Tim Hortons sued by franchisees

OAKVILLE Ontario Tim Hortons Inc. said it would contest a lawsuit filed by two franchisees over the chain’s switch to off-site doughnut production. The plaintiffs allege that the shift is a breach of contract because it failed to boost sales as promised.

The lawsuit further alleges that the company's adoption of a lunch menu featuring sandwiches and soups has not generated profits for franchisees because of the items' low margins and high operating costs.

The plaintiffs -- two franchisees in Burlington, Ontario -- are attempting to turn the suit into a class action. They claim in the suit that the corporate decision in 2002 to manufacture doughnuts off-site and then ship frozen products to stores has increased fixed costs from 9 cents to 20 cents per doughnut. Previously, doughnuts were baked in the individual stores.

Tim Hortons said in a statement on Friday that the lawsuit, which was filed in the Superior Court of Ontario, is "frivolous and completely without merit." Corporate officials also said the Tim Hortons Franchise Advisory Board, which is made up of eight franchisees, has said the complaint "doesn't reflect the opinion of the vast majority of franchisees."

Tim Hortons, based here, operates or franchises 2,839 doughnut shops in Canada and 399 in the United States.