Franchisee Restructure on BK's Grill

Blum announced that the chain had hired Trinity Capital, a financial services firm that specializes in franchisee financial restructuring. Trinity's services will be available to any Burger King franchisee at no cost to the restaurant owner, since Burger King is picking up the bill.

''For us to have great operations, we have got to address this issue,'' said Blum, who has been on the job at Burger King for a month. ``Once we've got that done, we'll be able to focus on getting back to taking care of our customers.''

Faced with debt from overexpansion and declining sales, about 20 percent of Burger King's U.S. franchise system have been struggling financially. Burger King's second-largest franchisee, AmeriKing, filed for bankruptcy protection in December and others have also been forced to seek refuge in court.

Blum's initiative was met with kudos from the leaders of the franchisee community.

''I applaud him for taking decisive and quick action,'' said Julian Josephson, chairman of the National Franchise Association. ``This is something that needs to be dealt with proactively.''

AmeriKing's problems are similar to that of many Burger King franchisees, which took advantage of readily available capital to fund expansion during the early and mid-1990s. But when sales hit the skids at the end of the decade, franchisees found themselves overextended, in default on loans and behind in royalty payments.

Under former Chief Executive John Dasburg, Burger King's management team attempted for much of the last two years to help franchisees restructure their debt independently or in bankruptcy court. While those efforts led to improvements in the financial situation for some of the company's largest franchisees, including Sydran Services and Cimm's, the problems haven't gone away.

If anything, the situation got worse last year, as the price war with McDonald's cut into already nonexistent profits. Blum hopes that by bringing in outside help he can speed up that recovery, so franchisees will have money to invest in improving their restaurants.

While Blum acknowledges that the process could force some franchisees out of the business, he hopes that number will be minimal. But there are no plans for Burger King to contribute funds to provide loans to franchisees or forgive past-due royalty payments.

Burger King's program should take up to 18 months to address franchisee problems, said Kevin Burke, managing director of Trinity.

''This is . . .a program that enables people to restructure operations and realize financial relief,'' he said.