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A franchisee dispute crosses the border

For two consecutive years in 2004 and 2005, Canadian Business magazine named Tim Hortons as the best-managed brand in Canada.

Oh, what a difference twelve years can make.

A franchisee dispute that began in Canadian Tim Hortons locations has crept over their southern borders to include operators of United States-based franchises in Ohio, Michigan and New York. That move intensified the legal tussle between franchisees and the company owned by Restaurant Brands International Inc., formed after the 2014 merger of Tim Hortons and Burger King.

The Great White North Franchisee Association established for Canadian franchises actually franchised itself with a location in the U.S. The move followed a lawsuit filed against Tim Hortons. In legal papers, they accused the company of misusing advertising fund revenues by overcharging for administrative costs.

The franchisee’s attorney believes that the ownership group disintegrated trust among the franchises. Without consulting with franchisees, they aggressively implemented systemic changes seemingly with contempt for the “front line’s” financial well-being.

Franchisees have listed their concerns with RBI that have stoked fears of “severely weakened franchisees” in both countries with many U.S. locations operating at a loss. Those concerns include abuse of procurement powers to take franchisee profits, franchisee intimidation, and problems with the franchisor’s performance metrics.

This is not the first time that RBI’s sweeping changes have been cause for franchisees’ concerns. They employed similar aggressive, cost-cutting strategies to reinvigorate Burger King.

Tim Hortons affirmed their commitment to collaboration with their franchises and their advisory board, referring to them as the “foundation of our system.” They promised to continue to seek their input to ensure the continued health of the brand.

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