A Tim Hortons Inc. franchisee’s legal battle has caused two Tim Hortons closings in the St. Louis, Missouri area. The lawsuit by franchisee Show Me Hospitality LLC against Restaurant Brands International, the owner of Tim Hortons, centers around what Show Me Hospitality claims was a warping of an agreement on the part of Restaurant Brands.
The Tim Hortons shutdowns came as a result of a deal made between the coffee shop chain and the St. Louis franchisee.
Show Me Hospitality signed a franchise agreement in 2014 to bring the Canadian coffee and donut chain to St. Louis, agreeing to open 40 standalone restaurants and smaller spaces within arenas or hospitals in the region over the next five years, with an option to add 90 restaurants in 15 years.
This was encompassed within Tim Hortons’ larger plan to expand by 300 U.S. locations by the end of 2018.
But then Tim Hortons was acquired by Burger King Worldwide Inc, which combined to create Restaurant Brands International, a company under the control of Brazilian investment group 3G Capital.
Eric Sigurdson, president of Show Me Hospitality, and the lawsuit allege that the new ownership instead wanted to renegotiate the deal, with a commitment to add 205 shops to the St. Louis area in the next decade and demand an additional $20.0-million capital investment.
The group claims that when it refused the new deal, Tim Hortons slowed down its process for approving new sites. This led to the Show Me Hospitality-Tim Hortons U.S.A. lawsuit, filed in Miami in July with the federal court.
The lawsuit also alleges that Tim Hortons suspended its marketing in St. Louis, charged unreasonable markups on equipment, and failed to provide support for the new locations.
Show Me Hospitality is suing for over $50.0 million in damages to compensate for the loss of business opportunity. The figure is based on a projection of value of the business over the 10 to 15 years.
Tim Hortons USA Closed 2 St. Louis Restaurants, Followed with 24 Layoffs
The Tim Hortons closing at the two locations in St. Louis, which first opened in 2015, led to 24 layoffs and delay to the plans to expand further into the U.S. Restaurant Brands International has expressed a desire to expand south, looking to add to the 700 restaurants already operating across 16 states. About 82% of Tim Hortons locations operate in Canada, with 15% in the U.S. and the remainder spread across the globe.
The St. Louis restaurant closures and resulting Tim Hortons layoffs are likely to slow that development, at least in the area.
“As a direct and proximate cause of (Tim Hortons USA’s) tortious interference with its business expectancy, Show Me Hospitality lost an ideal and promising partner that had committed to infusing millions of dollars in capital to Show Me Hospitality at a crucial time,” the lawsuit states. “Show Me Hospitality is now without the capital required to move forward with its Development Schedule.”
“The agreement we signed with the original ownership group was fuelled by a deep passion for the Tim Hortons brand. Our franchisor’s repudiation of its obligations under the original agreement derailed our business plan and scared off great new partners, leading us to have to evaluate our operations and locations, both now and in the near future,” Sigurdson said in a statement released through his lawyers.
More Tim Hortons Closures in 2017
Tim Hortons closings in 2017 are not limited to St. Louis. Below is a list of closures across the U.S.:
- A Tim Hortons closing took place in Dayton Ohio, earlier in the year
- Flint, Michigan also had a Tim Hortons close its doors in October
- At the start of the year, another Tim Hortons closing occurred in Waterville, Maine, adding 15 more to the Tim Hortons job cuts in 2017
“Tim Hortons franchisee closing two St. Louis doughnut shops amid legal spat with chain,” St. Louis Post-Dispatch, November 27, 2017
“Tim Hortons owner faces more franchisee ire — this time in form of a $50M lawsuit in the U.S.,” Financial Post, November 28, 2017.
“JUST IN: Local Tim Hortons restaurant closes abruptly,” Dayton.com, May 4, 2017.
“Flint Township Tim Hortons store closes without explanation,” Michigan Live, October 17, 2017.
“Another Tim Horton’s Location In Maine Has Abruptly Closed,” WCYY, January 3, 2017.