Tim Hortons Terminating Disgruntled ‘Rebel Alliance’ Franchisee Contracts as Part of a ‘Spring Cleaning’ [Op-Ed]

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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.

Sylvain Charlebois
Sylvain Charlebois
Dr. Sylvain Charlebois is Senior Director of the Agri-Foods Analytics Lab at Dalhousie University in Halifax. Also at Dalhousie, he is Professor in food distribution and policy in the Faculty of Agriculture. His current research interest lies in the broad area of food distribution, security and safety, and has published four books and many peer-reviewed journal articles in several publications. His research has been featured in a number of newspapers, including The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.

6 COMMENTS

  1. Restaurant Brands are a UGH to Canadians, their way or the Highway. Have never done what was promised, from Head Office moves to Marketing etc. Hey those small doughnuts should be paying the price with smaller sales and on and on!

  2. Time to cut with Tim hortons and the cut franchisees to reform their own corporation as something like True Canada and restart when tim hortons was truly Canadian back in the 90s. Bring back real roll up to win, donuts made inhouse etc etc.

    This is the opportunity sitting on the table.

  3. Tim Hortons has been going down hill ever since those greedy Americans bought it. It’s honestly become an embarrassment. I hope The “old guard” finds a way to hit back. Hopefully the daughter of the founder has a few cards up her sleeve!!

  4. There is a same internal hoax going on internally at A&W food services of Canada as well. The food prices A&W charges their franchisees is ridicules. About 40% of the locations are barely breaking even. Greedy corporate people.

  5. How do I find the owner of an individual Tim Hortons store? There is a store in Pontiac Michigan that has let the property become shabby and the staff is undertrained. This location seems to be neglected though there is a high traffic volume here.

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