Vehicles line up at the Tim Horton drive thru on the Third Line on Dorval Rd. in Oakville, Ont., on Feb 15, 2022.Fred Lum/the Globe and Mail
The board of a group of disgruntled Tim Hortons franchisees has resigned, after the chain’s parent company sent default notices to the restaurant owners serving on the board and terminated the franchise contract of its president.
The independent group, the Alliance of Canadian Franchisees (ACF), raised concerns last month about declining profitability for Tim Hortons owners – which the chief executive of parent company Restaurant Brands International Inc. has also said needs to be addressed. Shortly after the ACF spoke out about franchisees’ concerns, The Globe and Mail reported that the company sent a franchise termination notice to board president Ron Fox. The group now plans to return to a previous policy of anonymity for all franchisee members.
“There will be no franchisees on our board, and our governance system will be kept confidential to protect my members,” said ACF executive chair Dave Lush, who took over as the association’s executive director last October. Mr. Lush, who has led franchise businesses in the past including Speedy Corp., is not a restaurant owner but speaks for the group, which he says represents owners of nearly one-third of Tim Hortons’ 3,896 locations in Canada.
The five franchisees who were elected to the group’s board last March – including Mr. Fox; Jeri Horton-Joyce, the daughter of chain founder Tim Horton; and Mark Walker, a restaurant owner who previously served as the group’s president – are no longer involved with the ACF, Mr. Lush said.
“They got their default notices. The businesses were put at risk. … They look at Ron, message received,” Mr. Lush said. “We’re going to continue to push back on things that we think are unfair or not in good faith. That’s not going to change.”
Tim Hortons spokesperson Michael Oliveira would not answer questions about Mr. Fox’s departure as a franchisee or the terms of any deal to buy his two restaurants in Brantford, Ont. Mr. Fox also declined a request for comment. In an e-mail, Mr. Oliveira wrote that the company works well with the majority of franchisees, and referred to the ACF as “a small group of franchisees who want special recognition for themselves.”
“We don’t recognize or work with them and instead spend our time meeting with franchisees across the country and getting advice from franchisees who were elected by their peers,” Mr. Oliveira wrote, referring to an advisory board of 19 franchisees that consults with RBI in regular meetings. The company’s roughly 1,500 restaurant owners elect advisory board representatives for each of their regions in an anonymous vote.
Profitability has been the biggest issue that the advisory board has consistently raised with Restaurant Brands management over the past 18 months, said Tanya Doucette, the board chair and owner of eight Tim Hortons restaurants in Alberta.
While sales across the Tim Hortons chain have been going up, the increase has not made up for cost pressures. The company reported last month that the average Tim Hortons location made $220,000 in earnings before interest, taxes, depreciation and amortization (EBITDA) in 2022, down from $320,000 in 2018, the last time the company reported such numbers.
“We have been working, trying to find solutions to help owners to try to bring costs down wherever possible, and in other cases to help us to manage through this period of time,” Ms. Doucette said.
The ACF, however, says it has yet to see action on franchisee profitability and Mr. Lush questioned the effectiveness of that advisory board in pushing for changes with the parent company. While costs of goods are going up across the supply chain, the ACF has raised questions about whether Tim Hortons has raised prices more than necessary for supplies that restaurant owners are required to buy from the franchisor, saying that the problem precedes inflationary pressures.
Some Tim Hortons franchisees in the United States have also spoken out about the issue. In 2020, a group claiming to represent many U.S. franchisees filed a lawsuit in Florida saying that Tim Hortons owners paid as much as 50-per-cent more than competitors paid for supplies such as food, coffee and paper products. Mr. Oliveira confirmed that case is continuing.
It is not the first time the Canadian group has clashed with the parent company. The ACF was first formed in 2017 under a different name, and the following year, the company sent notices to franchisees who sat on the board at the time citing a breach of the media policy and “brand protection” requirements in their contracts. The company also revoked the franchise licences of the group’s president at the time. In 2019, Restaurant Brands settled two lawsuits with the franchisees in Canada.
In recent weeks, Mr. Lush has been speaking with franchisees and associations representing them at other companies, and is planning to expand the ACF’s membership. The groups often have similar concerns, he said, such as getting transparency in the cost of supplies and defending their right to associate.
Just last week, the U.S. Federal Trade Commission issued a call for public comment on franchise agreements and business practices, citing “growing concern around unfair and deceptive practices” across the industry.
“In the bigger picture, we believe that there has to be a look at the laws governing franchising in Canada,” Mr. Lush said. “How can this many systems have this many common problems?”