Franchisees Consider Settlement to End Legal Battles with Tim Horton
After a lengthy legal battle, 1,500 Canadian franchisees will now consider a proposed settlement offer on two class-action lawsuits they filed against the coffee/doughnut chain in 2017. The lead plaintiff and president of the Great White North Franchisee Association (GWNFA), Mark Walker, signed an agreement on March 6 with Restaurant Brands International (RBI), Tim Hortons parent company, which was filed in Ontario Superior Court.
The settlement, if approved, would address franchisees’ allegations against the franchisor on advertising fund mismanagement and other complaints contained in the two class action lawsuits. Franchisees under GWNFA had first launched a $500 million class action asserting that they were treated unfairly by Restaurant Brands International. They claimed that ever since RBI bought Tim Hortons and merged it with Burger King in 2014 their costs had increased, yet the new owners would not allow franchisees to raise prices to recoup those costs.
As part of the proposed agreement, the franchisor’s advisory board will regularly review advertising fund spending for added transparency, advisory board member terms will be shortened by a year and the company will institute electronic voting for the board, according to the Winnipeg Free Press. The report stated that Tim Hortons will also pay $10 million over two years for local advertising efforts and $2 million to the law firm representing the franchisee association.
The settlement will also include new provisions that the parties’ attorneys negotiated since the term sheet was submitted, “including more detail on how the advisory board will function to increase transparency, the report said. It added that it will also allow franchisees to negotiate some future contracts on their own, like insurance and dairy, after the current contracts expire.
The proposal also offers some protection from retribution to the six GWNFA members, including president Mark Walker, served with brand protection and breach of media policy notices last year, according to The Canadian Press, MSN.com. It said Tim Hortons will rescind those notices and has agreed to extend the franchisees’ agreements by 10 years, in addition to whatever amount of time remains on their current contracts.
The franchisees will have until mid-April to accept the settlement or request to opt-out, though a judge will make an official deadline determination at a later date. The parties will meet again in court in late April when any dissenting voices will be heard and the judge will rule on the proposed settlement, the news report said.
Tim Hortons’ chief corporate officer Duncan Fulton said in a company statement, “The settlement agreement allows us to move forward with all our franchisees focused on the same thing, building the Tim Hortons brand and business in Canadian communities.”
This is not the only litigation Tim Hortons is facing. In February a Minnesota-based franchisee filed a suit in a U.S. court alleging the franchisor engaged in price gouging and provided the franchisee entity, Tim-Minn Inc., with misleading statements that led it to invest millions of dollars into the venture, according to the MSN.com report. It said that none of the claims have been proven in court and RBI has said it disagrees with the operator’s point of view.
There is also another class action against Tim Hortons filed by U.S. franchisees alleging Restaurant Brands International “charges significantly above open market prices for necessary products and services.” RBI countered saying at the time that it does not reflect all the facts.