Dear Store Owners,

On March 31, 2017, Graham Oliver sent out an Advisory Board update for his area. From our understanding, a similar update was also sent by other Advisory Board members to store owners in their respective areas.

We are concerned about the nature and accuracy of information being provided to store owners by the Advisory Board and Tim Hortons leadership (both current and former). As such, our response to recent communication is provided below.

In Graham Oliver’s message, he provided an update on “important developments”.

Mr. Oliver stated: “On Tuesday, March 28, Tim Hortons leadership team held an All Owners call to speak to feedback they have recently received from the Advisory Board and from franchisees directly.

Daniel, Elias, and Sami acknowledged and apologized that they have not listened enough to owners over the past two years and committed to do better going forward, which includes working closely with the Advisory Board and our subcommittees.”

GWNFA Response: Let us first start by outlining (very briefly) who has been providing feedback:

March 10, 2017: A letter was sent to TDL/RBI from Sotos LLP, counsel for the Association, regarding the formation of the Association and highlighting its key concerns, including:

• misuse of advertising funds;
• profit center exploitation;
• misuse of GPS standards;
• lack of transparency and accountability; and
• favoritism towards large corporate franchisees. 

Subsequent to this letter (and only then), Tim Hortons leadership announced efforts to make changes and address concerns (raised by the Association).

March 21, 2017: The Association wrote to TDL/RBI outlining the irreparable harm that would result from the premature launch of the order-and-pay mobile app and giving TDL/RBI 48 hours to postpone the launch or face an injunction application to prevent the impending disaster. 

On March 23, 2017, TDL/RBI came out with a statement that the launch of the mobile app would be delayed.

March 31, 2017: Our counsel sent a letter to counsel for TDL/RBI regarding David Clanachan’s statement that he sent to store owners. The letter outlined our objections to his interference with store owners’ legal right to associate.

At the recent Calgary meeting hosted by TDL/RBI, Elias acknowledged the right of store owners to associate.

March 31, 2017: There was also a letter prepared from the Association to TDL requesting proper disclosure on the use of nearly $300 million of your ad fund dollars.

In our view, it appears quite clear whose initiatives and input the Tim Hortons leadership team is, in reality, responding to. These are just some of our recent efforts and there are a host of other initiatives currently underway. This is just the beginning. We are establishing a strong common voice for store owners that TDL/RBI will have no choice but to listen and respond to.

Mr. Oliver stated: TDL will “[m] aintain the franchise model in Canada – this is what built the brand. The master franchise model will be used to help accelerate growth of the Tim Hortons brand in other countries.”

GWNFA Response: The above statement is misleading. While RBI is not moving towards a master franchise model in Canada, there is clear evidence that it is transitioning to a system that favours larger multi-unit owners. The favouritism towards larger multi-unit owners is evident nation-wide – it is being implemented via new store opportunities (leading to sales cannibalization) and by ousting existing franchisees from the system as their licences expire or via GPS scores.

Mr. Oliver stated: TDL will “[p] ause MOS operational visits for a period of time so that we can improve the GPS audit and marking process by working with our Operations and Digital subcommittee.”

GWNFA Response: As we outlined in our initial letter to TDL/RBI, there are clear issues with GPS standards and their application. However, TDL/RBI’s gratuitous promise to improve the GPS audit is not binding and is devoid of concrete actions. A subcommittee has been set up to “study” what is already known. Who can be expected to hold TDL/RBI accountable to ensure that fair standards are implemented? The GPS system needs to be evaluated by independent experts and through widespread consultation with store owners who can speak openly and without fear that they will be denied a new store opportunity because of their input. These key components of evaluation can only be accomplished through an independent Association.

Mr. Oliver stated: TDL will “[d] elay the launch of the Mobile App in order to focus on the successful launch of espresso platform at the end of April (MOS will stay in field to help with this).”

GWNFA Response: As outlined above, we sent a letter to TDL/RBI spelling out the Association’s concerns on the launch of the mobile app. We demanded that the launch be delayed and indicated that we would pursue an injunction if the launch continued as planned. TDL listened to us and the launch has now been delayed.

Mr. Oliver stated: TDL will “[i] mprove service levels by hiring an external vendor to reduce GBS backlogs immediately, hiring more Franchise Support Analysts, and introducing live agents as of May 1.”

GWNFA Response: These commitments are, again, not binding and they highlight the short-sightedness of RBI’s corporate restructuring following the acquisition of Tim Hortons when hundreds of head office employees were laid off. Many of these employees had years of experience and a wealth of knowledge on the system and its operations. Now, there is a commitment to hire new staff that will require months of training. There is also no indication on whether the external vendor or new employees will be Canadian-based.

Mr. Oliver stated: TDL will “[c] onsider rent relief on a case-by-case basis by working with our Profitability subcommittee (meeting week of April 24) to review situations where restaurant sales have declined to the point that base rent is no longer sustainable.”

