Business

U.S. Tim Hortons franchisee group sues RBI over alleged price gouging, equity theft

A group of U.S. Tim Hortons franchisees filed a lawsuit today alleging their parent company engaged in price gouging and equity theft.
The U.S. chapter of the Great White North Franchisee Association filed the suit in a Florida county court claiming Restaurant Brands International and Tim Hortons USA strip them of income and profit through increased and improper franchisee fees. (Chris Young/Canadian Press)

A group of U.S. Tim Hortons franchisees filed a lawsuit Tuesday alleging their parent company engaged in price gouging and equity theft.

Restaurant Brands International "established a very aggressive and improper investment strategy in the Tim Hortons franchisee system, which resulted in the economic squeezing of Tim Hortons franchisees by RBI," reads the suit filed in the Eleventh Judicial Circuit of Florida court on behalf of the American chapter of the Great White North Franchisee Association.

None of the allegations have been proven in court and RBI disputes the allegations.

The U.S. GWNFA group, which says it represents about half of all American Tim Hortons franchisees, claims RBI and Tim Hortons USA strip them of income and profit through increased and improper franchisee fees.

RBI raised the prices of necessary products and services — like food supplies, paper cups, containers and cleaning supplies — that franchisees must purchase from approved vendors, according to the suit. These prices are "significantly above" open market prices, the suit alleges.

Tim Hortons franchisees pay $104.08 more per case of Applewood bacon than Wendy's franchisees do, according to the court documents, and $23.85 more for boxes of diet and regular Coke.

It also claims the company requires franchisees who want to sell their stores to first offer it to the company for the five-year declining depreciated value of the furniture, fixtures and equipment.

The GWNFA wants the court to declare the practices a breach of contract.

RBI spokeswoman Devinder Lamsar said in an emailed statement that the lawsuit "does not at all reflect the facts."

She said the company "will respond in due course with the facts to this U.S.-based claim" and that RBI works closely with its Canadian and U.S. advisory boards made up of franchisees committed to its plan to grow the business and franchisee profitability.

"These franchisees have been unfairly squeezed by Tim Hortons/RBI to the point where they are, in many cases, no longer viable businesses," said Jerry Marks, one of the lawyers representing the GWNFA in this case, in a statement.

"We expect to stop this type of abusive franchisor behaviour."

RBI is also facing two lawsuits from the Canadian GWNFA chapter, including one alleging the company improperly used money from a national advertising fund.

Shares of RBI closed Tuesday at $84.87 after slipping 44 cents, or 0.52 per cent, on the Toronto Stock Exchange. 
-0.44 (-0.52%

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