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Burger King breaks with franchisee group

Burger King Corp. has severed relations with the leadership of its U.S. franchisee organization, accusing it of disrupting the company's brand-building initiatives.
/ Source: The Associated Press

Burger King Corp. has severed relations with the leadership of its U.S. franchisee organization, accusing it of disrupting the company's brand-building initiatives.

In breaking off all but minimal contact with those running the National Franchisee Association, or NFA, the fast-food chain's management said it will divert a $1 million subsidy from the group to the brand's advertising fund.

The association is believed to represent about 90 percent of Burger King's domestic franchisees, or about 900 individuals. They operate most of the chain's 7,000 or so U.S. restaurants.

A letter to the association dated Sept. 30 and signed by Burger King North America President John W. Chidsey, cited "many instances of the NFA's noncooperation and affirmative disruption of efforts to improve the Burger King system."

He said the group's leaders had failed to publicly back efforts by the company to expand restaurant hours or to promote a value-menu strategy, competitive pricing initiatives and gift cards.

A 12-page letter dated Oct. 12 from NFA Chairman Daniel B. Fitzpatrick to the Miami company's management said its decision "to sever relations with the ... NFA is extremely regrettable" and based on "an erroneous set of facts, innuendo and rumor."

The letter characterized the diversion of financial support a breach of a written agreement and said at least $1.7 million is "due and owing on this obligation."

Fitzpatrick, a Burger King franchisee in South Bend, Ind., was said to be traveling and couldn't be reached for comment.

Neither the company nor the association has made the rift public, but Dow Jones Newswires reviewed recent correspondence laying out their differences.

Relations between Burger King and its franchisees' leadership have been strained in recent years but have grown increasingly contentious since a new senior management team took over at the company early last year.

Burger King is owned by investors that include Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners.