Tim Hortons sees progress in improving communication with dissident owners
New president says execs working more closely with staff to address discontent
After weathering a precipitous drop in its reputation with customers and engaging in a prolonged spat with a dissident group of franchisees, the new president of Tim Hortons says the company is making strides in working more collaboratively with the coffee chain’s Canadian restaurant owners.
Alex Macedo said Tim Hortons executives have been working more closely with members of the chain’s elected franchisee board to communicate better with its network of 1,100 restaurant owners across the country.
He took over the pivotal leadership role in December after helping to smooth over franchisee tensions as president of Burger King ’s North American division for four years. It follows more than a year of turmoil at Canada’s largest quickserve restaurant chain amid lacklustre sales and an ugly public battle with a splinter group of franchisees suing parent company Restaurant Brands International Inc. “We are not going to agree on everything,” Macedo said in an interview Thursday after the company ’s sparsely attended annual meeting of shareholders in Oakville, Ont. “That’s the nature of the franchise business. If we can work together with them and communicate better, when we have a plan they understand where we are going and can support us and guide us in that direction.”
After posting the sixth quarter in a row of disappointing same-store sales in April, Restaurant Brands chief executive Daniel Schwartz told analysts on a first-quarter conference call that Tim Hortons would work to improve its marketing and media relations in an effort to repair its tattered image and revive its Canadian sales. Discontent has been brewing among some franchisees since Brazil-based hedge fund 3G Capital merged Tim Hortons and Burger King to form RBI in 2014, and together formed the Great White North Franchisee Association, a group that says more than 60 per cent of Canadian franchisees are members.
The association is suing its head office, claiming a number of management practices have hurt their profitability. The group also complained to federal Innovation Minister Navdeep Bains about RBI earlier this year, saying the conglomerate has fallen short of promises it made under the Investment Canada Act at the time of the acquisition. GWNFA had no comment after Thursday’s meeting. Consumer surveys appear to have illustrated the impact of the rift this year, with the Tim Hortons brand scoring lower on a series of national brand reputation rankings, including a Leger poll in April that saw the chain plunge to 50th from a fourth-place ranking a year ago.
Schwartz told shareholders that average revenue and profitability for Tim Hortons restaurant owners in Canada had increased since the 2014 acquisition, with franchisee profitability increasing an average of 12 per cent to $320,000 per restaurant.
Macedo said the elected franchisee board at Tim Hortons has formed new subcommittees focused on goals such as increasing franchisee sales and profitability, improving operations and restaurant development, and is meeting more frequently with the board than standard monthly gatherings. The effort ties into Tim Hortons’s “Winning Together” program to improve the brand, which includes a marketing push, menu innovation and a restaurant renovation program expected to roll out to at least 50 per cent of the company’s 4,000 Canadian locations by 2021. The presence of Duncan Fulton at RBI’s annual meeting also suggests that Tim Hortons is taking its homegrown struggles more seriously than it did in the past. Fulton, a longtime Canadian Tire executive who resigned in February as president of its FGL Sports division, is consulting with Tim Hortons on its business strategy, franchisee relations, brand building and communications initiatives.
In the meantime, McDonald’s Canada has been on the offensive, more than doubling its market share in brewed coffee sold at restaurants in Canada since it reformulated its house blend in 2009, according to market research firm NPD.
Tim Hortons, with a share in the mid-70s, is aiming to take some of that back by expanding its breakfast business, the fastest-growing category in Canadian food service. The brand said last month that it will pilot all-day breakfast in a dozen Ontario locations beginning this summer. At the end of this month Tim Hortons will also begin a market test of self-order kiosks, which began rolling out at McDonald’s Canada in 2015. Macedo said Tim Hortons plans to expand an ongoing Ontario test pilot of home delivery in July.