In December 2017, Tim Hortons’ seemingly successful coffee and doughnuts location abruptly closed in O’Fallon, causing public outcry and bewilderment.
The reason behind the Canadian-based franchise’s closure, however, is no mystery — the answer lies in a fast-food chain merger that caused a management rift between Tim Hortons and its parent company.
In 2014, Restaurant Brands International bought and merged Tim Hortons and Burger King. In 2017, the company also acquired and merged Popeye’s Louisiana Chicken, Forbes reported.
After over a year of legal entanglements, however, the two burger joints showed financial growth while Tim Hortons lagged behind, according to the Forbes report.
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Multiple lawsuits have marred RBI’s relationship with the Canadian-based coffee shop and with the St. Louis area specifically.
In August 2016, Tim Hortons opened in O’Fallon at 450 Regency Park Drive.
However, 16 months after a packed grand opening, Tim Hortons closed its doors abruptly. St. Louis locations on Tucker Boulevard and in the Central West End also closed, over Thanksgiving weekend.
The metro-east was not the only area to see strife among its Tim Hortons.
In the most recent fiscal quarter, RBI reported an 87 percent rise in profits, with Popeye’s growing by 11 percent and Burger King growing by 8 percent. However, Tim Hortons only grew by two percent, according to the Financial Post.
On July 24, a multimillion dollar lawsuit filed by franchise owners blamed corporate mismanagement and price gouging for the closure of dozens of stores, including the O’Fallon location, according to a statement from franchise owners.
The lawsuit claims RBI used multiple methods to increase profits for themselves while short-changing franchise operators.
For example, the suit alleges RBI vastly overcharged franchise locations for food and paper, decreasing profits for stores while RBI pocketed more money from the up-charge.
Tim Hortons operators also claimed RBI requires store owners to offer for-sale restaurants to RBI for a significantly reduced price, including under-priced furniture, fixtures and equipment.
Tim Hortons’ legal history stretches back to when RBI took over the franchise, as shown by the following timeline:
- February 2017: Tim Hortons, Burger King and Popeye’s merged under one corporation, Restaurant Brands International, when RBI bought the chains for $1.8 billion.
- March 2017: Tim Hortons franchisees in the U.S. formed an alliance, called the Great White North Franchisee Association, to combat alleged mismanagement by parent company Restaurant Brands International. About 300 of Tim Hortons’ 700 U.S. locations are part of the association, according to Restaurant Business Online.
- June 2017: Tim Hortons owners filed a $500 million lawsuit against Restaurant Brands International. The suit claims money meant for Tim Hortons advertising instead was used to pay corporate employees or on other unrelated expenses, according to Nation’s Restaurant News.
- November 2017: Two Tim Horton shops in St. Louis close
- Dec. 6, 2017: Restaurant Brands International sues Minnesota’s Tim Hortons restaurants for allegedly failing to make proper trademark payments to the company.
- Dec 23, 2017: O’Fallon location and remaining St. Louis locations close.
In a December interview with the BND, Eric Sigurdson, president of Show Me Hospitality, said it’s “really sad” to close the stores, especially around Christmas. In a statement in November, Sigurdson said Tim Hortons’ parent company “derailed our business plan and scared off great new partners.”
On December 24, the first local lawsuit against RBI was filed by by St. Louis developer Show me Hospitality LLC.
Show Me Hospitality claimed RBI changed their initial contract and retaliated when the company did not agree to its new terms, which included opening 200 new restaurants and investing $20 million. The initial agreement to open 40 standalone restaurants in the St. Louis region over five years, with an option to add 90 restaurants in 15 years.
On July 9, Lion’s Choice opened in the old Tim Hortons location.
RBI officials did not immediately return a request for comment. Neither did Sigurdson, who owned the O’Fallon franchise.