Tims franchisees denied chance to air grievances
Smaller owners increasingly worried about changes since Burger King merger
A group of aggrieved OAKVILLE, ONT. Tim Hortons franchisees said they feel shut out by the coffee chain’s executives Monday after they were prohibited from asking public questions at the annual shareholders meeting.
“I was shocked and I was disappointed — I thought they would take questions from the floor, and instead they made a quick exit,” JJ Hoey, a Tim Hortons franchisee with 13 stores in Ontario, said after the brief morning meeting at parent company Restaurant Brands International Inc.’s headquarters in Oakville, west of Toronto.
Eighty-year-old Hoey, a franchisee since 1977, attended his first ever shareholders’ meeting with a number of other franchisees who have been increasingly concerned about changes since the chain’s 2014 merger with Burger King. Restaurant Brands is backed by the business interests behind Brazilian private equity firm 3G Capital.
Part of a group calling itself The Great White North Franchisee Association, Hoey and others have voiced concerns about the escalating cost of restaurant supplies and allege the franchisee advertising fund is being misused, among other issues.
The franchisee group formed in the late winter after relations with management reached a boiling point and the restaurant owners threatened legal action.
At Monday’s meeting, Restaurant Brands’ chief executive Daniel Schwartz gave a quick summary of the company’s accomplishments last year, when it rapidly expanded around the globe, including deals to open the first Tim Hortons locations in the Philippines and Scotland.
Restaurant Brands’ adjusted per-share earnings rose 45 per cent in 2016, and system-wide sales climbed 5.2 per cent at Tim Hortons and 7.8 per cent at Burger King. The company’s shares price has jumped 51 per cent in the last year.
While Schwartz said members of management would make themselves available to answer shareholder questions after the meeting, franchisees who came armed with questions were not able to find Schwartz or chief financial officer Joshua Kobza.
“They made a quick exit, and nobody came forward afterwards that represented RBI,” Hoey said.
Regardless, there appears to be a thaw in executives’ hardline stance of refusing to speak with the dissident group of franchisees. Since the association’s formation, management has softened a series of strict new standards for Tim Hortons restaurants and delayed the launch of a mobile app.
In an interview after the meeting, Schwartz said he met last week with several members of the group, including association president David Hughes, a franchisee in Lethbridge, Alta. The meeting came two weeks after Schwartz told the Financial Post that he would not speak with the association’s members.
“I said, ‘We are doing some great things here with your ownerelected advisory board, come and observe,’” Schwartz said. “We are willing to hear feedback — positive or negative. We just want to do it in a constructive manner with our owner-elected advisory board.”
Allegations related to misuse of the franchisee ad fund, which saw administrative expenses double to $31 million in 2015 from $14.6 million in 2013, “are totally untrue,” Schwartz said. “I offered openly for folks who are critical of it to come in, meet with my team and go through it line by line. I haven’t been taken up on my offer.”
Hughes says it’s still not enough, and owners want greater clarity about higher costs on items they buy from head office such as coffee, sugar and bacon.
The franchisees, citing 3G’s preferred method of dealing with larger group franchisees with dozens of restaurants, contend Restaurant Brands wants to evict smaller franchisees from the Canadian system by issuing so-called “default” notices. The average Tim Hortons franchisee in Canada has 3.5 restaurants.
Kobza, Restaurant Brands’ CFO, said that the number of default notices issued for franchisees “has been very stable and very low, almost exactly constant over the last few years.” Defaulting a franchisee “is the last course of action that we want to take,” he said. “We take it very seriously.”
Meanwhile, a shareholder proposal from OceanRock Investments asking Restaurant Brands to adopt a formal diversity policy to increase gender diversity on the board of directors and among senior management was defeated, for the second year in a row.
We are willing to hear feedback — positive or negative. We just want to do it in a constructive manner.