Our group recently wrote about the Ontario Court of Appeal decision upholding an important summary judgment win for franchisor Tim Horton's in Fairview Donut Inc. v. The TDL Group Corp.
The decision, issued from the bench at the conclusion of two days of arguments at the Court of Appeal, is an emphatic endorsement of Justice Strathy's thorough summary judgment decision dismissing the class action launched by Tim Horton's franchisees against Tim Horton's, alleging that changes made to the franchise system were contrary to their franchise agreement and that the duty of good faith under the Arthur Wishart Act had eroded their stores' profitability. The Court of Appeal found that the franchisor was entitled to consider the profitability and prosperity of the system as a whole in enacting changes to the system. They also agreed with Justice Strathy's finding that it was not the court's place to step in and rewrite the terms of the franchise agreement made between the parties.
This decision should be seen as confirmation to franchisors that Ontario courts will enforce the written terms of their contracts so long as they are performed and enforced in good faith. It also signals that common franchise industry business practices, such as requiring purchases from a designated supplier and capturing profits in the supply chain, will not easily give rise to class action liability. Click here for our full write up of the decision published in December 2012.
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