Burger King has told its largest German franchise holder to close the 89 outlets he took over just a few months ago.
The demand came after a TV show ran an embarrassing exposé of dirty conditions at franchisee Ergün Yildiz's restaurants. The program was supplied with information by a labor union that had been in a dispute with Mr. Yildiz's company, Yi-Ko, over the termination of several works councils, the employee representative bodies that are in most German firms.
Andreas Bork, head of Burger King’s German operations, said the decision was taken to limit reputational damage, adding that the company has to protect the remaining 599 restaurants in the country. Even so, the move has left thousands of jobs at risk.
The dispute began last year when Burger King, which was operating the 89 outlets itself, sold them to Mr. Yildiz and his Russian partner Alexander Kolobov so the pair could undertake a major restructuring and get them back on their feet. The German division of the fast-food chain had hoped this would allow it to improve its figures when reporting back to the U.S. parent company. But consistent with the restructuring, Mr. Yildiz terminated agreements with the NGG food, beverages and catering union.
The NGG enlisted the help of Team Wallraff, a TV program featuring undercover reporting by journalist Günter Wallraff. He used hidden cameras to film inside the stores run by Yi-Ko, documenting miserable working conditions and hygiene violations, which had also been highlighted by the NGG. As a result, Burger King’s sales collapsed, and the U.S. company quickly gave ground to the union in the ensuing legal disputes.
When “Team Wallraff” threatened further revelations, Burger King terminated its partnership with Mr. Yildiz.
In the meantime, the NGG has been in further labor disputes with Mr. Yildaz, this time centering on overtime pay for nightshifts. The union had again been in talks with Team Wallrath about further exposés, a spokesperson at TV channel RTL confirmed.
The unions are now using reports of working conditions as a weapon.
But with 3,000 jobs at stake at the Yi-Ko franchise branches, the NGG is playing a dangerous game. Insolvency is likely should the restaurants close, said Dieter Stummel, Mr. Yildiz’s legal counsel and Yi-Ko’s acting general manager. He wants to apply for an interim injunction to prevent Burger King closing stores at the last minute. He maintains there have been no “serious breaches of contract.” The move would be “an act of self-defense,” Mr. Stummel said.
The NGG's actions are reminiscent of other cases. Union-driven television reports of exploited cashiers also caused large drops in sales at the drug store chain Schlecker, accelerating its insolvency and the loss of thousands of jobs.
The unions are now using reports of working conditions as a weapon. The e-commerce companies Amazon and Zalando were also hit by working conditions revelations in the middle of industrial disputes over pay. The unions have apparently realized that a consumer boycott often hits the companies harder than a strike. But the consequences are not always predictable.
The NGG is now demanding that Yi-Ko be bought by another franchisee or, even better, by Burger King itself. The NGG doesn’t believe it shares responsibility for the possible loss of jobs. “The business management of Yi-Ko Holding alone is responsible for any possible insolvency,” union speaker Jonas Bohl said.
The author is a Handelsblatt editor with expertise in the food and consumer goods markets. To contact the author: [email protected]