Some Tim Hortons franchisees are threatening a public protest if management does not agree to overturn a decision to revoke the licence of a restaurant owner who was critical of the company.
Dissident franchisees are drawing a line in the sand over the case of Mark Kuziora, a restaurant owner who this spring became a flashpoint figure in the escalating battle with the coffee-and-donut chain after the company decided not to renew his licence when it expires in August.
A long-time Tim Hortons franchisee, Mr. Kuziora is active in the Great White North Franchisee Association (GWNFA), formed last year by unhappy restaurant owners to take on the company’s austere management practices, which franchisees say are at risk of damaging the brand and their bottom line. Mr. Kuziora signed his name to a GWNFA lawsuit alleging the company misused franchisee advertising funds. In April, he sued the company over the revoking of his licence.
Now, franchisees are warning they will protest at the company’s head office in Oakville, Ont. on June 20 – potentially hurting the brand further – if Alex Macedo, the new president of Tim Hortons, refuses to meet an association representative to try to find a middle ground in their dispute and reverse the Kuziora decision.
“Keeping in mind your refusal to acknowledge the GWNFA and its franchisee members, I believe we are at a point where it is crucial that a resolution be [found] as soon as possible,” Donna Willett, a Tim Hortons franchisee and a director of the GWNFA, said in a letter Friday to Mr. Macedo and Daniel Schwartz. Mr. Schwartz is chief executive officer of Restaurant Brands International Inc., which was created in late 2014 by Brazilian private equity firm 3G Capital to merge its Burger King chain with newly acquired Tim Hortons.
“Our brand has been damaged, we can’t change that, both sides have made mistakes, we can’t reverse that either, but we still have a strong brand and we have a future,” Ms. Willett said.
“We can continue to pull each other through the mud, point fingers and watch as our sales plunge and competent franchisees exit the chain, or we can act responsibly, and with everyone’s best interest at heart and take the steps necessary to begin to resolve this.”
The clock is ticking for the two sides to find some common ground. Sales have weakened at existing restaurants, and Mr. Schwartz has vowed to improve Tim Hortons’s performance with renovated restaurants, improved product quality and better communications.
“We still have plenty more work to do,” Mr. Schwartz told the parent company’s annual meeting last Thursday. “We don’t think that we’re going to be able to fix things overnight. But we are very confident that with the team we have in place and strong restaurant owners, we’re going to drive this business forward.”
The dissident franchisees say they want the company’s executives to make good on their pledge to work more closely with restaurant owners.
Mr. Macedo had initially agreed to meet this Tuesday with association president David Hughes, acting as an individual franchisee and not as the association’s leader. But Mr. Macedo cancelled the meeting last Thursday after he found out The Globe and Mail was aware of the rendezvous.
The company has criticized its franchisees for speaking to the media. It has refused to recognize the association and has instead worked through an elected franchisee advisory board. But the association says the board is simply a rubber stamp for corporate decisions and has no real voting power.
Company spokesman Patrick McGrade said management has planned several meetings with the advisory board in the next two weeks on key elements of its “winning together“ plan, including working together on new advertising, packaging and menu options. He said the board votes on some matters, but its goal is to come to a consensus on issues about which management seeks advice.
“The elected advisory board is the only representative voice for all restaurant owners – which is why we work with them extensively to make our plans better,” Mr. McGrade said in an e-mail. “These meetings are where all the decisions are being made with restaurant owners about delivering the best guest [customer] experience and growing the brand here in Canada.
“We really believe in the value of the elected advisory board and their prominence, governance and role in the business. Alex has committed to an open line of communication with all our restaurant owners, through their elected advisory board and through regular conversations with individual restaurant owners. It is not our practice to share the details of any individual meetings or conversations with the media.”
But the association is pleading with the company to work with it to resolve their differences and reverse its decision on Mr. Kuziora or face a public protest that nobody wants or needs.
“Mark Kuziora’s licence should not have been revoked,” says the letter from franchisee Ms. Willett. “We all reviewed Mark’s evaluations dating back to 2014 and all agreed that there were no significant issues in his locations that would lead our corporate office to make the decision they did.
“Franchisees feel strongly about Mark and the decision RBI made! … If this decision does not get reversed they will be there on the 20th. I think this would be disastrous, for the brand.”
A company executive has said Mr. Kuziora’s licence renewal was denied because of “a documented history of problems … including food-safety violations and not meeting a number of other Tim Hortons operating standards.” Mr. Kuziora refutes that.
Meanwhile, Mr. Macedo, a former Burger King executive who helped patch up tense relations with those franchisees, says he’s keen to do the same at Tim Hortons, vowing to work collaboratively with restaurant owners through the advisory board.
There’s a business case for Tim Hortons to find a resolution. Peter Sklar, retail analyst at BMO Nesbitt Burns, said he’s concerned that Tim Hortons’s restaurant economics could remain a prominent issue for franchisees.
“One of the primary contentious issues with franchisees has been the recent deterioration of store economics, particularly in Ontario, where minimum wage increased 22 per cent at the beginning of the year,” Mr. Sklar said last week.
Franchisees did not get corporate approval to increase their prices enough to cover steeper costs, Mr. Sklar said, while arch rival McDonald’s Canada raised its menu prices to offset higher costs.
But Mr. Schwartz said that franchisees are enjoying better financial results. He said last week franchisees’ average profit increased 12 per cent to $320,000 since the end of 2014 when 3G Capital acquired Tim Hortons to form Restaurant Brands.
Mr. Hughes, who owns four Tim Hortons restaurants in Lethbridge, Alta. (after handing back a fifth one to the company this year) said he’s disappointed that Mr. Macedo cancelled their Tuesday meeting.
“We are still hopeful that he will reschedule, since we believe it is imperative that at some point in time RBI will see the logic in recognizing our association, which represents well over half of the Tim Hortons chain,” Mr. Hughes said.