Diageo and the £55m burger

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The Independent Online

Food and drink giant Diageo, has set aside up to £55m to cover potential losses from a lawsuit in its Burger King operation, which it is promising to demerge next year, writes Jason Nissé.

Food and drink giant Diageo, has set aside up to £55m to cover potential losses from a lawsuit in its Burger King operation, which it is promising to demerge next year, writes Jason Nissé.

Burger King is being sued by La-Van Hawkins, who operates 26 US franchises and accuses Burger King of racism and trying to force him out of business.

Mr Hawkins claims $1.9bn (£1.3bn), alleging Burger King reneged on a deal to let him open 225 outlets across the US. For its part Burger King claims Mr Hawkins failed to pay franchise fees, debts incurred for building outlets and other debts, totalling $8m. The Franchise Acceptance Corporation, a body that finances franchise businesses, is also suing Mr Hawkins for $8.4m that it says he owes.

Despite attempts to mediate by African-American community leaders Jesse Jackson and Thomas Dortch, a court hearing to decide where the case will be heard, is due on Thursday.

Mr Hawkins met the Rev Jackson, once a US presidential candidate and a confidante of Martin Luther King, last week in Washington, but no progress was made on a settlement. The case has become something of a cause célÿbre in the African-American community, with Mr Hawkins claiming there was a conspiracy against successful black business people.

Burger King claims it is confident it will win its case against its troublesome franchisee. But its accounts, published last week, show that it has set aside £55m for "Burger King litigation and other costs".

A spokesman said the majority of this was to do with the La-Van Hawkins case but a small amount was to cover problems with a distributor of food products that has collapsed.

Diageo, which recently promoted Paul Walsh to the post of chief executive, is committed to de-merging Burger King next year, having bowed to pressure from both franchisees and shareholders. It is also selling its Pillsbury food manufacturing business to Great Mills.

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