Real estate property owner Ivanhoé Cambridge is exploring ways to densify some of its properties across Canada, joining a growing trend in the retail industry.
Julie Bourgon, Head of Retail, Canada, said property owners look at shopping centre assets differently today than they did a few years ago.
Julie Bourgon
“It used to be pure retail, sell to the consumer. We have now a much larger wholistic view of these assets. Not only do we try to activate them on a 24/7 basis. These are massive pieces of real estate. They cannot just be open 9 to 5. Hopefully we can find some great value creative solutions to make profit outside of these hours. We need to make the link between the digital to the presence of stores and we need to look at these assets as a large piece of real estate,” added Bourgon.
“In many of these instances, we will be focusing on densification and adding some other uses to the centre such as residence and even logistics, we’re exploring logistics in some instances, so that these pieces of land are not only the places to shop but they become a place to work and shop eventually. That’s our home for some of these strategic malls in the portfolio.”
Mapleview (Image: Ivanhoe Cambridge)
Bourgon said Ivanhoé Cambridge has at least half a dozen properties that will be pursued as strong densification.
“In fact, they’re very much underway, we’re having discussions with cities all around the country on the master planning and trying to get this density. This is a very long process. It takes a lot of time but we have very strong pieces of real estate in well-located assets and we’ll be able to have a lot of residential in the future,” she said.
Bourgon said the company has a portfolio of 19 assets in Canada in five provinces – Quebec, Ontario, Manitoba, Alberta and British Columbia – totalling close to 13 million square feet of retail, almost 1,000 tenants and 3,000 leases.
“It’s a big portfolio. It represents 45 per cent of our Canadian assets and the retail is 14 per cent of the IC portfolio but that includes some assets that will be in Asia and in Europe and Brazil,” said Bourgon.
She said the malls of the past won’t make enough money for landlords in the future to help property owners build and create the value that they did in the past.
“So we need to reinvent ourselves. It’s become so difficult on the retail piece that you need to just think outside the box and think about other ideas to try and create value for our stakeholders. That’s the goal of our company,” added Bourgon.
Guildford Town Centre (Image: Ivanhoe Cambridge)
Bourgon described the current retail sector in Canada as “challenging.”
“It’s been challenging for the past couple of years. I think we do have more clarity on some aspects as opposed to other asset classes which are still figuring out where the destination is. I think in retail we have a better sense of where the destination is but there’s still a lot of challenge,” said Bourgon. “Is it labour? Is it supply chain? Is it impacts of the global economic situation? Tension between China and the US. The war of Ukraine.
“All these things have had pressure on the consumers’ behaviour and with the inflation right now and interest rates. We’re really much watching all of this to see and observe what the impact will be on customer behaviour because of course we need sales to make our tenants happy and so there’s going to be challenge.
“But we are well positioned. We have turned a corner. I think we’ve been very proactive Ivanhoé compared to some of our peers.”
Metropolis at Metrotown (Image: Ivanhoe Cambridge)
She said the property owner made a strategic move to outsource to a well-renowned operating company awhile back and it’s sold several non-strategic assets, at least six or seven malls in the last few years.
“We will remain opportunistic real estate investors. But we’re very happy with the national presence we have now and I know we’ve been looked at by others about what we’ve been doing for the last couple of years,” said Bourgon.
She said malls will continue to evolve as they have in the past few years with more entertainment so people stay and have fun. There will be other uses as well such as car dealerships, IKEA smaller stores, pop-ups, grocery stores as well as online brands that want to test the market as stores.
“We’re very open to other types of uses because that’s going to make the mall a community, a place where people need to go. You need to think about other services in your mall if in the future you’re going to have multiple hundreds of people that live there as well,” added Bourgon.
Retail Ventures CND Inc. has been retained by Bed Bath & Beyond Canada LP and Alvarez & Marsal Canada Inc. (court monitor), to facilitate the sale of leases or other property rights for 54 leases of Bed Bath & Beyond and the 11 leases of Buy Buy Baby across the country.
Sam Winberg, Principal/Broker of Retail Ventures CND, said the brokerage is working under the direction of Dave Rosenblatt, Partner at Osler, Hoskin & Harcourt, LLP in Toronto, in the process that will conclude on March 31.
“Interested parties can purchase the lease and have the courts endorse the assignment,” said Winberg, who was an original founder of Northwest Atlantic Canada in 1991, which was sold to JLL in 2018.
Photo: Bed Bath & Beyond
Retail Ventures CND specializes in tenant representation and has partnered with world class retailers including TJX, Indigo, ULTA Beauty, Nordstrom, Whole Foods and Sporting Life.
“When Bed Bath & Beyond filed (under the Companies’ Creditors Arrangement Act), the Monitor reached out to us because we had experience doing this and have asked us to help them in trying to create value from the 65 leases that Bed Bath & Beyond and Buy Buy Baby have.
“During (court) filings, the Monitor’s job is to try to create value to pay debts of the filing company.”
One way is to do an in-store liquidation. The other way would be seeing if there is value in any of a company’s leased properties.
“In other words, would third-parties, retailers or landlords, look at the assets that they own, assets being leases, and do they have value? Are they under market? Do they have lots of term left? Maybe they have certain rights or restrictions on a property that a landlord or a tenant may find of value? It would be the value of the lease,” explained Winberg.
