Burger King legal issues

Template:Infobox Burger King As with other multi-national corporations, international fast food restaurant chain Burger King has had its share of controversies and legal issues over the course of its existence. Issues that involved a myriad of topics have affected all areas of the company; depending upon its ownership and executive staff at the time, its responses to these challenges has varied from acceding to demands to refusal to concede its position regardless of the outcome.

Trademark issues involving the similarly named Burger King in Mattoon, Illinois lead to a law suit whose outcome helped define the scope of the Lanham act in the US and an existing trademark held by a shop of the same name in Queensland forced the company to change its name in Australia. Several legal decisions have set contractual law precedents in regards to long-arm statutes, the limitations of franchise agreements and ethical business practices; many of these decisions have helped define general business dealings that continue to shape the entire market place.

Controversies and disputes with groups such as PETA over the welfare of animals, governmental and social agencies over health issues and unions and trade groups over labor relations have touched on concepts of animal rights, corporate responsibility and social justice. Issues of cultural sensitivity have arisen in parts of the world that have caused problems in the different communities the company serves. How the company has responded to these controversies has draw praise from some and scorn from others.

Cases of note

Burger King Corporation v. Hungry Jack's Pty Limited

([2001] NSWCA 187)

In 1991, Hungry Jack's Pty Limited renewed its franchise agreement with Burger King Corporation which allowed the Hungry Jack's to license third party franchisee, however one of the conditions of the agreement was that Hungry Jack's had to open a certain number of stores each year for the term of the contract. In 1996, shortly after the Australian trademark on the Burger King name lapsed, BKC made a claim that Hungry Jack's had violated the conditions of the renewed franchise agreement by failing to the expand the chain at the rate defined in the contract and sought to terminate the agreement. Under the aegis of this claim, Burger King Corporation in partnership with Royal Dutch Shell's Australian division Shell Company of Australia Ltd., began to open its own stores in 1997 beginning in Sydney and throughout the Australian regions of New South Wales, Australian Capital Territory and Victoria. Additionally, BKC sought to limit HJ's ability to open new locations in the country, whether they were corporate locations or third-party licensees.

As a result of Burger King's actions, Hungry Jack's owner Jack Cowin and his company Competitive Foods Australia, began legal proceedings in 2001 against the Burger King Corporation claiming BKC had violated the conditions of the master franchising agreement and was in breech of the contract. The Supreme Court of New South Wales agreed with Cowin and determined that BKC had violated the terms of the contract and awarded Hungry Jack's $46.9 million AUD ($41.6 million 2001 US dollars). In its decision, the Court said that Burger King sought to engineer a default of the franchise agreement so that the company could limit the number of new Hungry Jack’s branded restaurants and ultimately claim the Australian market as its own, which was a purpose that was extraneous to the agreement.

After BKC lost the case, it decided to terminate its business in the country and sold its operations and assets to its New Zealand franchise group, Trans-Pacific Foods (TPF). The terms of the sale had TPF assume oversight of the Burger King franchises in the region as the Burger King brand's master franchisee. TPF administered the chain's 81 locations until September 2003 when the new management team of BKC reached an agreement with Hungry Jack's Pty to re-brand the existing Burger King locations to Hungry Jack's and make HJP the sole master franchisee of both brands. An additional part of the agreement required BKC to provide administrative and advertising support as to insure a common marketing scheme for the company and its products. TPF transferred its control of the BK franchises to HJP, which subsequently renamed the majority of the remaining BK locations as Hungry Jack's. While HJP is now the exclusive master franchisee for Burger King in Australia and has the right to allow new Burger King locations in the country, no new locations have opened and only a small handful of BK restaurants remain in New South Wales.

