000425 Burger King Says It's Not for SaleApril 13, 2000Miami, FL - Under pressure from restaurant owners, Burger King said it's not for sale and believes that most franchisees are confident about a $500 million plan to help revitalize the brand. The National Franchisee Association Inc., an organization of Burger King franchise holders, said Monday it is exploring the idea of spinning the company off from British parent Diageo PLC. The group denied it was seeking to buy Burger King, however. “The franchisee group has not made an offer to purchase Burger King Corp. from Diageo nor does it plan to,” the association said. Burger King Corp. responded Tuesday with a statement from chief executive officer Dennis Malamatinas, who said, “Diageo is completely confident in BKC's vision for reshaping the brand and believes that the majority of franchisees are as well.” Franchisees have complained of slim profit margins, ineffective marketing campaigns and lack of leadership at a time of slow U.S. sales growth. In a Feb. 26 letter to the company that was obtained by Dow Jones Newswires, franchisee association president Steven M. Lewis alluded to “the weakened state of the Burger King brand and inadequate franchisee support by Burger King Corp.” To franchisees, Burger King's subsidiary status in Diageo is a predicament, especially compared with McDonald's Corp.'s standalone position atop the fast- food industry, said Brian Eisenharth, a Diageo stock analyst with Collins & Co. in San Francisco. “The problem is that Burger King is only a piece of what Diageo's doing, and to the Burger King franchisees that's all that they're concerned about,” Eisenharth said. “Diageo has got a lot of oars in the water.” Malamatinas pointed to the four-year, $500 million plan to “re-image” restaurants and an 18-month program to install new logos and enhance 2,000 restaurants as indications of confidence by Diageo and franchisees. “We are on the cusp of a major breakthrough for our system with rapid payback expected,” he said. It can't be rapid enough for some. The franchise group has hired consultant Arthur Andersen, the Wall Street law firm of Weil Gotshal & Manges and public relations specialists Hill & Knowlton to research options, including Diageo's divestiture. Burger King plans to offer details of its “transformation initiatives” Wednesday at a franchise meeting in Orlando, and Diageo plans to meet with franchise officials May 26. Diageo is primarily a liquor and beer company whose brands include Guinness beer and Johnnie Walker scotch. It also owns Pillsbury baked goods, Green Giant vegetables and Haagen-Dazs ice cream. Burger King is the world's second-largest hamburger chain, behind McDonald's Corp., with some 10,900 Burger King restaurants worldwide. Of Burger King's 8,160 U.S. restaurants, 94% of them are franchise-owned. Miami-based Burger King Corp. contributed $1.4 billion in sales to Diageo's $18.3 billion.
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