“So our job is to generate interest in the leases. We’ve already had about 15 or 16 companies contact us. They would receive a confidential spreadsheet after they sign an NDA (nondisclosure agreement) which would detail the square footage, the size of the premises, the length of the lease, the rent, fixed options. And then they would notify us of any properties that they had interest in acquiring and then we would get them access to the data room. And the data room would contain the actual leases, waivers, those sorts of things. And then have only until the end of this month to then send us something that satisfies the Monitor, that they’re prepared to pay some remuneration for the assignment of that lease and then prior to the leases that have no interest being disclaimed, the Monitor and the courts would assign leases to interested parties.”
Winberg said in the retail sector not all leases are attractive.
“But we happen to be in an environment now where we’re coming out of COVID and interest rates are going up. There’s not a lot of new development, especially in the larger format. There’s a lot of condominium development where there’s ground floor retail units but if you’re a larger format retailer there’s really been no new stock being built in the last couple of years,” he said. “Construction costs over the last year have gone silly, interest rates are high.
“So if you’re a retailer and can’t find vacant real estate or new built real estate they may very well be interested as part of their growth.”
Image: Bed Bath & Beyond
He said Bed Bath & Beyond and Buy Buy Baby may have some leases with rents below market which would be attractive for retailers who may want to grow.
Winberg said the stores are between 20,000 and 30,000 square feet located primarily in the better power centres across the country in every province.
“Bed Bath was a sophisticated retailer that made good real estate transactions. Unfortunately from an operations perspective they didn’t survive but their leases could live on,” he added.
“Those that have interest should contact Emma at our office emma@retailcnd.com and she will send out an information package with a NDA and once the NDA is executed by the party they will be sent this confidential spread sheet and it will detail what the process is. The time frame on this particular mandate is very short.”
Photo: Bed Bath & Beyond
Court documents filed in the Ontario Superior Court of Justice on February 10 under the Companies’ Creditors Arrangement Act indicated that the Bed Bath & Beyond Group has been in financial difficulty for the past several years, suffering significant net losses since 2018.
“Over this period, BBB Canada itself has seen dramatic declines in revenues. In an effort to improve the Bed Bath & Beyond Group’s financial performance, former management embarked on a series of initiatives designed to transform the business. Unfortunately, the COVID-19 pandemic and the broader economic downturn significantly disrupted the Bed Bath & Beyond Group’s operations, putting further financial strain on the entire enterprise, including BBB Canada, and hindering the transformational efforts of management,” said the documents.
“The Bed Bath & Beyond Group’s situation significantly worsened throughout 2022, with declining year-over-year sales in both the United States and Canada, multiple credit rating downgrades, cash flow constraints, and significant inventory reductions. Cash constraints caused delays and stoppages of merchandise shipments to BBB Canada’s stores, causing inventory levels to decrease dramatically.”
Photo: Bed Bath & Beyond
As of January 31, BBB LP employed approximately 387 full-time employees and 1,038 part-time employees in connection with its retail operations across Canada.
“The North American retail industry has experienced a period of rapid change and shifting consumer demands over the past number of years. Even prior to the COVID-19 pandemic, retailers like the Bed Bath & Beyond Group faced dramatic declines in retail foot traffic as consumers shifted their spending to online platforms like Amazon and Wayfair. The rapid changes resulted in a surge of retail bankruptcy filings,” said the court documents. “The Bed Bath & Beyond Group was not immune to the foregoing challenges. By 2018, its revenues were declining and it was reporting significant net losses. Recognizing the need to quickly adapt, the Bed Bath & Beyond Group’s former management developed a comprehensive plan to transform its business and position itself for long-term success.
“Unfortunately, the Bed Bath & Beyond Group’s efforts to restructure its operations was interrupted in its early stages by the global COVID-19 pandemic in March 2020. The impact of the COVID-19 pandemic extended beyond the immediate effect of store closures and resulted in global supply chain disruptions and persistent inflation. Ultimately, the Bed Bath & Beyond Group’s liquidity constraints resulted in a significant number of key suppliers either tightening or revoking the ability of the Bed Bath & Beyond Group to access inventory on credit.
“In 2022, the Bed Bath & Beyond Group announced that it had taken steps to address its liquidity constraints and improve its balance sheet and cash flows. The process of remedying the Bed Bath & Beyond Group’s business and financial decline, however, continued to be complex and challenging throughout the Fall of 2022. While the Bed Bath & Beyond Group successfully reduced its accounts payable, raised gross proceeds of approximately US $75 million through an at-the-market offering program, and cleared out a significant portion of its excess private-label goods, inventory issues continued to plague the Bed Bath & Beyond Group through the 2022 holiday season.”
Seattle-based Nordstrom announced on Thursday that it will be exiting its Canadian operations, including shutting its six full-priced Nordstrom stores as well as its seven off-price Nordstrom Rack locations and Nordstrom.ca. Nordstrom’s first store in Canada opened in 2014 and its first Rack location opened in 2018.
“We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty. We also made the difficult decision to wind down operations in our Canadian business. This will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “As we enter fiscal 2023, we are focused on enhancing the customer experience, improving Nordstrom Rack performance, increasing inventory productivity and continuing to advance our supply chain optimization initiatives. We remain confident in the strength of our brands and our ability to drive profitable growth and deliver long-term value to our shareholders.”
Nordstrom at CF Chinook Centre (Image: Lee Rivett)
Nordstorm will take a financial hit of between $300 and $350 million according to an earnings call on Thursday. Sales at Nordstrom in Canada were about $515 million for fiscal 2022, representing about 3% of sales for the entire company. The company lost $72 million during that time. About 2,330 people will lose their jobs with the closure of Nordstrom’s stores in Canada.
