THE FOUNDER

founder1The late philanthropist Joan Kroc accomplished much during her 12-year courtship and subsequent 15-year marriage to Ray Kroc, the founding chairman of the McDonald’s Corporation. One thing she did not do, however, was convince her second husband to deploy milkshake mix in place of real ice cream in the stores.

That’s the pivotal plot point in the “The Founder,” a film that purports to tell the true story of the controversial corporation that defined fast food and forever changed the way the world ate. Not since musician Mark Knopfler immortalized the irascible CEO in his 2004 song “Boom Like That” has the early beginnings of the company been depicted in popular culture. Such moments are notable, given McDonald’s notorious resistance to outside scrutiny. (Just try, as an independent researcher unaffiliated with the company, to gain access to the voluminous corporate archives.) The only existing history of McDonald’s was composed under the watchful eye of its executives, way back in 1986.

The story of how Kroc morphed an idea sprouted in the California desert into an international franchising empire is studied in business schools around the world even today, though it’s most typically told through the lens of unchallenged mythology. But rather than setting the record straight, “The Founder” plays fast and loose with the facts, leaving an erroneous impression about the mechanics of the deal, as well as about Ray’s formidable and largely unsung third wife, Joan.  (Scroll down for the fact-check.)

founder2Joan was, indeed, married to a man named Rollie Smith when she collided with Kroc in 1957 in St. Paul, Minnesota. Rollie didn’t own a restaurant; he was a Navy veteran working as a fireman on the Milwaukee Road railroad.  Kroc, a former paper cup and milkshake machine salesman, was himself married, and peddling franchises around the mid-west on behalf of brothers Dick and Mac McDonald. Their hamburger stand in San Bernardino, one of countless such operations on the emerging byways of post-War America, had emerged as a runaway success because of their spare menu and well-choreographed “Speedee” system of service they’d artfully charted out on a tennis court.

Then 28, Joan serenaded diners on a Hammond organ in an upscale restaurant in St. Paul called the Criterion, one of three jobs she juggled to make the family’s ends meet. Ray, himself a pianist, was smitten by her musical proficiency, not to mention her striking good looks. Soon, Joan’s employer, Jim Zien, was buying in to the fast-food game, and, not coincidentally, hiring Joan’s husband to manage his McDonald’s outpost in nearby St. Louis Park, Minnesota—store number 93.

With a bonus Rollie earned for his hard work, he, Joan and their daughter decamped to Rapid City in 1959 to open the first outpost of the fast food chain in South Dakota. Wives were the only women allowed then to work at the hamburger stands. (Unpaid, of course—and out of sight.) From the back office, she dutifully placed orders to local suppliers for potatoes and such, helping to launch her husband as a successful franchisee.

Meanwhile, drama was brewing between Kroc and the inventors of the system he was propagating across the land. The corporation was bleeding money as the ambitious salesman added staff to expand the empire and police stores for consistency. Back home at the original outpost, Dick and Mac were collecting sweet, passive income for their idea: of the 1.9% royalty collected from franchisees, they received .5%. More concerned with keeping parking lots tidy than with the tedious chore of balancing the books, Kroc struggled to pay his own bills, as well as those of the company’s, even after his chief ally, financial mastermind Harry Sonneborn, cooked up the real estate formula that eventually righted the unstable ship.

founder3The film depicts Joan’s purring insistence that Kroc switch from ice cream to milkshake mix to save franchisees on pricey refrigeration, and that his acceptance of this convenience product precipitated the breakup with Dick and Mac. Kroc most certainly needed Joan, but not in this capacity. Such a product was one with which he was well-acquainted from his days as a salesman of revolutionary multi-spindled milkshake machines. (During World War II and the era of sugar rations, he’d made do by selling Malt-A-Plenty, a powder made from corn syrup first used in 1938.)