Further information: Hungry Jack's

Burger King v. Rudzewicz

(471 U.S. 462)

In 1965, two Michigan businessmen, John Rudzewicz and Brian MacShara, entered into a franchise agreement with Burger King to run a restaurant in Detroit. After attending training courses at regional Burger King training facilities in Michigan and in the Florida headquarters on how to run a Burger King franchise, they began operation of their new business. Sales began to decline at the location after several years, and because of their financial difficulties, they failed to pay their required franchise fees and rent service to Burger King Corporation. This prompted BKC to file a lawsuit in Florida in the United States District Court for the Southern District of Florida for breach of contract and trademark infringement against Rudzewicz and MacShara because they continued operation of their restaurant after they were served notice to vacate the property.

The District Court found that Florida has personal jurisdiction under Florida's long-arm statute. They also found for Burger King and ordered Rudzewicz to close the restaurant, to which Rudzewicz and MacShae appealed. In their appeal, they claimed that since they were residents of Michigan, and because the claims did not arise within the Southern District of Florida, that District Court lacked personal jurisdiction over them. Additionally it was claimed that the long-arm statute violated the 14th Amendment and was unconstitutional. Citing a similar case, World-Wide Volkswagen Corp. v. Woodson, the United States Court of Appeals for the Eleventh Circuit agreed with the defendants and overturned the lower court's decision. In turn, Burger King Corporation appealed the Appellate Court's ruling to the US Supreme Court and was granted a hearing.

In its decision, the Supreme Court overturned the Appellate Court and found that Florida does have jurisdiction in the case. The Court concluded that the defendants, Rudzewicz and MacShae, sought out their franchise in the state of Florida and were availed of the protections of that state and were, therefore, subject to jurisdiction there. Additionally, the Court reasoned that the defendants had a "substantial and continuing" relationship with Burger King in Florida and that due process would not be violated because the defendants should have reasonably anticipated being summoned into court in Florida for breach of contract.

Further information: Burger King v. Rudzewicz

Burger King of Florida, Inc. v. Hoots

(403 F.2d 904)

The Hoots' family Burger King restaurant located on the corner of Charleston Ave. and Fifteenth St. in Mattoon, Illinois. (September 2007)

As the company expanded, it became engaged in several disputes in regards to trademarks. The most prominent incident of infringement in the United States occurred with the similarly named Burger King located in Mattoon, Illinois. Eugene and Elizabeth Hoots owned an ice cream shop in the city of Mattoon; due to the success of the store, in 1957 they expanded it with an additional shop located in a former garage next to the original operation. Keeping with theme related to the name of the ice cream shop, Frigid Queen, they named their burger stand Burger King and registered their trademark with the state of Illinois in 1959. In 1962 The Hootses, with knowledge of the Federal trademark held by Burger King Corporation, added a second location located in Charleston, Illinois.

In 1961, with its first location in Skokie, Illinois, Burger King Corporation and its franchises began opening stores and by 1967 had over twenty locations spread throughout the state. The Hootses, claiming that their trademark gave them exclusive rights to the name in Illinois sued BK in the state, and later federal, courts under the case Burger King of Florida, Inc. v. Hoots 403 F.2d 904 (7th Cir. 1968). The decision issued by United States District Court for the Central District of Illinois, and upheld by the United States Court of Appeals for the Seventh Circuit, stated that the BKC federal trademark, applied for in 1961 and granted in 1963, took precedence over the Hootses' older, state trademark; The Court granted the Hootses exclusive rights to the Burger King trademark located within a circular area defined with a 20 mile (32 km) radius centered on their original location.

The Burger King v. Hoots trademark dispute and its resulting decision went beyond the original case, it established a major legal precedent in the United States in regards to the Lanham Act. The ruling states that while the senior user of the state service mark or trademark has prior usage of the common law marks, federal statute overrides the earlier, state service mark and prohibits the senior user from preventing the junior user from exercising the use of the federally registered mark outside of a defined geographic reach of the senior user.

Further information: Burger King (Mattoon, Illinois)

Controversies

Animal welfare

2001 protest by vegan proponents outside of a Burger King restaurant in San Francisco, California.

