Bt20403 Commercial Law The Founder

THE FOUNDER
Assignment #2: The Founder (FilmNation Entertainment, The Combine, Faliro House
Productions S.A. 2016)
Guidelines:
a) Watch the movie.

b) Read the synopsis of the movie before you watch the movie so that you have
a general understanding of what is going on in the movie.
c) This assignment carries 10% of your carry mark for coursework. Please
complete all the questions.
d) Each question carries certain marks as indicated in a bracket at the end of the
question.
e) Submit in person to me or tutor latest by 12 noon 29 March 2019
A. Signing the franchise contract (3 marks)
1) Who made the offer to McDonald’s brothers (Mac and Dick) for turning their
business into franchise? (1 mark)
Ray Kroc. After McDonald’s brothers told him about the journey of their business,
he met with the brothers in the next morning and tells them that their whole
operation and the tasted of their product are meant to be a franchise.
2) Initially, Mac and Dick were not keen in entering franchise contract with Ray
Kroc. Because they have previously encountered absentee franchisees who were
lackadaisical in upholding their system. However, Ray was very persistent and
eventually managed to convince them. The brothers agreed to do on certain
term. What is the term? (2 marks)
On the minute of 37:00, Ray Kroc and McDonald’s brothers are signed the
contract that consist of the term. The term given by the brothers is Ray
receives 1.9% of net profits generated by franchisees and 0.5% from the said
profits are paid to the brothers. They stated on the contract any changes to the
speedy system or any parts of the business must be formally submitted in writing
for approval by the brothers.
B. Pioneers in McDonald’s franchise business (3 marks)
1) During the initial stage of the McDonald’s franchise business initiated by Ray, he
was caught by surprise during his visits to the outlets. He noted that the
franchisee (movie at 49:37 to 50:40) had deviated from McDonald’s business
terms. Explain any two terms had not been complied by the franchisee. (3
marks)
The reason why Ray Kroc was caught by surprise when he visits the McDonald’s
outlet is because the franchisee didn’t follow the standard operation procedure
(SOP) that has been set by him. As we saw on the movie, the first things he see
is that there is trash everywhere of the floor of the outlets. This shows that the
franchisee didn’t care about the cleanliness of the shop. Then, he see the quality
of food that been sell to the customer are not good.
C. The McDonald’s Corporation (4 marks)
1) Ray renames his company to The McDonald's Corporation and demands to be

released from his contract and buy the brothers out. How did Ray manage to end
the contract with the brothers? (2 marks)
In minutes to 1:38:22, Ray wants to end contract with the brothers Dick and
Mac. Ray and the brothers use the lawyers to solve their problems. Due to Dick
and Mac’s inability to cover the costs of suing Ray, they have to agree to lease all
McDonald’s assets submitted to Ray and Ray offering $2.7 million in
compensation. Ray succeeded in terminating the contract with two siblings
before a lawyer in whom fate was in favour of him because they did not make
any written contract; they just shook it as a sign of consent.
2) The brothers had proposed a 1% annual royalty in perpetuity, but when the time
comes to finalize the agreement, Ray refuses to include the royalty in the
settlement and instead offers it as a handshake deal. Does a handshake deal
amount to a binding agreement? (2 marks)
A handshake deal is a verbal commitment to a transaction. A witness must take

place in order for the deal to become binding. Or also have a follow up email or
some form of communication to the other party, have any correspondence or
other documentation that could be used as evidence in court or other legal
needs, or begin to perform to the agreement in the deal. Usually when we are
signing an agreement, usually it will be signed on paper for both parties and
there will be some witnesses there as proofs of the agreement.
Based on the movie, the two brothers had proposed a 1% annual royalty in
perpetuity. Ray Croc agrees with it and when they met, there are no agreements
to be sign, instead he just offers them a handshake deal to protect his investor
group. This shows that there is no clear agreement has been made because the
deal was not binding. These deals are easy to be done and also easy to be
cancelled as there are no proofs on paper, and instead, it is done verbally.
Besides, the witnesses have to be trusted and liable on the deal. Later on in that
movie, the two brothers never get their royalties as they were unable to prove
their handshake deal.

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THE FOUNDER

a) Watch the movie.

1) Ray renames his company to The McDonald's Corporation and demands to be

A handshake deal is a verbal commitment to a transaction. A witness must take

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