Second Cup franchisees file lawsuit against coffee chain

A group of Second Cup Ltd. franchisees is suing the struggling Canadian coffee chain for $300,000 each, alleging the firm’s actions have been detrimental to them.

The current and past franchisees outline a long list of complaints against their franchisor in a lawsuit filed earlier this month in the Superior Court of Quebec.

None of the allegations has been proven in court, and the company declined to comment.

While the company has seen positive change over the past three years as it’s attempted to win back customers, franchisees continue to suffer, according to the lawsuit.

“On the contrary, during these three years franchise revenues have continued to decline,” documents read.

The company allegedly misused a franchisee-funded advertising reserve, it said. Franchisees must pay the equivalent of two to three per cent of their sales to the ad fund.

“Second Cup does not use this money in an adequate manner to advertise and fails to fulfil its contractual obligations to that end,” read the court documents.

The coffee chain also forced franchisees to acquire debt to pay for equipment that failed to boost sales, according to the suit, such as equipment needed to sell Pinkberry brand frozen yogurttreats.

Franchises “swimming in debt suddenly went further in debt,” according to the claim.