2nd UPDATE: Burger King Franchisees Sue Over Late Hours
Dow Jones

(Adds statement from Burger King in seventh paragraph, updated stock price.)

By Paul Ziobro


NEW YORK (Dow Jones) --Three longtime Burger King Corp. (BKC) franchisees filed a lawsuit against the parent company, alleging that forcing stores to have extended late-night and early-morning hours wastes money and puts the safety of employees and customers at risk.

The franchisees, who filed the lawsuit Tuesday in Miami-Dade Circuit Court, also allege that Burger King's actions violate their franchise agreements, which had contained provisions for shorter hours.

Starting June 1, Burger King began to require that all franchisees keep their stores open until at least 2 a.m. local time on Thursday, Friday and Saturday to better compete with fast-food chains like McDonald's Corp. (MCD) and Wendy's International Inc. (WEN).

The franchise agreement states that stores only have to stay open until 11 p.m., according to the lawsuit.

The company also required stores to open at 6 a.m. instead of 7 a.m. Monday through Saturday.

News of the lawsuit was reported Thursday by the Miami Herald.

In a statement Thursday, Burger King spokeswoman Denise Wilson said the company has the right to set required hours, and that the vast majority of its franchisees have complied by staying open late.

"These extended hours will enable us to effectively compete in the quick service restaurant industry," the statement read.

She declined further comment, as the company has not been formally served with the lawsuit.

The three franchisees, which together own 57 Burger King locations, allege that forcing them to stay open into the early morning creates a greater chance that employees or customers could be subject to crime or other dangerous situations.

They also claimed sales in those hours aren't enough to keep up with the higher salary, energy and insurance costs associated with staying open late.

"The financial impact on the franchisees is devastating," said Robert Zarco, an attorney who represents the plaintiffs.

The plaintiffs in the suit are Ramalco Corp., Southern Management Corp., Tri- Management Co. and Furman's Inc. Southern Management and Tri-Management are both controlled by the same individual franchisee.

The complaint has the backing of Burger King's National Franchisee Association, which represents more than 1,200 franchisees in the system. In a statement, the group said that it has heard similar concerns from franchisees nationwide.

Burger King shares recently fell 57 cents, or 2.1%, to $26.86.

-By Paul Ziobro, Dow Jones Newswires; 201-938-2046; paul.ziobro@dowjones.com

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  07-31-08 1454ET
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