McDonald's Brothers: The Lost 1% Royalty
The McDonald brothers sold to Ray Kroc for $2.7M with an alleged handshake 1% royalty deal that was never honored — worth billions over the decades. A cautionary tale about verbal business agreements.
The McDonald brothers (Dick and Mac) sold their restaurant operation to Ray Kroc in 1961. The deal allegedly included a handshake agreement for a continuing 1% royalty on gross revenue — but this promise was never honored. The official buyout was for $2.7 million. At the time, this seemed like a large sum. But the alleged 1% royalty, had it been paid, would have been worth billions over the following decades as McDonald's grew into the world's largest fast-food chain. Key details: - The 1% promise was reportedly a verbal/handshake agreement, never put in writing - Ray Kroc later reportedly said the brothers were naive for not getting it in writing - No evidence exists that any royalty payments were ever made beyond the initial buyout - The brothers' original San Bernardino location was eventually replaced by a Kroc-controlled franchise The story became a widely cited cautionary tale about the importance of written contracts in business deals, particularly when large future values are at stake.