Some Tim Hortons franchisees in Quebec are taking the company that owns the brand to court. They blame what they see as unreasonable restrictions in the company's licensing agreements for their lower-than-expected profits.
A group of 16 companies with Tim Hortons franchise licenses has filed a lawsuit in Quebec Superior Court. They claim that the contracts with TDL Group Corp. give the company too much control over their 44 restaurants.
The plaintiffs allege that TDL has control over every essential aspect of running a restaurant, from supplier deals to equipment, through the Tim Hortons license agreements.
According to the lawsuit, TDL also determines the prices of menu items and the ingredients needed by the restaurants.
The franchisees argue that TDL's pricing policy did not adjust to the market. They say that the franchisor's rules leave them with no flexibility and impose costs that they cannot cover with their sales. As a result, their profits have decreased, making it challenging for them to afford the renovations and other investments expected by TDL.
The lawsuit states that before 2019, the franchisees' profits were in line with TDL's forecasts, but they started to decline after that. Between 2021 and 2023, the 16 franchisee companies claim to have lost a total of $18.9 million.
The statement of claim mentions that appeals for changes, such as the flexibility to set prices for some products within an agreed range, were not successful.
The lawsuit argues that TDL has breached its contractual obligation to support and collaborate with the franchisees.
According to court documents, as a result of TDL's breaches, the plaintiffs are unable to achieve the expected profitability. They claim that TDL has not fulfilled its duty to assist the plaintiffs in reaching their common goals.
The franchisees are seeking compensation from TDL to cover the losses incurred between 2021 and 2023.
Tim Hortons has refuted the claims made in the lawsuit, which have not been proven in court.
In an emailed statement, the company said, “Tim Hortons franchisees operate one of the most profitable and loved restaurant concepts in Canada and in Quebec.
The company also mentioned that in the last three years, 24 Tim Hortons franchisees have purchased 77 restaurants in Quebec and that franchisees have the opportunity to earn substantial profits if they operate the restaurants well and according to the brand's standards.
