Tim Hortons brew-haha shows how the fast-food industry doesn’t get PR, Economics 101, or what Canadians think

Posted on January 08, 2018, 12:57 am
10 mins

PHOTOS: Ontario Premier Kathleen Wynne in a very old picture that has the dual advantages of showing her wearing a smile appropriate to the occasion being discussed and of having been taken by your blogger. Below: Canadian Centre for Policy Alternatives analyst Michal Rozworski (Photo: Twitter), the late but actual non-iconic Tim Horton (Photo: Wikipedia), and the faintly creepy looking Bank of Canada building in Ottawa. Does anyone else notice the similarity to the entrance to Scrooge McDuck’s vault?

Having quite possibly won the next Ontario general election for Premier Kathleen Wynne and her admittedly long-in-the-tooth Liberal government, the association of perpetually infuriated rogue Tim Hortons franchisees half-heartedly tried to walk back last week’s plan to beat the crap out of their employees because the government had raised the minimum wage in the province to $14 an hour.

No, no, the Great White North Franchisee Association said Friday in hopes of getting the dust to settle a little, “Tim Hortons team members should never be used to further an agenda or be treated as just an ‘expense.’ This is completely unacceptable.”

Better late than never to come to this realization, I guess. But the whole brew-haha demonstrates how Canada’s fast food industry doesn’t really get it about Public Relations best practices, or for that matter Economics 101 and the mood of Canadians.

The threats and complaints about increases in the minimum wage taking place in many provinces are not just an Ontario phenomenon. I expect soon enough we’ll be seeing some of the same petty bullying that cropped up among members of the franchisees’ group in Ontario – forcing employees to buy their own uniforms, no more paid breaks, and a spiteful end to insignificant perks like a free cup of crappy coffee at the end of a shift – here in Alberta.

Still, the Ontario Hortons franchisees’ foray from retail coffee and donuts into retail politics was so egregiously ham handed, and Premier Wynn’s response to it so defiantly pitch perfect, that the damage they’ve done to whatever objectives they’d hoped to achieve is probably irreparable – which, from the perspective of making Canada a better country for its citizens, is a good thing.

Indeed, it took a swift and harsh disavowal of “the actions of a reckless few” by Restaurant Brands International, the Brazilian-owned corporation that franchises the apostrophe-free Tim Hortons brand, to head off what could have turned into a national boycott of the company’s hitherto iconic coast-to-coast coffee shops.

The brewing trouble first made the news when a franchise in Cobourg, Ont., owned by the daughter of the late Tim Horton himself and the son of the chain’s other founder, sent a letter to its employees telling them they’d be losing paid breaks and other incentives because the government had raised the minimum wage and the corporate head office wouldn’t let them raise prices.

“A 9 hour shift will be paid for 8 hours and 20 minutes,” the employees were churlishly advised in the letter. They were told they’d have to sign a pledge saying they agreed.

This brain-dead rebellion soon spread to other Ontario franchises, whose owners had apparently concluded this would show Premier Wynne and RBI’s head office honchos a thing or two.

Ms. Wynne’s response took it directly back to one of the Coburg owners, Ron Joyce Jr., who, as the premier reminded Ontarians, is “a man whose family founded the Tim Hortons chain, which was sold for billions of dollars.”

“I’ll be blunt. It is the act of a bully. If Mr. Joyce wants to pick a fight, I urge him to pick it with me and not those working the pickup window and service counter of his stores.” Premier Wynne must have been fighting to suppress a smirk when she said that, whether or not she cared that Mr. Joyce didn’t personally pocket the $12.5 billion paid for Hortons by its Brazilian owners in 2014. (Dear Old Dad, Ron Sr., it’s worth noting, is officially a billionaire.)

Ontarians everywhere – and lots of Canadians elsewhere too – muttered, “You go, Premier!”

At this point, I’d bet you the cost an overpriced can of Tim Hortons ground coffee that despite all the grunge thrown at her in the past couple of years, Ms. Wynne can cruise to victory on this performance. Just watch, it won’t be hard for her to tie the bullying opposition to the minimum-wage increase to the would-be bullies of the Conservative Opposition in Queen’s Park.

But if the Ontario Hortons franchisees don’t understand the fundamentals of Public Relations – you know, making it sound as if you’re doing it for the people you’re trying to persuade, not your own sweet selves – Canada’s small but potent network of AstroTurf organizations that lobby tirelessly against improvements in minimum wages certainly does.

So the good news last week for enemies of the widespread move by provinces toward a $15 minimum wage in Canada was that mainstream media took the lobby’s bait on a recent Bank of Canada research note on the impact of higher minimum wages hook, line and sinker.

