Tim Hortons is firing back at more than a dozen Quebec franchisees who sued the company over their declining profitability \u2013 saying the restaurant owners are responsible for their business struggles and, in one case, for spending \u201clavishly\u201d on investment properties and helicopters rather than investing in the operations.<\/p>\n
The fast-food giant\u2019s statement of defence, filed with the Quebec Superior Court last Friday, also sheds light on how Tim Hortons sets the prices of items such as coffee and doughnuts that millions of Canadians buy each day. That includes an acknowledgment that the restaurants increased menu prices by 21 per cent in Quebec from 2021 to 2024.<\/p>\n
The Quebec franchisees first filed their lawsuit against Tim Hortons in 2024, claiming the company\u2019s decisions had eroded their profitability \u2013 which had collectively declined by millions of dollars in recent years. Some plaintiffs have been added to the lawsuit since then, and it now represents 15 franchisees operating 41 restaurants in the province.<\/p>\n
The chain, owned by Toronto- and Miami-based Restaurant Brands International Inc. QSR-T<\/a>, has approximately 3,900 locations in Canada, roughly 620 of which are in Quebec and operated by about 300 franchisees.<\/p>\n The 15 who are plaintiffs in the lawsuit argued that their costs for supplies had risen, while the hikes to menu prices had not sufficiently offset those costs \u2013 squeezing their profit margins, eroding their restaurants\u2019 value and harming them financially since 2019.<\/p>\n None of the claims on either side have been tested in court.<\/p>\n 2024: Quebec franchisees sue Tim Hortons, claiming declining profits<\/a><\/p>\n Tim Hortons sets menu prices for the restaurants and controls the prices for many of their supplies and equipment. That\u2019s because Restaurant Brands subsidiary TDL Group Corp. either sells those supplies to restaurant owners itself, or dictates the suppliers that they must buy from.<\/p>\n In its defence, TDL argues that franchisees benefit from this system, because its size and buying power mean that it is able to negotiate more favourable deals with suppliers.<\/p>\n The lawsuit is essentially a dispute over how Tims coped with skyrocketing food inflation \u2013 including in 2022, a time of massive global supply-chain disruptions, when food prices in Canada increased at the fastest rate in decades. <\/p>\n But Tim Hortons rejects the assertion that menu prices were not raised enough to offset some of these rising costs.<\/p>\n The court document explains that the prices customers pay for Tim Hortons coffee and other menu items are set in 62 regional \u201cclusters\u201d across the country, and determined by factors including what competitors in that region are charging, inflation measures affecting restaurants\u2019 costs, and the price increases that customers in each market will bear.<\/p>\n The 21-per-cent increase in menu prices in Quebec from 2021 to 2024 outpaced inflation during that time, although it lagged industry-wide price hikes of 26 per cent over the same period, according to figures provided by the company in its court filing.<\/p>\n