A number of Quebec Tim Hortons franchisees are taking the model’s proprietor to court docket, blaming what they describe as unreasonable constraints within the firm’s licensing agreements for lower-than-expected earnings.
In a lawsuit filed in Quebec Superior Court docket on Thursday, 16 firms with Tim Hortons franchise licences allege the TDL Group Corp.’s contracts “place it able of absolute dominance” over their mixed 44 eating places.
“By means of these Tim Hortons licence agreements … TDL controls each important lever concerned within the operating of a restaurant,” from offers with suppliers to gear, the plaintiffs allege of their utility.
TDL additionally units costs for each menu gadgets and the elements eating places must make them, the lawsuit contends.
But TDL’s coverage of fixing costs did not adapt to the market, the franchisees assert. They argue the franchisor’s guidelines depart them “no room for manoeuvre” and impose prices they’re unable to match in gross sales.
A ensuing blow to their earnings has diminished the worth of their eating places and made it tough for them to bear the price of renovations and different investments that TDL expects, they are saying.
Earlier than 2019, the franchisees’ profitability principally aligned with the forecast TDL offered them, the lawsuit states. However earnings started to fall after that. And between 2021 and 2023, the 16 franchisee firms say they misplaced out on a mixed $18.9 million.
In the meantime appeals for reform, comparable to flexibility to set costs for some merchandise inside an agreed upon vary, have been unsuccessful, the assertion of declare says.
The lawsuit argues TDL has due to this fact violated its contractual obligation to assist and accomplice with the franchisees.
“On account of TDL’s breaches, the plaintiffs are unable to generate the satisfactory profitability to which they’re entitled to count on,” court docket paperwork learn. “TDL has failed to assist the plaintiffs and to behave in an affordable and diligent method to work in live performance with the franchisee to realize their frequent targets.”
The franchisees are searching for compensation from TDL to cowl the 2021-2023 losses.
Tim Hortons has rejected the claims within the lawsuit, which haven’t been confirmed in court docket.
“Tim Hortons franchisees function probably the most worthwhile and beloved restaurant ideas in Canada and in Quebec,” the corporate stated in an emailed assertion.
“Simply within the final three years, we’ve got seen 24 Tim Hortons franchisees purchase 77 eating places in Quebec — as a result of it’s well-known that franchisees have the chance to earn substantial earnings once they function the eating places properly and in keeping with our model requirements.”
Legal professionals for the plaintiffs didn’t reply to a request for touch upon Saturday.