The break-up of the brothers from Kroc had nothing to do with frosty treats, but rather their chilly relations. Kroc needed to extricate himself from his ironclad agreement with Dick and Mac in order to raise capital and continue to grow. In 1961–the same year he divorced his first wife, Ethel–he asked the founders of McDonald’s to name their price to go away. Tired of his temper and bossy bluster, they were in the throes of planning an encore: A chain of coast-to-coast motels they intended to call, in honor of their heritage, “A Wee Bit of Scotland.” After mulling it over for a short while, the men who invented McDonald’s delivered the price to sell their creation to the man who ran with the idea: $2.7 million.

A panicked, cash-poor Kroc asked if he might pay down this grand sum in installments, over time. Dick McDonald’s answer: “If it’s not cash, we might as well continue with the royalty.”

Sonneborn managed to raise the necessary money for the buy-out, though, poising the company for its blockbuster stock market debut in 1965.  Even then, no one could have imagined the eventual, phenomenal growth of the chain.

Neither brother ever appeared to lament the financial terms of the deal. “You won’t have to hold a tag sale for us,” Dick said in one interview. (Mac died in 1971.) “I have no regrets,” he said in another. He told a reporter for the Wall Street Journal in 1991 he’d never calculated what the continued royalty would have made him.  He proudly showed off a copy of the payout check to visitors.

He did, however, angrily push for recognition.   For a time, the fact that real men with the name McDonald actually existed was craftily avoided in corporate lore.  That wasn’t Kroc’s doing; it was the PR machine behind the company that amped it up, particularly after Kroc died in 1984.

founder4As for Joan, after some dramatic detours, she became Ray’s wife in 1969. Her biggest contribution to his life had to do with another liquid beverage: Early Times whiskey, and his affinity for it. She became an innovative pioneer in the modern alcoholism addiction movement; an early proponent and funder of hospice; the first individual to give a million dollar gift to the Democrats; and a passionate, active supporter of the no-nukes movement. Her posthumous $235 million gift to NPR is credited with putting the network on sound financial footing, and her $2 billion gift to the Salvation Army created several dozen world-class recreation facilities in poor neighborhoods around the country. She never forgot the roots of her fortune, though. Around the fancy neighborhood of Rancho Santa Fe where she made her last home, she was known to drive through the McDonald’s to pick up a snack, sometimes forgetting her purse, other times offering $100 tips.


FACT-CHECKING

• Movie asserts: The McDonald brothers’ previous franchise agent “didn’t do a great job,” allowing Ray an opening to sell on their behalf.

NO. Original franchise agent Bill Tansey had a heart attack. Dick McDonald said in an interview in 1992 that if he hadn’t, Kroc would likely still be selling milkshake machines.

• Movie asserts: Ray mortgaged his home behind Ethel’s back in order to finance his first McDonald’s.

SORT OF. He did take out second mortgages to finance his involvement with Prince Castle, but Ethel knew about them, though they did infuriate her.

• Movie asserts: A franchisee in Minnesota named Jim Zien takes Ray to dinner at a fancy restaurant, and introduces him to the restaurant owner, Rollie.

NO. Jim Zien owned the fancy restaurant; Zien hired Rollie to manage the McDonald’s franchise Zien opened in St. Louis Park. Rollie had been a fireman on the railroad before that, with no prior restaurant experience.

• Movie asserts: Joan is in her early 30s when they meet.

NO. She was 28. Ray was 55.

• Movie asserts: Ray drinks Canadian Club.

SORT OF. Ray famously drank a more downscale brand of whiskey, Early Times, even after he became a multi-millionaire.

• Movie asserts: Long-time McDonald’s executive Fred Turner was a hired hand in a restaurant when Ray first spots him.

NO.After dropping out of college and serving in the Army, Fred wanted to buy a franchise with friends, and worked in a restaurant to learn the ropes of the business while they figured out a location. Ray took a liking to him and promoted him to corporate.

• Movie asserts: When Ray’s unsuccessful at getting loans, he goes to his golf club to sell franchises.

SORT OF. He was indeed unsuccessful at raising money because of his bad financial track record, but he also needed franchisees.

