Wednesday, November 19, 2014

Update on the Old Burger King Story

Back in the spring, I blogged on Burger King in Germany and some investigative reporting which laid out some sanitation and employee issues with one single group (eighty-nine franchise operations) which were owned by one single company (a Russian guy with a German company, and a Turkish guy as it's operating officer).  The BK headquarters in Germany put the foot down and forced some significant changes with those operations.  Truth be told.....it hurt every single Burger King in Germany in the pocketbook because people thought they were all crappy.

Well....months have passed.  In today's Focus reporting.....they say that the headquarters of Burger King in Germany has done recent audits and inspections of the eighty-nine facilities, and found they all slipped back into a crappy situation.  Vacation pay and sick leave pay have been screwed with almost 3,000 employees of the eighty-nine franchise operations....which they were warned about this practice in the spring after they did an audit.  After a short period of retreat, they came right back to the same issue.

So, this week....as Focus reports it.....the contracts over the franchises affected appear to be in a cancellation phase.....as the national headquarters is trying to retake the situation and correct an apparent management problem.

Whether the eighty-nine operations stay in business is a question mark, and I suspect that they will.....except some national guru will step in as the temp-boss of the deal until the legal aspects are settled.

Where does the mess really begin?  Burger King had an aggressive discount coupon campaign which has been active for a number of years.  I probably get at least one whole page of coupons every month in some mailer.  If I were aggressive.....I'd probably visit BK at least ten times a month and save at least ten Euro.  That ten Euro was profit from the individual BK operation.  Imagine ten thousand customers in a region which did that.  Monthly, it's a ton of lost profit.

The national BK folks went with this agenda of discount coupons, not the local franchise owners.  So, if you had an invisible owner and a operations manager working together.....the guy who bought the franchise operations would have a magic number in his head for profit, and he'd want to reach that number by every single trick in the book.  So, money would be found somewhere in the daily operations and all help to reach the magic profit point, even if you were screwing over employees.

The Russian owner here?  I'm guessing he bought into the operation back when they weren't so obsessive about the monthly coupons.  The profit talk from burger operations like McDonalds, Wendys and Burger King are generally regarded as reasonable and it's hard to find a failure.  With the discount coupon gimmick.....they bring in more customers, but the local operation isn't making any real income off that customer.

Another failed business?  This one falls into a different category.  They failed more because of a coupon strategy than anything else.

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