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Court rules in favor of Dunkin' Donuts franchisees accusing company of negligence

The Quebec, Canada Court of Appeal has ruled in favor of former franchisees in Québec in a lawsuit with Dunkin' Brands Canada Ltd. charging the company with incompetence, negligence, lack of support and breach of the contract.

April 21, 2015

The Quebec, Canada Court of Appeal has ruled in favor of former franchisees in Québec in a lawsuit with Dunkin' Brands Canada Ltd. charging the company with incompetence, negligence, lack of support and breach of the contract entered into between the franchisor and franchisees as regards to the brand's protection and development between 1995 and 2005. The ruling reduced damages payout from $16,407,143 to $10,908,523. Dunkin' Brands' estimated total with legal fees and interest will result in paying plaintiffs a total of $18 million.

The Court of Appeal also states the following:

[77] Beyond the obligation to allow individual franchisees to use the Dunkin' Donuts system, the contracts created, through express language and by necessary implication, a duty owed to the franchisees collectively to take reasonable measures to support and enhance the brand. This included the duty to respond with reasonable measures to help the franchisees as a group to meet the market challenges of the moment and to assist the network of franchisees by enforcing the uniform standards of quality and cleanliness it holds out as critical to the success of the franchise.

[81] […] By denying that it has a duty to protect and enhance the brand, the judge rightly saw the Franchisor as going back on its word in each individual contract by denying the existence of the very cause of the arrangement.

           [84] What can a franchisee do about a free-rider who, for example, fails to adhere to the contractual standards of product quality or store              cleanliness? Little or nothing.

[85] It is up to the Franchisor to police the network by taking reasonable measures to root out the free-riders. […]