Franchisees Say Burger King Value Menu Ate Profits
But BK Says Franchisees Did Not Apply for Value Menu Exemption NEW YORK CITY (Blue MauMau) – A brother and sister team is suing quick service restaurant chain Burger King for forcing them to serve the company's $1 value menu items. Franchise owners Elizabeth and Luan Sadik said they begged Burger King for permission to raise the value menu price to cover the extraordinarily high costs of operating in Midtown Manhattan. They state that a value price of $1 for a hamburger just wasn't high enough to cover rent. For example, they paid $18,000 per month in rent for their store near Grand Central Terminal.
A spokesperson for Burger King Holdings, Inc., Keva Silversmith, disagrees that the promotions hurt business. "Our value menu items drive traffic and overall profitability in New York City [stores]," he says.
Value meals are sometimes loss leader items that are meant to attract customers into a store. Customers come into the doors to buy a dollar menu item but then decide to buy a large Coke that may have an 80% margin.
The two franchise owners are represented by attorneys Richard Gallucci and Oliver Griffin of Spector Gadon & Rosen. Attorney Galluci reasons that such promotions are unrealistic in a city where it is difficult to find turkey sandwiches for under $5.
Franchise units in pricey areas are often exempt or given leeway from such value promotions. But in order to become exempt, store owners typically must apply to the head office for an exemption.
According to Galluci, that is exactly what the two New York franchisees did. "Burger King required [the Sadiks] to seek an exemption, but their appeal for an exemption was denied," he declares.
Not so, says Burger King. "An exemption was never requested," Burger King's Mr. Silversmith told Blue MauMau.
According to court papers, the Sadiks have been operating Burger King restaurants for more than a decade, but haven't turned a profit since 2001. Elizabeth and Luan had 5 units. Galluci says the first two were closed because the value menus made a profitable business unviable. Burger King Holdings responded to the unauthorized closings by suing the two in federal court in Florida. A third was closed. And then six weeks ago Burger King required the two remaining units to be terminated because the previous franchises were abandoned (closed down).
According to Galluci, royalty fees for the stores have been paid in full until the closures.
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