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Tim Hortons Franchisees Sue for Millions
21 Jun
Summary
- 15 franchise holders are suing Tim Hortons for $27 million.
- Tim Hortons uses 62 price clusters nationwide to adjust costs.
- Tims Rewards became self-funded within a year of its 2019 launch.
Fifteen Tim Hortons franchise holders in Montreal have filed a lawsuit seeking $27 million Canadian dollars, claiming the company's practices have negatively impacted their profits. The legal action, initiated in March 2024, is progressing slowly, with Tim Hortons recently filing a motion to dismiss the claims.
The lawsuit provides insight into Tim Hortons' pricing strategy. The company adjusts prices based on 62 "price clusters" across the country, considering local competition, labor costs, and customer volume. This system aims to "balance competitiveness with profitability" by setting prices as high as possible without deterring customers.
Furthermore, the court documents reveal that the Tims Rewards program, introduced in 2019, became self-funded within its first year due to a combination of price increases and reduced loyalty benefits. Franchisees are reportedly seeking operating profit margins of 15%, though Tim Hortons states most achieved between 9% and 14%.
Franchise agreements require owners to purchase supplies from company-approved sources and maintain store appearance, while Tim Hortons controls royalty payments and advertising contributions. Franchisees also bear full responsibility for hiring and employee wages, with some outlets utilizing temporary foreign workers.
In response to criticism regarding its reliance on temporary foreign workers, Tim Hortons launched a campaign to hire 10,000 local staff. The company's chief corporate officer estimates that around 6,500 individuals have joined since the campaign began three weeks prior.
