Quebec franchisees of Tim Hortons are suing the company’s parent company for nearly $19 million. They accuse the fast food giant of having hurt their profitability by not raising prices enough during the inflationary period.
“Starting in 2019, the profitability of several restaurants began to decline,” reads a lawsuit filed in Superior Court.
The process was initiated by around fifteen franchisees, representing 44 restaurants spread across several regions of the province, including Centre-du-Québec, Capitale-Nationale, Chaudière-Appalaches, Montérégie, Mauricie, Gaspésie-Îles-de -La-Madeleine, the Laurentians, the North Shore and Estrie.
They claim that Tim Hortons’ pricing policy, which controls both the cost price of raw materials and the sales price of items, “failed to adequately adapt to market fluctuations to take into account the increase in fixed costs constantly growing.
Ultimately, these managers say they have suffered “discrepancies between the selling price and the cost of the product sold that they do not control and which directly and negatively affect their profitability”.
But that’s not all. According to the pursuers, the “FidéliTim” program, which aims to offer rewards to loyal customers who accumulate points, had “an impact on the pace of daily operations”. Indeed, “the need to connect to the mobile application in order to benefit from the points accumulated and to use the card correctly at the time of the transaction negatively affects the pace of a restaurant,” says the group.
Since the arrival of this rewards program, the number of transactions has in several cases been “significantly affected downward, particularly at the drive-thru level,” the suit reads. We add that “this is without taking into account the complexity of the product offering to consumers which leads to additional handling and considerably slows down the chain of operations”.
Multiple requests
Failing to be able to “generate adequate profitability”, local managers claim to have made these arguments to Tim Hortons on several occasions in recent years and months.
An email was first sent in June 2019, then a letter was also sent in April 2021. Then, in February 2022, “the situation had become so worrying that many franchisees in Quebec came together for the submission of a joint letter denouncing the decline in their profit margin,” the lawsuit states.
In total, the 16 franchise companies behind it estimate the losses they have suffered at just over 18.9 million. They are therefore asking Tim Hortons to reimburse, to the nearest dollar, the entire amount.
It is the Montreal law firm Cain Lamarre, specialized among others in business law, which represents the group of restaurateurs. The latter also filed the lawsuit in the judicial district of Montreal, where the Canadian company has a branch of its general management.
Tim Hortons plans to defend itself
Called to react, Tim Hortons for its part assured Friday by email of its intention to defend itself “against these unfounded allegations in court.”
“The franchisees operate one of the most profitable and popular restaurant concepts in Canada and Quebec,” the organization maintains in its statement.
She specifies in passing that with its approximately 1,500 franchisees across the country, the pursuers “do not represent the positive experience and opinions of the vast majority of Tim Hortons restaurant owners.”
In the last three years alone, “we have seen 24 Tim Hortons franchisees purchase 77 restaurants in Quebec, because it is well known that franchisees have the opportunity to make substantial profits when they operate the restaurants well and they respect our brand standards,” concludes management.
Last November, Tim Hortons, which is owned by parent company Restaurant Brands International, announced that sales at its locations open at least a year increased 6.8% in the third quarter, after increasing by 9.8% a year ago.
reference: www.lapresse.ca