A Florida federal district court found that a doughnut franchisee's failure to pay royalties and other fees constituted a material breach of contract justifying termination, even though the franchisee expressed a willingness to pay.

The franchisee had been in the Tim Hortons' system for a decade, and had operated this particular Tim Hortons franchise for over four years. On July 7, 2016, Tim Hortons sent the franchisee a breach notice for failure to pay monies owed. The notice provided that if amounts owed were not paid in full within five days of receipt of the notice, the franchise agreement would terminate on written confirmation.

The franchisee failed to pay by July 12, 2016 and Tim Hortons terminated the franchise agreement on July 13, 2016. That same day, the franchisee offered to pay the amount demanded in the breach notice and requested that Tim Hortons provide wire instructions to send payment. Tim Hortons rejected the offer and confirmed the franchise's termination.

Following a bench trial, the court upheld Tim Hortons' decision to terminate the franchisee for failure to pay monies owed. The franchisee argued that it was willing to pay the fees owed and asked Tim Hortons for wiring instructions.

The court found that an "offer to pay" was not the same as actual payment and in any event, the offer to pay came after the cure deadline. The court stated that, under Florida law, payment has not occurred until there is an actual "tender" of funds. A suggested willingness to send funds and a request for information on where to send was not equivalent to a tender of funds. The court concluded that the franchisee's offer to pay was not a cure of its breach and Tim Hortons had the right to terminate.

This decision serves as a warning for franchisees. Franchise agreements often have terms that favor the franchisor and these terms are likely enforceable. Franchisees should evaluate the costs and benefits before entering into a franchise relationship and recognize that the risks are different from ordinary business risks associated with business ownership.

Tim Hortons USA, Inc. v. Singh, 2017 WL 4837552 (S.D. Fla. Oct. 25, 2017)