Burger King's franchisees are taking their fight against the company over sandwich pricing to court.
The National Franchisee Association filed a suit this week in U.S. District Court in Miami against Burger King, arguing that the company does not have the authority, under the franchisees agreement, to "dictate maximum pricing."
The motivation for the suit comes after Burger King forced all franchisees to sell its double cheeseburger for $1, starting in October. Franchisees had twice during the summer voted against the $1 double cheeseburger promotion.
The franchisee association, which represents more than 80 percent of U.S. Burger King franchisees, filed the lawsuit after unsuccessful attempts to negotiate with Burger King. They are asking the court to acknowledge that Burger King does not have the right to set prices and that power rests with the independent franchisees.
"Our franchisee community is united in protecting our entrepreneurial rights as independent business owners," said William Harloe Jr., the chairman of the NFA and a Maryland BK franchisee.
As of Thursday morning Burger King had not yet been served with the lawsuit, a company spokeswoman said.
During an earnings conference call last month, Chief Executive John Chidsey told analysts he was encouraged by the early results of the double cheeseburger promotion.
During an 18-month test, the $1 double cheeseburger had a negative impact on gross profit margin, Burger King said, buts restaurants saw an increased gross profit because consumers added on high profit items like sodas and french fries.
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