Tim’s brand could be the big loser in this battle

Loss of trust a major risk, writes David Dunne.

With Tim Hortons franchise owners in Ontario reducing benefits and hours for their employees as a result of the provincewide minimum wage increase, consumers’ trust in the restaurant’s brand may be at risk. The impact is not lost on Tim Hortons owner Restaurant Brands International, which blames the move on a “reckless few” franchisees.

The first phase of the minimum wage raise that Ontario Premier Kathleen Wynne announced last year went into effect last week, hiking the hourly wage for workers from $11.40 to $14. To offset the costs, two Tim Hortons franchises in Ontario cut paid breaks and clawed back employee benefits. Wynne denounced the move as the “act of a bully.”

Make no mistake, Tim Hortons is Canada’s leading coffee brand, claiming to pour eight of every 10 cups of coffee sold in Canada. The big question is: Will this Ontario episode erode customer trust? Will Tim Hortons regulars decide to take their coffee-buying needs elsewhere?

This episode has unleashed a storm of protest online, sparking a strident debate and raising important questions about trust in the Tim Hortons brand. It has made us at the Gustavson School of Business reflect on the profound implications that the relationship between brands and their franchisees can have on brand trust.

Tim Hortons has held a leading spot among Canada’s most trusted brands since we introduced our Gustavson Brand Trust Index in 2014. The index measures Canadian consumers’ opinions of nearly 300 corporate and product brands across 26 categories. In our inaugural year, the brand was ranked as the most trusted brand in Canada, and in 2017, Tim Hortons maintained a high ranking and was the most trusted restaurant brand.

Stung by the controversy, Restaurant Brands International has tried to distance the Tim Hortons brand from the actions of its franchisees. In a statement to the media, RBI stressed Tim Hortons’ connection with communities and relationship with guests make it truly unique.

Our work at Gustavson shows that RBI is right — community connection and customer relationships are fundamental elements of brand trust, and up to now Tim Hortons has been a winner on these factors. That’s why it has done so well in the index. Along with quality, price and customer service, consumers trust brands that align with their values of contributing to local communities, respecting and protecting the environment, and caring about societal well-being. Yet even as RBI was making its statement to the media, some franchisees were cutting back further, telling employees that they would now have to pay for their uniforms and even for their own coffee.

Brand trust, built over many years, is easily lost. Just ask the people at Volkswagen, which ranked close to the bottom in 2017 after a storm of controversy surrounding environmental testing. When Canada’s emblematic coffee shop is accused of disrespect for its own employees, it hits directly at the foundations of trust in the Tim Hortons brand. Even though the Ontario franchises are the “culprits” here, Tim Hortons’ status as an iconic Canadian brand may well have been undermined by the negative publicity.

Franchisees, of course, don’t set prices, so they can’t pass the cost of the minimum wage increases on to consumers. Yet the wage increase has been on the cards for some time, and in an ideal world RBI and its Tim Hortons franchisees should have been working together to plan for it.

For restaurants, franchising has many advantages, but a major disadvantage is that you can lose control over the brand.

Will coffee lovers really see, or care about, the difference between RBI, the Tim Hortons brand and the actions of franchisees? We’ll find out when the 2018 Gustavson Brand Trust Index is released in May.

In this doughnut fight, the brand could be the big loser.

Will Tim Hortons regulars decide to take their coffee buying needs elsewhere?