Thornton Melon (played by Dangerfield) is a truly successful rags-to-riches story. The son of an Italian immigrant tailor, he is shown as a boy in his father's shop one day, bearing his report card, which has less than stellar grades. When he tells his father his ambition is to work in the shop with him, his father tells him that "if a man's got no education, he's got nothing," and that he can do whatever he sets his mind to do.

Thornton is shown opening his first "Tall and Fat" clothing store and eventually becoming a corporate giant, complete with a TV commercial in wihch he asks: "When you go jogging, do you leave potholes?" He also has changed his last name to "Melon" (from the original "Meloni").

After his son Jason (played by Gordon) cancels plans for a visit, Thornton goes home to his second wife Vanessa (played by Adrienne Barbeau). Thornton is a widower and Vanessa is a money-hungry, aspiring socialite, unable to bear her crude husband. He threatens to expose her adulterous affairs after she threatens to sue him for divorce. "You're impossible," she says. "And you're easy," he replies.

Thornton tells his chauffeur and bodyguard Lou (played by Young) to drive him to Jason's college. Jason works as a towel boy for the Grand Lakes diving team, not making the cut during tryouts, and is treated badly by his rival Chas Osborn (played by Zabka). Thornton learns that Jason is unhappy, with only his best friend Derek (played by Downey) there for support. Jason intends to drop out, so Thornton offers to go to college with his son if he'll stay.

Possessing neither a high school diploma nor any transcripts or SAT scores, Thornton’s efforts seem to be stalled. But when the university's "Dean" Martin (played by Ned Beatty) -- a play on Dean Martin -- asks how he can possibly admit an unqualified student, the next scene cuts to a groundbreaking at the new Thornton Melon School of Business on the university grounds.

Thornton has bribed his way into an admission, which earns him the wrath of Dr. Philip Barbay (Paxton Whitehead), dean of the business school. Thornton also strikes up a romance with Dr. Diane Turner (Kellerman), an attractive professor dating Dr. Barbay, who becomes further enraged when he learns of Thornton’s interest in her.