Group of Tim Hortons franchisees in Quebec sue brand owner for $18.9 million

Several Quebec Tim Hortons franchisees are taking the model’s proprietor to courtroom, blaming what they describe as unreasonable constraints within the firm’s licensing agreements for lower-than-expected income.

In a lawsuit filed in Quebec Superior Court on Thursday, 16 firms with Tim Hortons franchise licences allege the TDL Group Corp.’s contracts “place it in a position of absolute dominance” over their mixed 44 eating places.

“Through these Tim Hortons licence agreements … TDL controls every essential lever involved in the running of a restaurant,” from offers with suppliers to gear,” the plaintiffs allege of their software.

TDL additionally units costs for each menu objects and the components eating places have to make them, the lawsuit contends.

Yet TDL’s coverage of fixing costs did not adapt to the market, the franchisees assert. They argue the franchisor’s guidelines go away them “no room for manoeuvre” and impose prices they’re unable to match in gross sales. A ensuing blow to their income has diminished the worth of their eating places and made it troublesome for them to bear the price of renovations and different investments that TDL expects, they are saying.

Before 2019, the franchisees’ profitability largely aligned with the forecast TDL offered them, the lawsuit states. But income started to fall after that. And between 2021 and 2023, the 16 franchisee firms say they misplaced out on a mixed $18.9 million.

Meanwhile appeals for reform, reminiscent of flexibility to set costs for some merchandise inside an agreed upon vary, had been unsuccessful, the assertion of declare says.

The lawsuit argues TDL has due to this fact violated its contractual obligation to assist and associate with the franchisees.

“As a result of TDL’s breaches, the plaintiffs are unable to generate the adequate profitability to which they are entitled to expect,” courtroom paperwork learn. “TDL has failed to help the plaintiffs and to act in a reasonable and diligent manner to work in concert with the franchisee to attain their common objectives.”

The franchisees are in search of compensation from TDL to cowl the 2021-2023 losses.

Tim Hortons has rejected the claims within the lawsuit, which haven’t been confirmed in courtroom.

“Tim Hortons franchisees operate one of the most profitable and loved restaurant concepts in Canada and in Quebec,” the corporate stated in an emailed assertion. “Just in the last three years, we have seen 24 Tim Hortons franchisees buy 77 restaurants in Quebec – because it is well known that franchisees have the opportunity to earn substantial profits when they operate the restaurants well and according to our brand standards.”

Lawyers for the plaintiffs didn’t reply to a request for touch upon Saturday.

This report by The Canadian Press was first printed March 31, 2024.