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Does Klein's Temporary Leave Herald the End for the King?

BK Insists All Is Well With Ad Efforts, but Franchisees Are Hungry for Change

By Published on . 8

CHICAGO (AdAge.com) -- An unusual Burger King memo stating that chief marketing officer Russ Klein is taking a leave of absence sent tremors through the organization last week and prompted speculation from franchisees about the future of the company's advertising.

Russ Klein
Russ Klein
The memo from CEO John Chidsey, the contents of which were shared with Ad Age, said little to explain the leave, but wished Mr. Klein a "speedy return." The company confirmed Mr. Klein was on leave, and has since insisted that this is not some sort of euphemistic -- or even deceitful -- way of announcing Mr. Klein's departure. "Let me reiterate," spokeswoman Susan Robison said in a statement. "This is a temporary leave of absence and when Russ is ready to return, he will."

As for Mr. Klein, by way of explanation he offered this statement to Ad Age, sent via e-mail: "Simply 'sharpening the sword.' And the bigger the dragon waiting for me when I return, the better. That's all you need to know. Print it." It was signed, "Positively, RK."

While conceding that the first they heard of the leave was when it was reported on AdAge.com, agency executives who work for Burger King said they had no reason to disbelieve it. They also noted that Mr. Klein and one of his children suffered health problems in the mid '90s and hoped that those had not resurfaced.

However, the possibility of a family illness did not stop franchisees and analysts from attributing Mr. Klein's departure to what they describe as a "low point" in his relationship with other senior executives and the franchisee system. The chain has lost four of the last six votes put before franchise operators in recent months.

Operators are up in arms about sliding sales, and some point to ads such as "SpongeBob Square Butt," as well as sexually charged or religious-themed print work that has appeared in other countries and -- so they claim -- alienated women, seniors and minorities at home. Franchisees are also currently in the process of suing Burger King over a proposed 25% increase in ad spending, to be funded through soft-drink rebates that many of them have historically used for restaurant repairs.

Sliding growth
The chain's sales growth, which was ahead of most of the fast-food industry following Crispin's breakthrough "Whopper Freakout" campaign in 2007, had slipped to parity by late 2008 and had fallen behind the industry by spring 2009. Same-store sales fell 5% in the U.S. and Canada for the quarter ended June 30.

Burger King marketing executives sat down with Crispin creatives for a week in June, at which time, franchisees said sales had "fallen off a cliff." The next major initiative, proposed to operators in July, was a dollar-double-cheeseburger promotion that was voted down twice. Before the second of those votes, Mr. Klein sent a memo to franchisees promising to tone down the sexual content in the chain's advertising.

One franchisee said Burger King had not dropped the idea following the votes. The franchisee also said that news of Mr. Klein's departure was "a relief."

"We've been impacted because of marketing faux pas," said the franchisee. "And I can't imagine that on some level didn't impact this particular announcement."

Franchisees and other executives familiar with the matter said Burger King needed a change in direction. Of course, that prompted speculation about agency relationships, with many focusing on the chances of Crispin being retained if there was a CMO change.

Privacy
BK was keen to smack down that notion. "The oversight, direction and marketing strategy at Burger King Corp. has not changed," Ms. Robison said, adding "the long-standing relationships with our agency partners will continue as well."

It's also important to note that -- as with its advertising -- Burger King has a tendency to handle PR in, let's say, its own way. And that could well include protecting Mr. Klein's privacy even at the expense of prompting guessing games in the industry.

Mr. Klein has been Burger King's CMO for six years, and overall has an impressive record. After shifting the chain's creative to Crispin Porter & Bogusky in 2004 and retooling advertising to connect with young, male super-fans, he is seen as having been a key player in the chain's resurgence, and partially responsible for six years of positive same-store sales gains. Burger King routinely credits marketing and advertising with sales gains in quarterly filings, and Mr. Klein participates in the calls, along with Mr. Chidsey and Chief Financial Officer Ben Wells.

Steve Schneider, an attorney for Mitchell Silberberg & Knupp, who reviewed Mr. Klein's contract, said that Burger King appears obligated to pay him through the end of June 2010, unless there is a decision to terminate his employment for cause. Still, he said that opaque announcements are nothing new. "They're always going to leave us guessing," he said.

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Contributing: Jeremy Mullman, Bradley Johnson and Michael Bush

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