Article

Will Burger King’s competition take advantage of merger backlash?

Fans, politicians are calling for a boycott of Burger King after company establishes Canadian headquarters.

August 27, 2014 by Alicia Kelso — Editor, QSRWeb.com

Now that the dust has settled a bit on the Burger King/Tim Hortons deal, in which the two brands will form a combined global QSR company headquartered in Canada, it’s a good time to assess the general reaction. And there has been quite a reaction.

Some may even call it a backlash.

Just take one look at either brand’s social media channels and you’ll find an overwhelming majority of fans’ comments to be negative. Tim Hortons’ fans largely believe their beloved Canadian icon has sold out to the slightly larger American burger company for $11.4B.

These comments continue today even as both brands have reiterated that nothing will change, that it will be business as usual, and that the merger is about expansion, not taxes.

"The decision to create a new global QSR leader with Tim Hortons is not tax-driven – it’s about global growth for both brands. BKC will continue to pay all of our federal, state and local U.S. taxes," Burger King wrote on its Facebook page.

A majority of the brand's nearly 6,000 commenters however, aren’t convinced. Most of these Whopper fans are convinced the deal has nothing to do with pleasing them, but rather boosting the company’s bottom line from the alleged tax inversion nature of the deal. The move would allow Burger King to pay taxes at Canada’s rate, which is slightly more than 26 percent, versus the U.S. rate of nearly 35 percent, the highest corporate tax rate in the world.

A tax inversion is when an American company embarks upon an acquisition or merger to reincorporate as a foreign company, which means their foreign earnings are taxed at a lower rate.

It is totally legal, although frowned upon by many. For example, Walgreens backed off its idea to move to Europe after facing harsh criticism earlier this month. President Obama has called tax inversions an "unpatriotic loophole."  

And, although on Tuesday executives from both companies denied this deal had anything to do with taxes, Wall Street analysts, business reporters, politicians, pundits and consumers are convinced otherwise.

According to CNN, Ohio Senator Sherrod Brown called for a boycott of BK. Michigan Senator Carl Levin said BK is basically "renouncing its citizenship." MoveOn.org has even filed a petition asking for a Burger King boycott, which has generated more than 60K signatures already.

"Burger King benefits enormously from being an American company and should pay its fair share of taxes here in America. Don’t even attempt this whopper tax dodge or we will boycott," the petition said.

How deeply will all of these grievances affect business? Time will tell if there is any lingering reputational damage for Burger King (or, Tim Hortons). In the meantime, you have to wonder if other QSRs (Chicago-based McDonald’s, Ohio-based Wendy’s, Massachusetts-based Dunkin’ Donuts, maybe?) in this intensely competitive industry are busy drawing up a marketing strategy touting their Americanism.

About Alicia Kelso

---

None

Connect with Alicia: