Tim Hortons’ franchisees fancied themselves above all other franchise systems renters.

Even McDonald’s.

Maybe they never met Ray? Or his loyal Canadian subordinate, George?

 

Boom, Like That

I’m going to San Bernardino ring-a-ding-ding

Milkshake mixers that’s my thing now

These guys bought a heap of my stuff

And I gotta see a good thing sure enough now

 

Oh my name is not Crock, that’s Kroc with a K

Like crocodile but not spelled that way now

It’s dog eat dog, rat eat rat

Kroc-style… Boom! like that

 

Folks line up all down the street

Now I am seeing this girl devour her meat now

And then I get it Wham! as clear as day

My pulse begins to hammer then I hear a voice say:

 

These boys have got this down ought to be one of these in every town

These boys have got the touch It’s clean as a whistle and it don’t cost much

Wham! Bam! You don’t wait long, shake, fries, patty you’re gone

How about that friendly name, heck, every little thing ought to stay the same

 

Or my name is not Crock, that’s Kroc with a K

Like crocodile but not spelled that way now

It’s dog eat dog, rat eat rat

Dog eat dog, rat eat rat now

Oh it’s dog eat dog, rat eat rat

Kroc-style… Boom! like that

 

You gentlemen ought to expand

You’re gonna need a helping hand now

So gentlemen well what about me?

We’ll make a little business history now

 

Oh my name’s not Crock, you can call me Ray

Like crocodile but not spelled that way now

It’s dog eat dog, rat eat rat

Kroc-style… Boom! like that

 

Well we’ll build it up and I buy ’em out

But man they made me grind it out now

They open up a new place flippin’ meat

So I do too, right across the street

 

I got the name but I need the town, sell em’ in the end and it all shuts down

Sometimes you gotta be an S.O.B. you wanna make a dream reality

Competition sent em south, if they’re gonna drown put a hose in their mouth

Do not pass “Go”, go straight to hell

I smell that meat hook smell

 

Oh my name is not Crock, that’s Kroc with a K

Like crocodile but not spelled that way now

Ohh it’s dog eat dog, rat eat rat

It’s dog eat dog, rat eat rat

Ohh it’s dog eat dog, rat eat rat

Kroc-style… Boom! like that

I smell that meat hook smell

 

 

Should the 1,100 Canadian Tim Hortons’ franchisees unionize themselves?

Considering the Ontario Labour Relations Board’s ruling (The Ontario Labour Relations Board Opens The Door To Franchisee Unionization In The Canada Bread Certification Case), you’d think it’s worth looking at.

Do you think the Tim Hortons franchisees have understood that they’ll likely be paying 3G Capital for the privilege of exiting their stores?

• ie. that the franchisor, currently, can unilaterally drive a franchisee’s equity into the negative and hide the fact from the market and other with confidentiality agreements.

Do you think the franchisees perceive themselves to be at war?

There would be no charge for me to create a WordPress weblog for the Tim Hortons franchisees.

Who dislikes my involvement more: the franchisor, franchisee leadership or the franchisee lawyers?

The Canada Bread class action was valued at $350-million.

Gag orders create filthy “settlements”.

Tim Hortons franchisor slammed with 2nd class action: now $500+$850-million for intimidation.

As I mentioned before, Right to Associate is the “game changer” for intelligent groups of Canadian  franchisees.

TORONTO, ONTARIO: MAY 17, 2017–TIM’S–Tim’s Horton’s location on Wyecroft Road in Oakville, Ontario, Wednesday May 17, 2017. [Photo Peter J. Thompson] [For Financial Post story by Hollie Shaw/Financial Post] //NATIONAL POST STAFF PHOTO

A good article by Hollie Shaw Tim Hortons franchisees sue corporate parent for $850M, alleging bullying, and

TORONTO — Tim Hortons franchisees who created an association to address their grievances with parent company Restaurant Brands International Inc. have filed an $850 million class action lawsuit against the company, the fast food operator is trying to intimidate its restaurant owners and force the franchisees who formed the group out of their restaurants.

And:

Les Stewart, an Ontario-based franchisee consultant, said the issuance of default notices to franchisees is highly unusual.

“This shows a predatory franchisor at its worst and it suggests (RBI) is taking a juvenile approach towards Canadian law,” he said. “It seems that they don’t understand the difference between a franchisee and an employee.”

It is not an easy legal road for master franchisors to take back healthy franchises, Stewart added.

“The Superior Courts understand how franchising works.”

I was pleasantly surprised to find out how discerning Superior Court Justices are about the David and Goliath, predatory  nature of franchising.

Which shareholder enables the franchisee class-action game?

The informal franchisee leaders. The organizers. The “white knights”.

When the class-action fraud sausage explodes, You can’t really blame the lawyers for pandering to your lack of wholeness, wisdom, and confidence.

Can you?

Who profits when a $500-million Canadian class-action franchise lawsuit happens?

The least likely are individual franchisees.

That may or may not happen especially when 98% of all lawsuits never make it to trial and withstand an appeal.

The negotiations are held between the 2 lawyers. Franchisees are decision takers.

Parties:

• Franchisor (defendent) – the only payer, repeat player, credence good monopolists, (happier to pay 2 law firms a lot rather than a little to hundreds of franchisees)
• Franchisor’s Specialized Law firm – only one in Canada, repeat player, expert credence good provider, member of franchisor association
• Franchisees (plaintiff) – one time player, only non-credence good player, unskilled but unaware
• Franchisee’s Specialized Law firm – only one in Canada, repeat player, expert credence good provider, member of franchisor association

Both CDN law firms (one for the franchisor, one for the franchisee) at this level are businesspeople, first and foremost.

