The Crisis Brewing at Tim Hortons
There is a crisis brewing on Ontario’s coffee horizon that could soon spread its aroma to other parts of the country as minimum wages rise in other jurisdictions. While this brew-ha-ha will probably not decimate the Tim Hortons brand, it could leave a bitter aftertaste for the stakeholders involved if not handled properly.
When the minimum wage in the province of Ontario increased by approximately 21 per cent to $14.00 per hour on January 1, two franchisees in Cobourg, Ontario (about an hour east of Toronto), sent a letter to employees stating that benefits would be scaled back to offset the cost.
Other franchisees followed suit, cutting back on everything from medical insurance to paid breaks and a free drink at the end of a shift. While we could argue that some of these seem petty, there is an economic reality here of which we shouldn’t lose sight.
The increase in minimum wage will hurt franchisees, costing approximately a quarter million dollars per location. This is money that comes directly out of owners’ pockets. And it will hurt. Their profitability has been declining. About a year ago, they formed a franchisee association to bring this fact to the attention of the owner of the Tim Hortons brand, Restaurant Brands International (RBI)—months before anyone in Ontario even heard of a $14.00 minimum wage.
For managing their businesses to adjust to labour costs that could rise from 30 per cent to 43 per cent of franchise costs, franchisees have been labelled “bullies” for picking on workers by Ontario’s premier Kathleen Wynne and “rogue(s)” for messing with the Tim Hortons brand by RBI.
Quite the tempest. And nary a teapot to be found!
Advising the Franchisees
With an issue like this (which is not yet a crisis), if I were advising the franchisees, I would encourage them to not back down. I would strongly urge them to not stoop to the name-calling tactics of the premier and brand owner—to instead tell the honest story of how this impacts their stores, their families and their communities. I would also suggest that they consider focusing on the profitability of the Tim Hortons brand owner as a lever to get the corporation's attention.
The objective of any media relations activity would be to motivate the premier to acknowledge that franchisees are hard-working, tax-paying contributors to Ontario society and the communities in which they operate—ideally she should apologize for calling franchisees bullies—and to entice RBI to work with franchisees to find some middle ground while subtly reminding the brand owner that the minimum wage will soon rise elsewhere across the country.
This can only be done with a balanced, logical response—not by stooping to the name-calling tactics of the other players in this drama.
Advising the Brand Owner
If I were advising Restaurant Brands International, Inc., I would encourage them to sit at the table and listen—really listen—to what franchisees are saying. There are many hints that franchisees believe the brand owner is not listening— the formation of a franchisee association and an article in The Globe and Mail last September that highlights declining profitability.
As I’ve pointed out to clients for nearly 30 years, the phrase “you’re not listening” is either one or two things, and it’s their choice which. “You’re not listening” is always an early warning sign in issues management. If the warning isn’t heeded, “you’re not listening” can become the kiss of death in a crisis.
How likely is RBI to truly listen? Not likely, I’m afraid. A recent study showed that the very best organizations at listening devote less than one-third of their resources to listening—i.e. they talk twice as much as the listen.
For RBI’s sake, I hope they’re different. Right now, failing to listen may be the biggest threat to the Tim Hortons brand. (And make no mistake, other franchisees are watching.)
Advising the Government
If I were advising Kathleen Wynne, I would first urge her to quit being a bully by calling franchisees bullies. (If you’re interested in more about bullies, look me up on Facebook and read my post there.) And I would point out that she may have missed a glorious opportunity to come out of this smelling like a rose.
A quick search would have revealed that franchisees feel they’re being squeezed. Instead of calling them names to champion the downtrodden, she could have advocated on behalf of franchisees—perhaps not a bad thing to do during an election year.
She could have said that she knows they’re under pressure. But she could also could have used her spotlight to publicly encourage Restaurant Brands International to meet with franchisees and work out a solution beneficial to all. After all, as the company has publicly said: “Owner profitability is the backbone of our system.”
A media-savvy premier would encourage them to put their profits where their policy appears to be.