Canadian firm linked to IAWS hit by $2bn lawsuit
TIM HORTONS, the Canadian company which is a joint venture partner of Irish food group IAWS has found itself on the receiving end of a major law suit over the preparation of products in its stores.
Tim Hortons and IAWS are fifty-fifty partners in a major bakery facility in southwestern Ontario which produces and distributes par-baked (baked and then frozen) goods to the Tim Hortons restaurant chain in North America and to Cuisine de France outlets in the US. The venture uses the European baking expertise and experience of Cuisine de France.
But now this icon of Canadian franchising has been hit with a $1.95bn class-action suit over its conversion from a "fresh-baked" goods restaurant to a "microwaved products store".
In a statement of claim filed in an Ontario court, two Burlington franchise owners are suing the head office on behalf of all Tim Hortons franchisees claiming that the move to an off-site supply chain involving frozen doughnuts hasn't made them any more money.
Rather, they argue, it has driven up the fixed costs of a doughnut from 9¢ to 20¢, without increasing sales as allegedly promised.
Moreover, the two franchisees claim that "a more extensive lunch menu" featuring soups and sandwiches have allegedly earned them only a "minimal profit, and in some cases no profit at all."
They say the lunches have become increasingly popular. However, the lunches have "unreasonably low margins", and drive up operating costs because stores have to hire more staff to serve them.
They are claiming breach of contract, breach of duty of fair dealing, negligent misrepresentation and unjust enrichment. The claim has yet to be certified as a class action or heard by a judge.
Frivolous
A statement from Tim Hortons said that the lawsuit is "frivolous and completely without merit. The company intends to vigorously defend itself in this matter".
The statement said the lawsuit "doesn't reflect the opinion of the vast majority of franchisees".
"Strong relations with our store owners has been a hallmark of the firm's success during our 44-year history, reflected in the good relations we enjoy with the vast majority of our more than 1,200 franchisees."
A lawyer for the plaintiffs, Jerome Morse of Adair Morse in Toronto, said: "My client contends there has been a breach of the franchise agreement and that there has been a failure to conduct the franchise arrangement in a good faith manner."
He added: "We hope to satisfy the court that this is not fair to the franchisees, that they don't have to provide the lunch menus dictated by head office resulting in what we say -- no profit to the franchisees."
The claim says that until 2002 all doughnuts and most other baked goods were made on-site and each store was equipped with high-volume baking equipment. Bakers would work through the night preparing goods for the next day.
