Tim Hortons exterior Courtesy of Tim Hortons

Tim Hortons franchisee dispute spreads to U.S.

Operators form association and hire attorney amid complaints of intimidation

A franchisee dispute with Tim Hortons in Canada has spread to the U.S., where operators have formed their own association and hired a well-known franchisee attorney.

The Great White North Franchisee Association, the group begun by Canadian franchisees earlier this year, has formed an association to represent franchisees in the U.S. The association has hired attorneys Robert Zarco and Robert Einhorn of Zarco Einhorn Salkowski & Brito, a Miami-based law firm.

The moves suggest that Tim Hortons franchisees are intensifying their legal dispute with the company, which is owned by Restaurant Brands International Inc. The company formed after the 2014 merger of Tim Hortons with Burger King.

“The long-term success of franchise systems like Tim Hortons depends on trust in the franchisor and a fair and equitable distribution of profits,” Einhorn said in a statement. “Since taking ownership, trust in RBI has disintegrated, and it has aggressively imposed changes to the system without consultation and with contempt for the financial well-being of franchisees on the front line.”

In a statement, Tim Hortons said: “Our franchise owners are the foundation of our system, and we have always and will continue to seek their counsel and work in close collaboration with them to deliver a great guest experience every day across our restaurants in the U.S.

“As always, we are committed to continued collaboration with our franchise advisory board, the members of which are elected by our franchise owners, to ensure that the Tim Hortons brand is healthy for the long run by focusing on what will help us serve our guests and the iconic Tim Hortons brand, now and in the future.” 

The creation of the U.S. franchisee association follows a lawsuit franchisees filed last week against Tim Hortons in Canada, accusing the company of misusing ad fund revenues by overcharging for administrative costs.

It also follows the reassignment of the chain’s president. Last week, Tim Hortons president Elias Diaz Sesé was named president of international expansion. RBI CEO Daniel Schwartz will oversee Tim Hortons.

The franchisees have listed a number of concerns with RBI management, including “abuse of procurement powers” to take franchisee profits; franchisee intimidation and use of the ad fund. The franchisees also take issue with the franchisor’s performance metrics. They promised to work together on concerns over their ability to sell franchise locations at fair market value.

“These issues and others have severely weakened franchisees’ operations in both countries, with many stores in the U.S. operating at a loss,” the association said in a release.

“As demonstrated by the progress of fellow owners north of the border, Tim Hortons franchisees need to stand firm and hold RBI to account,” Einhorn said. “The association looks forward to bringing our collective strength to bear.”

Nearly half of Tim Hortons’ U.S. franchisees, including those in Ohio, Michigan and New York, are part of the association. 

Tension with Tim Hortons franchisees represents a major challenge for RBI, which brought the same aggressive, cost-cutting style that worked to reinvigorate Burger King to the Canadian coffee-and-doughnut chain.

Tim Hortons represents well over half of revenue and earnings for RBI, even after the company’s acquisition earlier this year of Popeyes Louisiana Kitchen. Tim Hortons same-store sales declined 0.2 percent in Canada and fell 0.1 percent systemwide in the first three months of the year.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

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