Coffee giant Timmies sees gains as franchisees fight with parent
HOLLIE SHAW
TORONTO — Sales at Tim Hortons improved slightly in the third quarter despite an ongoing feud between parent company Restaurant Brands International and a group of unhappy franchisees who are suing the corporation.
“It’s never helpful to have negative media attention, for the brand, but we don’t want to speculate on that,” Daniel Schwartz, CEO of RBI and head of Tim Hortons, said on Thursday.
The Great White North Franchisee Association, dissatisfied with the way the company is run under new management and the performance of its elected franchisee board, have launched two lawsuits against RBI since June, alleging head office had misused their advertising fund, hiked prices on restaurant supplies and interfered with their legal right to associate by bullying and intimidating store owners. The class action lawsuits still require court certification.
In September, head office served default notices — a legal attempt to eject the owners from their stores — to the Great White North Franchisee Association’s nine board members after alleging they leaked confidential information to the media.
“It’s unfortunate that a few of these owners did take these actions,” Schwartz said of the dispute. It would appear to be more than a few: The association formed in March, and announced last week that half of all Canadian Tim Hortons franchisees are now members, about 550 owners.
Schwartz said he can’t verify those numbers, and said he has travelled throughout Canada to meet with a range of franchisees to talk about the company’s initiatives.
“Nearly all of our franchisees elected their advisory board members, and those are the people we are working with to drive the brand and the business forward.”
The company earned US$91.4 million in the quarter ending Sept. 30, or US37 cents per share, up from US$86.3 million in the same period of 2016 (US36 cents) thanks to improved performance in its Burger King unit.
Revenue was US$1.21 billion compared with US$1.08 billion last year.
Same-store sales, a key performance metric that strips out volume at stores open for less than a year, grew 0.3 per cent at Tim Hortons, reversing two consecutive quarters of decline, and were up by 0.6 per cent in Canada where the chain has more than three-quarters of its restaurants. Same-store sales rose 3.6 per cent at Burger King, and fell 1.8 per cent at RBI’s most recent acquisition, Popeyes Louisiana Kitchen.
Adjusted earnings were US58 cents per share, compared with 43 cents a year ago and analysts’ mean estimates of US49 cents.
BMO Capital Markets commissioned a third-party survey to assess the performance of Tim Hortons’ new espresso drinks, launched in April, and its new mobile order and pre-pay app, launched in July.
“We believe third-quarter results at Tim Hortons suggest that both the espresso drinks and mobile app are not developing sufficient traction to move the (same-store sales),” analyst Peter Sklar wrote in a note to clients on Thursday.
The analyst also raised concerns about the effects of a minimum wage hike coming in January to Ontario, the coffee and donut chain’s biggest provincial market, and asked Schwartz on the analyst call about the wage hike and how franchisee economics and menu prices would be affected.
Schwartz said the company strives to balance franchisee profit with value to customers, and that the company is striving to improve the business by driving up sales over the long run. hshaw@nationalpost.com Twitter.com/HollieKShaw