The actual Bank of Canada note concluded that, for working Canadians, the benefits of increased minimum wages outweigh any depressant effect they might have on job creation. The headlines almost universally concentrated on the depressant effect, and left the impression the note had said a minimum wage increase would cause 60,000 existing jobs to be cut, which it emphatically did not.

“This is not the first time the media have gotten worked up about the wrong numbers,” observed Canadian Centre for Policy Alternatives analyst Michal Rozworski in a thoughtful commentary on how the note was reported and what it actually said. “This is only one example of a recurring pattern of business-friendly bias in the media.”

Here in Alberta, of course, United Conservative Party spinners used their usual pretzel logic to try to twist this technical debate into an attack on unions – since they’ve been criticized for advocating policies that would result in the elimination of thousands of actual, existing jobs held by taxpaying Albertans, some of whom are union members.

But the restaurant lobby, as a number of observers noted, has been strangely quiet lately hereabouts.

The explanation for that is probably simple: Canada’s professional anti-union, pro-temporary-foreign-worker, anti-minimum-wage lobby – despite its powerful voice, amplified many times by the friendly media echo chamber noted by Mr. Rozworski – is actually made up of a very small group of people.

This web of anti-union advocacy groups includes the Canadian Taxpayers Federation, the Canadian Federation of Independent Business, Restaurants Canada, the Workplace Democracy Institute of Canada, the Merit Contractors Association, “Working Canadians,” and the Canadian Labour Watch Association – often led by the same people in multiple board and executive roles.

With limited human resources, they have to concentrate their fire where the fight is most intense. And with several provinces moving toward a $15 minimum wage at once, that means they are likely experiencing a shortage of qualified and ideologically certified propagandists to carry on the battle.

Right now that’s in Ontario. It’ll be back to Alberta next fall when the minimum wage here is scheduled by our NDP Government to reach $15 and an election will be that much closer. Next, presumably, the campaign will move to provinces like B.C., which have scheduled that benchmark to be reached down the line.

The economics won’t change. A $15 minimum wage, especially if it is tied to a cost-of-living index, will benefit working people and society in general in every province.

And the threats, misleading claims and whining – especially by the fast-food industry – will never abate, no matter how many times their dire predictions don’t come true.

23 Comments to: Tim Hortons brew-haha shows how the fast-food industry doesn’t get PR, Economics 101, or what Canadians think

  1. J.E. Molnar

    January 8th, 2018

    A meta-study of 64 minimum wage studies published between 1972 and 2007 point towards no or near-zero effect on employment numbers.

    C.D. Howe, TD Bank, the Bank of Canada and right-wing think tanks like the Fraser Institute and the Heritage Foundation in the US have offered flawed studies that do not adjust for inflation, for economic growth, population and aggregate demand in their analysis. They cherry-pick their facts and do not predict absolutely an employment decline. Coulda, shoulda, woulda is not empirical evidence — and, very seldom do they do any follow up to verify their previous draconian predictions, once the wage hikes are fully implemented. Yet this debate rages every time a political jurisdiction raises the minimum wage. And the media scribes who write about minimum wage hikes are more than likely to distort and misinform when they fail to reveal and take into consideration the full basket of economic indicators that impact minimum wage hikes in their province or state. My advice: Readers beware!

    Reply
  2. Simon Renouf

    January 8th, 2018

    The minimum wage is also being used to cover for additional price increases. There’s a letter to the editor in Monday’s Glove complaining that the cost of a breakfast special at the writer’s local cafe had gone up by $1.04 due to the rise in the minimum wage. Really? Ontario’s minimum wage went up by $2.40 per hour. Does that mean it takes 26 minutes to rustle up one breakfast special?

    Reply
    • David Climenhaga

      January 8th, 2018

      Simon: Surely no Globe and Mail writer would patronize a place that took less than 26 minutes to rustle up the breakfast special! As long as they bring the champers-and-orange to the table right away, it’s all good. I speak from experience. DJC

      Reply
  3. January 8th, 2018

    Some small businesses are, no doubt, hurting, and a minimum wage increase will hurt them further. Sadly, however, too many other small businesses are using the minimum wage publicity, and the public’s gullibility, to increase their prices unreasonably. In this CBC article (http://www.cbc.ca/news/canada/toronto/small-businesses-support-minimum-wage-hikes-through-price-increases-1.4476108) a coffee shop uses the minimum wage increase of 22% to justify an across the board price increase of 22%. Just like Chicken Little, however, events like this really weaken the ‘small businesses are hurting’ message.

