How Burger King Cooked Up A Franchise Rebellion

AllBusiness:

When the going gets tough, the tough discount. That has long been a truism in retailing, and the going hasn’t been this tough since the Great Depression.

But hundreds of Burger King franchise owners are drawing a line on a decision by Burger King Holdings Inc. to dictate price discounts. The issue has been brewing for months and finally came to a head in October when the corporation ordered franchisees to sell a $1 double cheeseburger as part of a “Value Menu” promotion.

The company claimed the move would lift sales by as much as 5 percent in the down economy and was a response to similar promotions by rivals McDonald’s and Wendy’s. But franchisees argued that they are losing money on every double cheeseburger they sell.

Like most so-called “loss leader” promotions, the idea is to make up the difference by selling customers additional items; in this case, higher-margin French fries and soft drinks. Cash-strapped customers, however, just aren’t willing to shell out more money in the current economy, according to franchisees.

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