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Hold the pickles, hold the lettuce, hold the corporate chaos. Burger King executives wish they could. The fast-food giant that once urged consumers to "have it your way" can't seem to get anything to go its way these days. The perennial No. 2 in the burger wars is struggling with a menu of problems, from sluggish sales to ineffective ads to a boycott led by media-savvy activist the Rev. Al Sharpton. Now the company faces a revolt by franchisees who are increasingly fed up with Burger King's owner, Diageo PLC, the British conglomerate whose other brands include Guinness beer and Smirnoff vodka. "They're a distant, overcontrolling, overbearing parent that really has never taken the time to understand the business," says Steven Lewis, president of the National Franchisee Association, which represents most of Burger King's 7,800 U.S. franchisees. Cutting loose from Diageo, Lewis insists, is "absolutely paramount for this brand to function and prosper."
For some restive franchisees, the last straw was the recent departure of Burger King's CEO, Dennis Malamatinas, who left through the revolving door in the company's executive suite to join a dot-com. Now Burger King is searching for its seventh CEO in 11 years. It is also likely to replace its advertising agency, Lowe Lintas & Partners. Sales at established U.S. stores have been down. the first half of this year, thanks in part to a limp ad campaign featuring the less than memorable slogan "Got the urge?" "Our marketing hasn't been the best," concedes Rob Doughty, a Burger King spokesman. "We understand we have soft business performance right now--some of it our own doing."
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With competition reaching a brutal level, the 46-year-old company couldn't have picked a worst time to stumble. Besides longtime market leader McDonald's, Burger King must also contend with strong regional chains, such as Sonic Drive-In and Jack in the Box. Burger King is struggling to remake its image, boasting a redesigned logo and color scheme. It's also in the first year of a plan to install new signage and menu boards at all 8,292 outlets in the United States.
The last thing the struggling company needs is a fight with the fiery Sharpton, who wants more minority-owned Burger King franchises and increased advertising in minority-owned media. He has called for a boycott of Burger King by New York City blacks and is ready to take his campaign to other cities. In response, the company ran full-page ads in The New York Times last week touting its contributions to the African-American community. Among other things, the ads noted that there are nearly 1,200 minority-owned Burger King restaurants in the United States.
For its part, Diageo seems as ready to be rid of Burger King as some franchisees are to be rid of it. The British conglomerate announced plans in June to spin off 20 percent of Burger King in an initial public offering as soon as next spring. But executives later said the IPO won't go forward until sales improve significantly. A Diageo spokeswoman says it wants the business to function "independently as soon as it can." For the angry franchisees, that won't be soon enough.
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