Burger King franchise owner says value menu sapped profits

A family that owned several failed Burger Kings is suing the fast food giant, claiming the company's $1 value menu made it impossible for them to turn a profit in high-priced Manhattan.

The Miami Herald
March 6, 2008

Burger King franchise owner says value menu sapped profits

David B. Caruso

NEW YORK — A family that owned several failed Burger Kings is suing the fast food giant, claiming the company's $1 value menu made it impossible for them to turn a profit in high-priced Manhattan.

Franchise owners Elizabeth and Luan Sadik say in a federal lawsuit filed last month in Brooklyn that they begged Burger King for permission to raise prices at their Midtown restaurants so they could cover their high costs.

One of their eateries near Grand Central Terminal was paying $18,000 per month in rent, an amount they said they couldn't cover selling hamburgers for $1.

Burger King said no, and when the family closed two unprofitable Manhattan restaurants in response, the company took legal action to shut down two of their remaining New York eateries. The last one closed six weeks ago.

Now, the sister and brother team is suing to force Burger King to cover some of the costs of the failed business. The two sides are also in court in Florida, where Burger King has filed a suit claiming the pair improperly broke their franchise agreement by closing stores without company permission.

A spokesman for Burger King Holdings Inc., Keva Silversmith, said Wednesday that the family's claim was unfounded.

"We have no evidence that the value menu has hurt restaurant profitablitity," he said. On the contrary, he said, internal studies have shown the promotions to boost store profitability.

A lawyer for the Sadiks, Richard Gallucci, said the family wouldn't have been in this mess if it wasn't for the value menu. Other Burger Kings in high-rent locations, like airports, have been granted an exemption from the promotion, and Gallucci said that should have been extended to his clients as well.

"The businesses weren't viable anymore as a result of the value menu," he said.

Most of the nation's biggest fast food chains have embraced $1 value menus as a way of pulling in customers. The promotions have been successful enough that several chains have recently expanded offerings in the low-cost category. Burger King is among them. It is currently testing a $1 double cheeseburger in some markets.

Gallucci acknowledged that the menus may work well in some less-expensive cities, but he insisted that the option is unrealistic in a city where it is hard to buy a turkey sandwich for under $5.


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