• Movie asserts: That Ray declares, “I am telling you, McDonald’s can be the new American church, feeding bodies and feeding souls. And it ain’t just open on Sundays, boys. It’s open seven days a week.”

NO. Screenwriter Robert Siegel told NPR in an interview aired on January 25, 2017 that his wife made up that quote.

• Movie asserts: A door-to-door Bible salesman, a man named Leonard Rosenblatt, becomes a successful franchisee in Waugkegan, Illinois.

SORT OF. The salesperson was Betty Agate, wife of Sandy Agate. After knocking on the door of Ray’s office at 221 N. La Salle in Chicago, she and her husband became enormously popular franchisees in Waukegan.

• Movie asserts: Joan and Rollie give Ray a copy of Restaurant Business Monthly with an ad for milkshake mix.

NO. There was no such publication, nor was there such a product called “Instamix.” A dairy developed the mix for McDonald’s in the late sixties, early seventies. And during the war, when Ray was a milkshake salesman, Ray peddled a mix with corn syrup in place of sugar. It was called “Malt-a-Plenty.”

• Movie asserts: Ray meets Tastee Freez executive Harry Sonneborn at the bank, where he’s gone for a loan, and Harry approaches him when he hears him being rebuffed by a loan officer.

NO. Ray met Harry, who he credits with making the growth of the company possible, after Harry left Tastee Freez in a dispute with that company’s owner. Harry was at first reluctant to meet Ray because he’d heard he was anti-Semitic.

• Movie asserts: Harry saves the day by cooking up a brilliant real estate scheme.

YES. Even Ray later credited Harry with making McDonald’s viable.

• Movie asserts: Ray Kroc is listed as the president of Franchise Realty Corp, the company that Harry masterminded to buy real estate on which McDonald’s franchises were built.

NO. Harry was indeed the first and only president of the McDonald’s offshoot called Franchise Realty Corp.

• Movie asserts: The name of Franchise Realty Corp. was changed to McDonald’s to avoid confusion.

NO. Franchise Realty Corp. was folded into McDonald’s, and Harry became its president, when Harry secured an essential loan for $1.2 million that kept both companies alive and running. Backers insisted that Harry, who had the greater business sense, be in charge.

• Movie asserts: “It’s a whiz-bang idea and you thought of it” Ray tells Joan regarding the Instamix milkshake mix she suggested he deployed to save money on pricey refrigeration.

NO. Milkshake mix at McDonald’s is credited to Cumberland Dairy. Ray peddled Malt-a-Mix during WW2, when he was selling milkshake machines and the war rations cut the availability of sugar.

• Movie asserts: Dick is furious about mix rollout.

NO. Dick and Mac were gone from the company by the time McDonald’s rolled out milkshake mix. The use of frozen French fries, however, did happen on their watch.

• Movie asserts: Ray tells Ethel he wants a divorce while they’re eating dinner

NO. In fact, Ray told Ethel’s extended family he intended to divorce her before he ran off with Joan, who left her husband in 1961, and then returned to him before ultimately divorcing him 8 years later. Meantime, Ray went through with his divorce, married his second wife, and had his lawyer tell her he was leaving when Joan gave the go-ahead.

• Movie asserts: Ray visits Mac in the hospital with a blank check to buy them out.

NO. He basically asked the brothers, over the phone, to name their price. They responded a few days later with the sum: $2.7 million.  Ray describes in his memoir that he went ballistic; he had no idea where he’s get that kind of money.

• Movie asserts: In addition to that lump sum, one percent of future earnings is promised to the brothers in a handshake deal, but it’s left out of the contract to appease the financers of the cash.

NO. Since McDonald’s was cash-poor in 1961, Ray asked the brothers if he could pay their requested $2.7 million over time. The brothers said no, that if Ray couldn’t come up with the cash, they’d continue to collect their .5% royalty. Harry found a backer, and the brothers got their money.  No one knew at the time how much McDonald’s would grow.

• Movie asserts: Ray explains that he didn’t just steal the formula and use his own name because no one would have eaten at Kroc’s

YES.