    It reminds me of the same kind of sky is falling stories we heard before the carbon tax was implemented here. Farmer B even reported how a back hoe operator told him that he was going to increase his prices by 10% to cover the carbon tax.

    Reply
  4. tom in ontario

    January 8th, 2018

    In Ontario PC leaders seem to have trouble staying on the popular side of important issues. The present leader, Patrick Brown thinks raising the minimum wage should be implemented sometime, down the road, how far he hasn’t said. Maybe he’ll help Kathleen Wynne and the Liberals form a fourth majority government in 2018.

    Two elections ago, the polls said Tory leader John Tory, now Toronto mayor was ready to govern. In the middle of the campaign he announced a PC government would fund private religious schools. Whoops, major gaffe. Dalton McGuinty and the Liberals won again. In 2014, ahead in the polls, Tea Party Tim Hudak announced his PC government would turn Ontario into a “right to work” province and get rid of 100,000 civil servants. Union members and civil servants at all levels made sure he didn’t. Timmy scurried back to Welland. For all we know, he could be working at Tim’s.

    Reply
    • Farmer Dave

      January 8th, 2018

      I’m surprised that in Alberta Jason Kenny and his side kick Fildepockets have not commented on the minimum wage. Maybe they are applying for good paying minimum wage jobs at these places.

      Reply
  5. Albertan

    January 8th, 2018

    Main stream media and the political parties who support a $15 minimum wage, could also be reporting, and featuring, businesses and employers who are already paying, more, than minimum wage, and featuring the reasons why, i.e.to retain good, experienced staff, for example.
    And could one hope that those, hopefully, voters who are receiving the benefit of a more ‘living wage’ will actually get out and vote for the politics that is promoting a ‘living wage?’
    Also, here is an apt Bible verse for the situation where political actions are supposedly kept separate from so-called ?christian, personal beliefs:
    “Don’t take advantage of the poor just because you can; don’t take advantage of those who stand helpless in court. The Lord will argue their case for them and threaten the life of anyone who threatens theirs. Proverbs 22:23-23”
    http://www.unitedbiblesocieties.org/10-bible-verses-about-poverty-and-justice/

    Reply
  6. Farmer Brian

    January 8th, 2018

    As far as a Tim Horton’s franchise goes, if you have 30 employees and I admit this is a guess. I did read an article about one with 35. If you assume 172 hours a month for a full time employee, the $2.40 per hour increase amounts to $412.8 per month or $4953.60 per year. With 30 employees this amounts to an extra expense of $148608 per year. This does not include additional payroll taxes and holiday pay. Now I don’t know how much profit a individual franchise outlet makes per year but I assume this would affect the bottom line, especially when you have no control over what you sell your product at. So while those on the left run down franchise owners for being cruel I can certainly understand them attempting to control their costs going forward.

    Reply
    • January 9th, 2018

      Yeah, it does seem pretty gutless for corporate Tim Hortons to criticize their franchisees, yet not allow them to raise prices.

      Reply
    • Julian

      January 9th, 2018

      The reality is that since the heady boom days of Tim Horton’s and other franchised fast food operators clamouring for TFWs to ostensibly allow them to stay open, the wages in the big chains have consistently been over minimum wage. In the case of the most recent minimum wage increase here in AB (each employer in resto/fast food/coffee is different but..) I would guess that at most what an operator would face might be some wage pressure from employees that are over the minimum already, along with some mandated increases for new-hire or part timers who have had the new minimum surpass their rate by some amount. Certainly significantly less labour cost increase than your rather simplistic arithmetic implies. You can look up the Tim’s details yourself but here is what the Canadian Tim’s franchisor association says: “food, paper and labor costs have to be at 58 percent. “That’s the optimal number. Otherwise it’s very hard to cash flow the business, right now it’s anywhere between 60 and 67 percent.” Think about that 58% number. What portion is labour, after deducting the profit inflated consumables that the franchisees have complained about ever since 3G capital took over Restaurant Brands? What portion of Tim’s brand loyalty depends on frontline staff? Pretty efficient effective labour eh?
      Minimum wages shouldn’t much matter to the owners though because it’s a level playing field so one might conclude as the franchisees have, that if Tim’s corporate masters allow them to increase prices their problem with cost is solved. 3G/Restaurant Brands is concerned though because what if a price increase makes them uncompetitive and the business loses market share? The franchisees have come back with; well the franchisor could take a cut in their onerous margins on consumable supplies or I guess even the franchise fee to which 3G retorts; the share-holders would howl! Oh it’s so complicated! My lord why won’t the socialists just let these poor billionaires and millionaires continue the way it is? Do they hate them for their freedoms? Think of the unborn!
      Funny they have the chutzpah to ask that, given that the average Tim’s franchise generates millions in revenue, with profit before tax to the franchisee in the $400 thousand dollar range, and there are many multi-location franchisees that have produced multi-millionaires. 3G Capital/Restaurant Brands, has driven gross margin expansion from 19% to 33% on an asset valued in the billions, I’d say that the beneficiaries of all that labour efficiency are sufficiently motivated to figure out how to compete with every other mom and pop coffee shop that faces the same cost increase, not to mention Starbucks which hasn’t thought about minimum wage or competing on price, ever.
      Tim’s was a leader in the fast food coffee space before 3G with progressive wages, benefits and employee retention perks. However, as so often happens with the genius’s who captain the good ship “job creator” they’ve really made themselves look a bit foolish by thinking their customers are dumb enough to believe some simpleton libertarian’s, astroturf parroted, alternative fact style, financial justification for bad behavior when in reality 3G and the franchisees have profited handsomely and should/could have solved this by reducing corporate profit or allowing reality based cost increases to determine how much prices needed to escalate.
      Double trouble when you disgrace yourself dealing with the same problem all your peers have, I’d say.

