A popular sandwich chain is taking on the City of Orillia for alleged damages following the city’s expropriation of the former plaza at 70 Front St. N.
As part of the city’s waterfront redevelopment plan, the plaza was expropriated and demolished, despite Subway Franchise Restaurants of Canada Ltd. holding lease renewal rights with the former landlord through 2035.
As a result, Subway Franchise Restaurants of Canada Ltd. has filed a claim against the city for $70,000 in “disturbance damages” resulting from the expropriation, loss of “executive time” for an amount to be determined, professional fees, and reimbursement of legal, business valuation, and other costs incurred while determining compensation during the case.
A statement of claim filed with the Ontario Land Tribunal states that after the city acquired the land in 2016, it notified tenants the plaza “would be demolished to redevelop downtown Orillia” in 2019 — after which point it refused to renew leases with plaza tenants and “forced the de-occupation of the plaza.”
As a result, Subway argues the move resulted in “substantially reduced vehicular and pedestrian traffic in and around the subject business, resulting in a decline in sales, and thereby royalties and advertising fund contributions (to the franchisor).”
The claim states the plaza “was once a busy destination for consumers in downtown Orillia, and it was turned into an abandoned and vacant space in disrepair due to the (city’s) actions,” as numerous units were left vacant “for years.”
Although Subway initially leased its unit for a 10-year period between 2010 and 2020, the agreement had an option to renew the lease for three additional five-year terms upon written notice to the landlord.
After receiving a notice of expropriation in 2021, the Subway franchise sought a new location, and the franchisor offered to lease a property on Atherley Road, with plans to construct a new restaurant by the end of 2021.
However, construction delays brought on by the COVID-19 pandemic pushed occupancy to October 2022, with a lease agreement not executed until February 2023, and the restaurant opening in March 2023.
As a result of the prolonged construction, “further losses of profits that were sustained as a result of the respondent’s expropriation,” the claim states.
The franchise agreement with Subway Franchise Restaurants of Canada Ltd. required the franchisee to contribute eight per cent of the restaurant’s gross sales to the company as a royalty, and 4.5 per cent of gross sales as an advertising fund contribution.
Due to pre-expropriation and relocation impacts, the claim states the total royalty and advertising loss totals $70,000.
The City of Orillia declined to comment for this article.
“As a standard practice, the city does not provide public comment regarding legal matters,” said Melissa Gowanlock, manager of communications.
