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Franchisees put brakes on Tim Hortons mobile app roll out

A pedestrian walking past the Tim Hortons coffee shop in Toronto on Nov. 8, 2016. Tensions are heating up between Tim Hortons Inc. and its franchisees as a battle over the fast-food chain’s order-and-pay mobile app is delaying its launch.

Fred Lum/The Globe and Mail

Tensions are heating up between Tim Hortons and its franchisees as a battle over the fast-food chain's order-and-pay mobile app is delaying its launch.

Franchisees last week threatened to seek a court injunction to stop Tim Hortons, owned by Restaurant Brands International Inc., from going ahead with its plan to introduce the mobile app on March 30, according to a letter obtained by The Globe and Mail. The restaurant owners' new association, called the Great White North Franchisee Association, had warned in the March 21 missive that the app's roll out was being rushed without enough testing or staff training, pushing new costs onto the franchisees and threatening to damage their businesses as well as the brand itself.

An advisory board of the Oakville, Ont.-based company has now agreed to postpone the Thursday app introduction for two weeks, heading off the association's injunction threat to halt "what is clearly an ill-timed launch," the association says in its letter to Tim Hortons president Elias Diaz Sese and its corporate lawyer.

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"There have been many concerns and complaints voiced about the launch of the mobile app," the association says in another letter, two days later, to franchisees. "There are a host of outstanding and significant concerns and we question whether two weeks permits sufficient time to address all of these issues."

For subscribers: Inside the brutal transformation of Tim Hortons

The strains have been mounting since RBI, controlled by Brazilian private-equity firm 3G Capital, acquired Tim Hortons in December, 2014, and merged it with its Burger King chain.

The recently formed Tim Hortons franchisee association has said heavy corporate cost cutting is hurting the brand along with restaurant owners' economic health as RBI slashed head-office staff, shifted costs to franchisees and took shortcuts to save money. In response, Tim Hortons' top executives pledged this month to study the grievances and disclose more information about its ad-fund spending, which the association has questioned.

Now the timing of RBI's app launch at Tim Hortons – allowing customers to order and pay in advance on their smartphone without lining up to pay a cashier – is unclear. Company spokeswoman Shannon Hall said in an e-mail: "We remain very excited to launch the Tim Hortons Mobile App later this year, which is a key part of our long-term strategy." She said the decision to launch the Tim Hortons mobile app later this year was made in collaboration with the advisory board, whose members are elected by franchisees across Canada.

Rival Starbucks Canada introduced its pay app in the fall of 2015, raising the stakes in food-service industry automation efforts. At about the same time, RBI acquired a startup to develop the app, which it began testing late last year in 25 Tim Hortons cafés in Ontario.

Franchisee association executives would not comment on Monday. But its letter to Tim Hortons, signed by association president David Hughes, a franchisee in Lethbridge, Alta., acknowledges that technology is necessary in today's marketplace. Even so, the five-page letter outlines a series of concerns ranging from added labour and promotional costs being borne by the store owners to logistical and operational issues that he says have yet to be addressed.

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"The launch of the mobile app has caused considerable apprehension within the franchisee community which stems from the franchisor's decision-making process on this initiative," the March 21 letter says.

"There are a host of red flags and clear evidence that the mobile app is not ready to be launched on March 30, 2017. In fact, in February, [Tim Hortons president] Elias admitted that the app is not ready and that they were discovering new issues every day."

It says the test is too limited and being conducted mainly among head-office employees, with just a handful of customers at each location ordering from the app. Information and training has been inadequate compared with past national launches.

Archrival McDonald's Corp. is still testing its order-and-pay app south of the border, with a plan to launch it by the end of 2017, it says. When Starbucks introduced its app, it struggled with congestion at pick-up counters, resulting in some customers leaving without a purchase, the letter says. Starbucks received negative press and social-media attention, serving as a warning for Tim Hortons not to rush its app roll out, it says.

"The potential risk of customer loss at Tim Hortons is significant," the letter says."Launching a national program with significant potential negative risks and without adequate franchise information learned from test marketing is neither responsible nor reasonable. At minimum, franchisees deserve a sound business case for moving forward."

It notes that the launch comes as the company is also introducing a revamped espresso-coffee program, with franchisees required to buy new machines for it, while "countless" promotional discounting initiatives are under way at the same time, all "expected to be flawlessly executed at store level … Store owners are not prepared to bear the brunt of an unsuccessful launch."

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The association is worried that franchisees will be penalized by the "huge potential for increased customer complaints" about the app. RBI tracks store owners' performance in its so-called GPS system. "GPS scores are being used to justify owners not getting new agreements or new stores," the letter says. "The association has taken strong issue with GPS and the fact store owners' scores can further be negatively impacted by this program is unacceptable."

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