File:Murderking.png

Parody logo created by PETA to protest Burger King policies regarding its suppliers and the humane treatment of animals.

In 2001 the animal rights group PETA began targeting the various fast food chains in the United States over issues regarding the treatment of chickens by suppliers such as Tyson. Utilizing parodies of corporate logos and slogans, the group sought to publicly embarrass the companies into changing their corporate policies in dealing with poultry suppliers. After winning concessions from McDonald's with its McCruelty campaign, the group targeted Burger King with a six month campaign it called Murder King. The group and its supporters, including celebrities such as Alec Baldwin, James Cromwell, and Richard Pryor, staged protests outside BK restaurant across the US calling for the company to establish new compliance guidelines for it poultry suppliers. On 28 June 2001, Burger King agreed with the group and established a series of procedures to ensure that its suppliers were conforming to agreed standards for animal welfare. These changes, along with the company's new vegetarian offering the BK Veggie sandwich, drew praise from the group.

In 2006, PETA went before the Burger King Holding's board during its annual board meeting to request the company have its suppliers switch to a more humane method of form of slaughter called controlled atmosphere killing (CAK) in the preparation of its poultry products. Using a different tack that went beyond stating that the procedure is more humane, the group claimed that the method was economically more feasible for the company as it reduces the chances of injury to workers in poultry factories and it produced better products by preventing injury to the animal. Responding to this new protest, in March 2007 Burger King announced an additional series of changes to it policies regarding animal welfare. In the policy change BK announced that it would favor suppliers of chickens that use CAK rather than electric shocks to knock birds unconscious before slaughter. The company went on to add new policies that require its pork and poultry suppliers to upgrade the living conditions of pigs and chickens; the rules require that 2% of its North American egg suppliers use cage-free produced eggs and 10% of it pork suppliers use crate free pigs for its pork products. PETA and the Humane Society of the United States were quoted as saying that Burger King’s initiatives put it ahead of its competitors in terms of animal welfare and that they were hopeful that the new initiative would trigger for reform throughout the fast food industry as a whole.

Further information: [[:Burger King products]]

Nutrition

Several groups, including the American Heart Association, the Center for Science in the Public Interest and the Spanish government, have argued that BK has contributed to the western obesity epidemic by introducing products that contain large amounts of fat, trans-fat and calories. In recent years, BK has begun introducing several large, over-sized products including its European BK XXL line, Enormous Omelet Sandwich line and the BK Stacker line. These products, and others like them, have brought international scorn and negative attention due the large portion size and amounts of unhealthy fats and trans-fats. Many of these groups have accused BK and other fast food restaurant chains of failing to provide healthier alternatives and contribution the ongoing obesity problem in the West.

In a partial response, Burger King announced that it was joining The Council of Better Business Bureaus Children's Food and Beverage Advertising Initiative. The program is a voluntary self-regulation program designed to shift advertising messages aimed at children so that they encourage healthier eating habits and lifestyles. In a press statement, BKC announced that it will be taking the following steps in regard to its children's advertising:

In addition, Burger King Corp. will:

• Restrict advertising to children under 12 that uses third-party licensed characters to Kids Meals that meet its Nutrition Guidelines
• Refrain from advertising in elementary schools and from product placement in media primarily aimed at children under 12
• Promote Kids Meals that meet its Nutrition Guidelines on its Web site
• Promote healthy lifestyles and healthy dietary choices in advertising

The new Kid's Meal line will include several new products, including broiled Chicken Tenders, apple "fries", french cut apples served in a fry box, and organic apple sauce. According to a statement by BKC, the new Kid's Club meals will contain no more than 560 calories per meal, less than 30 percent of calories from fat, less than 10 percent of calories from saturated fat, no added trans fats and no more than 10 percent of calories from added sugars.