In the earnings call, CEO Erik Nordstrom said that the retailer had high hopes for Canada and despite its “best efforts”, never turned a profit in Canada since its entry into the country in 2014. He also said that Covid-19 was a factor and had a negative impact on sales.
Erik Nordstrom said that Canadian employees will be treated with “fairness and respect” and that an employee trust will be created to provide additional benefits to staff during the wind-down. He then thanked employees for their years of service at Nordstrom during the call.
Liquidation sales are expected to start around March 20 of this year, pending approval of the Court monitor overseeing the winding down of Nordstrom’s Canadian operations under the Companies Creditors’ Arrangement Act. Any gift cards will be honoured until the end of liquidation for purchases in-store, and no new gift cards can be purchased after today.
The Nordstrom.ca site is no longer selling merchandise — orders placed before today will be fulfilled and after March 17th, all sales will be final and returns and exchanges will no longer be permitted, according to Nordstrom.
Foodservice businesses in Nordstrom stores, which include restaurants, bars and coffee bars, will close on or before March 15. Nordy Club Canada members will cease to accrue new points effective as of 11:59 pm EST March 2, 2023.
Nordstrom at CF Pacific Centre (Image: Lee Rivett)
Nordstrom Rack opened its first Canadian store in March of 2018 at Vaughan Mills near Toronto. Nordstrom Rack stores subsequently opened at Deerfoot Meadows in Calgary, at Yonge and Bloor in downtown Toronto, at Ottawa Train Yards in Ottawa, South Edmonton Common in Edmonton, Heartland Town Centre in Mississauga, and most recently at the Willowbrook Shopping Centre in Langley near Vancouver in September of 2020. The store count for Nordstrom Rack in Canada sits at seven units, and the retailer said in years past that it planned to operate between 12 and 15 Rack stores in Canada. Nordstrom Rack stores are typically in the 30-40,000 square foot range.
Before the pandemic, there were signs that Nordstrom was struggling in Canada. Retail Insider was provided sales numbers for Nordstrom’s Canadian stores in 2019 and it was becoming apparent that there were challenges. While the Vancouver store’s sales were strong in the $300 million range annually, the other five stores failed to meet targets — although the CF Toronto Eaton Centre locations was said to be selling in excess of $100 million annually, which wasn’t bad. Still, things didn’t look good when most of the luxury brands exited Nordstrom’s Toronto stores — at CF Toronto Eaton Centre, almost all of the luxury brand bag/accessory shop-in-stores on the main floor shuttered during the pandemic, as did almost all of the luxury women’s boutiques on the third floor. At Toronto’s Yorkdale, Nordstrom has maintained most of the luxury brand shops for bags on its main floor, though almost all of the luxury shops for women’s ready-to-wear had shut before the end of 2022. Brokers in the know had commented on how the neighbouring Canada Goose store at Yorkdale was doing higher sales than the much larger Nordstrom location in the mall.
A recent visit to the Vancouver Nordstrom store showed a well-stocked flagship with a substantial amount of luxury offerings for women and men, as well as a robust offering of luxury brand bags and footwear. The Vancouver store is the only Nordstrom in Canada to see such an expansive assortment of brands and it’s also one of the most luxury-heavy in the chain, and has been said to be the company’s top-selling store in recent years.
At the same time, sources told Retail Insider that some high-spending Chinese shoppers had moved on to other places, impacting luxury sales at Nordstrom in downtown Vancouver as well as other retailers in the area.
Nordstrom at CF Toronto Eaton Centre (Image: Dustin Fuhs)
Nordstrom’s exit from Canada could partly be due to a Canadian connection. Montreal-based Ryan Cohen, who is also Chairman of GameStop, recently bought a substantial number of shares in Nordstrom, giving him the opportunity to shake up the retailer’s board. And besides making changes to the board, Cohen was said to be supporting cost-cutting as Nordstrom’s market cap declines.
It’s not known if Cohen’s influence led to Nordstrom’s decision to exit its Canadian operations, though he noted challenges to Nordstrom over the December 2022 holidays which included price markdowns, an inventory glut, and lacklustre sales. News of his share purchase sent Nordstrom shares soaring in early February.
The announcement that Nordstrom is exiting Canada will send shockwaves through the industry. Even though it has far fewer stores than Target which exited Canada in 2015, Nordstrom’s move into Canada was expected to be a runaway success with many Canadians being fans of the retailer’s US stores. The optics of Nordstrom’s exit will be a black eye on Canada for a time.
Retail Insider’s first article in 2012 was about Nordstrom’s possible entry into Canada, which was subsequently confirmed with the acquisition by landlords of several former Sears locations which were overhauled for Nordstrom stores. That included Nordstrom moving into former Sears boxes in Vancouver, Calgary, Ottawa and CF Toronto Eaton Centre in Toronto. The Yorkdale and CF Sherway Nordstrom locations were newly constructed stores.
Nordstrom Rack at One Bloor East (Image: Dustin Fuhs)
Thus Cadillac Fairview is particularly exposed to Nordstrom’s exit, owning five of the six malls where Nordstrom stores are located in Canada.
The exit of Nordstrom from Canada is sad news for the retailer which had high hopes for the Canadian market. More Nordstrom stores had been expected for Canada. In 2015, Nordstrom had been looking at opening a 150,000 square foot store at West Edmonton Mall in Edmonton, and plans were cancelled when oil prices tanked at the time. In Montreal, a source told Retail Insider that in 2019 Nordstrom had been looking at opening in the Royalmount project along with French department store Galeries Lafayette.
