The Buffalo News Business Today reports that the Syracuse-based company that is the largest single owner of Burger King franchises is standing by the chain’s promotion of a cut-rate double cheeseburger, and is not participating in an uprising being mounted by many other franchisees.
The National Franchisees Association, on behalf of 850 other Burger King operators around the country, has filed a lawsuit against the Miami-based Burger King Holdings Inc., protesting the corporation’s insistence that its franchisees offer double cheeseburgers for $1.
But Carrols Restaurant Group, in Syracuse, which owns 314 Burger King restaurants throughout the Northeast and Midwest, including many of those that dot the landscape in the Buffalo area, is remaining loyal to the King.
“We don’t agree with the lawsuit,” said Joseph Zirkman, vice president and chief counsel of Carrols. “We’re not part of the National Franchisees Association, and they do tend to take positions we don’t necessarily agree with.”
The NFA, in a letter signed by 27 franchisees, members of the organization’s board and the heads of 21 regional franchisee organizations, says the nationally advertised promotion causes those actually operating the restaurants to lose money, as much as 10 cents on each double cheeseburger sold.
“Your management team has pushed the franchise community to the brink,” the letter said. “We are taking this extraordinary and historic action to communicate our concerns directly to the board.”
As the largest owner of Burger King franchises, Zirkman said, Carrols doesn’t have to resort to lawsuits to communicate with BK management.
“We’re just different,” he said. Zirkman also said that his company concurs with Burger King management on the need to offer the inexpensive double cheeseburger to compete with low-priced deals offered by competitors such as McDonald’s and Wendy’s. He said such promotions build traffic in the restaurants, and customers attracted by the deal are also likely to purchase other, higher-margin items, such as fries and soft drinks, while they are there.
Zirkman also said that he doesn’t think a $1 double cheeseburger is really a money loser.
“It’s a low-margin item,” he said, “but it’s not like you lose money every time you sell one.”
Ninety percent of Burger King’s 12,000 locations are owned, not by Burger King Holdings, but by franchisees. Those owners may operate one restaurant or hundreds, and NFA claims to represent 80 percent of them.
In its lawsuit, NFA argues that Burger King Holdings does not have the right to set the prices charged by its franchisees, and points out that the organization twice voted against the plan before it was imposed anyway last month.
Burger King management, meanwhile, issued a statement defending not only the promotion, but also the chain’s recent record of growth, including six years of worldwide increases in same-store sales and the addition of more than 800 new locations.
In addition to its Burger King operations, Carrols owns the Pollo Tropical brand, a chain of marinated chicken restaurants that operates mostly in Florida, with franchises in the Northeast and in Puerto Rico, Ecuador and the Bahamas, and it owns Taco Cabana Inc., a chain of 150 restaurants in Texas, Oklahoma and New Mexico.