I.

In 1954, Ray Kroc was 52 years old and selling milkshake machines. He had diabetes and the beginnings of arthritis, and had already lost his gall bladder and most of his thyroid.

He drove to San Bernardino because a single restaurant had ordered eight Multimixers at once, and he wanted to see what kind of place needed to make forty milkshakes at a time.

His own first store opened in Des Plaines on 15 April 1955 and took $366.12 that day. By the time he died in 1984 there were 7,500 of them.

II.

The franchise deal Kroc signed was bad. He received 1.4% of gross sales — under $3,300 per restaurant per year at early volumes — and out of that he had to cover operating expenses, hire staff and finance all expansion. The brothers took their 0.5% and went golfing. He couldn't change the building, the menu or the pricing without their approval.

He signed anyway. Not from naivety — he had been negotiating commercial agreements for three decades. He signed because access to the system was worth more than favourable terms. Get inside first, then find the economics. Harry Sonneborn eventually found them, in the land beneath the restaurants.

When the upside is asymmetric enough, terms are a second-order problem. Access is the deal.

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III.

By 1961 Kroc wanted control and asked the brothers to name their price. They said $2.7 million — a million each for Dick and Mac, and $700,000 for the tax. An astronomical sum in 1961. He borrowed it and paid.

Then he discovered the deal excluded their original San Bernardino restaurant. They had kept the flagship.

In 1963 he opened a brand-new McDonald's virtually across the street from it. They were no longer legally permitted to use the name.

He was already rich by then. He did it anyway.

"I was an overnight success all right. But thirty years is a long, long night."

— Ray Kroc, Grinding It Out

"The organization can't trust the individual; the individual must always trust the organization."

— Ray Kroc

One question: What are you turning down on terms that you should be taking for access?

Cheers,
Alex

P.S. Every issue distills one playbook from the Research Library — 813 of history's greatest people and companies, sourced.