Nordstrom’s exit from Canada could give La Maison Simons an opportunity to expand further — the Quebec City-based large-format retailer would likely see success with downtown stores in Toronto and Vancouver, as well as possibly in Calgary where it has a downtown store. In years past, Simons had been looking to open at Toronto’s Yorkdale Shopping Centre and now the opportunity is there. CF Sherway Gardens might be too close to Square One where Simons has a store, though the opportunity presents there as well. CF Rideau Centre in Ottawa is already home to a beautiful Simons store so landlord Cadillac Fairview will need to repurpose the Nordstrom space once the store closes in that mall.
Nordstrom Rack stores are considerably smaller than the full-priced Nordstorm locations in Canada. Finding new tenants and filling these spaces won’t be as challenging for landlords as Nordstrom’s bigger full-priced stores. At the same time, Bed Bath & Beyond recently announced that it is exiting Canada which will include vacating 65 stores of similar sizes.
Winners will be a winner with Nordstrom Rack’s exit, as will its TJX-owned sister brands Marshalls and HomeSense. Off-price concept Saks OFF 5TH, which is said to be underperforming in Canada, could also see a boost with less competition following Nordstrom Rack’s Canadian exit.
Nordstrom’s large-format fashion store positioning in terms of price-point is, for the most part, between Hudson’s Bay and Holt Renfrew. Nordstrom’s exit will send some customers to both retailers as well as Saks Fifth Avenue, which at press time operates three standalone stores in the Toronto and Calgary markets.
The department store model has struggled in North America in recent years. And while Nordstrom isn’t technically a department store (many refer to it as a large-format fashion retailer), similar retailers in recent years have shuttered as consumer preferences have shifted. The rise of online shopping, specialty stores and brands opening their own stores have impacted large-format fashion retailers and department stores, not to mention discount retail, off-price and category killers.
Nordstrom Rack (Image: Dustin Fuhs)
At one time, department stores were places to discover brands and played a key role in the retail industry. Competition and a shift to digital has made department stores nearly irrelevant in North America. At the same time, in major cities in Europe and Asia, department stores are thriving as entertainment centres. Stores such as Selfridges in London, Galeries Lafayette in Paris, Lotte in Seoul and others feature a roster of luxury brand concessions as well as ample food-and-beverage offerings and other things to drive consumers into stores. Investment and creativity is required for such a successful retail store, and in North America the ‘art of the department store’ appears to be, for the most part, a thing of the past.
David Ian Gray, Principal and strategist at Vancouver-based DIG360, agrees with the sentiment, noting that Nordstrom never ended up creating a Canadian head office in Toronto as originally planned.
David Ian Gray
“Reflecting on such a strong impression in 2015 in Vancouver and Toronto, The Seattle HQ has been trying with limited capital to lay a new foundation for several years now and this appears to be part of a deep focus on fiscal health of the overall business. The ripple effect in this country is that, under duress, US and offshore retail leaders tend to maintain their domestic bases at the expense of Canada, an outpost region. Notably, Nordstrom never followed through on its promise to set up a Canadian based country head office.”
Gray went on to say, “I have long questioned whether the large department store isn’t an archaic format, at least in Canadian cities, small by global standards, that lack intense concentrations of walkable wealth around a flagship. However, as a customer, I will be sad to see Nordstrom close here. This will adversely impact employees, malls and adjacent stores, and vendors but be welcomed by Hudson’s Bay, Holt Renfrew and La Maison Simons.”
For weeks prior to the announcement that Nordstrom will be exiting Canada, Retail Insider received numerous tips from insiders about the retailer’s struggles and plans to exit. Sources told Retail Insider that Nordstrom hasn’t been profitable since it entered the Canadian market. One source said that Nordstrom Rack was delaying February deliveries into the later spring, possibly indicating that vendors were being pushed back ahead of an announcement of Nordstrom’s Canadian retreat.
Thus parts of this article were written well in advance ahead of the anticipated announcement. Given that Nordstrom is a publicly traded company, Retail Insider held off on any speculative reporting in terms of Nordstrom’s future in Canada until the company announced it itself on Thursday.
We’ll follow up on this story as news arises surrounding Nordstrom’s exit from Canada. Watch for an upcoming Retail Insider podcast where Craig Patterson will discuss the topic further.
Retail Insider is streamlining its Canadian retail news from around the web to include a handful of top news stories that can be viewed quickly during the day. Here are the top stories from the past 24 hours.
“The idea was mine from many, many years ago – probably 30 years already I wanted to start a wing place. Not just any restaurant but an upscale chicken wing place,” said Schwartz.
“I finally had the good fortune of meeting George. I knew nothing about the restaurant business. Met George. He’s a unicorn in this business. Smart business man. He knows everything really there is to know about running a successful restaurant.”
Image: Birdhouse Wingerie & Bar
Image: Birdhouse Wingerie & Bar
Image: Birdhouse Wingerie & Bar
The company has one location of about 3,200 square feet in Dollard-des-Ormeaux in the Montreal area.
Lorne Schwartz
“The concept is very simple. It’s an upscale, fun, vibrant, kind of gastro pub food in a setting that plays music videos on a big music video wall, mostly targeted towards 18-45 (years old). Really going after that market of young people looking for a place to have some entertainment and some great comfort food,” said Schwartz.
Massouras said Schwartz first approached him with the idea about three or four years ago.
“My first reaction was ‘really, chicken wings?’ I was not a big fan of chicken wings myself at the time. Now I am. We were just building the concept over a few years. We knew exactly what we wanted to specialize in. The concept itself we narrowed it down to an upscale, comfort food type of concept with a very fun atmosphere and I’m very happy we accomplished that,” he said.
