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Burger King franchisee value meal suit results in mixed ruling
May 23, 2010
The battle between Burger King and the National Franchise Association, which represents a large bloc of the company's franchisees, has been partially resolved. Earlier this month, Burger King filed in U.S. District Court in Miami to have the class action suit brought by the NFA dismissed citing earlier rulings that allowed the company to require franchisee participation in its BK Value Menu. Late Thursday, a federal court judge affirmed that Burger King does have the authority to set such pricing while also ruling that the NFA has the right to file a suit on behalf of Burger King franchisees.
The portion of the NFA's suit charging that Burger King did not act in "good faith" by requiring its franchisees to sell the $1 Double Cheeseburger can now move forward. The NFA filed the suit in November on behalf of a class of all U.S. Burger King franchisees over concerns that the promotional price negatively impacted profits.
Both Burger King and the NFA are considering the ruling a victory.
Burger King said in a statement that the decision reaffirms its right to require franchisee participation in its BKValue Menu, including adding the $1 sandwich.
BKC believes the results of extensive testing conducted before the national rollout of the $1 Double Cheeseburger more than validated the business case for the addition of the competitively-priced product to its Value Menu.
NFA chairman William Harloe said in a statement that while the ruling did not go entirely in its favor, the organization feels vindicated by the decision because it confirms the right of the NFA to represent its franchisee members by filing suit on their behalf to protect their interests.
"The NFA will continue to litigate our claims, and we believe we will prevail," he said.
Burger King raised the price of the $1 Double Cheeseburger to $1.29 in April and launched the Buck Double, which features two patties with a single slice of cheese, on the value menu. The company said on its latest earnings call that the $1 sandwich promotion was part of the company's strategy to increase the value portion of its sales mix. Although the strategy did lower check averages, the company is counting on premium product rollouts such as its new Fire-Grilled Ribs to offset the shift.
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