A Loss Leader Promotion Has Franchisees Crying Foul

Burger King Franchisees Sue Over $1 Promotion (MSNBC)

Burger King Franchisees Upset With PromotionIn a posting earlier this week we noted that not all franchisors listen to their franchisees the way Subway did when they developed their popular $5 Footlong promotion.  And here is a perfect example.

Burger King’s franchisees are screaming at the franchisor saying they are losing money on BK’s new, highly publicized $1 Double Cheeseburger promotion.  They go a step further and claim that BK does not have the right to set maximum prices on products sold in the franchisees’ stores.

Clearly this is intended to be a loss leader pricing promotion and it is a little hard to believe Burger King can’t run such a promotion for the short term.  But we’ll have to see as the courts will take up the matter next week.

The National Franchise Association, a group that represents more than 80 percent of Burger King’s U.S. franchise owners, said the $1 promotion forces restaurant owners to sell the quarter-pound burger with at least a 10-cent loss.

If the franchisees win on this issue, what would it mean for any future promotions that are directly involve a low price offering?

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