“I’ve been in the restaurant business since I was 18 years old. I’m 44 years old now. I’ve owned and operated my own restaurants since 2003. I’ve always been involved with franchises. I wanted to build something that was my own and build our own brand. So I put 100 per cent of my effort in this new concept and I’ve been operating it since day one.”
Image: Birdhouse Wingerie & Bar
Ben Labrecque, Managing Partner with Oakmont Real Estate Services Canada, which is spearheading the brand’s expansion plans, said the brand’s growth plans include a combination of company-owned and franchise restaurants with goals of 24 locations by 2027 within Quebec.
Ben Labrecque
He said one of the biggest hurdles is that many people associate chicken wings to a grab and go or fast food environment and sports bars.
“But what’s unique about this concept and probably one of the only hurdles we’ll have in expanding this concept is educating the developers to the fact that this is not a sports bar and stop associating wings directly to fast food and or sports. Once they come in and see the concept and try the food, they realize quickly that it’s an elevated chicken wing complemented by a host of other great items on the menu,” said Labrecque.
“It’s really an experience and the food is quite elevated. Once we can get them to experience it, and taste it and live it, the concept sells itself.”
Image: Birdhouse Wingerie & Bar
He said the brand is looking for locations of between 4,000 to 5,000 square feet.
“We think we’ve got a lot of expansion in Quebec still,” said Schwartz. “But we’d love to take the concept West and even East. Our problem is we kind of get tossed in the fray of ‘oh there’s a wing place’. But it’s far from a wing place.”
Schwartz said the current Birdhouse location in Montreal has about 65 to 70 per cent of its clients who are women.
“Surprising for sure. But I think it talks to the fun vibe of the place and the fact that it’s not a sports bar and the fact we have vegan options and vegetarian options and so on,” he said.
Montreal has not been known for its chicken wings in establishments like other parts of the country where sports bars, in particular, have a special wing night every week.
“For some reason, there’s been no real wing places in Montreal,” said Schwartz. “We don’t have the franchises that the rest of Canada has . . . I’ve always been a wing fan. Literally when I was 20 that would have been in 1987 I sent by regular postal service a letter to the guys at Hooters to try and open up one in Montreal. I think they said ‘where the hell is Canada and where the hell is Quebec?’
“So that didn’t go anywhere. But I wanted to do it since then. And I kept saying ‘someone’s going to open a wing place’ and no one ever did. Everyone has wings as an appetizer but no one actually did anything focused on wings. There’s burgers, tacos, pizza and so on. We didn’t want to do a quick service restaurant. This is a full sit down place with a high attention to service and the vibe and the atmosphere.”
Walk into any major shopping centre today and you’re bound to come across several optical retailers within a few walking steps of each other.
And in the past couple of years, Canada has attracted a number of international retailers eager to launch their brands in this market.
Why?
First, Canada has been under-served in the market. Second, it’s a recession-proof business in many ways. As the population ages, more and more potential customers are entering the market and in need of eyewear.
George Minakakis, Principal of Inception Retail Group, a former Country Manager and CEO with Luxottica and author of The New Bricks & Mortar Future Proofing Retail, says the market is going to get even more competitive, particularly with Specsavers setting the tone with price.
In this video interview, Minakakis discusses the closure of BonLook locations, whether the eyecare market is over-saturated right now, why international retailers are setting up shop in Canada, and what retailers have to do to be competitive in order to survive.
The Video Interview Series by Retail Insider is available on YouTube.
Connect with Mario Toneguzzi, a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and the only Canadian – to learn how you can tell your story, share your message and amplify it to a wide audience. He is Senior News Editor with Retail Insider and owner of Mario Toneguzzi Communications Inc. and can be reached at mdtoneguzzi@gmail.com.
Also check out the other series offered by Retail Insider, including The Weekly podcast and The Interview Series, which are both available on Apple Podcasts, Stitcher, TuneIn, Google Podcasts, or through our dedicated RSS feed for Simplecast and other podcast players.
The ongoing internal feud at Tim Hortons between some franchisees and Restaurant Brands International, Inc. (RBI), Tim Hortons’ parent company, is nothing short of epic. For more than seven years, we have seen public accusations and a raft of legal threats between parties. But it now looks like RBI has just had enough.
We recently learned that RBI has terminated the contract of a long-standing franchise owner. Ron Fox, who owned a few Tim Hortons franchises in the Brantford, Ontario area for well over two decades, was leading a group of frustrated Tim Hortons franchisees, concerned about declining profitability amid soaring costs for food and supplies charged by the franchisor. His contract was terminated. It was also reported that RBI sent default notices to the current members of the group’s board, which includes none other than Jeri Horton-Joyce, the daughter of chain founder Tim Horton.
Tim Hortons in Brantford (Image: Cambria Design)
RBI stormed into the lives of Tim Hortons franchisees in 2014, by way of a multi-billion-dollar merger between American fast food restaurant chain Burger King and Canada’s top coffee shop and restaurant chain, Tim Hortons. After it acquired Popeyes in 2017, it became the fifth-largest fast-food operator in the world. It’s a gigantic organization now with a distinctive zero-based budgeting track record. Brazil’s 3G Capital, which focuses on cost management and penny-pinching measures was behind the deal, along with the famous Warren Buffett.
