A fight between Tim Hortons and its franchisees intensified this week after the Canadian coffee chain took over four locations in Canada owned by one of the franchisor’s most prominent critics.
The brand, owned by Oakville, Ontario-based Restaurant Brands International (RBI), took control of the four locations owned by David Hughes, president of the Great White North Franchisee Association (GWNFA).
The locations are being run as company stores until a new franchisee can be brought in, Tim Hortons said.
In a statement emailed to the media Tuesday, Hughes was clear why he thought his restaurants were seized.
“I believed RBI has specifically targeted me in order to hurt the Great White North Franchisee Association,” Hughes said. “Since our inception, the association has shone a light on many practices and policies that are detrimental to the individual franchisees and the chain as a whole. In relieving me of my stores, RBI believes they will put an end to the association, but it will continue to be the conscience of the corporation and the brand.”
In a statement, Tim Hortons said that the action is related to violations of the franchise agreement and not anything to do with Hughes’ position with the GWNFA.
“The Tim Hortons franchisee agreement clearly states it is not allowable for any restaurant owner to share confidential company information with the media; disparage the company or the Tim Hortons brand in the media or with community partners and vendors; or ultimately harm the Tim Hortons brand in any way,” the statement said.
“Our action has nothing to do with his position with the association. This is entirely about his conduct relative to his franchisee agreement with the company.”
The company said that its franchisee advisory board is supportive of the action.
“There are lots of avenues to raise issues with management, and the management team under Tim Hortons Brand President Alex Macedo has proven to be open, accessible and willing to address all issues brought forward by franchisees,” the company said. “Sometimes we agree and sometimes we don’t. But we have no tolerance for any owner that knowingly damages our brand.”
The incident nevertheless deepened an ongoing battle between the association and the brand while threatening to preoccupy parent company RBI as it works to integrate Popeyes Louisiana Kitchen and grow Tims in the U.S. and overseas.
The association, which RBI has deemed “dissident franchisees,” says that it accounts for more than half of the Canadian system. It emerged last year amid concerns about some of the cost-cutting measures that RBI was instituting at Tim Hortons, as well as the use of advertising funds and harsher standards for franchisees, among other things.
The association formed as relations with some of the company’s franchisees worsened. The association has claimed that Tim Hortons was trying to intimidate its operators by denying a license for one of its leaders.
The franchisor, meanwhile, has sued some of its U.S. franchisees.
Amid this, Tim Hortons’ same-store sales have lagged. Total same-store sales were flat in the quarter ended June 30 following a 0.2% increase in the first quarter.
While the chain has struggled in the U.S., it’s in Canada where the brand’s challenges matter most. Most of the brand’s 4,800 locations are north of the border. RBI as a company gets most of its revenue from Tim Hortons.
Tims has been working to improve its image in its home market. Macedo has done media interviews, visited restaurants and held regular phone calls with operators. The company is planning a redesign of its franchised locations, with plans to get most of the system remodeled by 2021.
RBI has also hired Duncan Fulton to be its chief corporate officer. He will oversee communications and franchisee relations, among other things.