Many franchise owners in Quebec are filing a lawsuit against the Tim Hortons trademark owner, blaming what they describe as unreasonable restrictions in the company’s licensing agreements for achieving lower-than-expected profits.

In a lawsuit filed before the Quebec Superior Court on Thursday, 16 Tim Hortons franchise licensees allege that TDL Group Corp contracts "place it in a position of absolute dominance" over their combined 44 restaurants.

Through the Tim Hortons licensing agreements... TDL controls every key lever involved in managing the restaurant, "from deals with suppliers to equipment," the plaintiffs claim in their filing.

The lawsuit confirms that TDL also sets the prices of menu items and the ingredients the restaurants need to manufacture them.

However, TDL’s price-fixing policy has not adapted to the market, franchise owners assert. They argue that the franchisee rules leave them "no room for maneuver" and impose costs they cannot offset in sales. They say the hit to their profits has led to a decline in the value of their restaurants and made it difficult to afford renovations and other investments expected by TDL.

Before 2019, franchisee profitability mostly aligned with the expectations provided by TDL, according to the lawsuit. But profits began to decline afterward. Between 2021 and 2023, the 16 franchise companies claim they collectively lost $18.9 million.

Meanwhile, demands for reforms, such as flexibility in pricing certain products within the agreed range, have been unsuccessful, according to the claim statement.

The lawsuit states that TDL has breached its contractual obligation to assist and partner with franchise owners.

The court documents said: "As a result of TDL’s violations, the plaintiffs are unable to achieve the sufficient profitability they are entitled to expect." "TDL has failed to assist the plaintiffs and to act reasonably and diligently to work in coordination with the franchisee to achieve their common goals.".

Franchise owners seek compensation from TDL to cover losses from 2021-2023.

Tim Hortons denied the allegations in the lawsuit, which have not been proven in court.

The company said in an emailed statement: "Tim Hortons franchise owners operate one of the most profitable and beloved restaurant concepts in Canada and Quebec." "In the past three years alone, we have seen 24 Tim Hortons franchise owners purchase 77 restaurants in Quebec – because franchisees are known to have the opportunity to earn significant profits when they run the restaurants well and according to our brand standards."

The plaintiffs’ lawyers did not respond to a request for comment on Saturday.