Burger King Goes Too Far in Price War

Burger King (BKC) stores are losing money on the company’s $1 double cheeseburger promotion, according to a lawsuit filed last week by the National Franchisee Association. The franchisees say the product costs them at least $1.10 per sandwich, and they’re challenging Burger King’s right to dictate maximum prices.

Last summer, Burger King asked its franchisees if they would support the temporary double cheeseburger price cut, but they said no. Twice, in fact. But Burger King decided to roll it out anyway, so the franchisees have taken it to the courts.

The economy has put chains like Burger King in a tight spot, and the choice seems to be between losing customers or bringing them in with lower prices that wind up hacking away at the bottom line.

I have no idea what the legal agreement is between Burger King and its franchisees, so I can’t speak to whether BK is right when it says the lawsuit is “without merit.” But from a business standpoint, ignoring store owners on the promotion doesn’t seem like the best strategy.

McDonald’s (MCD), in contrast, upped the price on its own double cheeseburger last December because of complaints from its own franchisees.