Business

Government probing franchisee complaints against Tim Hortons

The federal government is looking into concerns raised by Tim Hortons franchisees that the company has not lived up to promises made when the company was taken over by the owner of Burger King in 2014.

Ottawa's options include court action or other penalties

Tim Hortons has been having a public squabble with some of its franchisees for the past year. (Chris Young/The Canadian Press)

The federal government is looking into concerns raised by Tim Hortons franchisees that the company has not lived up to promises made when it was taken over by the owner of Burger King in 2014.

"We just recently a few days ago received a letter from the franchisees talking about a range of issues and concerns," Innovation Minister Navdeep Bains told the CBC News on Friday.

"I told my officials to look into the issues that have been raised and to see if those claims are true."

On Thursday, the Globe and Mail reported that the government was investigating the company for not living up to promises made when Brazilian firm 3G Capital acquired the iconic coffee and doughnuts chain, merged it with its Burger King chain to form Restaurant Brands International (RBI), and set about an aggressive cost-cutting strategy that has drawn ire from franchisees.

Among the promises made — which some franchisees say have now been broken — were pledges to maintain franchisee relationships, rent and royalty structures for five years and to keep existing employment levels at Tims franchises across Canada.

Should any of those allegations prove to have merit, Bains says the government has many tools at its disposal including various court actions, or levying other unnamed penalties.

"But it's premature at this stage," Bains said. "We need to analyze all the facts and do our homework."

For its part, Tim Hortons says it is not aware of any formal investigation. "Every year we have reported to the Government on meeting our undertakings, without complaint," the company told CBC News in an email.

"We have always been and remain committed to doing good business in Canada."

About half of Tims' more than 4,700 franchises are members of a dissident group called the Great White North Franchise Association (GWNFA), who don't like changes the corporate owners have been pushing.

Among other complaints, franchisees allege that the parent company has reduced the quality of equipment, while throwing added costs on to the backs of the restaurant operators to pay.

"Rome is burning," a letter from GWNFA president David Hughes to Bains' office says. "GWNFA has been the only group advocating for the Canadian franchisees and trying to salvage this great Canadian icon from the egregious management policies and practices that RBI has put in place."

One Toronto-area franchisee and GWNFA member who has owned and operated his location for almost a decade is suing the company for $4.5 million, after Tims told him at the end of March that his franchise licence would be revoked when the contract expires in August, according to a statement of claim obtained by CBC News.

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