Burger King is getting its way … for now.
A Miami judge said that the corporation can keep on charging what it wants for double cheeseburgers, but its franchise owners, conversely, can continue to sue over it.
A U.S. District Judge said Thursday that while the corporation has a right to set maximum prices for products, it may have breached its duty of good faith by forcing franchise owners to sell cheeseburgers at a less than profitable price.
According to Reuters, the National Franchise Association, who filed the suit on behalf of about 75% of Burger King franchise owners, alleged that Burger King admitted selling double cheeseburgers at $1 could lead to bankruptcy at a store level.
The suit originated back in October 2009 when Burger King Holdings, in an effort to remain competitive with other fast food chains, made it mandatory that all franchises add $1 double cheeseburgers to Value Menus. Prior to this decision, franchise owners had previously voted twice not to decrease the price of double cheeseburgers, citing that selling the product for $1 would be 10 cents less than what the burgers actually cost to make.
The National Franchise Association filed the suit in November 2009.
At the time, Burger King Holdings said that the case was without merit. However, in February, the corporation did attempt to appease its franchise owners by re-upping the price of the double cheeseburger to $1.19 and introducing the Buck Double to its Value Menu. Unfortunately, the Buck Double, which has two beef patties, but only one slice of cheese, wasn’t very cost effective either. The new offering had an estimated 47% profit margin; at $1.19, the double cheeseburger had a profit margin on 52.1%. Franchisees estimate that items need a 67% margin to make money.
While the future of this particular law suit still remains in question, Burger King latest offerings seem to indicate an interest in improving relations with its franchise owners. Burger King recently announced Fire-Grilled Ribs as a new menu item that will be priced for as much as $7.19. The ribs are expected to have a higher profit margin than Burger King’s current moneymaker, The Steakhouse XT.