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Unhappy Second Cup franchisees sue coffee chain

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A group of Second Cup Ltd. franchisees is suing the struggling Canadian coffee chain, alleging the company’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 as well as its lawyer declined to comment.

“It is not Second Cup’s practice to comment on matters that are actively before the court, particularly when, as in this instance, they are at a very early stage of the proceedings,” wrote spokeswoman Ali Azzopardi in an email.

Franchise revenues in decline

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.

Pinkberry deal a sore point

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 yogurt treats.

Second Cup signed an exclusive licensing agreement with Pinkberry in September 2017 to roll out the brand at its cafes after testing the concept at four locations that summer. It is now served at 84 Canadian stores, as of Nov. 5, and the company has said the yogurt is an important contributor to overall sales and transactions.

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

“Not only was the increase in franchise sales disappointing, it turned out that Second Cup customers were either having coffee or a Pinkberry smoothie, but not both.”

The plaintiffs also alleged product problems, including being required to purchase products at a “far higher” price than what it is worth on the market, stock shortages thanks to supplier changes, and “problematic” food quality.

The suit stems from an original claim by one Second Cup franchisee against the company that eight other franchisees later asked to join.

Second Cup filed a document last week arguing the additional plaintiffs should be treated separately from the first claim.

“… Each claim is extremely fact-specific in connection with a given franchisee location and a given plaintiff-franchisee relationship and would not be able to be tried at the same time and determined on the same evidence,” according to documents.

Cannabis is new strategy

Second Cup has been struggling amid increased competition from both high-end coffee purveyors and fast-food chains offering caffeine jolts.

It recently launched a strategic review of the company and announced plans to sell recreational cannabis. It is in the process of converting two Alberta stores to recreational cannabis dispensaries as part of a joint venture with a cannabis firm. It has identified many more Ontario locations as attractive candidates for such conversions.

The coffee chain is not alone in facing disgruntled franchisees. Restaurant Brands International, the parent company of Tim Hortons, has grappled with an unsanctioned, outspoken franchisee group for more than a year.

The Great White North Franchisee Association claims to represent more than half of Canada’s Tim Hortons franchisees. It formed in an effort to remedy alleged mismanagement of the brand and since its inception launched multiple lawsuits against the parent company, its subsidiaries and several executives. Among other things, it has also alleged mismanagement of the chain’s advertising fund — a claim the company has denied. RBI has also filed lawsuits against the group and some of its members.

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Real Estate

Montreal real-estate prices climbing much faster than Toronto or Vancouver: study

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MONTREAL — The cost of housing per square foot has skyrocketed in Montreal while other cities saw little change over the last year, according to a new national survey.

The study found that condominium prices in downtown Montreal are up 13.5 per cent from last year to, on average, $805 per square foot.

That’s not as high as other cities, but it’s catching up — and Montreal’s rate of growth is outpacing other major Canadian cities.

Toronto’s condo prices grew to $1083 per square foot, an increase of just under 10 per cent, according to the study. In Vancouver, where you can find some of Canada’s most expensive condo prices, rates are down 4 per cent to $1192 per square foot.

To make the comparisons, Canadian real estate giant Century 21 collected data from real estate boards across the country to calculate the home costs per square foot.

“It’s important to compare apple to apples,” said Todd Shyiak, the company’s vice president of operations.

Montreal’s rise was even more explosive for detached homes and townhouses.

Detached houses in Montreal’s downtown and southwest rose to $958 per square foot, 40 per cent up from last year.

“It’s wild,” said Century 21 broker Angela Langtry. She says the pandemic raised demand.

“People had a lot of time to figure out they don’t like the home they’re in,” she said. “They all want pools.”

There was a big spike in sales, she noted, following a pause in brokerage during the spring, at the peak of the pandemic.

Experts say the pandemic will push people into the suburbs as they search for affordable housing and home office space.

“A huge portion of our society’s housing needs changed overnight,” said Shyiak. People “no longer need to be 10 minutes from the office.”

He says that could mean less demand for condos in the future. “People want their own front door,” he said.

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Carttera buys prime downtown Montreal development site

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Carttera has acquired a prime downtown Montreal site at 1455 De La Montagne St. which will mark its third development on the thoroughfare.

“We think it’s probably one of the best, if not the best, locations in the whole city,” Carttera founding partner Jim Tadeson told RENX. “We’ve had great success on De La Montagne.”

The two earlier projects are: L’Avenue, a building with 393 residential units, 84,000 square feet of office space and 34,000 square feet of retail that was developed with Broccolini and occupied in 2017; and Arbora Residences, a two-phase development with 434 rental and condominium units in three buildings being built in partnership with Oxford Properties.

Thursday’s latest acquisition, for $48.5 million from 630745 Ontario, is a 31,750-square-foot surface parking lot with flexible mixed-use zoning on the corner of De La Montagne and De Maisonneuve Boulevard West.

The site is near the Vogue Hotel Montreal Downtown, the new Four Seasons Hotel Montreal and high-end retail.

“It’s zoned for up to 203,000 square feet of density, which we’re going to take advantage of,” said Tadeson. “Our vision for the site is a condominium project with some retail.”

Since there is no demolition required and no heritage issues to contend with, Toronto-based Carttera plans to move ahead quickly with the luxury project.

It’s in the concept design phase and Tadeson said it could take six months or more before it’s prepared to make a submission to the city.

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Montreal Has the Hottest Real Estate Market in Canada Right Now

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If you thought Toronto’s real estate market was on fire, it’s time for a second take, because the market in Montreal is the hottest in all of Canada right now.

A newly-released annual report from CENTURY 21 Canada reveals that, following an early-spring decline due to the COVID-19 pandemic, sales numbers are bouncing back and house prices across the country are maintaining their strength. The study compared the price per square foot of properties sold between January 1 and June 30 of this year, compared to the same period last year.

In Toronto and Vancouver, unsurprisingly, prices remain high. But while regions across the country are seeing varied stories when it comes to their housing market fluctuations, Montreal stands out — there, prices have increased dramatically since 2019. While the numbers remain lower than Toronto and Vancouver, that housing market is proving to be the country’s strongest right now.

In Quebec’s largest city, prices have increased significantly since last year, particularly in the downtown detached house and townhouse markets. For example, the price of a detached house in Montreal’s downtown and southwest rose 42.14% to $958 per square foot, while townhouses went up 44% to $768, and condos, 13.55% to $805. Comparatively, in Toronto and Vancouver, prices saw more modest increases or, in some cases, even declines.

“Even though real estate in Quebec was not considered an essential service, we have seen strong demand and a jump in prices in 2020,” said Mohamad Al-Hajj, owner of CENTURY 21 Immo-Plus in Montreal.

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