BK Rolls Out $1 Double Cheeseburger

Burger King will launch a dollar Double Cheeseburger offer this month despite considerable conflict with its franchisees. Nation’s Restaurant News reports:

After rumored friction this summer between Burger King Holdings Inc. and its franchisees centering on a $1 double cheeseburger, the Miami-based company announced late Friday that it would debut the $1 sandwich nationwide next month. In July, tension was reported about any debut of the $1 double cheeseburger, as the franchisor allegedly wanted to use the item to spark sales, but franchisees allegedly wanted to shelve the $1 product to protect margins.

Despite the franchisor's management team being certain it knows what is best for the brand, note the attention a Burger King securities analyst and the stock market pays to a history of franchisor conflict with franchise owners.

… securities analyst Steve West at Stifel Nicolaus lowered his rating on Burger King’s stock from a buy to a hold. He said sales pressures will remain through the company’s fiscal 2010, especially the current first quarter, when West projects U.S. same-store sales to fall 8 percent from a year earlier. … West finally cited franchisee tension in the system, often a problem that stems from reduced sales and profit at the unit level.

“Our recent channel checks and discussions with franchisees show growing discontent in the system,” West said. “New products … are not producing the expected sales lifts in test markets, pressuring restaurant-level margins. Additionally, management’s questionable decision to recoup soda vendor rebates is clearly not sitting well with a franchise base that is seemingly quickly becoming discontented and less profitable than a year ago.”

In May, a group of franchisees filed a suit against the franchisor for allegedly diverting funds from soft drink providers that were typically earmarked for franchisees to a national advertising fund.