McDonald's: Behind The Arches
If you want to understand the big picture about McDonald's, I highly recommend reading John Love's McDonald's: Behind The Arches
1. Kroc was the national licensing agent of the McDonald's and yet made substantive changes in the system, which may not even have been part of his role. He had no authority to change the McDonald's brother system, but did so anyways without written approval. Although, during the seven years, Kroc repeatedly asked for approval, he rarely obtained verbal approval and never written approval. "He concluded that the lawyer for the McDonald brothers was so intent on "protecting" them that he had drafted an unworkable contract."
2. As Kroc grew the system, the contract violations multiplied, hundreds of changes were made without the McDonald's approval. Kroc had jeopardized his master license, which could have put him out of business. Dick McDonald explained, why they refused to approve Kroc's changes thusly "If you have something that's successful and you start tinkering with it, it's a big mistake." Good thing for McDonalds, that Kroc never believed in a proven system but was always building a better system.
3. As the expiration of the master license came due, Kroc found himself in trouble. Kroc wanted more control, but the McDonald's lawyer was completely inflexible. "Kroc wasn't going to get one iota of control. He as just selling franchise and that was it."
Because the number of stores were growing and the possibility that the estate tax would wipe out their investment, both Kroc and McDonalds agreed upon the $2.7 million purchase price.
Kroc's final master license with McDonald's was for 99 years, or virtually evergreen. Love's book is one of my favorite franchising books.
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