Legal Dispute Behind the Closing of 2 STL Tim Hortons

Legal Dispute Behind the Closing of 2 STL Tim Hortons

Legal Dispute Behind the Closing of 2 STL Tim Hortons
Legal Dispute Behind the Closing of 2 STL Tim Hortons

Two STL Tim Hortons Cafe and Bake Shops Close Suddenly

St. Louis, MO/December 1, 2017 (STL.News) – Two of the six Tim Hortons locations in the St. Louis metro area have closed amid a legal battle between the local franchisee and the chain’s new ownership.  The doughnut and coffee chain locations in downtown St. Louis (231 N Tucker Blvd.) and in the Central West End’s Cortex Innovation District (4249 Clayton Ave.) both closed over the Thanksgiving holiday weekend.  According to a statement released by the franchise owner, Show Me Hospitality, on the Tim Hortons STL website, “the closings are directly related to the failure of (the) franchisor, Tim Hortons USA, Inc., to meet its obligations in its agreements with Show Me Hospitality.”

Show Me Hospitality opened the first Tim Hortons in the St. Louis area shortly after signing a franchise agreement in 2014.  At that time, the local franchisee reportedly agreed to open 40 restaurants in the region by 2020, with an option for an additional 90 locations in the next 15 years.  The ink on the franchise agreement was just about dry when the trouble began, according to an attorney for Show Me Hospitality, Scott Korzenowski with Minneapolis-based law firm, Dady & Gardner, P.A.  Just after the agreement was signed, Tim Hortons was bought out by Burger King.  Almost immediately afterward, Burger King was purchased by Restaurant Brands International.  RBI is controlled by 3G Capital, an investment group in Brazil once thought to be in the running to buy St. Louis-based Panera, before its sale to JAB Holding Co.

Korzenowski says RBI/Tim Hortons demanded that Show Me Hospitality sign a new franchise agreement calling for an additional investment of $20 million and a commitment to develop more than 200 new locations in 10 years.  That would be one restaurant per every 15,000 people in the St. Louis territory.  “To put this into perspective,” Korzenowski said, “McDonald’s has approximately 130 restaurants in the St. Louis region, which it built over several decades.”  The franchisee refused to sign a new agreement, opting to stick with the original agreement.

According to Korzenowski, the new owners are not willing to honor all of the terms of the original franchise agreement with Show Me Hospitality.  In July 2017, Show Me Hospitality filed suit against RBI/Tim Hortons in the U.S. District Court for the Southern District of Florida.  The suit charges Tim Hortons new owners with failing to honor the original franchise agreement.  Show Me Hospitality claims when they declined the new agreement, the franchisor began charging unreasonable markups on equipment, and refused to approve kiosk locations at Ballpark Village, the Saint Louis Zoo, and Gateway Motorsports Park in Madison, IL.  According to a statement on the STL Tim Hortons website, the parent company also “failed to provide branding and advertising during the critical time when Show Me Hospitality was 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.”  The St. Louis-based franchisee is asking for more than $50 million to compensate for the loss of a business opportunity they claim was projected to have been worth more than $125 million in 10 to 15 years.

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 in both the U.S. and Canada. There are two class action lawsuits seeking damages of approximately $1.5 billion.

Show Me Hospitality still operates three Tim Hortons Cafe and Bake Shop locations in the St. Louis area (Maplewood, Lafayette Square, and O’Fallon, IL), as well as an express cafe in Frontenac.  It’s not clear how many, if any, of the 24 people who worked at the two shuttered doughnut shops have been able to transfer to one of the remaining locations.

____

By Susan Smith-Harmon – published on STL.News by St. Louis Media, LLC

Susan Smith-Harmon
About Susan Smith-Harmon 116 Articles

Susan Smith-Harmon is an experienced writer, editor, and broadcast journalist with a strong news background. She’s worked in radio and television news, and for national and international newswire services.
She began her career in public radio while still a student at the University of Missouri-St. Louis (where she earned a B.A. in Communications). She soon made the jump to news/talk radio, handling assignments from field reporting, airborne traffic, and news anchor, to producing and hosting daily talk shows. She’s also worked in television, most recently as the inaugural producer for The Allman Report on KDNL-TV 30, and as a news writer and reporter for national and international newswire services.