Seven Tim Hortons restaurants in Minnesota sued for breach of contract

Seven Tim Hortons restaurants in Minnesota have been sued by their parent company over a dispute about overdue franchise fee payments.

The lawsuit, filed in federal court in Miami, claims that the Minnesota restaurants and their developer failed to pay royalties, advertising, opening fees and other charges required by franchise and other agreements. A developer involved with the restaurants did not return phone calls for comment.

Founded as a single store in Canada with U.S. operations based in Miami, Tim Hortons is a restaurant chain with more than 4,600 cafes, including more than 3,600 in Canada. It is known for premium coffee, doughnuts and other baked goods, sandwiches and other quick-service food.

Tim Hortons is owned by Restaurant Brands International Inc., which also owns Burger King and Popeyes.

The lawsuit states that each of the seven franchises in question is obligated to pay Tim Hortons USA, Inc. a royalty equal to a percentage of weekly gross sales for use of the company's system, and a certain percentage of monthly gross sales in return for advertising, sales promotion and public-relations costs on behalf of all Tim Hortons restaurants.

The developer of the seven franchises also must pay Tim Hortons USA for opening fees and other costs related to new restaurants.

The lawsuit claims that the ­franchisees and developer failed to make those payments and are therefore in breach of those agreements. An attorney for Tim Hortons USA declined further comment on details of the litigation, including how much the company is seeking in overdue royalties and other payments.

Tim Hortons has a handful of restaurants in Minnesota, but in June 2016 it also signed a deal with the Bloomington firm Restaurant Development Partners Corp. for exclusive rights to develop additional Tim Hortons restaurants in several parts of Minnesota and Wisconsin that include the Twin Cities metro area.

Franchises in the lawsuit include restaurants in Bloomington, Dinkytown near the University of Minnesota, Brooklyn Park, Minneapolis, Maplewood, Bemidji and Savage. Some of the franchises have been open for only a short time. The Savage location held its grand opening in August, followed by Maplewood in September. Tim Hortons Cafe and Bake Shop in Bemidji opened in October, and the locations in Dinkytown and at the Mall of America opened a year ago.

Executives at Restaurant Development Partners Corp. did not return phone calls to comment on the lawsuit.

Tim Hortons is also involved in a Missouri dispute, but it is the company that is being sued by a franchise developer.

Show Me Hospitality, the developer for Tim Hortons in the greater St. Louis area, sued the company for $50 million in monetary damages for allegedly failing to provide advertising and branding during a critical time when Tim Hortons was entering the St. Louis market, and for withholding approval of new locations and financial partners.

Show Me Hospitality officials have said the company began demanding that it open 200 new restaurants instead of 40 in the area shortly after Brazilian-based 3G Capital acquired the merged Burger King and Tim Hortons in 2014 and began running them under the newly formed Canadian firm, Restaurant Brands International Inc.

Restaurant Brands also is facing two class-action lawsuits related to Tim Hortons, including an $850 million case filed last month by a number of the restaurant's franchisees in Canada.

Tom Meersman • 612-673-7388