The Bertico v Dunkin' Brands Canada
Ltd. 2012 QCCS 2809, decision involved a claim brought by
twenty-one Quebec Dunkin' Donuts franchisees for the purpose of
seeking formal termination of their leases and franchise
agreements, plus damages for breach of the franchise agreement.
Starting in 1996, the franchisees began to alert the franchisor to
the progressive increase in the fast food coffee and donut market
share being absorbed by Tim Hortons. However, little was done by
the franchisor in response and Dunkin' Donuts' market share
continued to decline. In 2000, the franchisees demanded that the
franchisor respond to the decreased presence of the brand in Quebec
and expressed concerns regarding the management of the franchise
system. Later that year, the franchisor proposed a remodel
incentive program which offered the franchisees a financial
incentive if they made a commitment to renovate their stores prior
to the time prescribed in their franchise agreements. As a
condition precedent to entering the remodel incentive program, the
franchisees were obligated to sign an agreement that would bar them
from bringing a claim of any kind against the franchisor.
Committing to the remodel incentive program required a significant
financial investment and there was no guarantee that by making that
investment the franchised businesses would succeed. Those that
participated in the program did not see an increase in business. As
a demonstration of Dunkin' Donuts' fall from grace, it was
noted that there were 210 stores in Quebec in 1998 and at the time
this decision was released this number had been reduced to 13.
The trial judge found that the most important
obligation the franchisor assumed under its franchise agreements
was the promise to protect and enhance the Dunkin' Donuts
brand. The court held that "(b)rand protection is an ongoing,
continuing and 'successive' obligation", one that was
not fulfilled by the franchisor in the Quebec market between 1995
and 2005, resulting in a breach of this fundamental
responsibilities to the franchisees. The trial judge articulated
this failure on the part of the franchisor as "some five years
of benign neglect in the face of a determined new player in the
Quebec fast food market." In other words, the franchisor did
not attempt to adapt its system in order to compete with the
popularity of Tim Hortons.
Further, the trial judge ruled that the
remodel incentive program recommended by the franchisor in 2000 was
abusive considering the dire circumstances faced by the
franchisees, and therefore consent was missing or vitiated. Any
release that was signed by a franchisee was deemed to be a nullity.
Those franchisees that entered into the program were not barred
from bringing the action against the franchisor.
As a result, the franchisees were awarded
$16.4 million for lost profits and lost investments as an
"immediate and direct consequence of (the franchisor's)
While the franchisor's appeal from the
judgment is pending, six other Dunkin' franchisees have
commenced a lawsuit in the Quebec Superior Court modelled after the
first lawsuit, Services Alimentaires Kojo Inc et al v
Enterprises Dunkin Brands Canada Ltee, Docket No L66005222.
The first lawsuit covered the period from 1995 to 2005. This second
lawsuit covers the period from 2008 to 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.
From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.
Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).