Quebec Tim Hortons Franchisees Sue Brand Owner for Almost $19M

In a recent legal battle, 16 Tim Hortons franchisees in Quebec have taken the brand’s owner to court, alleging unreasonable constraints in the company’s licensing agreements that have led to lower-than-expected profits. The franchisees argue that the TDL Group Corp.’s contracts give it absolute dominance over their combined 44 restaurants, leaving them with little room for maneuver and imposing costs they cannot match in terms of sales. Here’s an in-depth look at the situation:

The Struggle for Profitability

Before 2019, the franchisees’ profitability largely aligned with the forecasts provided by TDL. However, profits began to decline after that. Between 2021 and 2023, the 16 franchised companies claim to have lost a total of $18.9 million. Appeals for reforms, such as flexibility in setting prices for certain products, have fallen on deaf ears.

Tim Hortons
Tim Hortons

TDL’s Control Over Essential Levers

The franchisees argue that TDL controls every essential aspect of running a restaurant, from deals with suppliers to equipment. TDL also sets prices for menu items and the ingredients needed to prepare them. Unfortunately, the pricing policy hasn’t adapted to market realities, leaving franchisees struggling to maintain profitability.

Breach of Contract

The franchisees contend that TDL has violated its contractual obligation to assist and cooperate with them. As a result, they are unable to generate the expected profitability. The value of their restaurants has decreased, making it challenging to afford renovations and other investments expected by TDL.

Seeking Compensation

The franchisees seek compensation from TDL to cover the losses incurred between 2021 and 2023. Tim Hortons, however, rejects the claims, emphasizing that its franchisees operate one of the most profitable and beloved restaurant concepts in Canada and Quebec.

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