article-single

The Founder: Celebrating Perseverance

Most people believe McDonald’s is in the burger business. Not hardly. “McDonald’s is one of the biggest real estate companies in the world,” Jonathan Maze wrote for Nation’s Restaurant News in 2015, “It owns $28.4 billion worth of land and buildings, before depreciation. It also leases the land, the buildings or both on 15,000 of its restaurant sites.”

The defining moment in the spectacular new movie “The Founder” has Harry Sonneborn (B.J. Novack), then an executive with Tastee Freeze, explaining to Ray Kroc (Michael Keaton), after going over McDonald’s books, why his (and the McDonald brothers) company was growing like a weed but dying on the vine. Kroc didn’t control any of the real estate, and Sonneborn tells him flatly, “You’re not in the burger business, you’re in the real estate business.”

The Founder” features another struggling salesman/entrepreneur downing whiskey (see “Gold”)at all hours trying to make just that one big score. The movie opens with Kroc trying to peddle milkshake machines by day and listening to motivational records in cheap hotel rooms under the influence of Canadian Club at night. Paraphrasing Say’s Law, he constantly chirps “Increase the supply and the demand will follow” in his sales pitch.

Why are the most advertised Gold and Silver coins NOT the best way to invest?

The viewer gets the sinking feeling he is another Willy Loman, except, well, we know how it turns out.  When a restaurant in San Bernardino orders six machines, Ray thinks it must be a mistake. Dick McDonald assures Kroc, who is talking to him from a pay phone in the midwest, that yes, he ordered six, but really needs eight machines, as sounds of a busy kitchen can be heard in the background. Kroc decides to drive to San Bernadino to see for himself.

Dick and his brother Mac (John Carroll Lynch) have dinner with Kroc and tell him their story. It’s a classic entrepreneurial tale of F.A. Hayek’s unplanned trial and error. A particularly enlightening scene has the McDonald brothers remembering the use of a tennis court and chalk to lay out the perfect kitchen layout to execute their “speedee service system.”

They had their employees simulate the traffic flow of each iteration.   When employees would run into one another, Dick would shoo them aside, erase his chalk-drawn stations, and re-draw the layout until he created the perfect kitchen setup.

Then, with a perfect kitchen and a system to provide burgers and fries in 30 seconds, nobody showed up.  But, then customers began to line up for what today would be considered a very plain hamburger. People went crazy for it. Fast food, wrapped in paper, fetched by the customer at the window.  The new age was born.

Kroc’s entrepreneurial vision saw McDonald’s concept nationwide. The brothers had tried franchising on a small scale and believed it to be impossible to manage.  They had too much pride in their product to let loose of it. As brilliant as they (especially Dick) were, their vision extended only to their property. Kroc, not the McDonald’s, epitomized what Murray Rothbard described in Economic Controversies, “the entrepreneur is not passive but extremely active. He takes risks, and attempts to forecast the future; he grapples with uncertainty.”

Kroc’s first wife, played by a perfectly dour Laura Dern, is tired of Ray’s schemes. She wants the life of dining at the Country Club with a husband that isn’t on the road hustling all of the time. Ray’s mortgaging of the house to finance the franchising model sends her into a tailspin when the bank calls to collect a seriously past due payment.

Sonneborn overhears Kroc giving an angry earful to his banker, chases him down, and provides life-changing advice.  Entrepreneurial “alertness” is grasping a good idea and running with it. And run Kroc did. He and the McDonalds had a contract requiring the brothers to approve everything, but Ray grew tired of their constant denials and began to ignore them.

Once he had the real estate, he had control. Contracts are only good if they can be enforced with the financial firepower to win in court. The guys in San Bernardino kept cranking out burgers and fries while telling Kroc to stop growing.

However, Ray, at age 52, was a man on a mission. He looked everywhere for hungry scrappers to be franchisees. He soon learned the rich guys he knew, and his wife Ethel liked so much, from the Country Club, while having the money, didn’t make good franchisees. They were too lazy and cared more about their golf handicaps than the management of their restaurants.  Kroc believed family men working two jobs after failing at their own businesses were perfect McDonald’s franchise candidates.

With scenes of Kroc picking up trash and sweeping store parking lots, moviegoers are constantly reminded that owning a business isn’t a glamorous do-nothing-but-count-the-money endeavor. It’s never ending hard work, attention to detail, and perseverance.

It took perseverance to get “The Founder” in theaters. The movie was shelved for two years. And while I gush about it, the movie has grossed only $11 million. Esteemed reviewer Rex Reed thinks he knows why. The movie would be a warm and fuzzy if the heroes were the two brothers. Instead, “It’s a painful story,” writes Reed, “but despite Michael Keaton’s charisma, the centerpiece of the film is such a heel that you cannot like him, believe what he says, or care about what he does to cheat his way to the top. With no one to root for, the movie leaves a bitter after-taste no Chicken McNugget can erase.”  Reed protest too much.

The film “Super Size Me” focused on a heel accusing McDonald’s of making America obese and the star [Morgan Spurlock] was said to have “goofy watch ability.” Nobody roots for entrepreneurs. Succeeding is somehow cheating. Outmaneuvering obstinate partners is supposedly unethical.

However, entrepreneurs don’t care. “No dullness and clumsiness on the part of the masses can stop the pioneers of improvement,” wrote Ludwig von Mises. “There is no need for them to win the approval of inert people beforehand. They are free to embark upon their projects even if everyone else laughs at them.”

The film portrays plenty of people laughing at Kroc. In the end, he fashioned thousands of multi-millionaires, including his third wife Joan, who won great acclaim, not for making billions, but for giving away what Ray created, including $225 million to National Public Radio. All things considered, maybe she was the heel.