Tim Hortons’ U.S. franchise association is accusing the brand of a campaign of intimidation against its members, in some cases forcing them out of their restaurants so they can be sold to preferred operators.
The lawsuit accuses Tim Hortons’ owner, Canadian quick-service operator Restaurant Brands International (RBI), of a “pattern of conduct” designed to weaken the association’s standing. The association says that half of Tim Hortons’ U.S. franchisees are members.
It also traces the problem to Tim Hortons’ ownership, accusing RBI of “aggressive cost-cutting” that led to an “economic squeezing of Tim Hortons franchisees.”
The accusations are in an amended complaint filed in a Florida court last month, stemming from a lawsuit that the U.S. arm of the Great White North Franchise Association filed against the Canadian coffee chain last year.
In that lawsuit, the association accused Tim Hortons of charging unreasonable rates for food and supplies and said that restrictions the brand placed on the sale of restaurants hurt the value of their businesses.
Tim Hortons said the allegations are “without merit.”
“Just like previous allegations in this lawsuit, the allegations in this amended complaint are without merit and [Tim Hortons U.S.] will defend itself vigorously in this matter,” the company said in an emailed statement.
The association wouldn’t comment on the revised lawsuit, in a statement through its attorneys. “We have no comment due to a sincere fear of retaliation by Tim Hortons USA on us and our association’s members. The amended lawsuit speaks for itself.”
Still, the allegations suggest growing discontent by a large percentage of Tim Hortons’ U.S. operators at a time when the brand is struggling to find its footing in a market it has long targeted for expansion.
System sales in the U.S. have declined by 17% since 2015, including a 5.1% decline last year, according to Restaurant Business sister company Technomic. Locations in Minnesota and Cincinnati have been shut down.
Disputes arose between the brand and its franchisees in Canada, where Tim Hortons is something of an institution, and then quickly spread to the U.S. beginning in 2017—when the U.S. division of the Great White North Franchise Association was formed.
The lawsuit accuses RBI and Tim Hortons of intimidating members of the association since that formation, including subjecting operators to “intimidation and bullying” in private and public.
The lawsuit accuses RBI of forcing numerous franchisee buyouts, requiring the operators to sell at a discount “to redistribute stores to preferred multiunit owners.”
The lawsuit also accuses the company of requiring franchisees to renovate locations at a cost of $450,000 per restaurant. The association says that the company uses the threat of renovation to devalue stores and force smaller operators out of the business in favor of preferred owners.
The lawsuit blames the problem on Tim Hortons’ 2014 merger with Burger King, which at the time was controlled by private-equity firm 3G Capital and which led to the formation of RBI.
“In general, private-equity (PE) funding can be beneficial to a successful franchise system, by investing money for systems and infrastructure improvements, resulting in greater franchisee growth,” the lawsuit says. “The situation brought by [the association] before this court exposes the darker side of PE funding.”
UPDATE: This story has been updated to include a statement from the association.
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