Buy from Walmart, Ontario Tim Hortons franchisees told, as a shortage hits Guelph warehouse

TORONTO — Tim Hortons has suspended franchisee shipments on a range of items from one Ontario-based warehouse and has suggested disgruntled franchisees try to source some of the commodities from Walmart until the problem is resolved.

The list of 45 “temporarily unavailable” items from the coffee and doughnut chain’s facility in Guelph, Ont. includes take-home packages of the company’s own Tim Hortons brand of coffee and single-serve pods, soda pop, bottled water, hot and iced teas, garbage bags and vinyl kitchen gloves.

Normally, Tim Hortons restaurant owners are legally required as part of their franchise agreements to buy hundreds of such items directly from head office, not through a third-party retailer or supply company.

“I realize that this is creating an issue into a business that is already always hectic,” says an April 14 message from Greg Hiltz, Ontario general manager of Tim Hortons, to franchisees across the province. The note, obtained by the Financial Post, references a supply “interruption” that occurred more than a week ago at the Guelph, Ont. distribution centre, which serves more than three-quarters of Tim Hortons’ roughly 1,750 stores in the province, its biggest operating region.

The latest news comes amid a prolonged period of distress at the chain: The brand has taken a beating in recent consumer surveys, and its head office is facing an internal mutiny from a franchisee group suing management for a number of alleged infractions, including improper use of a national advertising fund inflating the costs of goods that franchisees are required to buy from them.

Last week, the federal government confirmed it would investigate franchisee allegations that the parent company had breached promises it made under the Investment Canada Act when Brazilian investment firm 3G Capital bought Tim Hortons in 2014, merging it with Burger King to form Restaurant Brands International. Those promises included maintaining franchisee relationships, rent and royalty structures and existing employment levels at franchises across Canada for five years.

“We deeply appreciate the patience and cooperation you and your teams are demonstrating,” Hiltz said in the email to franchisees about the Guelph supply problem, adding backlog had put the facility 15 to 24 hours behind on its deliveries.

“The only way we can fully recover and re-establish regular service is through a substantial reduction in order volumes,” he added, noting the 45 items in question would be removed from the order guide for this week and urging franchisees to make smaller than usual orders from the centre.

“For items like vinyl gloves, we are obviously okay with sourcing these from 3rd parties for the next week. They are typically available at Wal-Mart (sic) or other retailers. Your restaurants will not be penalized during operational audits for using 3rd party items from the list below.”

Food items used in conjunction with two monthly promotions — a brownie and a wrap used for sandwiches — are also apparently unavailable from a supplier in Western Canada, sparking franchisee worries about potentially going out of stock on menu items. And a popular item, cream of broccoli soup, has been removed chainwide from the list of items available for franchisees to order. Restaurant Brands, according to a source, has told franchisees that there are issues with the soup at the supplier level. The manufacturer and supplier of the soup is Kraft Heinz, a company also controlled by 3G Capital.

In an email Monday, Tim Hortons said that it had apologized to restaurant owners for any inconvenience related to the distribution delays and expects the Guelph facility to return to normal service volumes by the end of this week. A statement from the company also said the 45 items at issue are “non-essential to restaurant operations.” The company did not comment on any of the other reported food outages.

Representatives for the Great White North Franchisee Association, a group whose membership includes more than 60 per cent of Tim Hortons’ Canadian franchisees who are unhappy with their head office, had no comment Monday.

But a source said Ontario franchisees are worried about losing sales due to the limits that head office has put on their ordering capacity due to problems at the Guelph distribution centre. “Yes, some things can be bought at Walmart, etc., but the coffee and teas can’t.”

Geoff Wilson, president of Toronto-area foodservice consulting firm FsStrategy Inc., said franchisees have a right to expect regular items they are expected to carry. “But issues arise in business that are sometimes out of the control of various parties in the supply chain,” he said. “It is in the best interests of both parties involved here to work their differences out.”

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