Burger King To Pay Franchisee $4M

Company settles suit over proximity of restaurants

By Alexis Muellner, Review Staff

Daily Business Review, The Newspaper of Enterprise, Real Estate and Law, Tuesday, June 20, 1995

Burger King Corp. has settled a closely watched franchise suit, agreeing to pay $4 million to a Massachusetts franchise-holder who claimed the company ruined his business by allowing another Burger King to open two miles from one of his restaurants.

Steve A. Scheck, the owner of a Lee, Mass., Burger King, claimed the company didn't deal in good faith when it opened a nearby competing restaurant it allegedly knew "would cannibalize" his business.  Scheck sued in federal court in Miami 1989, alleging breach of contract.  He later added a fraud count.  Scheck has personal and business bankruptcies pending in Massachusetts.

Of the $4 million being paid by Burger King, $2.63 million is going to settle the lawsuit, while $1.36 million is earmarked for the three stores the company is buying back from Scheck.  The settlement was reached last week.

"The successful resolution of this dispute demonstrates and strengthens Burger King Corp.'s commitment to positive franchisee relations," said Mark Giresi, senior vice president and general counsel, in a statement.  "This is a win-win situation for Mr. Scheck and for Burger King Corp."

Burger King, the Dade-based subsidiary of Britain's Grand Metropolitan PLC, has had several legal battles with franchisees in recent years over issues of encroachment and franchisee rights.  In addition, minority franchisees have sued the company alleging racial discrimination.

Robert Zarco, plaintiff's attorney, calls settlement "a clear indication that franchisers must tread cautiously."