      Reply
      • Farmer Brian

        January 9th, 2018

        Julian, the basic concept of the tax on C02 is that by making business inputs that create this gas more expensive a business will retool to become more efficient and use less inputs that give off C02, in short increase the cost of something that government wants you to use less of. So isn’t it counterintuitive to profess that by making the cost of labor higher that businesses will create more jobs? As you detailed above the cost of food, labor and paper need to fall in a certain range for the business to cash flow! And notice I responded without insulting your intelligence, imagine that

        Reply
        • Julian

          January 10th, 2018

          Your point regarding carbon while partly true, doesn’t consider that there are alternatives to carbon. Following your logic leads me to point out that where Canadian workers are concerned, Jason Kenney offered the alternative of bringing cheap offshore labour here so you wouldn’t have to re-tool for a daily drive to Manila to get your double double. His idea was kind of the dystopian wind power of the libertarian market ship at full sail if you will.
          Seriously though; the fact that using less carbon has the added benefit of helping to avoid extinction and that the reality that exploiting foreign workers at the expense of Canadian labour in labour favourable market conditions has no ethical or socially redeeming qualities, seems to have escaped your incisive wit. Were you feeling smug? I know your comment made me feel a little icky.
          Just saying.

          Reply
        • Julian

          January 10th, 2018

          PS Farmer Brian; I realize that you want us to believe that your grass roots grow hundreds of miles from a Tim Hortons, when it suits you. xxxxoooxxxooxxo.. Mmmm. You’re it, big fellah!

          Reply
        • zalm

          January 12th, 2018

          With respect, business doesn’t create jobs. Demand creates jobs. Business is simply one way of fulfilling demand, and a very effective one too. Please don’t put the cart before the horse. The increased minimum wage raises demand solely at the expense of the business, which should be free to seek recompense from customers. I have little respect for RBI in controlling the business inputs to the franchisees in the way that they do that totally disregards sound business fundamentals to the benefit of shareholders that don’t even reside in the country.

          Reply
    • Kang the barbarian

      January 9th, 2018

      Farmer B has put his finger on a basic problem. The structure of most franchises is from medieval times. You have a Lord who owns the franchise. In return for tribute he gives his vassals (the individual store owners) the right to exploit a territory with some peasants to do the work. The NDP and others have told the vassals to raise the wages of the peasants and of course the big Lord continues to take his full tribute, leaving it to his vassals and peasants to fight it out.

      When Jimmy Carter was the President, he created an “Institute for Local Self-Reliance.” One of its studies indicated that franchise operations removed much more money from a local economy than they contributed. Would cancelling the business licence of the franchise to operate in Canada free up the store owners and their staff to divide up a much larger pie?

      Reply
    • Farmer Dave

      January 9th, 2018

      Tim Horton’s supported a large festival many of us were involved with for several years and the festival continues to grow. Since they sold their company Tim Horton’s cancelled that sponsorship. Their competitors continue to support this great festival. Is Tim Horton’s a company you want to support when our festival attendee’s and our volunteers supported Tim Horton’s for so many years buying coffee and other food products from them?

