The attempt by the food and drink group Diageo to sell its Burger King fast food chain has suffered a major setback.

A consortium of US venture capitalist firms, which in July this year agreed to buy Burger King, has now demanded a price cut.

Earlier this month, Diageo warned that the sale was being reviewed after poor trading at the fast food chain.

The deal was to have seen Burger King sold for $2.26bn (�1.4bn), but the offer was subject to the business meeting certain performance targets.

Diageo said the consortium, which is being led by the private equity group Texas Pacific, had expressed "a desire to continue in discussions towards a transaction materially different as to terms and conditions".

Deal flamed

When Diageo warned that the deal was under review earlier this month, Diageo's broker Cazenove reduced its estimate for Burger King to just under $1.9bn.

But the US consortium is now reported to be looking to offer just $1.5bn.

"Diageo now faces a fine balancing act of whether to go ahead with a cut-price sale to Texas Pacific or to wriggle out of the exclusivity clause it has with Texas Pacific and talk to other potential buyers," one industry analyst told the Reuters news agency.

Diageo has been seeking to offload Burger King in order to concentrate on its drinks business.

It is the world's largest drinks group, and includes brands such as Baileys Irish Cream liquor, Smirnoff vodka and Johnny Walker whisky.

Burger King is the world's second largest fast food chain in the world after McDonald's, with 11,457 restaurants worldwide.

Shares in Diageo dropped on the news of the setback, closing down 29.5p, or 4.1%, at 684p.