Judge Allows Burger King to Set Prices

Burger King Holdings Inc. won part of a legal battle against its franchisees over a widely-publicized mandatory pricing of its $1 double cheeseburger.U.S. District Judge K. Michael Moore ruled that the franchisor can set maximum prices on products that franchisees must abide by.

According to a Wall Street Journal article the franchisor won dismissal in part of a lawsuit brought by franchisees over the Value Menu product promotion, but a Miami court will hear arguments on whether the company acted inappropriately in implementing the deal.

The court will now hear arguments on the franchisees' claim that Burger King acted in bad faith in implementing the $1 double cheeseburger promotion, which many franchisees said forced them to sell the double cheeseburger at a loss.

"Construed in a light most favorable to the [franchisees], these allegations plausibly state a claim that [Burger King] breached its duty of good faith," Moore wrote.

The judge’s decision also gives the National Franchisee Association (NFA), which represents 75 percent of franchise owners, legal standing in bringing the lawsuit, which Burger King has contested. NFA Chairman William Harloe said, "Protecting our members' best interests is one of our association's primary reasons for being."

Burger King issued a statement saying it was confident that it can prevail on the remaining issues of the lawsuit. A spokeswoman for the company stated:

The results of its extensive testing conducted before the national rollout of the $1 Double Cheeseburger more than validated the business case for the addition of this competitively priced product to its Value Menu.

Although franchisees objected to the $1 double cheeseburger, arguing that they could not make a profit on the product, Burger King went ahead with it anyway without their support. The company felt the aggressive discount was necessary to help Burger King attract “penny-pinching customers.”

WSJ Article:  Burger King Franchisee Group Can Bring Suit On $1 Promo - WSJ.com*

--

Related Articles:

• Franchisees Sue Burger King over Mandatory Pricing
• Burger King Franchisees Take Complaints Directly to Board of Directors