Under terms of the proposed settlement the company would spend $10-million over two years for regional and local marketing to build the brand, said Mark Walker, president of the Great White North Franchisee Association.Todd Korol
Tim Hortons and its dissident franchisees are a step closer to an agreement to settle disputes that have created tensions at the coffee-and-doughnut chain over the past two years.
The company and the Great White North Franchisee Association, which was formed in early 2017 to represent grievances of unhappy Tim Hortons restaurant owners, have agreed to non-binding terms of a potential settlement of two class-action lawsuits against the chain, lawyer Richard Quance, who represents the franchisees, said in an interview on Wednesday.
The agreement could form “a framework” and the basis of a possible settlement to the two cases seeking class-action status, each of which was launched in 2017, he said.
“We’re working on something,” Mr. Quance said on Wednesday after the franchisees who are seeking class-action status asked Ontario Superior Court for funding from Galactic Litigation Partners LLC, a New York firm that provides financing for such legal fights.
The tentative agreement comes after about two years of squabbling between dissatisfied franchisees and the company amid complaints that parent Restaurant Brands International Inc. (RBI), controlled by a Brazilian private equity firm, was slashing costs and hurting the Tim Hortons brand and franchisees’ bottom line.
Under terms of the proposed settlement, whose details still have to be worked out, the company would spend $10-million over two years for regional and local marketing to build the brand, said Mark Walker, president of the franchisee association and one of the franchisees who launched the lawsuits. It could include investing more in the Timbits minor-sports program, introducing more coffee trucks at local community events and heavier promotions of the Tim Hortons smile-cookie campaign, he said.
As well, the company has agreed to pay $2-million toward the association’s legal and administrative costs, he said.
The terms include provisions to strengthen the governance of the franchisee advisory board, which the company recognizes as the sole voice of the franchisees although the association views it as having no real power and being a puppet of the company.
And while the association had been pushing for the company to recognize it as the official representative of the franchisees, the tentative terms don’t provide for that recognition.
Mr. Walker said he thinks the association can still have a positive influence on Tim Hortons without the official recognition. “We’re going to continue as an association to do our best for all the franchisees in Canada and see where that leads us.”
He also emphasized that the settlement is just a preliminary framework and has yet to be approved.
“It will be good to put all this behind us and move forward together,” he added.
In June, 2017, then-franchisee Mark Kuziora sought class-action status for a lawsuit, claiming the company was misusing franchisee advertising money. Four months later, two other franchisees – founding association president David Hughes and Mr. Walker – sought class-action status, alleging the company was interfering with the franchisees’ right to association.
Two of the three franchisees involved in the lawsuits – Mr. Hughes and Mr. Kuziora – were the most prominent figures in the association but left the company last summer after RBI negotiated settlements with each of them for undisclosed amounts.
The departures paved the way to secret talks between RBI and Mr. Walker, the association’s new president, to try to reach an agreement and get the internal battle out of media headlines.
As well last year, RBI named new executives at Tim Hortons, including president Alex Macedo who came from RBI’s Burger King and had a reputation there of smoothing frayed relations with its franchisees. The company has since rolled out new initiatives, such as all-day breakfasts and children’s menus, which are helping improve its financial results.
Under the non-binding terms of the tentative settlement, at least four members of the advisory board can review the ad-fund spending at least four times a year, Mr. Walker said. And the terms acknowledge that Mr. Walker has reviewed the ad-fund decisions made in 2015, 2016 and 2017 and is satisfied with the current ad-fund terms.
Mr. Quance, the association lawyer, would not comment on details of the settlement’s non-binding terms, which were presented to Justice Edward Morgan on Wednesday. The judge told the two sides to return to court on March 21 with a final settlement, giving individual franchisees until April 26 to opt out of the would-be agreement.