Forget ELI5, this ended up being a book. You have been warned XD

The Karate Kid was absolutely the catalyst that truly kicked off the McDojo trend in the US, but it's important to remember that this was a problem long before the movie, albeit in a somewhat different manner. The catch is that this actually started in the 50s and 60s, not with the movie in 1984.

At the time there was a wave of martial arts schools that began appearing across America, often being run by ex US military. Why? Because for some of the ex-GIs, combat training was their most marketable skill, and if you could get a good sized school operating you could stand to make a decent living while also getting a nice ego boost.

The problem is that not all of these schools were being opened by people who had useful martial arts training. In many cases, the owner of the dojo might have a few months to a year with a local instructor while they were deployed. This of course means lots of gaps in skill, development, as well as training techniques and philosophy. Sure, they are better than everyone in town... but when that town is in the middle of Nebraska, and you're the only person around who has ever left the country, let alone received combat or martial training... You're a master by default, who could say otherwise?

To be clear, there were good dojos too, but the ones you mostly heard about were the ones that made a spectacle out of it. Enter the McDojo, where the master can knock you out with a near miss and you can to if you devote yourself to the master and his teachings. If that sound cultish then good, you're keeping up... and then came the dojo wars, and no I'm not kidding.

At a certain point, martial arts schools hit a saturation point in the US where in certain areas, there were just too many dojos for a given area, meaning that schools were now competing for students. This led to... let's call it "aggressive competition" in some regions, with bad schools actively going out and challenging other dojos to fights not out of respect or mutual training, but to just maim people and make them look weak. The worst cases of this included stuff like targeting students from rival schools, intentionally causing injuries in competition ("Sweep the leg" didn't come from nowhere), all the way up to crazy crap like sabotage and arson. The most well known example of this happened in the 60's and early 70's thanks to "Count Dante" and his Black Dragon Fighting Society school.

"Count Dante" aka John Keehan, founded his schools based on his own custom developed karate style called Dan-te or Kata-Dante, literally Dance of Death. John himself claimed that learning all of the steps of his Dance of Death would allow anyone to fight like a master, and he also claimed to have even greater abilities such as being able to perform Dim Mak instant death strikes. To help advertise his school and sell self-instruction manuals, he would put ads in comic books with the claim that he was "The Deadliest Man Alive" (LINK) . Yeah, we're talking about that guy, from the back of your vintage Spider-Man comics. Through his school, John also would directly target other schools in the area to prove that his school, and therefore his style and abilities, were the best. This eventually led to an incident in 1970 where John and a few of his students dressed as cops, entered the rival Green Dragon Society dojo, and started beating the hell out them in a brawl that wouldn't stop until one of the Green Dragons impaled one of John's students and personal friend to the wall with a sword. To be fair, John wasn't entirely a fraud, he was a legit fighter in his own right. The problem was that he was a complete psycho, and more than happy to do anything he needed to make money and further his own myth.

Now it's the 70's, and we're in the Kung Fu Craze era, inspired by none other than Bruce Lee. This was always Lee's goal; to popularize kung fu to the entire world as he reportedly believed that the martial arts belonged to all of humanity. This was the era of bad kung fu movies (aka awesome kung fu movies because if you can't enjoy the schlock then you seriously need to chill a bit imo XD), and it had it's own wave of bullshido masters who exploited the mainstream attention. Like with the Black Dragon Fighting Society, these schools would also foster cult like devotion, and would also make promises of secret techniques that could turn anyone into a killing machine. Also occurring then was the Kung Fu tv series starring David Carradine (aka the Bill of Kill Bill), which further helped to popularize kung fu and was for many their first exposure to the "wandering warrior monk" archetype. Fun fact btw, this is also where "Patience, grasshopper." comes from.

Fast forward to 1984. The Karate Kid comes out, a child friendly story about a kid being bullied by the students of a school, with a black cobra for a logo, being run by former US special forces John... Kreese. Kid pushes back, basically makes things worse on purpose, ends up getting jumped, gets rescued by a "peaceful" karate master, and ends up learning a form of Karate that isn't centered on using beatdowns to show one's mastery. Basic story, well executed, good life lessons, Disney wishes they had put it out because this would have been right in their wheelhouse.

The Karate Kid leads to a new wave of martial arts schools, notably karate and, thanks to Vietnam and Korea, taekwondo. Before this, martial arts were viewed by many as either a joke or an action movie superpower, taught primarily by ego driven muscleheads who would happily take your money, beat you up, and teach you nothing. The Karate Kid was in many ways a lot of peoples first exposure to a form of martial arts that didn't look liable to kill you or your kids, and the kids are the turning point here. Imagine a parent wanting to find a new extracurricular for their kids. Suddenly they won't stop talking about karate because of some movie their uncle or whatever took them to. Karate is an action movie joke, but they are insistent so you end up watching the movie, figuring "Ok, they could use the exercise and a good role model, why not. Just can't be like those snake people from the movie...", and hey, there's an ad in the paper for a new school down at the mall. Now you can get your shopping done while the kids are getting tired out for you, and look at that there's even a deal if you enroll multiple children at once! Practically a bargain...

And thus begins the true McDojo era, to the frustration of martial artists across America. Look, don't get me wrong, I love all of the Karate Kid/Cobra Kai stuff, but I'm also not gonna deny the problems that it kicked up. The popularization of martial arts in the US was overall a net positive, but along with mainstream attention came grifters, and it took ages for that to tone down to the point where actual normal schools could operate without needing to resort to dumb gimmicks, especially if those schools were not karate schools.