570 News in Toronto reports that Tim Horton’s franchise owners have launched a near $2-billion lawsuit claiming lost profits since the iconic Canadian company switched from fresh-baked to frozen donuts. The $1.95-billion suit is scheduled to go to court in November and it has even divided franchisees, as a large group of store owners is trying to stop a smaller group from following through on the lawsuit.

A sign outside a Tim Hortons store in Oakville, Ont., west of Toronto. THE CANADIAN PRESS/Richard Buchan

“It really plays out as a battle between those ‘old school’ guys who were loyal to the Ron Joyce era and Ron Joyce himself against some of the newer store owners who have come in under the new guard in the last 10 or 15 years,” explains Michael Friscolanti, senior writer for Maclean’s, where the story appears this week.

Joyce, a co-founder of the Tim Horton’s chain, revealed in 2003 that the company had stopped baking donuts on-site and had instead turned to the “par-bake” method where a donut was 95 per cent prepared, flash frozen, and then later re-heated for sale.

At the root of the lawsuit is the cost of these new donuts. The plaintiffs in the case allege the company told them it would cost no more than 12 cents per donut, while the true cost today (according to Tim’s) is 17.9 cents. One franchise owner claims that increase cost him as much as $57,000 in profits at one store.

“What you have here is this classic case of a few disgruntled franchisees who are saying we’ve lost some money (and) Horton’s needs to pay us back some of this money that we’ve lost,” Friscolanti tells 570’s Gary Doyle Show. “And at the same time you have a much larger group of franchise owners who have come forward to say ‘no, no’ no, that’s totally wrong, we’re doing very well.’ ”

Friscolanti says the concern of the franchise owners opposed to the lawsuit is that trade secrets and their bottom line will become public fodder, making them appear greedy. There is also concern over negative media coverage of the iconic restaurant chain.

One of the franchise owners opposed to the lawsuit is Graham Oliver, who owns five Tim’s stores in Kitchener. In an affidavit obtained by Maclean’s, Oliver writes “I do not agree with many of the material allegations and claims advanced by the plaintiffs. In fact, they are patently wrong and cannot be supported. Negative publicity has the potential of tainting the public image of the Tim Horton’s brand, which is vital to our business.”

To read Friscolanti’s full story in Maclean’s, click HERE.