The Canadian government is looking into complaints that Restaurant Brands International Inc is not meeting the terms set out by Ottawa when it allowed the takeover of coffee and doughnut chain Tim Hortons, a government spokesman said on Friday.
Lawyers representing a group of Tim Hortons franchisees sent a letter to Innovation Minister Navdeep Bains earlier this month alleging Restaurant Brands has not lived up to commitments including maintaining the rent and royalty structure of Canadian franchises.
The terms were part of the previous Conservative government’s agreement to clear the takeover of Tim Hortons, which is considered a Canadian icon.
The letter dated April 3 said franchisees are concerned Oakville, Ontario-based Restaurant Brands is trying to increase its margins at their expense.
“The Minister is aware of the concerns raised by the franchisees and looking into them,” said Bains’ spokesman Karl Sasseville. “We are monitoring compliance with the undertakings, as we do with all investments.”
Restaurant Brands was formed in 2014 when 3G Capital-backed Burger King acquired Tim Hortons. The company also owns Popeyes Louisiana Kitchen.
Patrick McGrade, Tim Hortons spokesman, said the company has been told there is no investigation underway. “Every year we have reported to the government on meeting our undertakings, without complaint. We have always been and remain committed to doing good business in Canada,” McGrade said.
The relationship between Tim Hortons and its franchisees has become increasingly contentious.
Tim Hortons has also been dealing with the fallout of bad publicity from its reaction to minimum wage increases in the country. Many Tim Hortons franchises cut back on employee perks and benefits when the Ontario government raised minimum wages by 21 percent to $14.
By Friday afternoon, the stock was down 1.3 percent, while the benchmark Canada share index was up 0.3 percent.
Update: 3G Capital, a U.S. private equity firm with Brazilian roots, combined Burger King with Tim Hortons for $12.6 billion. It was 2014’s largest Canadian PE deal.
Restaurant Brands acquired Popeyes Louisiana Kitchen last year for US$1.8 billion.
(Reporting by Leah Schnurr; Editing by Bernadette Baum)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)