News Briefs

“One of the distressing things is how young some of the victims appear to have been,” said John Rowe, director of EEOC's Chicago District, which includes Wisconsin. Several of the employees were high schoolers, he said.

With Value-Menu Lawsuit Settled, New Burger King Leadership and Franchisees Get Down to Business

The annual convention for Burger King franchisees, held in April, represented a turnabout in atmosphere from what “felt like a morgue” in 2010, according to one participant who asked to remain anonymous. Franchisees are attributing the positive energy to the executive team brought in by 3G Capital, a private equity firm that bought BK last year.

One of the most prominent decisions made by the new executives was an agreement that ended litigation filed by the National Franchisee Association (“NFA”), which represents about 75% of U.S. franchisees of Burger King Corp. (“BKC”). In 2009, NFA sued BKC for imposing a maximum price of $1 for a Double-Cheeseburger, a level that franchisees argued was well below their costs. That lawsuit was withdrawn by NFA on April 18, 2011, shortly before the convention.

“With the issuance of the new policy and the dismissal of the lawsuit, BKC, the NFA and the franchisee litigants now look forward to building a stronger and more collaborative relationship,” said Steve Wiborg, president of North America Operations, in a prepared statement. Not insignificantly, Wiborg is a former Burger King franchisee.

Burger King was twice victorious in the courtroom (see FBLA, January 2011), including an opinion from U.S. District Court for the Southern District of Florida Judge K. Michael Moore that the franchise agreements “unambiguously conferred on BKC the right to require franchisees, without their consent, to offer designated items as part of its Value Meal menu and therefore to set unilaterally maximum prices for those items.”

However, new management chose to work with the franchisees to resolve the matter, rather than to face appeals. Under the agreement, sources say that Burger King will consider a series of metrics and will confer with franchisees before setting maximum prices. The compromise leaves Burger King with the ability to set prices, which could have been negated if a court ruled in favor of the franchisee association. Even while the lawsuit was active, BKC had made gestures to end the stalemate, such as raising the maximum price for the Double-Cheeseburger to $1.29 and raising prices on other Value Menu items.

BP Franchisees Sue over Point-of-Sale System

Many franchisors require that franchisees purchase sophisticated point-of-sale (“POS”) systems that track sales, taxes, and inventory. Now, more than 60 franchisees of BP Plc are alleging that the POS system they purchased does not work properly and overcharged customers. The franchisees, which operate under the BP, ARCO, and am/pm brand names, are seeking $200 million. The class action lawsuit is No. BC460880 in Los Angeles Superior Court.

Franchisees were required to purchase the new systems, developed by Retalix Ltd., for about $30,000 each. They tracked sales and inventory levels of fuel, as well as convenience store products. But franchisees allege that the systems are defective.

The proposed $200 million in damages includes compensation for lost sales, government fines for issuing incorrect receipts, and the cost of hiring staff to compensate for the problems with Retalix software, according to the lawsuit.

“We believe this class action is without any merits and we will defend this vigorously,” said Retalix in a prepared statement.

BP, Retalix, and a third defendant, PayPoint, as well as the attorneys for the plaintiffs, Kabateck Brown Kellner LLP, did not respond to a request for comment.

Faegre & Benson Franchising Health Care Conference Set for July 26-27

Faegre & Benson LLP (Minneapolis) will be hosting a conference on July 26-27 that will focus on emerging business opportunities and legal issues in health care franchising. The conference is designed for companies considering franchising their health care services, and panelists will include franchise attorneys, as well as executives from Comfort Dental, Elements Therapeutic Massage, PharmaJet, Doctor's Express, Dr. G's Weight Loss and Wellness, and Max Muscle Sports Nutrition.

Also speaking will be Shelly Sun, co-founder and CEO of BrightStar Franchising, LLC, which provides health care staffing for private home care and supplemental staffing for medical facilities. In 2005, BrightStar became the first franchisor in the country to specialize in both medical and non-medical care and health care staffing, and it now has more than 200 locations.

For more information, go to www.franchisinghealthcare.com.

EEOC Files Complaints Against Del Taco, McDonald's Franchise Owners

The U.S. Equal Employment Opportunity Commission (“EEOC”) has sued owners and managers of Del Taco and McDonald's franchises for sexual harassment of female employees.

In March, the EEOC sued Gala AZ Holdings, Inc., a Del Taco franchisee, in U.S. District Court for the District of Arizona. The lawsuit, EEOC v. Gala AZ Holdings, Inc. (Civil Action No. CV11-0383-PHX-JAT), alleges that an assistant manager at a Glendale, AZ, Del sexually harassed a female employee who was suspended and fired when she complained to her managers.

In April, EEOC sued Missoula Mac, Inc., owner of 42 McDonald's franchises, for the alleged harassment of female employees at a restaurant in Reedsburg, WI. The complaint states that the women were subjected to sexual comments, sexual propositions, or physical touching by co-workers, and that some of them were fired in retaliation for complaining about the sexually hostile work environment. The suit, EEOC v. Missoula Mac, Inc., d/b/a McDonald's Restaurant (Civil Action No. 3:11-cv-00267), was filed in the U.S. District Court for the Western District of Wisconsin, in Madison.

“One of the distressing things is how young some of the victims appear to have been,” said John Rowe, director of EEOC's Chicago District, which includes Wisconsin. Several of the employees were high schoolers, he said.