The Burger King $1 Cheeseburger: How Much Does It Really Cost?





I’ll admit it. Most of the time I am biased. I am usually out there trying to protect prospective franchisees. I try to provide tons of information to them about the realities of being a franchise owner. I also try to provide tips that current franchisees can use to grow their businesses.

It’s not that I’m against the franchisor. Franchisors provide that entrepreneurial spark — that service or product idea that they have systematized to sell to others. If it wasn’t for the franchisor, hundreds of thousands of people would never have had a shot at small business ownership.

I just try to level the playing field a bit. I like to see franchisors award, not sell, franchises to the right people. My feeling is that if the franchisor is extremely choosy about who becomes a franchise owner for their concept, that system will be one that prospers, and both parties can reach the levels of success that they want. Everybody wins.

The world of franchising  is not perfect, and situations arise that challenge the “system.”

The $1 Burger King cheeseburger franchisee lawsuit is one such example. Franchisees are claiming that it costs them more than a dollar to produce said cheeseburger, and are angry and resentful that Burger King corporate is forcing them to sell it at a loss. Can you blame them? Aren’t these franchisees in business to make a profit? They’re suing for the right to do so.

In my recent web-interview with Fox Business, I was asked to chime in on the Burger King franchisee lawsuit, and you may be surprised by my comments. I also discussed the current credit crunch, and a couple of other franchise related topics in this short interview. After you watch it, I’d love to hear your opinion on the Burger King debacle. Who’s right?

Image: Shutterstock

12 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

12 Reactions

  1. I have seen a lot of comments regarding this lawsuit from the responders online; and the public is overwhelmingly against the franchisees’ lawsuit and see it as greed on their part. I do agree that even though they may sell a dollar cheeseburger, they charge horrendous prices for drinks and fries. I remember McDonald’s having their $1 double cheesburger…and McDonald’s is way ahead of Burger King when it comes to customers…actually Burger King’s food and service is not the best quality compared to Wendy’s and McDonald’s…we can just see that from the customers each restaurant receives. Plus in this economy, you have to cater to the customer’s dollar…they are stretching their money as far as it can go, and those restaurants that are making a sacrifice with cutting cost will get the customers..and customers will “remember” who gave them the best deal in this economy. I see longer lines at McDonald’s and even Wendy’s because of their great deals and great service..at Burger King…not close at all. So, I would think that a smart franchisee would see that and just chuck it out for now. They serve the customers, the customers do not serve them…and the customer will take their money elsewhere. Plus, there are fast food restaurants on every corner, so if a Burger King franchisee can not make it, then he/she can easily be replaced by another burger joint. It is the franchisee who is causing the horrible PR; and many of the online responders that I have seen state that BK headquarters is doing the right thing.

  2. “If it wasn’t for the franchisor, hundreds of thousands of people would never have had a shot at small business ownership.”

    What utter BS. That’s like saying without Walmart, people wouldn’t have the opportunity to buy groceries. Without franchises, business owners might work harder in some realms due to lack of formulas to follow (they’d also keep far more of what they earn), but your premise is ridiculous.

  3. Martin Lindeskog

    Joel,

    I couldn’t listen to the interview. The video didn’t start. I don’t know if it was something wrong on Fox site.

    As an experienced purchaser I am curious to know how much the ingredients are adding up. How much for the hamburger bun, beef patty, salad, and slice of cheese? My wild guess is that you could purchase all of these ingredients for a buck, but when you have all the other things to consider, e.g. wages, facilities, etc.

    My question is why do you have these campaigns at all? Why not try to come up with other things than getting a huge crowd that want to have only cheap stuff. How about quality, service, adding extra value to the experience, and so on.

  4. Joel Libava

    Hi Martin,

    It must be a European thing.

    When I clicked the link at the end of the article, it cranked right up…

    The Franchise King
    Joel Libava

  5. Joel Libava

    Eric,

    Thank you for chiming in.

    A lot of people that want to get into a business of their own are not “idea people.” They are looking for a plan. A franchisor provides that.

    Franchising is an option that some people choose.

    The Franchise King
    Joel Libava

  6. Martin Lindeskog

    Joel,

    It could problem with Murdoch vs Europe! 😉 Do you have a transcript?

    What’s your favorite fast food place?

  7. I, unfortunately, have to agree with you about franchisors selling versus awarding franchises. I owned a Marble Slab Creamery last year. Got zero support from the company, which has left a permanent bad taste in my mouth for franchises. I understand not all are that way, but it’s up to the franchisor to help EVERY location succeed. It reflects upon them when a store closes.

  8. That’s great publicity Joel and your advice is spot on. As for the Burger King debacle, both the franchisees and Burger King have valid points. The question is whether or not upsells are outweighing the loss leader.

  9. Joel Libava

    Robert,

    Thank you…

    My math skills are average. (At best)

    But, if I am a BK franchisee, and I can sell a soft drink for $1.45, and let’s say my cost is .13, then….

    The Franchise King
    Joel Libava

  10. The issue shouldn’t unfortunately have gone to a lawsuit. When a franchisor begins to get pushback from a meaningful number of its franchisees, it shoud listen, because it will never win by leaving a bad taste in the mouth of those who are really on the front lines closest to the customers. Franchisees, like their franchisors, want to make money, so they know what they’re talking about when they question this type of transaction. This went on in Quiznos as Quiznos corporate pushed out buy one, get one free sandwich coupons — they nearly sunk their own ship! Burger King has had a history of bad relations with its franchisees, likely because as a franchisor it has changed hands and management many many times and the franchisor has lost touch with its operations. A franchisor has to have and retain very smart people at the top. When they do their franchise system works very well. When they don’t, you hear that manifested in the form of litigation. Very unfortunate for Burger King because they have very tough competition and need to keep their focus squarely on the competition!

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