A few years prior, 3G Capital also acquired Anheuser-Busch InBev and Kraft-Heinz. The group creates value by cutting, restructuring, and leveraging the value out of their supply chain to support global brands. When 3G Capital acquired Tim Hortons, the aim was to do just that and make Tim Hortons a successful global brand.
But early on, ideologies clashed between the old guard and the newly formed company. Franchisees prided themselves for being incredibly community-focused. And they were. Tim Hortons dominated the market by monopolizing hockey rinks, soccer fields, and small-town Canada. But RBI quickly made significant changes in the company’s costing structure, alienating the franchise’s long-standing players. That’s why some formed an association in 2017, called the Alliance of Canadian Franchises, formerly the Great White North Franchisee Association, with about 1000 stores being represented. They have a public board, a website, a podcast – everything – all separate from RBI.
RBI’s series of marketing blunders early on galvanized the rebel alliance. RBI introduced several new products on the menu which made little sense. The delayed loyalty program launch, the introduction of meatless products – the disasters just piled on.
But RBI turned the marketing fortunes around and has had a few marketing coups of late: several appropriate seasonal changes to the menu, the incredibly successful “Tim Biebs” campaign, and the launch of highly successful breakfast cereals, converting grocery foot traffic into more coffee store business. Suddenly, the brand connected again with communities, progressively mastering the magic of the old while fostering a new, evolving business model globally.
Tim Hortons Clifton Hill (Image: Dustin Fuhs)
The franchise now has stores in 15 countries, including India and now Pakistan, since earlier this year. Tim Hortons will have 3000 stores in China by 2026. The chain currently operates a little over 3,500 stores in Canada. In just a few years, Tim Hortons will have more stores outside of Canada than within Canada. Even though the chain has reached a point of saturation in Canada, closing 53 stores last year, same-store sales were up more than 11 percent last fiscal year.
Slowly, the dissenting voices within the ranks of the franchisees have become just noise, and the old regime influence is fading away.
The goal for RBI is this: the parent company wants Tim Hortons to be more like the Burger King franchise structure, which is another RBI division. A Burger King franchise owner will operate 150 restaurants on average, not just two or three. This comes with much less corporate and personal pampering, higher supply chain efficiencies and sound cost-management practices. When most franchise owners operate around 150 restaurants, consensus on these features is easily attained.
About two-thirds of Tim Hortons franchisees are perfectly fine with RBI’s modus operandi. But enough was enough. Instead of waiting for the Alliance to exhaust its resources, RBI has clearly decided to clean house and will likely let go of a few more recalcitrant owners over the next several months. Don’t be surprised.
Bottom line, when someone purchases a franchise, especially in the food sector, that person is simply buying a sponsored management position within a larger network, which comes with some support and moderate perks. That support will change with different ownership, and when that changes, franchisees should also expect rules to change. In food franchising, particularly, franchisees are rarely in control, no matter how successful their own stores are.
Since Subway is now for sale, store franchisees around the world should take note.
Declaration: The author was involved with the Alliance of Canadian Franchises as an adviser in 2020-2021.
Best Buy at CF Toronto Eaton Centre (Image: Dustin Fuhs)
Retail giant Best Buy Canada has launched a new monthly subscription service for consumers to purchase electronics.
Mat Povse, SVP Retail & Geek Squad Services, and Best Buy Business at Best Buy Canada, said the Monthly Subscription program is an innovative way for consumers to get, own, and use their technology.
Mat Povse
“Today it’s offered only on laptops, and subscribers pay a low monthly payment for a defined period of time. The monthly payment is lower than traditional financing because we agree to take that device back at the end of the period, (for example, a two-year term) where the subscriber gets to choose to refresh to a new device, maybe they want to upgrade, and, for some, they prefer to keep their device and end the subscription. There is no interest, the fee is low or free if you’re already a Best Buy Member,” he said.
Best Buy Membership Signage at CF Toronto Eaton Centre (Image: Dustin Fuhs)
According to Povse, here’s how it works:
Eligible customers choose the laptop they want and the term they wish to subscribe for – and they will have the option to refresh, upgrade, return, or keep the product at the end of their term;
At the end of the subscription term, if they choose for Best Buy to take that product back, the retailer will find a new home for it or responsibly recycle it.
Example:
Let’s say you choose a Macbook Air for $1299; the monthly fee is as low as $43/month for 24 months. That’s $1032 in total payments – less than the retail price of the laptop;
At the end of the 24 months the customers can choose the latest version of that Macbook and carry on with payments and Best Buy will find a new home for their old one.
Or they could choose to buy it out for a one-time final payment and keep it forever.
Povse said the retailer has been evolving to serve consumers in new ways – pushing the boundaries to meet their needs, exceed their expectations and even serve up things they didn’t know were possible.
“We’ve seen great success with our new store formats, growth in our Best Buy Membership, and our enormously successful Best Buy Marketplace has expanded our assortment success and provided even more options for our customers,” he said.
“There’s a lot of great reasons why we think Monthly Subscription makes sense. First, we all love looking forward to our next piece of technology, whether it’s a new phone, or laptop or TV – it’s exciting! – and a Best Buy subscription makes it hassle free. It’s a great way for some customers to afford that “even-better” tech they really wanted and pay for it over the term rather than all upfront. Finally, we’re also really committed to sustainability, so the “bring it back” nature of subscription helps us give old tech a new home.”
Image: BestBuy.ca Best Buy Membership Signage at CF Toronto Eaton Centre (Image: Dustin Fuhs)
Povse said right now the subscription is only made available by talking to an Advisor in stores, nationwide excluding Quebec.
