:01,010 --> 00:40:05,410 Speaker 2: Cautionary Tales is a production of Pushkin Industries. It's recorded 509 00:40:05,410 --> 00:40:09,010 Speaker 2: at Wardhore Studios in London by Noria Barr and Lucy Ry. 510 00:40:10,130 --> 00:40:12,930 Speaker 2: If you like the show, please remember to share, rate 511 00:40:13,170 --> 00:40:15,330 Speaker 2: and review. It really makes a difference to us and 512 00:40:15,370 --> 00:40:17,770 Speaker 2: if you want to hear the show, add free to 513 00:40:17,770 --> 00:40:20,330 Speaker 2: sign up to Pushkin Plus on the show page on 514 00:40:20,410 --> 00:40:24,450 Speaker 2: Apple Podcasts or at pushkin dot fm, slash plus