Time To Smile For Burger King?

Many who bought restaurants in the 80's have seen them fail
By David Poppe, Review staff

From franchisees, claims of bad faith

 Thaddeus Deas didn't think he could fail as a Burger King franchisee.  After all, he'd worked for the company 16 years and was the first black engineer and construction manager at Burger King Corp.

Eager to strike out on his own, Deas left his $60,000 per year corporate job as director of construction in Atlanta to become a franchisee in 1987.

Strike out, he did.

"I was not looking to get rich," he says.  "I wanted to be an entrepreneur, to live the American dream."

Deas bought a restaurant from Burger King, paying $410,000, must of it borrowed, for the franchise and the equipment he needed.  The restaurant he bought was 20 years old and not very prosperous, he says, but Deas felt he could make it work.

Six months later, however, his dream soured.  Burger King Corp. opened a new restaurant a mile and a half away, over Deas's vocal complaints.  After that happened, sales at Deas' site fell from $925,000 per year, about break-even level, to $750,000 per year.

Deas complained that Burger King had cannibalized his customer base, but he got little relief.  Trying to salvage his business, Deas says he took no salary for several years, but finally ended up in bankruptcy in 1991.

"For the first time in my life I had to say, I give," says Deas, who today works for an Atlanta general contractor building fast-food restaurants.  "That's a feeling that's worse than terrible.  To put your life's earnings in there, and work there for 16 years, you feel they would stand by you.  They didn't.  It was like I was any John Doe off the street."

The problem Thaddeus Deas poses for new Burger King chief executive James B. Adamson is that he's not alone.  There are scores of franchisees like Deas, who couldn't make it in the Burger King System.  Since 1990, Burger King has filed 105 suits in U. S. District Court in Miami against struggling franchisees, including Deas.

Burger King media relations vice president Cori Zywotow says that with 1,5000 franchisees, some troubles are inevitable.  "That's just the nature of relationships," she said.  Burger King won't comment on individual cases in litigation.

Critics, however, have plenty to say.  "This company, it is our experience, does not act in good faith when franchisees come to them with problems," says Robert Zarco, a Miami lawyer who represents a dozen Burger King franchisees and took an affidavit from Deas in a separate Burger King case.

While Burger King's former owner, Pillsbury Co., sold Deas his restaurant----he was offered a choice of three, all of which ultimately failed --- Deas blames Grand Metropolitan PLC, the British conglomerate that bought Pillsbury in 1989, for its indifference to minority franchisees.

Many African-Americans bought Burger King restaurants in the mid-1980s after the Rev. Jesse Jackson and his group, Operation PUCH, protested Burger Kings' lack of black franchisees.  But the black owners, with less capital of their own, often had to borrow more money to buy their franchises making them vulnerable to downturns in sales.

In Atlanta, a city with a healthy black business community, Burger King had eight minority franchisees in 1987.  Today, it has one.  "To tell me that all of the [black] franchisees in the system didn't know how to run stores, would be improbable," Deas says.

Another African-American franchisee, Floyd Shorter, says the two Burger Kings, he bought in Richmond, VA. in the mid-1980s never matched the financial results the company promised.  He described Grant Met as "heavy-handed," saying most of the 60 or so blacks who bought restaurants with him in the mid-1980s failed.

"I guarantee you three-fourths are gone, and a lot of us lost everything we had in our life," Shorter said.

George Elias, Jr., a Miami Beach lawyer, says Burger King sold him and an African-American partner a franchise on U.S. 441 near Griffin Road in Hollywood for about $400,000 in 1986.

The restaurant failed miserably.  Elias says model financial statements prepared by Burger King showed the site would bring in $1 million per year, but sales never passed $700,000 per year.  The restaurant, which Burger King built, was barely visible from U.S. 441.  Worse, the road underwent a major construction project shortly after the restaurant opened.

Elias claims he later learned Burger King had rejected his site for a company-owned restaurant.

The troubles aren't limited to minority franchisees.  Art Weaver has owned Burger King restaurants for 17 years in Montana, and says he's made good money. But he has been fighting the company in court since 1990 because, he says, Grand Met broke a written promise to compensate him when Burger King opened a new company-owned restaurant on Malmstron Air Force Base near two of this restaurants in Great Falls.

But when Grand Met bought Pillsbury, Weaver says new management reneged on the promise.  "Pillsbury would have paid it." Weaver said.

Though most analysts give Pillsbury low marks for its management of Burger King and say Grand Met has done much to repair the damage, Weaver says that to him, Pillsbury was a better business partner than Grand Met.

"With the English having it, when someone tells you something, you don't believe any of it," he said.

That's a view that even fans of new Burger King chief executive James B. Adamson seen to second.

"I don't know about Grand Met's commitment," says Jerry Ruenheck, a former president of Burger King Corp. and now president of Burger King's National Franchise Association. But, he adds, "Jim Adamson's commitment is to make the average individual Burger King restaurant healthy."