NEW YORK (Reuters) - Franchisees of Burger King Holdings have won the right to argue in court that the hamburger chain acted in bad faith when it added its double cheeseburger to its $1 Value Menu.
A Miami court ruled on Thursday that Burger King Holdings has the right to set prices at its stores but said allegations by the franchisees of bad faith by the company had enough plausibility to be argued in court.
The National Franchisees Association had alleged Burger King admitted that selling its double cheeseburger at $1 could lead to the bankruptcy of stores.
U.S. District Judge K. Michael Moore ruled that, “construed in a light most favorable to the NFA, these allegations plausibly state a claim that BKC breached its duty of good faith.”
Burger King said in a statement emailed to Reuters it was pleased by the court’s decision to reaffirm its rights, and added that extensive testing “more than validated the business case for the addition of this competitively priced product to its Value Menu.”
Burger King spokesman Miguel Piedra also said that a number of franchisees had embraced the promotion before its national roll-out.
The National Franchisees Association sued Burger King late last year in the Miami federal court, alleging that the company did not have the right to enforce maximum pricing rules.
Fast-food restaurants use low-priced food like $1 burgers to lure diners into restaurants, but if those items are priced below cost, franchisees can suffer.
Officials at the National Franchisees Association and Burger King could not immediately be reached for comment.
Shares in Burger King closed up 17 cents at $18.88 on Friday.
Reporting by Elinor Comlay, Nick Zieminski; Editing by Gary Hill
Our Standards: The Thomson Reuters Trust Principles.