      Reply
  7. David

    January 8th, 2018

    The corporate Tim Hortons has for the last year or so been trying to squeeze its franchisors, who now in turn are trying squeeze their employees. The corporate ownership is about as Canadian as McDonalds or WalMart. Although the image still lingers of a Canadian company, it has actually been a number of years since Mr. Horton’s family sold off their shares. With their billions from that, the Ontario minimum wage increase will not cause them any real hardship, so their response to it is indeed a giant PR failure The biggest winner of this brouhaha so fair is Ms. Wynne, who needs a new unpopular political opponent. Unfortunately, for her Mr. Harper was no longer available or willing for that role after late 2015. Normally Canadian politicians flock to Tim Hortons to have their pictures taken talking to regular Canadians especially during campaigns. Ms. Wynne might be the first to try run against Tim Hortons, perhaps successfully.

    Ontario is probably about as tired of its government as Alberta was in 2012, but even in the depths of unpopularity Ms. Wynne has been doggedly putting all the various pieces together to come back from behind in her 2018 election. She has already dealt with high electricity prices, getting rid of the deficit, pharma-care for students, housing costs (through the foreign buyers tax) and now is bringing in a big increase in the minimum wage. She might not be popular, but her policies might be.

    Those right wing organizations fighting against minimum wage increases are going to have a tough time. They have been suspiciously quiet lately, perhaps they had an inkling that this was not the right moment for their job killing argument that they had used before so often in Alberta, particularly just when record job growth here had just been announced (yes, just months after the minimum wage increased). The high cost of housing and high rent in places like Toronto and Vancouver also makes it difficult to argue against an increase in the minimum wage there. The middle class is acutely aware of these affordability challenges, so there is currently a lot of sympathy in Canada for those making less and struggling.

    Yes, increasing the minimum wage does create difficulties for some small businesses until they can figure out how to adjust things, but its not like Tim Hortons customers will go to India or China to get their morning coffee instead. It is a level playing field, as it is a cost that all businesses in the province face. It just happens to be more of a problem for particular companies, like Tim Hortons that rely more on a low wage model than some other coffee chains.

    The Ontario Liberals did not stay in power for so long without having some good political sense (especially close to elections) and even though Premier Wynne is not well liked, she seems to have a clear agenda now that seems like it will resonate with Ontario voters.

    Reply
  8. Mary Patricia Paulin

    January 9th, 2018

    Cobourg, Ont.—Coburg, Bavaria

    Canadian Centre for Policy ALTERNATIVES

    Reply
    • David Climenhaga

      January 9th, 2018

      Thanks as always to my readers for editing my copy for me! They’ve been fixed. DJC

      Reply
  9. Bill Malcolm

    January 9th, 2018

    This is a rather brilliantly written article. Best of the bloggers again.

    My reservation concerns Jorge Lemann (head of 3G Capital, owners of Inbev and RBI plus half of Kraft-Heinz along with old Warren Buffett), the Brazilian connection. He is well-known for knowing the price of a paper clip down to the thousandth of a cent, and decimated Tims head office upon takeover, as well as killing the Leamington ON tomato ketchup industry.

    The 500 Tims Great Whites franchisees have accused RBI of “illegally” using the fees each franchisee pays toward corporate advertising, and other skullduggery. When Joyce stood up on his hind legs and started yapping about the Ontario $14 minimum wage, announced the mean actions taken against employees and complained that RBI wouldn’t allow posted price increases or give franchisees a break on coffee prices to “help” out, it was a golden opportunity for Lemann. For once appearing to take the high road, he could stick it to those pesky Great White franchisee group who are threatening to sue RBI, and appear like a Saint. In fact he is exactly the opposite, based on how Budweiser and his other companies holding 50% of the global beer market have reduced quality and squeezed every barleycorn for a millionth of a penny. It just suited his plan to beat down rebellious franchisees, in my opinion. A golden opportunity to beat back what to him is the lower orders – the king versus the landed gentry. Of course RBI condemned the nasty mean franchisees – it costs him/them nothing, and puts the opposition on their back foot looking stupid.

    Such is life. The big predator usually wins …

    Reply
    • zalm

      January 12th, 2018

      Hear,hear. This is where the problem lies. The franchisees can mostly be faulted for their tin ears, and given the pressure they’ve been under from head office, it’s not surprising they’re making some bad decisions about how to react to their circumstances.

      Reply
  10. brett

    January 10th, 2018

    Those Tim Horton franchisees appear to be doing everything necessary to set the stage for a successful union drive across all Tim Horton’s franchises.

    They have detracted from the brand. There is a dollar value attached to this depreciation.

    It is difficult for me to understand how a clear thinking employer/business person could do this. Not only to his or her employees, but actively shooting themselves, the other franchisees, and the brand in the foot as it were.

    Reply

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