Burger King's Late-Night Holdouts Dealt a Setback

Franchisees Suing Over Mandatory Operating Hours Plan to Submit Revised Complaint

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CHICAGO (AdAge.com) -- A Circuit Court judge has dismissed a lawsuit filed this summer by Burger King franchisees against a system-wide corporate mandate that they stay open for late-night hours.
In the suit, franchisees alleged that late hours are less profitable in some markets and necessitate heavy security in some areas.
In the suit, franchisees alleged that late hours are less profitable in some markets and necessitate heavy security in some areas. Credit: ZUMA Press

Franchisees argued that the fast feeder did not have authority to mandate hours of operation beyond the agreed-upon 7 a.m. to 11 p.m. They also alleged that late hours are less profitable in some markets and necessitate heavy security in some areas.

Robert Zarco, attorney for the franchisees, noted that Miami-Dade Circuit Judge Jon I. Gordon has invited the group to amend its complaint, providing additional information. The group has about two weeks to do so.

Not backing down
"The Burger King decision is legally wrong," Mr. Zarco asserted, saying his clients disagree with the chain on the interpretation of what constitutes "minimum" hours of operation, particularly "as it relates to establishing Burger King's broad discretion to mandate, as opposed to suggest, or recommend extended hours." If he and his clients are unsuccessful with the amended complaint, Mr. Zarco said, "we will appeal it to [other] courts."

Burger King attorney Mike Joblove maintained that the dismissal is significant. "The court disagreed with [franchisees] and said the language is clear that Burger King has the right to extend the hours," he said. Moving forward, he added, "It would be hard to imagine that they could come up with any claim, based on the court's determination that the language allows Burger King to extend the hours."

Wendy's and McDonald's don't require franchisees to observe late-night hours.

The Burger King suit comprises only a handful of operators, but they are among the system's most respected and include some former Burger King executives. The group has also drawn the support of the chain's National Franchise Association, which represents 5,000 of Burger King's 7,000 U.S. locations.

Even though the late-night litigation is still likely to filter through the courts, Burger King wasn't hesitant to claim victory. An e-mail from North American President Chuck Fallon sent to the Burger King system touted the suit's dismissal as evidence that the chain does have the right to require hours of operation.
CEO John Chidsey
CEO John Chidsey

Chidsey touts late-night benefits
Burger King CEO John Chidsey highlighted late-night hours during the company's third-quarter earnings call last week, maintaining that they have been beneficial to sales, and said that most franchisees are on board with the initiative. "We are getting franchisees in the right place for the late-night business," he said. "Our 24-hour franchisees continue to climb. About two-thirds of our system is open until 2 a.m. on Friday and Saturday, and the other third ... are in malls and places where they realistically can't be open."

He added that breakfast and late night are the chain's biggest growth drivers.

Burger King has been winning legal fights with franchisees this year. Luan and Elizabeth Sadik charged that Burger King's value menu, particularly the double cheeseburger, had driven them to insolvency. The Sadiks lost their case, but Burger King quietly terminated its test of the item at $1.
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