Thursday, December 3, 2009

More flamebroiling tempers at BK?

A financial analyst may have inadvertently fanned the broiler flames at Burger King, where franchisees have squared off with the home office over the deeply discounted Double Cheeseburger.

The Wall Street Journal reported online this afternoon that Morgan Stanley had advised investors to reconsider their positions in McDonald’s because the burger giant is being sapped by competitors’ discounts. BK’s $1 Double Cheeseburger was specifically cited by the brokerage, where analyst John Glass handicaps the restaurant sector.

If investors pull their money out of McDonald’s because it’s being hurt by Burger King, is it such a leap to assume some will shift it over to Burger King Holdings, the keeper of BK’s castle?

In other words, the Double Cheeseburger appears to be helping the franchisor’s stock price. And that’s going to go down like three-week-old Onion Rings with franchisees.

They’ve argued that the quarter-pound Double Cheeseburger is boosting traffic and sales, the base for the home office’s revenues and profits, at the expense of unit-level profits. In filing a lawsuit a few weeks ago to halt the head-turning offer, an association of franchisees alleged they’re losing a dime on every Double they sell for a buck.

Now comes word that the deal is not only helping BK Holding’s revenues, but also boosting its stock valuation.

If you should see a torch-toting mob of BK franchisees outside the chain’s Miami headquarters, you’d best run for cover. It could get ugly.

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