A Tim Hortons franchisee is seeking a class-action lawsuit against parent company Restaurant Brands International (TSX:QSR), alleging it improperly used money from a national advertising fund.
The claim alleges that since RBI acquired Tim Hortons in 2014, its subsidiary TDL Group Corp. started to charge administrative and operational expenses, such as the costs of franchisee training, to the fund. It also alleges TDL failed to provide statements of the fund's operations, which is required by franchise agreements.
"RBI has funnelled the money to itself, TDL and the individual defendants at the wrongful expense of the franchisees," read the claim filed on behalf of franchisee Mark Kuziora in Ontario Superior Court on Monday.
The allegations have not been proven in court. The suit is seeking $500 million in damages.
Each franchisee contributes 3.5 per cent of their gross sales to the fund to be used for advertising, marketing and sales promotion, according to the claim. Since Dec. 14, 2014, the fund has collected nearly $700 million, it says.
TDL and several individuals, including RBI CEO Daniel Schwartz, are listed as defendants in the proposed class action.
"We vehemently disagree with and deny all the allegations," said RBI in a statement, adding it's "very disappointing" that a few restaurant owners opted to take action against the company.
A rogue franchisee group, the Great White North Franchisee Association, was recently formed in an effort to raise some franchisees' concerns about RBI's management of the coffee-and-doughnut chain. The plaintiff, Kuziora, is a GWNFA member.
"The claim was filed because RBI failed to adequately respond to legitimate questions about its use of advertising funds collected from Tim Hortons franchisees," said the group in a statement, adding litigation was not its preferred option.
Schwartz has previously said he'd prefer if the group relayed their concerns privately and recently met with some of the franchisees.
Tim Hortons Canada brand president Sami Siddiqui sought to reassure restaurant owners in an email following the filing of the claim.
He rejected the allegations in the claim, saying the company has offered to go over numbers, line by line, with any restaurant owner wishing to do so, and echoed Schwartz's misgivings about the public criticism.
"As we have discussed many times before, these types of public accusations will only hurt the brand that all of you have worked so hard to build," Siddiqui said.