Burger King to Franchisees: Price It Our Way… Or Else

by sean on March 5th, 2008

Burger King Franchise (FranchisePick.Com) A bitter & costly battle with NY franchise owners forces Burger King to disclose its secret retail strategy: Give away the food, screw’m on the Coke.

Siblings Luan & Elizabeth Sadik have been operating Burger Kings for more than a decade, but haven’t turned a profit since 2001. They claim that BK’s 99-cent menu and the more recent dollar value menu were forced down their throats, and made it impossible to survive with the high costs in Manhattan.

The monthly rent at the Sadik’s Fifth Ave. franchise location was $9,000 and $18,000 at their E. 47th St. location. The company also collects a royalty based on gross monthly sales.

Last year, Burger King sued the Albanian immigrants after the Sadiks closed two of their two restaurants without the company’s permission.

Six weeks ago, Burger King closed the Sadiks’ remaining franchise restaurants for allegedly breaching their franchise contract.

The Sadiks have responded with a suit of their own in Brooklyn Federal Court.

According to an article in the Daily News:

“The essence of our complaint is that greed is dictating [Burger King’s] decision-making, not fairness,” said lawyer Oliver Griffith, who represents the Sadiks.
Griffith summed up his clients’ plight this way: If a Whopper hamburger costs $3.50 in Manhattan and a customer can buy two Whopper Juniors for $2 with a value meal, the restaurant operator eats the $1.50 difference…
“The value meal may be a wonderful thing, but with the cost of doing business in a market like Manhattan, the franchise cannot sustain itself,” Griffith said.

…cost food items, which further deteriorates the [Sadiks’] bottom line,” the suit contends.

A Burger King executive, testifying at a deposition, explains the wisdom of the value meal pricing that the franchise owners obviously fail to appreciate:

“It drives people in,” Barry Blum said. “And many people, they come in because, hey, they have this dollar value menu and they buy something for a dollar, but then they also buy a large Coke which has an 80% margin. I mean that’s the way retail works.”

So now you know the way retail works, right from the King’s mouth: Give away the food, but screw’m on the Coke. With a marketing strategy like that, how could the Sadik’s have possibly been unprofitable?

WHAT DO YOU THINK? SHARE A COMMENT BELOW.

SHOULD BURGER KING HAVE THE RIGHT TO DICTATE A FRANCHISEE’S PRICING?

Read the Daily News article: Burger King banishes two midtown sites over value menu dispute

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