Tim Hortons franchisees in Quebec sue owner for $18.9M

MONTREAL Several Quebec Tim Hortons franchisees are taking the brand’s owner to court, blaming what they describe as unreasonable constraints in the company’s licensing agreements for lowerthan-expected profits.

In a lawsuit filed in Quebec Superior Court, 16 companies with Tim Hortons franchise licences allege the TDL Group Corp.’s contracts “place it in a position of absolute dominance” over their combined 44 restaurants.

“Through these Tim Hortons licence agreements ... TDL controls every essential lever involved in the running of a restaurant, from deals with suppliers to equipment,” the plaintiffs allege in their application.

TDL also sets prices for both menu items and the ingredients restaurants need to make them, the lawsuit contends.

Yet TDL’s policy of fixing prices didn’t adapt to the market, the franchisees assert. They argue the franchisor’s rules leave them “no room for manoeuvre” and impose costs they can’t match in sales. A resulting blow to their profits has reduced the value of their restaurants and made it hard for them to bear the cost of renovations and other investments TDL expects, they say.

Before 2019, the franchisees’ profitability mostly aligned with the forecast TDL provided them, the lawsuit states. But profits began to fall after that. And between 2021 and ’23, the 16 franchisee companies say they lost out on a combined $18.9 million.

Meanwhile appeals for reform, such as flexibility to set prices for some products within an agreed upon range, were unsuccessful, the statement of claim says.

The lawsuit argues TDL has therefore violated its contractual obligation to help and partner with the franchisees.