Canada Post: Dunkin' Donuts Company Sued by Quebec Franchise Owners for C$16.4 Million

Democratic presidential candidate Senator Obama selects donuts to be delivered to local campaign volunteers at a Dunkin' Donuts shop in Manchester(Photo : Reuters)

By Zanub Saeed

Dunkin' Donuts franchise owners were awarded a total of C$16.4 million from damages suffered from what was apparently called the "Tim Hortons Phenomenon," where the donut stores in Quebec were closed in less than 10 years as it lost market share to the Canadian breakfast branch, said Canada.com in a news report on Tuesday.

Back in 1998, there were over 200 Dunkin' Donuts stores available throughout the Canadian province of Quebec, which diminished dramatically in the last 14 years; there are now only 11 stores open in Quebec, said Canada.com. The Quebec Superior Court stated that Dunkin' Donuts Canada Ltd. had failed to protect its smaller franchises as they did not enhance or promote their brand, at the cost of 21 stores, said the report, and caused the store owners to buy into a new strategy that never worked.

Like Us on Facebook Follow @franchiseherald

"In this case, you have a very large franchisor with a successful chain and it's facing a competitive threat by another large chain, i.e. Tim Hortons," Toronto-based franchise lawyer David Sterns of Sotos LLP said to Canada.com. "And the judge's view is that the franchisor couldn't just cede the territory to the competitor, that it was incumbent on the franchisor to hold the ground for the system."

Dunkin' Donuts, as a corporation, had not given half of the $40 million it promised to invest into the franchises, stated the court order. One of the judges presiding over the case, Judge Daniel Tingley, argued against the claim that the franchises were responsible for their own failures.

"A successful brand is crucial to the maintenance of franchise. However, when the brand falls out of bed, collapses, so too do those who rely on it," said Justice Tingley.

The money awarded will go towards those damages caused during 2000-2006, as well as the price of the franchise stores. A couple who owned two Dunkin' Donuts stores in Saint-Georges-de-Beauce will be receiving C$1.16 million for their loss.

"When we started [in 1984], Dunkin' Donuts was the best in coffee and doughnuts in the world," Doyon told The Globe and Mail. "We worked very hard in this business and we believed in Dunkin' Donuts. But we had many problems" with the company.

"We are very satisfied, we believe justice was rendered in this case," Doyon said in French through a translator, as recorded by Canada.com.