Burger King Lets Franchisees Have it Their Way on Soda Rebates

ATLANTA – The National Franchisee Association, representing over 90 percent of all Burger King franchisees in the US, has settled two class action lawsuits with franchisor Burger King Corp. (NYSE: BKC) and its two soft drink distributors, Coca Cola and Dr Pepper.

The litigation was over Burger King Holding’s unilateral decision to appropriate a substantial percentage of soft drink rebates for the franchisor’s designated use. Franchisees have received the “restaurant operating funds”, or ROFs, for the last decade based on the amount of syrup they purchased from the drink companies. The burger chain had hoped to start taking 40 percent of the soda rebate money this year as a way to increase its national marketing efforts. 

NFA Chairman William Harloe Jr. made this statement yesterday to members: "We are pleased to report that we have been successful in negotiating a joint stipulation that memorializes [Burger King's] decision to cancel the implementation of the reallocation of ROF and preserves your rights in the event the ROF issue emerges in the future."

Burger King was served with federal lawsuits, filed in the Southern district of California, on the opening day of its grand annual convention on May 4, 2009. Since that time, the franchisor has been dealing with negative press resulting from its tensions with franchise owners over the soda litigation and it requiring its franchisees to discount certain menu items. Another lawsuit filed by the franchisee association last year challenged Burger King’s promotion of its $1 Double Cheeseburger, which franchisees claim costs more than a dollar to make.

The franchisor recently acquiesced, saying that it will raise the menu price for the double cheeseburger to $1.19.

Burger King officials were not available for comment but issued this statement to Blue MauMau:

Burger King Corp. is pleased that the company and the National Franchisee Association have mutually agreed to dismiss the lawsuit related to the reallocation of a portion of Restaurant Operating Funds provided by soft drink suppliers.

BKC leadership and a diverse, cross-section of franchisees recently collaborated on a new approach to bolster the brand’s national media fund and provide incremental dollars to promote new products and dayparts. This new approach does not involve the reallocation of these restaurant operating funds.

BKC takes great pride in our franchise system and working constructively and collaboratively with our franchisees to strengthen the BURGER KING® brand as a whole and move the business forward.

The joint motion for dismissal is without prejudice, meaning NFA can refile the lawsuit at a future date. The parties also agreed to pay their own legal fees.