Defining Obsolete Equipment Key In Pending BK Franchisee Case

Burger King has lost the first round in a court battle to shut down a Miami franchisee who didn’t install new cash registers in time to meet the chain’s deadline.

On Jan. 5, U.S. Magistrate Judge Edwin G. Torres denied Burger King’s efforts to obtain a temporary injunction against franchisee Al Cabrera that would have forced the closing of four Miami restaurants. The judge cited insufficient evidence that Burger King properly terminated the franchise agreement, and pointed out that the defendant’s restaurants continue to operate properly without any harm “to the goodwill of the Burger King brand.” The chain was attempting to shut down Cabrera’s restaurants because he failed to install the new cash registers by a Dec. 31, 2009 deadline or after a warning and six-week deadline extension by BK. Cabrera installed the new system by April 2010.

If, in the pending trial, Burger King fails to prove that Cabrera’s cash registers were obsolete, there could be a ripple effect with hundreds of other franchisees who were forced to install the new system to replace what Cabrera’s attorney referred to as “perfectly operating equipment.”

Miami-based Burger King claims it needs the new cash-register system to better monitor sales activity and target promotions to keep up with its competitors. Any Burger King franchisees with cash registers at least 10 years old had to upgrade them by Jan. 1, 2010; phasing in new systems continues through Jan. 1, 2014. The court agreed that Burger King can require its franchisees to make equipment changes, but within certain parameters of the existing franchise agreement. The definition of equipment, and the final decision on the chain’s ability to command change carries broad implications.

The judge referenced that in today’s fast-moving world of technology, “new creative inventions are uncovered on nearly daily basis.” However, Torres added, “Each new invention, although it may be a clear improvement over the older version of the same product, does not necessarily make the older product `obsolete.””