Court Rules in Favour of Dunkin’ Donuts Franchisees

Jennifer Dolman

June 25, 2012

By Sean Silcoff, The Globe & Mail

For decades, Dunkin Donuts was the undisputed coffee and doughnuts champion of Quebec, with more than 200 stores across the province. But after Tim Hortons stepped up its expansion in the province in the 1990s, the U.S. chain’s business fell down a hole, and there are just 11 Dunkin’ Donuts left in Quebec.

Now, a Quebec judge has slammed Dunkin’ Brands Group Inc., siding with a group of 21 former franchisees who sued the U.S. food service giant, saying it failed to heed their warnings more than 15 years ago about the Tim Hortons juggernaut and what they needed the parent to do to protect the business. The judge awarded the group, which operated 32 outlets, $16.4-million in damages plus legal costs. “The greatest failing of all was [the parent company’s] failure to protect its brand in the Quebec market,” Quebec Superior Court Justice Daniel Tingley said in a blistering judgment released Friday.

“A successful brand is crucial to the maintenance of healthy franchises. However, when the brand ... collapses, so too do those who rely upon it. And this is precisely what has happened in this case.”

Jennifer Dolman, a Toronto-based franchise lawyer, said while disputes between franchisees and franchisors are common, “it’s rare for a court to find that there was such a devaluation of the brand.”