Burger King Operators Reject $1 Double-Cheeseburger Plan
July 09 2009 - 4:25PM
Dow Jones News
Burger King Holdings Inc. (BKC) operators shot down the parent
company's plan to sell double cheeseburgers for $1 nationwide, but
the company is still trying to push through a modified plan.
According to a memo reviewed Thursday by Dow Jones Newswires,
Russ Klein, Burger King's president of global marketing and
innovation strategy, said a plan to slash the price of the sandwich
to $1 for four months, starting later this summer, didn't receive
the necessary number of votes.
Instead, the company is putting forth a plan to sell the
sandwich at that price for just six weeks in a limited time offer,
as it looks to turn up the heat on its chief competitor, McDonald's
Corp. (MCD).
A vote on the new measure is due Friday.
A Burger King spokeswoman declined to comment. The company
previously said that various product and menu strategies are always
under consideration.
Franchisees are concerned that they would lose money on the sale
of each double cheeseburger, putting pressure on the bottom line
just as the U.S. federal minimum wage is set to increase later this
month. McDonald's late last year raised the price of its double
cheeseburger from $1 due to complaints that it was generating
unprofitable sales.
Benefits from increased sales, meanwhile, would mainly flow up
to the parent company since royalty payments are derived from
revenue, not profits.
"They want to take a high-cost product and sell it for a buck,"
said one Burger King operator with more than 100 stores who
declined to be named. "The program they put on the table is an
incredibly aggressive offer understood to generate sales and
traffic but not profitable sales and traffic for the
franchisee."
Burger King already has a strong $1 sandwich in its Whopper Jr.,
and another major offering at that price could encourage more
customers to trade down on the menu.
Burger King is trying to scale up its value message to try to
attract penny-pinching customers, after losing market share chiefly
to McDonald's. In recent months, Burger King shifted its focus from
advertising premium products such as its Whopper to focus on the
lower-priced side of its menu, hoping to help falling sales.
Burger King's shares were recently down 30 cents, or 1.8%,
recently at $16.40, and are off 37.2% over the last 12 months.
The broader markets recently slightly higher, with the S&P
500 rising 0.31% while the Dow Jones Industrial Average was up
0.01%.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com