2024-03-31 12:34:09
Several Quebec Tim Hortons franchisees are suing the brand owner for unreasonable constraints in its licensing agreements and lower than expected profits.
In a lawsuit filed Thursday in Quebec Superior Court, 16 companies holding Tim Hortons franchise licenses allege that TDL Group’s contracts place them and their combined 44 restaurants in a position of absolute domination.
Tim Hortons […] TDL controls all the essential levers involved in running a restaurant, from supplier agreements to equipment”,”text”:”Through these licensing agreements with Tim Hortons […] TDL controls all the essential levers involved in running a restaurant, from supplier agreements to equipment”}}”>Through these licensing agreements with Tim Hortons […] TDL controls all the essential levers involved in operating a restaurant, from supplier agreements to equipment, the plaintiffs claim in their motion.
TDL also sets prices for menu items and the ingredients restaurants need to prepare them, the document states.
No room for maneuver
However, TDL’s pricing policy has not adapted to the market, franchisees say. They argue that the franchisor’s rules leave them no room for maneuver and impose costs that they cannot match in terms of sales.
The hit to their profits reduced the value of their restaurants and made it difficult for them to afford the cost of renovations and other investments expected by TDL, they say.
Before 2019, franchisees’ profitability largely matched the forecasts TDL provided them, they say. But then profits began to fall. Between 2021 and 2023, the 16 franchise businesses say they lost a total of $18.9 million.
At the same time, calls for reforms, such as flexibility to set prices for certain products within an agreed range, have failed, the statement argues.
The suit claims that TDL therefore breached its contractual obligation to assist and cooperate with franchisees.
As a result of TDL’s failures, the plaintiffs are unable to generate the adequate profitability they are entitled to expect, according to court documents. TDL failed to assist the plaintiffs and act reasonably and diligently to work together with the franchisee to achieve their shared goals.
The franchisees are seeking compensation from TDL to cover losses for 2021-2023.
Tim Hortons rejected the lawsuit’s allegations, which have not been proven in court.
Tim Hortons operate one of the most profitable and popular restaurant concepts in Canada and Quebec”,”text”:”Tim Hortons franchisees operate one of the most profitable and popular restaurant concepts in Canada and Quebec”}}”>Tim Hortons franchisees operate one of the most profitable and popular restaurant concepts in Canada and Quebec, the company said in an emailed statement.
Tim Hortons franchisees purchase 77 restaurants in Quebec – because it is well known that franchisees have the opportunity to make substantial profits when they operate the restaurants well and according to the standards of our brand.”,”text”:”Just at the Over the past three years, we have seen 24 Tim Hortons franchisees purchase 77 restaurants in Quebec – because it is well known that franchisees have the opportunity to make substantial profits when they operate restaurants well and to our brand standards.”} }”>In the last three years alone, we have seen 24 Tim Hortons franchisees purchase 77 restaurants in Quebec – because it is well known that franchisees have the opportunity to make substantial profits when they operate restaurants well and according to our brand standards.
Lawyers for the plaintiffs did not respond to a request for comment Saturday.
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