‘Business suicide’: Civil war erupts between Tim Hortons franchisee factions
TORONTO — Tim Hortons’ elected franchisee board has struck back at a vocal group of franchisees who formed last year to oppose the practices of their new corporate parent, calling the groups’ complaints to the federal government earlier this month the “final straw” and warning that a flood of adverse media stories are turning consumers against the brand.
“The negative commentary that continues to come from inside our franchisee family results in negative public attention that is corrosive and damaging to our brand, our livelihoods and that of our teams,” said a letter sent Tuesday to Tim Hortons franchisees across Canada and signed by all 19 members of the Tim Hortons Canadian Franchisee Advisory Board.
“Ask yourself why a guest would feel good about patronizing a brand (restaurant owner/company) that repeatedly fights their battles in public? Guests are turning away from restaurant owners, not supporting them,” the letter added, calling the ongoing franchisee dissent tantamount to “business suicide.”
The group of 19 restaurant owners in question are elected in four-year staggered terms by other Canadian franchisees. They liaise regularly with company brass, but have remained publicly silent amid a mounting outcry from the Great White North Franchisee Association, a dissident franchisee group that formed last year out of a shared belief that the elected board was rubber-stamping new management’s directives rather than addressing their raft of concerns about head office’s practices.
The GWNFA, who says its membership includes sixty per cent of Tim’s franchisees in Canada, or more than 600 restaurant owners, initiated class action lawsuits last year against Restaurant Brands International Inc., the corporate parent formed when Brazilian hedge fund 3G Capital merged Tim Hortons with Burger King in late 2014.
On Wednesday, the elected advisory board made the unusual move of responding to media queries about the letter.
“The GWNFA doesn’t speak for all franchisees,” Lou Gossner, chair of the advisory board, said in an e-mailed statement. “The advisory board and most franchisees choose to work collaboratively rather than spread misinformation that harms us all. …. It is truly unfortunate that the leadership of this group reflects such a negative image of what most Canadian Tim Hortons franchisees are really all about.”
The apparent trigger for the board’s blistering attack was a letter sent last week by GWNFA lawyers to Innovation Minister Navdeep Bains, alleging Restaurant Brands International had failed to live up to promises it made to the federal government in 2014 as part of the Burger King merger. Those included commitments to maintain franchisee relationships, to maintain the rent and royalty structure for five years, and to maintain existing employment levels at Tim’s restaurants.
“The franchisees are increasingly concerned with RBI’s self-serving attempts to significantly increase its margins at the expense of the franchisees,” the letter to Bains said, estimating the average revenue per Tim Hortons location had declined by 2.4 per cent in 2017.
The franchisees allege the company has inflated the prices of goods that they are required to buy from head office, such as coffee and sugar.
“RBI is effectively increasing its royalty structure for Canadian franchisees, without allowing the franchisees to increase the price of products correspondingly as a means to recoup such increasing costs. RBI appears to have managed to indirectly accomplish what it is prohibited from doing directly.”
The federal government confirmed last week that it is looking in to the franchisee’s complaints.
In its letter Tuesday, the Tim Hortons Canadian Franchisee Advisory Board voiced its support of head office’s good intentions for the business while defending its performance in representing franchisees officially, saying it had made strides with management on the valuation of restaurants, labour support, food and paper costs and regional marketing changes. The elected board also convinced management to make adjustments to a set of quality metrics for restaurant owners known as a GPS score, which tracks objectives such as store cleanliness and drive-thru times, that had earned the early enmity of multiple franchisees.
“We are fully aware and understand that the transition of this company did not go smoothly,” the letter acknowledged.
“The past cannot be changed but we are confident that (Tim Hortons management) understands that without a strong, profitable and engaged franchisee group, this brand and this company cannot continue to succeed.”
In the meantime, the veteran Canadian brand has endured a wave of negative publicity related to its reputation with franchisees and an outcry over restaurant owners who clawed back employee benefits in response to the Ontario minimum wage increase in January. The company has since seen its brand reputation decline precipitously in consumer surveys this year, its comparable store sales fell 0.1 per cent in 2017, and shares of Restaurant Brands International have tumbled 17 per cent in the last six months.
Sami Siddiqui, president of Tim Hortons Canada, had no comment Wednesday on the civil war erupting between the two groups of franchisees. In the past, Tim Hortons management has referred to GWNFA as a “rogue group” of franchisees and has said it will only speak with the 19 members of the elected board about franchisee concerns.
“We are committed to improving our relationship with all of our franchise owners,” Siddiqui said in an emailed statement Wednesday.
“We realize we have work to do, and welcome all opportunities for dialogue with franchisees in pursuit of that goal.”
The GWNFA had no comment Wednesday about the franchisee advisory board’s letter.
Financial Post
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