“We’ve never advertised it, however this month, Calgarians will see and hear more about subscription as the first market we’ll actually campaign in,” he said.
“It’s available in stores nationwide excluding Quebec. We’re working hard to expand Monthly Subscription to Quebec, to online, and to offer it for more products.”
Povse said Best Buy customers love technology and want the very latest premium devices. Then there are some customers that don’t need or even want to own their tech – they just want hassle-free use of their devices. Some customers are more focused on affordability and like payments whereas some like the idea of owning used technology. Monthly Subscriptions appeals to all of these customers, he said.
Povse cited different research on consumer trends such as: consumers continue to have an appetite for the latest technology, with overall spending on consumer electronics up 20 per cent since 2020, and it’s expected that consumers buy around two new pieces of consumer electronics this year; Canadian consumers, in particular younger demographics, see the appeal of subscription services; the monthly subscriptions market is projected to increase by 27.5 per cent from 2022-2028; and the model provides options for those consumers with short-term cost pressures (inflation, smaller wallet size).
Best Buy Membership Signage at CF Toronto Eaton Centre (Image: Dustin Fuhs)Best Buy Membership Collateral (Image: Dustin Fuhs)
Best Buy has 127 stores and 33 Mobile Stores coast to coast. Last year it opened two new Small Format Stores – one in Sherwood Park, Alberta and the other in Sydney, Nova Scotia.
“And they are doing amazing,” said Povse, adding that more stores will be opened this year but could not elaborate at this time.
“We’re excited about new concepts and new markets that help us serve even better,” he said.
Busy Bee Tools has experienced incredible growth in the past few years and is now poised to expand its retail footprint to more locations in Canada.
The retailer, which was established in 1976, currently has 10 locations – one in BC, two in Alberta, six in Ontario and one in Nova Scotia.
“I took over as President about four years ago. In that time, the company has grown by 61 per cent,” said Hanif Balolia, President of Busy Bee Tools. “We recently went through a wave of retirements on the senior management side. Part of me taking over, one of the biggest tasks was actually rebuilding the senior management team.
“The majority of our team at head office is actually quite young and we have some pretty significant growth plans. In 2021, we expanded our head office and distribution centre by 20,000 square feet and that allowed us to keep up with our growth. We have expanded significantly through e-commerce but also focusing on same store sales.
“We obviously didn’t want to open a new brick and mortar location during COVID. That would not have been wise. But brick and mortar we still see fantastic potential for our locations. The reason for that is because of the type of product that we carry, the product mix. It’s still a lot of heavy machinery and customers do like to see that still in person. We’re not competing too heavily with the Amazon’s and the large third-party players when it comes to machinery.”
Image: Busy Bee Tools
In 2022, the retailer invested heavily into its digital infrastructure across the company, added Balolia.
“That was a big venture for us. That was very important to me to make sure our digital transformation and our digital structure was very sound to allow us to grow. That allows us in theory to have what we like to call a store in a box. So we can effectively open locations faster because we don’t have to worry so much about technology anymore like we used to,” he said.
“So our plan right now after these two significant things were done which was the expansion of our distribution centre and completing our digital transformation the plan is to now scale e-commerce even further, grow our product line, grow our product offering and open more locations with a focus on Ontario to begin.
“We have six locations in Ontario at the moment. I personally feel that the market is still underserved for our products. Ontario is a strong province. Our customer base is vast in Ontario. Our head office is in Ontario which allows for greater control and operational efficiency. The changes we’ve made in the last few years are allowing us to now capitalize on this potential growth.”
The brand was started by Balolia’s father in Burnaby, BC.
“The original background is we were actually in the dry cleaning business and the family had 10 dry cleaning stores called Busy Bee Dry Cleaners. If you go to Vancouver, you’ll still see that brand is still there,” said Balolia. “My dad and his brother got out of the dry cleaning business a long time ago.
“They had a passion for tools and we were one of the first importers of woodworking machinery in Canada. So they began importing woodworking and metalworking machinery from Taiwan back in 1976-77 and the interest in the tool was growing. It was specifically growing among serious do it yourselfers, people who were doing this part time, making furniture, very crafty with their hands and machinery at the time was very expensive. You had a couple of main brands you could buy from.
Image: Busy Bee
“They started importing and that was obviously enough to show the family to get out of the dry cleaning business. We moved the head office of Busy Bee to the Toronto area in 1985 and the reason for that was just more opportunity for growth and we saw that as being a better location for our head office and from there we started to grow the business.”
The company today has a large and growing e-commerce business.
Typical store size is about 10,000 square feet although Edmonton, which is the largest, is about 14,000 square feet. The smallest store is London at just over 7,000 square feet but it will expand to 10,000 square feet.
Balolia also operates two other businesses. In 2009, he started an e-commerce company for home health care products. He is President and Founder of Agecomfort.com. Craftex Property is also another of his businesses.
Image: Busy Bee Tools 40th Anniversary Video
In London, the real estate arm of the company has a five-acre retail plaza that it is building. There will be four to five buildings. Church’s Texas Chicken is going to be an anchor tenant with a drive-thru and Busy Bee is going to be one of the key and largest tenants in that plaza.
“We want to open (new locations) carefully because we’re also scaling e-commerce at the same time. I think we want to be in about 15 stores in the next four to five years,” said Balolia.
“We’re not looking as much into really commercial/industrial type locations. We want more retail presence, more retail traffic. We don’t mind paying a little bit more higher rent . . . In the past the history of the company would always sort of be locations in that industrial type of plaza, lower rents because we were a drive to destination but with the age of the internet drive to destinations are not as common in retail as they used to be.
