By Denis Shmidt
While technology continues to change and evolve, we are constantly reminded that human nature remains the same. The Founder, the story of the man who took McDonald’s from a single obscure location and turned it into a household name, has the same themes as a modern-day tech startup: high hopes, best intentions, friction between the “engineers” and the business, betrayal, a power struggle, and ultimately the rewriting of history.
For those who haven’t seen it, it chronicles the story of the Richard and Maurice McDonald, two brothers who engineered an unprecedented system to create fast, cheap, consistent, and “delicious” burgers. When their attempts at expansion fell flat and they were relegated to a single California location, in stepped Ray Kroc, who partnered with the brothers to expand their system and name nationwide.
What starts as a promising partnership, ends with the McDonald brothers losing their restaurant, the right to use their own names, the control of a multi-billion dollar empire, and even their place in the McDonald’s origin story. But did it have to end that way? Just as with countless startups where one founder is pushed out and erased from history, the McDonald brothers had multiple opportunities to stop their own demise. By waiting until it was too late, they sealed their own fate.
Here are five things entrepreneurs can do to avoid stumbling in their footsteps:
1. Don’t ignore disagreements.
The last thing co-founders want to do is fight. They have a million things to take care of, and addressing internal strife doesn’t even make the list. However, just like in any relationship, a disagreement that remains unspoken doesn’t disappear. It grows, festers, and ultimately spills over into every other part of your life.
In The Founder, every argument is cut short by a slam of the phone. Unsurprisingly, even when the two sides are not speaking, the disagreements continue and lead to lost sleep, spoiled relations, and even a heart attack. Sticking it out until a compromise is reached may seem like torture in the moment, but it could end up saving your business, your relationships, and maybe even your life.
2. Don’t lose touch as your business grows.
You may have been an indispensable member of the team in the early years, but as your business grows, that could easily change. Staying within your comfort zone and ignoring how your business is evolving is the surest way to become obsolete.
In The Founder, the McDonald brothers insist on maintaining control of their national franchise while remaining in California. This quickly creates a gap between what they believe and the reality of how their business is expanding. Without this knowledge, they constantly butt heads with Kroc, miss opportunities that Kroc is able to capitalize on, and ultimately become a hindrance to progress rather than its catalyst.
No successful business survives without change, innovation and growth. M&Ms began as an efficient and cheap way to transport chocolate to the U.S. military during World War II. Today, the candy has successfully shirked its militaristic past and targets families and children with an endless assortment of colors. After the war, anyone who worked at the candy company and started out in military procurement would have had to change and adapt quickly, or move out of the way.
The same goes for you. If your business started as B2B but is now marketing directly to consumers, you either need to change with the times or watch as someone else takes the reigns.
3. Don’t let yourself be bullied.
There’s a difference between being combative and standing up for yourself. Not everything needs to be a fight, but allowing others to walk all over you is just a prelude to having them walk you out the door.
In The Founder, Kroc continues to push the limits of his agreement with the McDonald brothers without any negative consequences. He publicly announces himself as the sole founder of McDonald’s and inventor of the McDonald’s method, calls the first store he opens the original McDonald’s, and consistently ignores the brothers’ instructions. The more he gets away with, the more he pushes, until he finally pushes the brothers completely off the map.
Picking your battles is important. Not every perceived slight is a potential coup for your company. However, being a doormat is the surest way of being left behind. Deciding when to stand up takes experience and perspective. Having an outsider, such as an advisor, mentor, or advocate, who is not mired in the day-to-day politics, and who can help you see the big picture, can be the best way of making sure that you’re protecting yourself without becoming the problem.
4. Don’t let your partners define your options.
If a dispute does develop, it’s time to stop seeing your co-founders as partners and start seeing them for what they are: adversaries. If they are trying to push you out, everything they say is designed to do just that. Just because they frame your options in a certain way, doesn’t mean you have to accept them. Get outside professional help and explore all options before making a decision.
In The Founder, Kroc makes his final power play after having established a large corporation and with significant resources at his disposal. He freely admits that he violated his written agreement with the McDonald brothers and that they would likely win in court, but convinces them that they just don’t have the resources. Believing him, the brothers sign away their rights in exchange for a miniscule fraction of what their shares are worth and deprive themselves, and their descendants, of billions of dollars in future revenues.
As a litigator, this deal had me wanting to shout at the screen. The myth that a larger company cannot be beaten is just that, a myth—especially when the stakes are so high. Had the McDonald brothers sought competent legal counsel rather than being convinced by Kroc’s self-serving statements, we’d all be eating at…well, it would still be called McDonald’s, but you get the point.
5. Put it in writing!
Despite countless stories of co-founder disputes, a “gentleman’s agreement” continues to be a common and popular method of “formalizing” a partnership. Whether it’s the romantic notion of a “handshake” deal, the want to avoid awkward conversations, or just being too busy to sit down and hammer out a formal written agreement, these verbal agreements continue to persist. Having a written partnership agreement is the single smartest and easiest thing you can do to protect yourself.
In The Founder, even after Kroc has lied, cheated, stole from, and taken advantage of the McDonald brothers, he proposes a “handshake” agreement for their stake in McDonald’s Corp. Miraculously (for Kroc), the brothers accept. As the movie ends, we are told the obvious: The handshake deal was never honored, could not be enforced, and today would have been worth billions of dollars.
If your partner is willing to make you a promise verbally, they also should be able to put the promise in writing. If it’s put in writing, make sure you understand what you are signing. After spending years of your life and all of your savings creating a company, don’t cut corners at the finish line. Get someone who can help you understand the agreement, negotiate to make sure you get the best deal possible, and who will ensure that the agreement is honored.
If history has taught us anything, it is that the great thinkers are all too often pushed aside by the ruthless. The difference between those who are left standing and those that fall is whether they’re prepared to push back.
About the Author
Post by: Denis Shmidt
Denis Shmidt is the founder of Orsus Gate Law, a litigation boutique that helps companies recognize, mitigate, and avoid risk. After working for an international law firm and the County of Los Angeles, Denis now focuses on emerging to mid-sized organizations with a specialty in founder disputes.