Burger King settles value menu franchisee lawsuit

AP News
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Posted: Apr 18, 2011 2:16 PM
Burger King settles value menu franchisee lawsuit

Burger King's new owners have a long to-do list as they try to remake the struggling hamburger chain. On Monday, they crossed off one chore: Making nice with disenfranchised franchisees.

The company and its franchisees announced they would settle a legal battle they've been fighting since 2009, when the corporation told restaurant operators to sell the double cheeseburger for $1. The franchisees sued, saying they couldn't make money at that price.

The settlement comes six months after Brazilian investment firm 3G Capital bought Burger King for $4 billion. Since then, 3G has shaken up management, laid off workers and trimmed other costs, and set plans in motion to expand in Asia and Latin America.

The franchisees are not getting any money in the settlement. The double cheeseburger remains on the Value Menu, but at $1.29, where it's been for a year. At the time of the lawsuit's filing, the burger cost franchisees about $1.10.

But the franchisees will get more power in future decisions about what goes on the Value Menu, according to the company and the National Franchisee Association, which represents the independent restaurant owners and filed the lawsuit.

"I think we both feel it's not optimal, but that means it's a good settlement," said Tony Versaci, a Michigan franchisee who became the NFA's chairman in January. "If one side is real happy and other real sad, you've got a bad deal."

Burger King has incentive to keep its franchisees happy. They represent about 90 percent of the chain's restaurants, and 3G hopes to increase that to about 95 percent. Franchises carry lower overhead costs for the parent company.

Versaci and Steve Wiborg, Burger King's North America president, declined to give many details about the franchisees' new rights but said they will be able to vote on company proposals. Wiborg was a Chicago franchisee and a member of the NFA until 3G recruited him to the parent company in the fall.

"He's gone over to the dark side," Versaci joked.

Versaci and Wiborg described the legal fight as a situation they inherited. They said they've known each other for years and that they talked about how to settle the dispute even before they were in their current positions.

"We talked about it over dinner, we talked about it over lunch, we talked about it over breakfast, we talked about it walking into church on Sunday," Wiborg said.

The company had struggled with declining sales, in part because its main customers, men between 18 and 34, suffered high rates of unemployment in the recession.