Why did the McDonalds agree to a handshake deal in The Founder?
When Ray Kroc attempts to buy McDonald's from Dick and Mac, one of the brothers' demands is "1% if the company's profits in perpetuity". However, when negotiating, Ray Kroc refuses to put this demand in writing, in the form of a contract, and instead offers a handshake deal.
I wonder why the brothers, and most importantly their lawyer, did not object to this. Mac seemed to be reluctant while shaking Ray's hand, but no one from their party said anything.
All throughout the film we see how Ray slowly pushes the brothers out of their own company. In a scene before that, Ray even makes clear in a call to Dick, saying that he is ruthless in competition. Surely they would have known by that point that Ray wasn't trustworthy.
So why did they not refuse a non-contractual deal?
Best Answer
For the same reason that they agreed to sell the name in the first place: they had no leverage to fight it; even though they knew they were getting screwed over.
By that point, Ray had enough resources and determination to win any legal battle. Even though the brothers were in the right and could have gotten whatever they wanted from the legal standpoint; they didn’t have the means to go to court and fight for it. Ray says something to this effect shortly before the deal is made.
So even if the commissions had just been outright refused instead of promised in a non-binding way; there’s not much that the brothers could have done about it. Agreeing to the commission helped to move the deal along; but Ray had the power by that point to simply refuse it.
So the brothers had 2 choices at that point… take the money along with a hope of maybe getting the commissions also; or end up getting a new deal that didn’t involve commission. They didn’t have the power to force a third option of getting the money and the commissions in a legally-binding way.
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What is McDonalds handshake deal?
But there's something the family rarely talked about: the handshake deal in which Ray Kroc promised the McDonald brothers a half-percent royalty on all future McDonalds proceeds.Did Ray Kroc honor his handshake deal?
Did Ray Kroc renege on his handshake deal to pay the McDonald brothers a percentage of the revenue from the franchises? Did Ray Kroc really credit himself with being the founder of McDonald's? Yes. After the McDonald brothers sold the company to Ray Kroc in 1961 for $2.7 million, he began to take credit for its birth.What was the final deal negotiated between the McDonald brothers and Ray?
Negotiations were made wherein it was decided to give the entire business control to Ray while the brothers keep the original store in California, get paid 2.7million USD and also receive 1% of all the revenues Ray would make in perpetuity.What was the mistake the McDonald brothers made?
If anything, the McDonald brothers just made a classic business mistake: cashing out too soon. It seems that the McDonald brothers were financially successful even before they met Kroc. In 1954, their single restaurant in San Bernardino netted them $100,000, or $900,000 in today's dollars.Kroc buys the McDonald brothers out – The Founder (2016)
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