A group of Tim Hortons franchisees in Quebec has initiated legal proceedings against the brand’s owner, alleging that the company’s licensing agreements impose unreasonable constraints, resulting in lower-than-expected profits.
The lawsuit, filed on Thursday in Quebec Superior Court, involves 16 companies holding Tim Hortons franchise licenses, collectively operating 44 restaurants. The plaintiffs claim that the licensing agreements with TDL Group grant the company “absolute domination” over their businesses, controlling essential aspects such as supplier agreements and equipment procurement.
According to the lawsuit, TDL also dictates prices for menu items and the required ingredients, without adapting to market conditions. Franchisees argue that these rigid pricing policies leave them with no flexibility and impose costs that exceed their sales capabilities, thereby diminishing profitability and impeding their ability to meet TDL’s expectations for renovations and investments.
Prior to 2019, franchisees assert that their profitability aligned with TDL’s forecasts. However, profits began to decline thereafter. Over the period from 2021 to 2023, the 16 franchised companies claim cumulative losses of $18.9 million.
Despite calls for reforms, including greater flexibility in setting prices within an agreed range, franchisees allege that TDL has failed to cooperate. The lawsuit contends that TDL breached its contractual obligation to support franchisees, resulting in inadequate profitability.
In response to these allegations, the franchisees are seeking compensation from TDL to cover losses incurred between 2021 and 2023.
Tim Hortons has denied the claims made in the lawsuit, emphasizing the profitability of its franchise model. The company highlighted recent franchisee acquisitions in Quebec as evidence of the lucrative opportunities available within its system.
Lawyers representing the plaintiffs declined to comment on the matter when contacted.
It’s important to note that the allegations made in the lawsuit have not yet been proven in court.