GWNFA Response: Commitments such as this by RBI are intended to placate store owners while delivering nothing. This commitment is entirely subjective and, therefore, of no value. Store owners need clear economic metrics such as those existing before RBI (rent capped at 8.5 % of sales) and they must be assured of retroactive application.

Mr. Oliver stated: TDL will “[d] irect more Ad Fund spending to regional levels by working with our Ad Fund subcommittee (meeting April 5) to build the Tim Hortons brand in our local communities.”

GWNFA Response: Why does TDL/RBI need to work with the Ad Fund subcommittee to reintroduce what it took away? Can it not simply revert to past practices? Aside from this, the Tim Hortons brand has been built in local communities through the hard work and dedication of individual store owners. Store owners fiercely dedicated to the brand have spent years working and building relationships in their local communities. Therefore, we see the issue as extending beyond marketing support. Long-time store owners are being ousted from the system despite their dedication to the brand, which they have spent years integrating into their communities. Driving long-time store owners out of the system is short-sighted as it breaks a store’s entrenched ties with a community. It is difficult to rebuild those ties with someone who is unfamiliar with the community and who did not invest years building those ties.

Mr. Oliver stated: “That same day, the Operations and Digital subcommittee met to discuss improvements to the GPS audit and marking process. Our Advisory Board representatives (Graham Oliver, Adam Colburn, Greg McAuley) jointly aligned with Tim Hortons management on some important action items that will benefit the business:
• Remove the Guest Feedback metric (i.e., # of complaints / 100K transactions) from the 2017 GPS Scorecard while continuing to capture this data on TAP so that we can continue finding ways to improve the guest experience
• Maintain the current handwashing procedure (i.e., 6-step process)
• Change how the Food Safety Audit is scored in order to move away from an “all-or-nothing” approach on 10 elements. 
• Simplifying the time and temp log evaluation method
• Clarification on mandatory/optional items on FSA.”

GWNFA Response: The GPS standards now being re-evaluated by the Advisory Board were implemented while the Advisory Board was in place purportedly doing its job representing the interests of store owners. Why were these changes implemented in the first place? What was the rationale? Again, the outlined commitments are not binding, meaning that the standards can be changed at any time. The Advisory Board has zero legal authority to ensure that fair standards will be implemented and maintained over time. Also, before these standards were changed, there would have been report analyzing costs and benefits. We have not seen it.

Mr. Oliver stated: “These changes are a direct result of your feedback, and in turn, the Advisory Board’s dialog with Tim Hortons leadership team and leveraging the new subcommittees. So please continue to share your feedback so that we can continue to make changes that support franchisees to better serve our guests and at the same time build the brand and our businesses.”
GWNFA Response: The Advisory Board was created by TDL. Its structure is determined by TDL/RBI. Its agenda is established by TDL/RBI. The Advisory Board has no budget to hire independent experts to evaluate new proposals and they have no legal authority to implement change.

The Advisory Board and subcommittees lack an independent voice. Their inability to stave the avalanche over the last 2 years is the best evidence of their power and authority.

Evidently, many of the changes that store owners have witnessed and been personally affected by are part of a larger shift dictated by 3G. In order to understand this shift, it is necessary to appreciate 3G’s established business model, which is focused on profit-extraction for the benefit of its key stakeholders, namely shareholders.

3G’s business model treats companies’ long-time employees, suppliers and other partners as numbers in a larger, profit-centric equation. Those affected by this model, including communities, are often overlooked in the pursuit of profit. Look, for instance, at what happened in Leamington, Ontario (the “tomato capital of Canada”) when Heinz was acquired by 3G. Soon after, the closure of the iconic, long-time Heinz plant was announced, affecting hundreds of employees and Canadian farmers whose families had been dedicated to Heinz for generations.

Tim Hortons store owners are no different – we are part of an equation focused on profit-extraction. The shift occurring at Tim Hortons is a textbook example of the implementation of 3G’s business model. RBI took $235 million more out of TDL in 2016 over 2015. Where do you think that money came from?

In sum, placating promises to help store owners don’t stand a chance against RBI’s profit extraction machine for the short-term benefit of shareholders. There won’t be a balanced relationship with TDL/RBI unless effective checks and balances are in place. We, as store owners, need to establish ourselves, and be viewed by TDL, RBI and 3G, as key stakeholders not only for our own benefit, but also for the benefit of the brand. We need a strong, assertive and independent voice – the Association is that voice.

Evidently, both veiled and blatant attempts are being made to devalue and delegitimize the Association’s efforts. But we are not going anywhere. Out momentum is building every day with new members signing on.

We believe that in order to make meaningful progress, change needs to come from below – from store owners. We are here at a grassroots level and we have hit the ground running. We are all store owners and we face the same challenges and concerns that you do. Our interests are aligned – simply put, we want a fair and collaborative relationship with TDL/RBI but in order to get there, we need an independent voice.

If you are a member, we thank you for your support. Rest assured that we are working with passion and dedication to advocate on your behalf. If you have not yet joined the Association, we ask you to reconsider. We need your support.

Yours truly,

David Hughes