Saturday, January 6, 2018

Tim Horton's Controversy in Ontario

     The cost of living keeps going up.  We are faced with increase prices on everything from access to the internet, groceries, restaurants, electricity and our phones.  Some Canadians living in certain provinces have a carbon tax that is either new or has been increase.  In Alberta they initiated a carbon tax on January 1 2017 at $20 per tonne.  On January 1 2018 is was raised to $30 a tonne.  This represents a 50% income in the carbon tax and people have to pay GST on their purchases which include the GST on the final price of the product or service plus the carbon tax.  That's right! Paying tax on tax.
      The other major increase in the cost of living is raising the minimum wage. The NDP government of Alberta said they will raise the minimum wage in Alberta to $15.  They won the last election so they implanted this promise.  On October 1 2017, the minimum wage in Alberta was increase from $12.20 to $13.60. What happens when the minimum wage is increased?  The price of almost everything has increased.  Alberta is set to raise their minimum wage to $15.00 on October 1 2017.  Any workers that were getting paid close to the new minimum wage, want an increase to the hourly rate.
      People thought Alberta raising the minimum wage by that amount was bad. People complained that businesses had to reduce hours and staff.

   What happened on January 1 2018?

     Businesses knew in Ontario changes were coming on January 1 2018.  The Ontario government raised the minimum wage in Ontario from $11.60 to $14.00 on January 1 2018. That represents an increase of 20.7%.  Have you ever heard of someone getting a 20.7% increase in their pay in on setting?
      People who work at Tim Horton's often start off working at minimum wage. In my hometown, a former supervisor at Tim Horton's told me she made $0.50 more an hour then the regular workers.  
      Tim Horton's is a chain of fast food restaurants that started off with one coffee and donut shop in 1964. Tim Horton's is named after it's founder Tim Horton, who was a player for the NHL team Toronto Maple Leafs.  Although the company started just as a coffee and donut restaurant, the business model changed over the years to include things such as breakfast sandwiches, muffins, sandwiches etc. Tim Horton took on investor / partner in the first year who was Ron Joyce. Ron Joyce was a policeman in Hamilton at that time.  A few years later, Tim Horton was killed in a car crash.  Tim Hortons continued to expand the number of restaurants by franchising.
         Tim Hortons was sold to Wendy's Restaurants in 1995 with Ron Joyce becoming the largest shareholder of Wendy's.  If you live in Canada, you have likely seen Tim Horton's and Wendy's operating independently under the same roof.  Around 2005-2006 , Tim Horton's once again became a stand alone company. In Dec 2014, Tim Hortons became part of the new formed company called Restaurant Brands International. At that time, The 2 companies that were part of this new formed company was Tim Horton's and Burger King.
       Do people who work at Tim Horton's actually work for Tim Horton's?  If a person works at a franchise restaurant, they work for the franchisee under a company that could be called something such as "ABC Investments ".  

        Why is Tim Horton's in the news recently.  On January 1, the province of Ontario raised the minimum wage from $11.60 to $14.00.  Two franchisees that own 2 stores together in Coburg, Ontario have been rumored to sent a notice to the employees of their 2 restaurants that their breaks will no longer be paid and that they will have to pay more for their benefits.  People who have worked for 6 months to 5 years will have to pay 75% of their costs of benefits.  People who have 5 years or more will have to pay 50% of their costs of benefits.  The workers are suppose to sign this letter to acknowledge that were informed of these changes.   It has since been verified that this letter of notice is true. 
           The misconception people have is that when a company pays say $10 per hour, that it costs the company $10 per hour.  This is not the case.  Employers have to pay taxes and Worker's compensation fees on top of that.  Therefore, roughly is would cost the employer more like $13.50 per hour.
            The reason that is such big news is that the 2 franchisees are Ron Joyce Jr and Jeri-Lyn Horton-Joyce.  Ron Joyce is known to be a cofounder of Tim Horton's over the many years.  Ron Joyce Jr and Jeri-Lyn Horton-Joyce are the son of Ron Joyce and daughter of Tim Horton. These 2 people are believed to be married to each other.
             People seem to be placing the blame on Tim Hortons and saying they will boycott them.  The parent company said they do not get involved in the employment matters and that is the responsibility of the franchisee.  These 2 franchisees stated in their letters to the employees that their actions is due to the large wage increase and receiving no help from the Ontario government or Tim Horton's.  Tim Horton's do not want to raise their prices to help with this.
              These franchisees and other franchisees have complained to their franchisor that they are being squeezed.  With these 2 franchisees being the son and daughter of the Ron Joyce and Tim Horton, some people believe they are using this has a way to send a message to the Ontario government and Tim Horton's.

           Why Are They Getting Squeezed?

      The franchisees must by a lot of their products from Tim Horton's directly which is apart of their agreement.  This cost along with the cost of getting the product to their restaurants seems to be increasing.
       Personally, I believe the service is the major issue.  Over the past several years, I have noticed the service has gone down.  An example is the lineups not moving fast enough and orders getting mixed up. This did not happen years ago. 
      Could it be the workers get mixed up as the restaurants keep increasing their product offerings. So, if the restaurants operate better people will be more apt to eat there more. 

 Do you agree what the actions of the 2 franchisees?

Disclosure: Currently a shareholder of Restaurant Brands International and held shares of Tim Horton's when it was a stand alone public company. 

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

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