Page 33 - The Bootstrapper Bible

ChangeThis Which leads to the exit strategy. Itʼs terrific. Any number of national retail chains could buy the Stereo Advantage and use it as a template for rolling out a national chain. The owner has managed to create a management team that doesnʼt require his personal involvement in every decision. In many ways, itʼs the ideal business to sell: too small to go public, but per- manent enough to last beyond its founder. Ray Kroc, one of the greatest bootstrappers ever, took a completely different tack. McDonaldʼs (which he didnʼt invent, by the way) was built with the intent to “scale” it—to make it bigger. Ray found a restaurant in California, run by two brothers. They had a system. They knew how to make a great hamburger, super fries, and a wonderful milkshake. They had a look and feel that was easy to communicate. And a way to cook. Ray decided that growing the business was the key to competitive insulation and profits. If he was the biggest, first, he would win. So he started franchising. He let others buy the right to build their own McDonaldʼs. The franchise deal was simple: a little money up front along with a share of the profits forever in exchange for the brand name, a rulebook, advertising, and unique products. Letʼs take a look at the McDonaldʼs business model as Ray saw it in 1965 with regard to the five principles: IT’S A VERY PROFITABLE BUSINESS. The cost of making the products is low, and a newly prosperous American public, fueled by a baby boom, is happy to pay for them. IT’S VERY PROTECTIBLE. The brand name is powerful, and becomes more so every time any McDonaldʼs on earth runs an ad. And by being first in the market, it gets the best locations, which are worth almost as much as the brand. (Did you know that in 1997, on any given day, one out of seven Americans ate a meal at McDonaldʼs?) | iss. 6.01 | i | U | X | + | h 33/103 f