Leger-National released its annual report ranking Canada’s most admired companies recently.
Tim Hortons’ year was just plain awful. It went from fourth to 50th, in just 12 months. This significant free fall can be linked to the very public spat between Tim Hortons franchisees and parent company, Restaurant Brands International (RBI). This dispute has taken its toll and likely affected the reputation of the iconic Canadian company.
RBI has been at war with Tim Hortons franchisees since 2014, when RBI swooped in with an efficiency-driven agenda.
Menu changes, royalty structure modifications, higher costs of supplies to operate outlets — all were revised to serve RBI’s shareholders, not necessarily to the Canadian public. This year’s Leger-National rankings confirm that Canadians have been keeping tabs.
RBI’s profit-driven agenda has started to work against it. The $15-an-hour minimum wage campaign made Tim Hortons a public target. To make matters worse, memos were leaked suggesting that, in Ontario, where the minimum wage increased by 22 per cent on January 1, 2018, some Tim Hortons employees had been asked to pay for uniforms and cut out breaks.
Interestingly, however, even though RBI’s strategy has been all about profitability for the holding company, its share price has taken a hit recently. Sales are slumping, and as a result, RBI’s shares values have fallen and could drop even further.
RBI’s response is to invest $700 million over the next four years, in changing the interior design all of its Tim Hortons restaurants. But here’s the catch: most franchise owners will be required to pay over $450K per outlet. Given that the average Tim Hortons franchisee owns three outlets, the cost to support RBI’s new redesign strategy will be well over $1 million for a typical franchisee.
RBI’s message to franchisees is quite simple: pay up or leave. RBI’s intent is clearly to renew its portfolio of franchisees and deal with operators who are more inclined to buy into the parent company’s philosophy. Not a great move on its part, if it cares about reputation.
The Leger-National survey may not measure how nationalistic ideals affect Canadians’ perception of companies at home, but this factor clearly skews ranking results.
In Tim Hortons’ case, the brand itself is inherently linked to our perception of how it honours Canadian values.
So, what the recent reputational survey is really telling us is that Tim Hortons is no longer seen as a Canadian company. Things are different now, and Canadians can feel it.
Franchisees have known for a while that RBI’s game is disconnected from Canadian beliefs and that the company is distanced from Canada and from the restaurant business.
Since the RBI takeover, the traditional uniforms, the successful Roll up the Rim to Win campaign, the welcoming friendly smiles — all have been just a façade. They hid the troubling truth about the Tim Hortons conversion.
The recent Leger-National survey confirms that Tim Hortons’ transformation into a foreign company is now complete.
The brand will eventually survive, but things will never be the same.
Sylvain Charlebois, is professor in food distribution and policy and dean of the faculty of management at Dalhousie University.