Tom Hortons Restaurants- it doesnt get more Canadian than that, although Tim Hortons is
now also available in the USA.
If a Canadian client calls us - Tim Hortons is usually the franchise they think they want
to buy.
When I ask people why Tim Hortons, I have yet to hear a good reason other than "Theres
always a line up" Well guess what , you don't get paid for line ups.
Today why Tim Hortons may not be as great of a franchise as many people think.
A wise man once said you can't step in the same
river twice.
And the river that Tim Horton's franchise owners stepped in 10 and 20 years ago is a
radically different river than today.
And what people fail to realize is that just because someone purchased a Timmy's franchise
25 years ago and has a great location and makes a lot of money does not mean you will.
A little known fact that most people dont know is that all new proposed Tim Hortons
locations are first offered to existing franchisees, so how good of a location do you think you
will get with only the leftovers?
Taken from the Tim Hortons 2017 US FDD it will cost you $680,900 to $1,822,400 for a
Standard Shop.
Most shops cost around 1 million.
Royalty 4.5% if you lease the building from Tim Hortons and 6% if not.
Advertising fee will be 4%.
Taken from their website you will need a minimum 1 million dollars net worth and $300,000 cash
to be considered by the group.
We get a lot of investor groups and business people who have several other businesses calling
and asking about Tim Hortons.
The first thing I ask is do you intend on working your other businesses full time?
If yes, you can't buy a Tom Hortons because they will only accept owners who who are willing
to commit to them full time.
They also look for prior management experience, solid business acumen and you will need a
partner.
I was once told a joke that is because Tim Hortons will run a single human being into
the ground.
Tom Hortons was founded in 1964 by Canadian hockey player Tim Horton and partner and for
many years Tim Hortons expanded to become one of the most Iconic Canadian brands.
But as we always try and illustrate to people, every brand has a lifecycle, and unfortunately
by the time these brands expand so big everyone wants one, the party is generally over.
Bet you didnt know that Burger King purchased Tim Hortons for $11.4 billion dollars in 2014
and they became a subsiduary of the Oakville based Restaurant Brands International.
RBI is majority owned by a company from Brazil called 3G capital.
Now right when RBI took over many analysts, including us, knew this would not be pretty.
Soon thereafter there was a Canadian Policy Alternatives study that suggested this company
takeover is "likely to have overwhelmingly negative consequences for Canadians."
The study analyzed 3G Capital's past history of takeovers of Burger King, Heinz, and Anheuser-Busch
and stated "it has a 30-year history of aggressive cost cutting, which could hurt Tim Hortons
employees, small-businesspeople, Canadian taxpayers, and consumers.
And we'll cover that in a minute but before we do let's back up a little.
Back about 10-15 years ago Tim Hortons switched from baking fresh in store, to having their
goods parbaked, which is partly cooked, frozen then delivered.
But Tim Hortons very slogan was "always fresh" and this is where many Die hards thought Timmies
had turned to the dark side.
IN 2008 there was a class action lawsuit over this switch to parbaking for "breach of contract,
breach of duty of fair dealing, negligent misrepresentation, and unjust enrichment"
and the lawsuit cited that franchisee's costs to produce a doughnut literally tripled from
6 cents to 18 cents per donut, required new equipment and other expensive investments.
That case was eventually dismissed however needless to say franchisees were not happy
now making 3 times less on donuts than they had prior to parbaking and having to buy the
goods from corporate.
Remember you can't step in the same river twice?
That river of three times profit passed over a decade ago.
Since that time Tim Hortons and their franchisees have had a turbulent relationship.
There is the 850 million dollar class action lawsuit where franchisees sued Tim Hortons
for bullying and intimidation.
The statement of claim read �Since the time of the corporate takeover of Tim Hortons,
the relationship between Tim Hortons and its franchisees has become more adversarial than
amicable,� on behalf of a franchisee group called the Great White North Franchisee association.
Tim Hortons claims this organization is only a few negative owners, and has warned franchisees
about spreading "misinformation" to analysts.
The president of the GWNFA however suggests that over half of all Tim Hortons franchisees
have joined the battle against corporate.
It's no secret that many franchisees allege the company culture is under attack, .their
cost cutting is in the wrong places, Here is another 500 million dollar class action
suggesting the company is gouging them and are in general taking advantage of franchisees.
Now beyond franchisee dissatisfaction, public sentiment towards Tim Hortons has also dropped
a massive 25 points and more than 40 spots in a recent corporate reputation study of
which corporations Canadians admire the most.
Tim Hortons had always been a top 5 but this year dropped to #50.
Now just a few months ago there was another uproar, protests and calls for boycotts in
Ontario when Tim Hortons franchisees clawed back workers benefits, tips and other entitlements
including free coffee!
The "No Timmys Tuesday" boycott encourages people to go to an independednt donut shop
or make your own on Tuesdays.
This was brought about by an increase in minimum wage from $11.60 to $14.
This prompted franchisees to try and offset these labour costs by eliminating paid breaks
and increasing the employees contributions for benefits.
This is a tough spot because from one side if you have ever seen a Tim Hortons employee
at a busy drive through they should be paid $100 hr, that is a tough grind and I respect
the heck out of people working hard to put food on the table for their families.
The other side is franchise owners will now lose an average of $243,000 per location because
of this wage increase.
Making a quarter million dollars a year less hurts especially stores that aren't enormously
profitable.
Franchisees have asked corporate to raise prices to help them out, you can guess how
that has gone.
So is a Tim Hortons franchise a good investment?
Ongoing legal battles with corporate, public sentiment dropping, increased costs, lower
revenues, premium locations are unlikely and corporate ownership with a history of being
difficult.
We don't make the decision, we just bring you the facts.
Some savvy investors are looking ahead for the franchise that will be the next Tim Hortons
in 10-15 years.
What 95% of the people do of course is flock to what everyone else is running to, same
in stock, same in real estate bubbles, and you have most people rush in just before the
decline.
The small emerging brands today are the ones that are most likely to make the millionaires
who purchase master franchises and area developer arrangements.
Can Tim Hortons turn the ship around?
Will franchisees ever be as profitable as in the peak?
Only time will tell.
If you need help finding or researching the best franchise give the experts a call at
Franchise City.