“What’s happened over COVID a lot of people were at home and they ended up having time to work with their hands and get back into hobbies. This actually affected the younger generation more so than the older. Our customer base was actually dying. Our typical customer was over the age of 50 and what I mean by dying physically they were slowly getting to that age but also they also were fully retired and they had bought out the majority of the machines that they wanted. So what we were missing was that next generation to come and two things happened. The school system in Canada put woodworking classes back into the school system and the age of social media has really helped increase the interest in woodworking specifically. Woodworking has blown up on Instagram and a lot of people are doing things with their hands. That’s going to be a big part of the future.”
Prior to COVID, Busy Bee was offering workshops but they were scaled back because of the pandemic. Today, people are much more prone to watching videos from the comfort of their homes. In the future, Busy Bee will be launching an initiative where customers will get in depth training through their home on machines bought through the retailer.
The company has seen in the last few years a rise in a younger demographic of customer as well as more females.
Resthouse, the Victoria-based sleep brand, has launched a crowdfunding campaign through FrontFundr that will essentially help them expand their retail footprint, further develop product lines, and grow their ecommerce presence.
“Over the last 20 years, we’ve witnessed the extreme environmental impacts that the sleep industry has had on the planet,” said Chris Manley, Resthouse co-founder.
“24 million mattresses are thrown away each year due to false narratives around re-purchasing bedding. At Resthouse, we have the knowledge, passion, and products to fundamentally break this cycle and the devastating impact it’s having on the environment while helping to educate consumers about how to have the most restful and restorative sleep.
“Right now there is a tremendous opportunity to reshape the industry and help people sleep better, and we couldn’t be more excited for the launch of our first equity crowdfunding campaign.”
Image: Resthouse
Resthouse launched its first retail store in 2015 in Duncan, B.C., and has nearly $3 million in annual revenues. Today the brand’s home is in a new 3,700 square-foot brick-and-mortar retail showroom in Victoria. The brand is also available online. It maintains a warehouse presence in Duncan as well.
“It’s all about organic bedding. Organic and natural. We really focus a lot on each individual sleeper. I know the industry. I’m a mattress geek. That’s all I’ve ever done,” said Manley.
“But in 2000 a really brutal thing happened which nobody talks about. Mattresses went one-sided. And so when they went one-sided it basically made mattresses disposable and it’s what’s causing the environmental disaster. One of our biggest things that we talk about is let’s get mattresses out of landfills.”
Resthouse Co-Founders, Chris and Olga
The sleep company has a vision of building flourishing communities by providing people with adaptable and personalized sleep environments while making real and sustainable changes in the sleep industry. Individuals across the country now have the opportunity to become co-owner of the disruptive brand for as little as $500 through the crowdfunding campaign.
Filling the gap in the market for sustainable, high-quality products that respect individuals’ sleeping preferences, body types, and unique needs, Resthouse says it offers an ecosystem of sleep essentials that promote restorative, quality sleep. This includes its own in-house brand of Kakūn mattresses, pillows, comforters, protectors, and toppers, as well as a carefully curated assortment of ethically-sourced sheets, blankets, duvet covers, towels and robes from like-minded brands such as Coyuchi, Obasan, and Holy Lamb Organics.
Resthouse has its own designed and developed in-house brand of Kakūn mattresses, pillows, comforters, protectors, and toppers.
“There’s a lot of passion but my whole life has been sleep,” said Manley.
“We want to expand more heavily into the States. That’s a big part of what we want to do. We just did a whole new website relaunch, changing it to focus on the five sleep essentials. And those five sleep essentials are just really talking about the different parts of our body that are not working in the conventional mattress world. You talk about the pillow, you talk about the alignment, and temperature is huge. Everybody screws up temperature. Most beds are warm because they make you hot and they keep putting ingredients in things like gel memory foam to make them cooler but it’s still just memory foam.”
Those Sleep Essentials include:
Comfort starts with your head and neck;
Correct alignment and shoulder collapse;
Customize your full body support;
Maintain your ideal temperature; and
Top with breathable softness.
“What we want to do with the crowdfunding is grow into the States. We’ll be hiring a proper sales manager for our store because I’m still on the floor. We want to grow the Kakūn brand and we want to expand our retail footprint. We want to have another store in Vancouver in the future. That’s something that’s on the horizon. We haven’t planned it out yet because we’re obviously just doing the FrontFundr, launched the website and moved to Victoria. We’re looking for the investment because we just want to scale. We know we have something that is unique.”
Image: Resthouse
The company says one in three people are sleep deprived.
“Life is stressful and there is a growing awareness of how sleep is central to our mental health and wellbeing. Half of consumers around the world reported a desire for more products and services to meet the need for high-quality slumber,” it says
“For the last 20 years we have been sold cheap, generic sleep products, made of synthetic materials, that don’t respect individual sleeping preferences, body types or unique needs. The result is an environmental disaster, as people throw out their bedding/ products that don’t work and continue to suffer from a lack of sleep. 24.2 million mattresses per year are discarded in North America.
“The vast majority of which will not be recycled. We can do better. Our unique approach to sleep—developed over 20 years of working in the mattress & bedding industry—combined with our sustainable product commitment, ensures our customers are taking care of themselves and our planet.
“We’ve seen all the issues and we’re showing up as Resthouse with our own product line, named Kakun, to fix them. It’s not just the mattress. By considering the whole sleep system, we are able to provide personalized products that accurately target common causes of poor sleep (overheating, misalignment, and improper support).”
