Sources inform “Globes” that Burger King has offered to sell its Israel franchise to Burger Ranch, using the Burger King brand for the merged chain. Burger King is leaning toward merging its Israeli franchise, which is under a stay of proceedings, with Burger Ranch and its 86 branches. Burger Ranch would then operate under the Burger King brand.
Burger Ranch submitted a joint $6 million cash bid with Macdonald’s Israel to Burger King Israel trustee Adv. Doron Tischmann. Burger Ranch presumably has no reason to give up its brand, which is well-known in Israel, especially since merging with Burger King Israel would involve 5% royalty payments on sales to Burger King.
Burger King has not received any royalties from Burger King Israel since August 2001, and the franchise-owner owes it $2.5 million in royalties. One possibility is to convert the debt to shares that will be bought by the new franchisee.
Industry sources believe that none of the groups bidding to buy Burger King Israel will invest $6 million, except for Macdonald’s Israel and Burger Ranch.
Although Burger King is willing to help the new franchisee to operate the chain in Israel, it will not do so at any price. Some potential buyers reportedly demanded that Burger King concede its franchise fees for three years, or reduce the royalties to 2% of sales.
Commenting on the risk that Macdonald’s Israel or Burger Ranch would undermine Burger King’s attractive leases in malls, in order to drive it out of the market, Burger King executives said the company was aware of the risk, and the new franchisee would have to deal with it.
Burger Ranch stated in response that at the moment, it was jointly bidding with Macdonald’s Israel for Burger King Israel.
Burger King stated is response, “Burger King has no preference for any bidder at this time.”
Published by Globes [online] - www.globes.co.il - on March 4, 2003