Page 33 - Everything I Know About Business I Learned

Honesty and Integrity

In the interest of seeing his operators succeed, Ray even saw
that supplier rebates went to the franchisees, not to corporate.
He did anything he could to lower costs for the operators and
help them be successful. This was a core principle and major
point of differentiation from other franchise organizations, even
today. In my consulting practice we have worked with a number
of franchise companies, and it continues to strike me how in other
systems the franchisor is less concerned about the franchisee’s
financial success, which can result in ultimately compromising
the entire system. It seems that many franchisors are concerned
only about the royalty check and how many more units a fran-
chisee will develop, with the franchisee taking all the risks.

Lesson Learned

As a franchisor, McDonald’s ran its system so that all of the 3
stakeholders stood to gain. It made everyone feel like a true
partner.

Putting the needs of the franchisee first was paramount to
building McDonald’s, but that didn’t make building the system
easy. Far from it, said Mike Quinlan, who served as the company’s
fourth CEO, from 1987 to 1998. Ray was a powerful motiva-
tor, an idealist, who struggled to meet his bottom line in the
early years. Noted Mike: “Ray used to say, ‘The operators have
to make money before the company does, right?’ Well, his for-
mula was so messed up we were going broke before Sonneborn
figured out we were going broke.” Mike was referring to Harry
Sonneborn, the company’s first CEO who brought the company
public in 1965; it was Harry who devised the strategy to acquire
the land where McDonald’s units would be built—putting
McDonald’s in the real estate business, and opening up a new