QQuestionBusiness Law
QuestionBusiness Law
Did Ray Kroc honor the handshake deal regarding the 1% profits in perpetuity (i.e., "forever")?
A. Yes
B. No
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Answer
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Step 1:To answer this question, I'll provide context and analysis about Ray Kroc's deal with the McDonald brothers:
Step 2:: Understanding the Original Agreement
The McDonald brothers (Dick and Mac) originally started the McDonald's restaurant concept. Ray Kroc became their franchise agent in 1955 and later bought the entire company. During initial negotiations, the brothers believed they had a handshake agreement for 1% of future profits in perpetuity.
Step 3:: Kroc's Actual Actions
Ray Kroc did NOT honor the handshake agreement. When he purchased the McDonald's business for $2.7 million in 1961, he deliberately excluded the 1% perpetual royalty from the contract. The McDonald brothers were under the impression they would continue receiving this 1% profit share, but Kroc intentionally omitted this from the final agreement.
Step 4:: Financial Impact
The 1% would have been extremely valuable, potentially worth hundreds of millions of dollars as McDonald's became a global franchise. By excluding this clause, Kroc saved the company substantial money and kept the entire profit for himself and future shareholders.
Step 5:: Ethical Consideration
While technically legal, Kroc's action was considered unethical, as it violated the spirit of their original handshake agreement.
Final Answer
No, Ray Kroc did NOT honor the handshake deal regarding the 1% profits in perpetuity.
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