Burger King's response to angry customers: Canada relocation not tax-driven

Burger King and Tim Hortons emphasized their commitment to communities in both Canada and the US on Tuesday, after claims that their combination's primary goal is to avoid American taxes.

Burger King's response to angry customers: Canada relocation not tax-driven

MIAMI: Burger King has responded on social media to boycott threats over its planned relocation of its corporate headquarters to Canada as part of its takeover of coffee chain Tim Hortons, contending that the acquisition is not tax-driven.

On Tuesday morning, the fast-food restaurant chain posted a statement on its Facebook page stating that rather than being tax-focused, the goal of the $11.4 billion deal is "global growth for both brands." It added that Burger King will continue to pay all federal, state, and local US taxes.

After The Wall Street Journal broke news that Burger King was nearing a deal for the Canadian chain on Sunday, much of the media attention on the story focused on the trend of companies enacting "tax inversion" moves to avoid US corporate taxes. In an earlier example, US-based pharma company AbbVie said in July that it was buying Irish company Shire for $53 billion, then reincorporating overseas to cut its tax bill. However, pharmacy chain Walgreens decided to stay based in the US after acquiring the remainder of European drugstore chain Alliance Boots earlier this summer, despite an investor backlash.

The Treasury Department estimates that US companies relocating their headquarters internationally could eventually take a $20 billion bite out of corporate tax receipts.

Burger King paid an effective tax rate of 27.5% in 2013, while Tim Hortons’ was 26.8%; Canada-based companies generally pay a rate of about 26% including provincial taxes, according to Reuters.

Both Burger King and Tim Hortons will continue to operate as independent brands, but under common ownership. While the combined company will be based in Canada, Burger King’s headquarters will remain in Miami and business will "continue as usual" in restaurants worldwide, the company said.

"We hear you. We’re not moving, we’re just growing and finding ways to serve you better," the company added in the statement. "The Whopper isn’t going anywhere."

Echoing Sunday’s statement confirming that talks were taking place with Tim Hortons, Burger King reiterated that the chain will maintain its "long-standing commitment" to employees, franchisees, and the local communities in which it serves.

Brunswick Group, which is supporting Burger King’s communications team on the deal, declined to comment on its comms strategy.

RockOrange handles global comms for the Burger King brand. Alison Brod Public Relations, Burger King’s PR AOR for US marketing communications since last year, continues to work with the chain, but is not helping with comms for the deal, Alison Brod VP Brooke Mogan told PRWeek.

Since confirming talks on Sunday, Burger King has received backlash from customers on social media, who have blasted the company for what they believe to be a move to Canada to avoid US taxes.

Prominent politicians have also spurred the public to boycott the chain.

Sen. Sherrod Brown (D-OH) published a press release on his website on Monday, saying: "Burger King’s decision to abandon the US means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders. Burger King has always said ‘Have it Your Way.’ Well, my way is to support two Ohio companies that haven’t abandoned their country or customers."

"To help business grow in America, taxpayers have funded public infrastructure, workforce training, and incentives to encourage [research and development] and capital investment," he added, in the statement. "Runaway corporations benefited from those policies but want US companies to pay their share of the tab."

His counterpart from Vermont, Sen. Bernie Sanders (I-VT), also weighed in during a HuffPost Live interview on Monday, saying the deal highlights the "contempt" that big business has for average Americans.

Earlier on Tuesday, the companies released a statement about the deal, which said it will create a fast-food conglomerate with approximately $23 billion in system sales and over 18,000 restaurants in 100 countries. It also included a section headlined, "Commitment to Canada."

The statement emphasized that Tim Hortons will continue to manage its own operations and community involvement, adding that the Canadian chain’s franchisee relationship and business model will remain untouched.

Tim Hortons restaurant-level staffers will not be affected by the combination and the global company’s management and shared services operations will consist of a "meaningful number" of Canada-based executives, the statement added.

The companies also noted that Burger King will continue to support local communities and charitable causes in the US, such as the Burger King Scholars Program.

Under the deal’s terms, Burger King majority owner 3G Capital would continue to own most of the new company’s shares on a pro forma basis. The remainder would be held by Tim Hortons and Burger King’s existing shareholders.

Alex Behring, executive chairman of Burger King and managing partner of 3G Capital, will lead the merged company as executive chairman and director. Meanwhile, Marc Caira, president and CEO of Tim Hortons, will be appointed director and vice chairman, and Burger King CEO Daniel Schwartz will become CEO of the combined company, according to a statement.

Caira and Schwartz will continue as chief executives of Tim Hortons and Burger King, respectively, through the transition period.

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