Burger King Uses Darth Vader Tactic on $40 Million Ad Fund: "I Have Altered the Deal!"
Burger King is in the midst of a huge Star Trek co-promotion right now, but its restaurant owners claim the corporate HQ has adopted a tactic from Star Wars — the part where Darth Vader tells Lando Calrissian: “I have altered the deal. Pray I do not alter it further!”
In a suit filed in federal court, 850 Burger King restaurant franchise owners claim that Burger King’s corporate HQ and Coca-Cola have conspired to keep millions in dollars that they had previously agreed would be spent on ads* restaurant maintenance and use it for advertising instead.
Since 1999, Coke, Vader, Burger King, and its restaurants have had an agreement that generates advertising funds: Coke gets exclusive sales of its drinks in Burger King restaurants; the franchisees collectively buy 600 million gallons of Coke syrup (the stuff that is mixed with water so that it becomes “Coke” when it pours out of the soda fountain); and after that Coke makes rebate payments back to the restaurants of a certain amount per gallon.
Burger King HQ recently informed its restaurants that starting in 2010, they intended to take 40 percent of the syrup rebates (technically called “restaurant operating funds”) for itself. That adds up to hundreds of millions of dollars over the years, the restaurants claim.
The restaurant owners calculate they will lose $25 million in 2010, and about $40 million after that.
Coke and Burger King have yet to file a response to the suit.
*Correction: BK wants the money for ads, the franchisees want it for maintenance. Apologies for the error.
Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.
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