A minimum wage is not a living wage

Tim Hortons is in hot water — and I don’t mean coffee.

When the Ontario government bumped the minimum wage up from $11.60 an hour to $14 an hour, some Tim Hortons outlets slashed hours and benefits for their staff, who ended up getting a pay cut instead of an increase.

A deluge of criticism followed, in newspapers, and in online petitions.

Disclosure: I do not own shares in Tim Hortons or its parent companies, Restaurant Brands International and 3G Capital, a Brazilian investment giant. But I am a Tim Hortons customer. And my daughter worked for Tim’s for a few years.

The policies that earned scathing editorial comments happened at a minority of Tim’s franchises — perhaps a couple of dozen, all in Ontario.

Tim Hortons was founded by — surprise! — Tim Horton, a player with the Toronto Maple Leafs hockey team. Horton was later joined by investor Ron Joyce, who expanded the chain beyond its Ontario roots until it now has over 4,600 franchised outlets around the world.

Years ago, author Pierre Berton defined the two most Canadian institutions as the NHL and the United Church. If he were alive today, he would probably name Tim Hortons.

Tim’s expanded the Canadian vocabulary with the term, “double-double”— coffee with double cream, double sugar. Long ago Tim’s surpassed McDonald’s in Canada. According to Wikipedia, Canada has the highest per-capita ratio of doughnut shops of any nation. Tim’s dominates the coffee business in Canada, selling 10 times as much as Starbucks!

Over the years, the chain’s ownership has gone through the usual high-level flip-flopping as investors cash in. But the local stores are not owned by the chain. They’re owned by individual franchisees. The fee for a franchise varies, but it is commonly called a licence to print money; if you can’t earn your investment back in two years, you’re considered a failure.

In 2011, Maclean’s magazine reported that the average franchise returned $265,000 a year.

The parent company decides what products the retail outlets will sell, for how much. It even dictates the brand of paper napkins used. Doughnuts used to be locally baked, fresh every morning; today, they are partly precooked in a plant in Brampton, Ont., and shipped frozen to franchises.

The parent company also controls advertising. And it sets some policies — for example, that drive-thru customers take priority over walk-ins.

Employment standards, on the other hand, are up to the local franchise. Which makes sense, because they have to deal with varying provincial labour regulations. But that also puts them in a bind. Because when a province raises the minimum wage, local franchises have can’t simply pass extra costs on to consumers, because the parent company controls pricing.

Personally, I think the Ontario franchises tried the wrong solution. If you reduce staff and services when wages go up this time, what will you do the next time? Keep on cutting back until you have no customers left?

The staff are the bottom end of the feeding chain. Most of them are paid minimum wage. In Ontario, now $14 an hour; in B.C., still $11.35 an hour; in Saskatchewan, just $10.96.

Even with full-time work, 40 hours a week and no holidays or days off, a Tim’s employee in B.C. can’t earn more than $23,000. Possibly enough for a single person, renting a room in a boarding house. But a mom with two kids will have to pay $1,200 a month just for an apartment here.

And some franchise owners manipulate work schedules so that no employee works more than 20 hours a week, and never qualifies for benefits. Half-time work drops a B.C. employee’s income to under $12,000 a year. Waaaaay below the poverty line. My sympathies lie with the workers. Three principles seem to emerge from this welter of information.

The parent company doesn’t care about its franchisees or their employees. It cares only about the Tim Horton’s brand. It’s the brand that’s saleable. To new franchisees. And to even bigger companies.

The franchise owners don’t care about their employees. Or their customers. They care about the return on investment that they feel entitled to.

Yes, they’ve taken a financial risk. But they’re not entrepreneurs, creating something new; they’re buying into an established brand.

The employees are not entitled to anything.

I don’t think that’s fair. If I have to pay an extra 25 cents for a cup of coffee, or ten cents more for a doughnut, so that a part-time employee can benefit from an increase in the minimum wage, so be it.

Jim Taylor is an Okanagan Centre author and freelance journalist. He can be reached at rewrite@shaw.ca. This column appears in The Okanagan Weekend.