Burger King’s Move To Dodge American Taxes Not Going Over Well

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"Burger King’s Move To Dodge American Taxes Not Going Over Well"

Workers strike outside an Atlanta Burger King on May 15 as part of a nationwide push to force changes in fast food industry practices.

Workers strike outside an Atlanta Burger King on May 15 as part of a nationwide push to force changes in fast food industry practices.

CREDIT: Rebecca Leber

Burger King’s plan to buy Canadian coffee chain Tim Horton’s and relocate over the border to reduce its U.S. tax liability isn’t going over well with some of the fast food store’s customers. Instead of the usual chatter on Burger King Facebook posts, recent updates on the company’s social media page have drawn dozens and dozens of angry comments relating to the merger and promising to boycott the company over its tax practices.

“If you become a tax cheat you can count my family of seven as former customers,” reads one post with 97 likes. “If BURGER KING moves to Canada then US will boycott its restaurants,” says another that’s been liked over 700 times. The top comment on the store’s most recent post includes a promise to “NEVER step foot in another Burger King again.” It has 1,251 likes as of this writing.

The prospective merger of Burger King and Tim Horton’s, which executives confirmed this morning and awaits only the approval of Canadian authorities, could go a long way to close the size gap between McDonald’s and the rest of the fast food industry. The merged company would be worth something north of $20 billion and could expect profits of over half a billion dollars annually — still a far cry from McDonald’s $5.6 billion profit and more than $90 billion in net worth, but closer than any other chain.

While drug manufacturers and tech companies have made elaborate tax avoidance schemes a standard business practice over the past decades, companies like Burger King and Walgreen’s have a harder time staring down popular anger. Such Facebook ire is a long way from an organized boycott, but the possibility of concentrated consumer disaffection is one of several ways in which Burger King’s move is distinct from other recent “inversion” mergers. The maneuver is getting more and more popular with tax consultants and executives who are looking for new ways to juice their stock prices, and Wall Street has raked in almost a billion dollars in fees from arranging the corporate marriages. But while many of the companies that have pondered or completed an inversion merger in recent years are household names, few are in the direct customer service role that a food store occupies.

While it remains to be seen what role the masses will play in Burger King’s fate, the move is putting two famous rich men at odds. Multibillionaire investor Warren Buffett is reportedly helping to finance the American burger chain’s Canadian donut acquisition. Mark Cuban, the outspoken Texas billionaire, made headlines earlier this summer for vowing to sell off shares of any company that conducts an “inversion” deal. Deals like these are generally portrayed as benefiting shareholders and stock prices — something that can draw negative attention when the shareholders who benefit from an inversion are members of Congress, like House Speaker John Boehner (R-OH) and Rep. Dave Camp (R-CA).

It will be interesting to see if investors line up behind either Cuban’s position or Buffett’s endorsement of the tactic. But assuming the merger goes through, neither of those two men will have very much influence over what life is like at the new King Horton’s. Instead, the Brazilian private equity group 3G Capital will likely rule on even the most minute details of work at the new company. 3G owns Burger King now and is credited with reviving the company’s sagging profitability largerly by trimming costs. Employees aren’t allowed to use minifridges or color ink for printing (unless it’s a document for someone outside the office), and the company’s philosophy for its commercial empire is known as PSD for the three qualities it wants in new hires: “poor, smart, deep desire to get rich.”

But no matter how lean the new Brazilian bosses manage to render the new chain, simply streamlining the current operations won’t solve the larger problem facing the fast food industry. Young customers are turning away from fast food stores to shop instead at so-called “fast casual” food spots like Chipotle or Five Guys. There is more and more scrutiny of the industry’s reliance on low wages, quiet government subsidies through the public assistance programs that keep their full-time workers from starving, and out-and-out wage theft. Strikes and other worker organizing efforts have spread from New York City to hundreds of cities and towns in every part of the U.S. since late 2012, and workers are vowing to raise the stakes in future demonstrations. The current model may be great for executives, who are paid 1,200 times more than their front-line workers, but it seems increasingly unsustainable over the long haul.

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