Legal News

Burger King says money from syrup is honey for ads

By Richard Binder

National Franchise Association Inc., which represents over 75% of Burger King's U.S franchise operators,  is trying to block plans by the parent company to divert rebates the store operators receive from buying soft-drink syrup into a beefed-up national advertising budget. The group says that franchisees will lose hundreds of millions of dollars over the next decade as the parent company uses long-standing funds the operators had received for advertising.

Burger King is trying to tap up to 40% of the syrup-rebate funds that all stores receive in order to increase its national advertising presence next year at a time of fierce fast-food competition.The lawsuit says the total money diverted would be $25 million next year then almost $40 million a year until 2022, when National Franchise Association estimates the agreement between the company and drink suppliers will expire. At issue is whether the parent company can control the use of money from a soft-drink contract entered into by Burger King and the two drink companies in 1999.

The two complaints, filed May 4 in U.S. District Court in Southern California, also name Coca-Cola Co.and Dr Pepper Snapple Group Inc. as defendants. The lawsuit is seeking class-action status.

Full story at WSJ.

Full post as published by Legal Pad | LA on May 13, 2009 (boomark / email).