Show Me Hospitality Blames Parent Company for Tim Hortons Closings
St. Lois, MO/December 30, 2017 (STL.News) – There are no more Tim Hortons in the St. Louis area. The last four St. Louis locations of the Canadian-based coffee and donut shops closed on Dec. 23, 2017. The local franchise owner, Show Me Hospitality announced the closings in a press release on the company’s website. The 50 people who had worked in the shops in Frontenac, Maplewood, Lafayette Square, and O’Fallon, Illinois were all let go Saturday. All six St. Louis area Tim Hortons locations are now closed. Two other shops, in downtown St. Louis and the Central West End closed on November 27, displacing more than 20 workers at that time. The closings come amid a legal battle between the franchisee and Tim Hortons parent company, Brazilian-based 3G Capital’s Restaurant Brands International (RBI).
Show Me Hospitality opened the first Tim Hortons in the St. Louis area in 2014. Tim Hortons USA’s expansion into this market was part of a larger expansion by the chain which planned to add 300 U.S. restaurants by the end of 2018. The franchise agreement between Show Me Hospitality and Tim Hortons USA called for the franchisee to open 40 restaurants in the St. Louis region by 2020, with an option for as many as 90 more over the next 15 years. Shortly after the agreement was made, Tim Hortons USA was purchased by RBI. According to Show Me Hospitality president Eric Sigurdson, the new parent company immediately asked him to sign a new franchise agreement requiring an additional $20 million up-front investment and a commitment to develop more than 200 new locations here in just 10 years. Show Me Hospitality declined the new agreement, opting to stick with the original franchise agreement. They say RBI never honored their commitments under that Area Development Agreement.
In July 2017, Show Me Hospitality filed suit against RBI/Tim Hortons USA in the U.S. District Court for the Southern District of Florida. According to the press release, that suit claims the parent company “stopped approving restaurant locations submitted by Show Me Hospitality (including kiosks at Ballpark Village and the St. Louis Zoo), failed to provide branding and advertising during a critical time entering the St. Louis market, withheld approval of new partners and necessary capital investment, and stated that if Show Me Hospitality did not commit to the 200 restaurant program, Tim Hortons would terminate the Area Development Agreement.”
According to Show Me Hospitality, the lack of support from Tim Hortons USA has made operating their St. Louis stores financially impossible. Troubles were apparent earlier this year when the Missouri Department of Revenue revoked Show Me Hospitality’s sales tax license. Such licenses are rescinded when businesses fail to forward to the state any sales taxes collected from customers or income taxes withheld from employee paychecks.
Show Me Hospitality is not the only North American franchisee suing the parent company. Numerous legal actions have been filed against RBI/Tim Hortons by other franchisees and franchisee associations in both the U.S. and Canada. There are two class action lawsuits seeking damages of approximately $1.5 billion, including one by GWNFA USA, the franchisee association to which Show Me Hospitality belongs. Sigurdson says the circumstances in these other suits are similar to those his company has experienced in St. Louis. “While the timing does not help Show Me Hospitality continue its operations in St. Louis, we are confident that the association will bring Tim Hortons and RBI to account,” Sigurdson said.
For his part, Sigurdson says his Show Me Hospitality had invested in the Tim Hortons franchises for the long-term. “Never did we imagine when we signed on with the original Tim Hortons ownership group, prior to the acquisition by 3G Capital, that we would close all of our restaurants in little more than two years,” Sigurdson said. “In this challenging situation, our greatest regret is not being able to serve our loyal customers and, by actions of the franchisor, not being able to operate a business with the ability to meet all obligations to our creditors, professionals, and partners that so loyally supported us,” he said. Sigurdson has said his company is working with former employees of the St. Louis-area Tim Hortons to help them find new jobs.
By Susan Smith-Harmon – published on STL.News by St. Louis Media, LLC (MS)