Labor

A protracted South Florida labor dispute between the Coalition of Immokalee Workers (CIW) and growers of tomatoes in the region has expanded to include Burger King and other major fast food companies, including McDonald's and Yum! Brands. Beginning in 2001, the CIW sought a pay raise of 1¢ per pound for tomato pickers in the region and began to target these chains with protests, letter writing campaigns and petitions demanding that the companies only purchase tomatoes from suppliers that agree to the pay increase. In 2005, both McDonald's Corporation and Yum! signed an agreement agreeing with the group's purchasing demands; however Burger King corporate parent Burger King Brands (BKB) declined to enter into an agreement with the group.

A December 2007 Associated Press article about the conflict claimed that BK parent Burger King Brands (BKB) had devised a contingency plan to remove itself from the dispute. Citing internal company documents, the AP stated BKB had concerns that such agreements might prove to be a possible violation of anti-trust laws, had possible tax implications and that there were issues with third-party oversight for the agreements as reasons for not entering into an agreement with the labor group. As part of the company's plan, AP claimed that the company was going to cease purchasing product from suppliers with whom the CIW was in disagreement with. In a response, the company stated that in February 2007 BKB issued a press release claiming that while it is a larger purchaser, it is not responsible for the pay rates of the workers of its suppliers as wages disputes are the province of the said producer. BKB also pointed out that it has an open offer of employment for any dissatisfied CIW members and scholarships through its Have it Your Way Foundation for family members of CIW workers.

In the release, BKB Vice President of Global Food Safety, Quality Assurance, and Regulatory Compliance Steven Grover confirmed the factuality of the AP report and that if the dispute between the growers and the CIW continues, the company would go forward with its plans to stop purchasing tomatoes from farms in the Immokalee region. The company stated that it purchase only 1% of its tomatoes from that area and other suppliers could easily make up the difference. Speaking on the dispute, Grover stated "We’re being asked to do something that we have legal questions about. We want to find a way to make sure that workers are protected and receive a decent wage." CIW spokesperson Julia Perkins faulted this move, stating "...farm workers across the country and world face the same problems as those in the Immokalee region, but says many don't have a human rights organization, such as the CIW, to stand up for their interests. Running away from the scene of the crime, does that make you any more innocent? Are they really willing to pay an exorbitantly higher transportation cost[s] to bring in tomatoes from overseas or Mexico and pass that on to their customers rather than pay a penny more per pound?"

Further clouding the issue, Mr. Grover has recently been found to be trolling websites that have posted pro-CIW media. Additionally several terse, stridently worded e-mails were sent from a possibly fictitious employee at BK world headquarters in Miami to supporters and media groups; the company has labeled these communications as unsanctioned and not reflecting official corporate positions. As of April 28, 2008, Burger King declined to add further comment on the issue.

Supporters of the group have stated that they intend to continue to protest BKBs position until such time that the company agrees to sign an agreement with the group.

Islam

An issue of a religious nature arose in the UK when BK introduced a new prepackaged ice cream product; the label of the product included a silhouette of the ice cream that when rotated on its side bore a resemblance to the Islamic inscription for God. Several local Muslim groups pointed out the issue of the possible interpretation and Burger King voluntarily recalled the product and reissued it with a new label.

Another issue that arose with the Islamic community was over an Israeli franchise opening stores in the Occupied territories. When the Israeli BK franchisee Rikamor, Ltd. opened a store in the West Bank settlement of Ma'aleh Adumim, many Islamic groups argued that international BK parent Burger King Corporation's (BKC) licensing of the store helped legitimize the disputed settlement. BKC quickly pulled the franchise license for that location and had the store shuttered saying that Rikamor, Ltd. had violated its contract by opening the location in the West Bank. Several American-based Jewish groups issued statements that denounced the decision as kowtowing to threats of boycotts by Islamic groups. In a statement issued by BK Corporation, Burger King stated that it "made this decision purely on a commercial basis and in the best interests of thousands of people who depend on the Burger King reputation for their livelihood."

References

See also

• McDonald's legal cases

External links