The two law firms act as rent seeking coercive monopolists.

Tim Hortons operators might listen to Bob Purvin’s sage advice about franchisee associations

Legal advice is necessary but it should not lead ANY franchisee group. Do not allow any lawyer to capture control.

AAFD chairman and founder Bob Purvin

In a conversation with BlueMauMau.org, AAFD Chairman Purvin: Power of Franchisees in Bargaining and Cooperatives in Reducing Costs:

SNIEGOWSKI: Some franchisee associations, frankly, seem banded together merely as an excuse for a class-action lawsuit against the franchisor to resolve a grievance, or at least the threat to the franchisor of one.

PURVIN: Sadly, that is too often the case.

If a lawsuit is the only reason for a franchisee association to exist, it will disappear five years after its startup or until the next round of franchise contract negotiations. The successful associations do more.

The Griswold Healthcare Franchise Association [GHFA] is an example. Franchisees created a fabulous task force on best practices that worked with the company to put on seminars each month. They have great turnouts for their seminars, which are done by webinar. They are now getting involved in lobbying, especially around the issue of caregiver wages. Their legal fund is dedicated to working with various state and local agencies over the rights of caregiver business owners.

Griswold created a products committee, where the franchisee association is now getting involved in the supplier side in a collaborative way. It is not just the franchisor that is cutting a deal with this supplier [getting kickbacks] and mandating that franchisees use that product to enrich the franchisor.

Associations can be more about the supply side than about renegotiating the franchise agreement.

Let me repeat: Associations can be more about the supply side than about renegotiating the franchise agreement.

American Association of Franchisees and Dealers

Rule of Thumb: add together what you’re paying for royalties and ad fund (ie. 4 and 3 = 7%). As a franchisee that does not have a franchisee-led and -owned buying co-operative, you’re putting an additional 7 per cent of hidden cash into your franchisor’s pocket via product and equipment costs.

Who is best to consult to a few Tim Hortons franchisees in their relationship with 3G Capital?

I did the franchising industry forensic accounting (diminishing gross margins) for the National Bread Network.

A membership program was developed and executed. The initial ROI leverage was impressive to 100% of the Canada Bread franchisees. See one of three direct mail pieces.

In the end, the few elite investors made much, much more.

How efficient and effective are the best franchisors in using their franchisees’ store investments?

Of the investment resources they attract, do they use them effectively or are they squandered?

I chose some of the more “blue chip” of the U.S.-based systems and chased down their 2013 FDD (thank you the state of Wisconsin).

Opportunism is when someone in a position of advantage, uses that position against another. In franchising, the situation that the franchisor controls the store’s sunk cost investment, can be exploited. A very good test of opportunism is: If the ownership of the assets were reversed, would the alleged “opportunist” likely change their decision?

While the 5 systems grew by 4,342 new stores (adding +$6-billion to franchisors’ coffers), there was also a loss of 1,738 stores or $2.5-billion of franchisee store investment that left the industry.

How “sticky” are franchisee investments in these systems? On average for every $1.00 of new franchisee that enters the market 42.2% was lost from 2010 to 2013.

 

Measured from the best practice level of Dunkin’ Donuts, there is some very large variation in these systems as they purport to take care of “other people’s money”.

Losing over 40% of the invested capital in 4 years? It seems the franchise industry is a bit of a leaky bucket.

• Fairly apparent when the information is publicly available.

Kudos to the states of California, Wisconsin, Minnesota, Washington, and soon-to-be New York for their online repository of franchise disclosure documents.

Why is it so hard for Canadian entrepreneurs to access franchise disclosure documents in Canada?

Perversely, much more information is available via U.S. internet sources for Tim Hortons franchises than can be found north of the 49th parallel by an independent researcher.

Since 1979, the U.S. Federal Trade Commission has required all franchise disclosure documents to be publicly available (the Franchise Rule). As an example, this is the first of 555 pages of the free online copy of the 2013 Tim Hortons Traditional FDD. This is critical information; similar to financial market prospectuses.

It’s as easy as going to the Wisconsin site, typing in the name of the system, and more-often-than-not a free pdf shows an unbelievable amount of investment disclosure information.

How about getting the most recent filing for Tim Hortons in Canada? On Feb 17th, I emailed the new owners and asked for a copy and received this reply:

Dear Les Stewart:

Thank you for your message. All of the information we are able to provide the general public is available on our website. If it is not on the website, we regret to inform you it is proprietary in nature and we are unable to fulfill your request.

Sincerely,
The TDL Group Corp.
Angelee ,
Franchising Canada Representative

The Ontario law is called the Arthur Wishart Act (Franchise Disclosure), 2000. It’s disclosure requirements were modeled on the U.S. model.

Disclosure requirements (standard format, both U.S. and Canada)

• bankruptcies (p. 17 of the U.S. Tim Hortons Traditional FDD),
• litigation history, (p. 15),
• corporate-, franchisor-owned outlets (p. 72),
• franchised stores: terminated, non-renewed, re-acquired, ceased operation, transferred, and sold-but-not-opened (by category for 3 years, p. 72),
• fees (royalty, advertising, computer, other, p.17),
• franchisor’s financial statements (p. 85),
• list of current franchisees: name, address and telephone number (Exhibit O: p. 333),
• list of recent former franchisees: name, address and telephone number (Exhibit P: p. 387),
• restrictions on sources of products and services (and amount $ franchisor receives, Item 8: p. 32),
• entire franchise agreement (p. 133), financial representations (Item 19: p. 69) and
• leases, trademarks, etc.

The Ontario government/Wishart currently does not require either (1) public filing or (2) an online repository of documents.

I believe Canadian small business investors deserve as much access to this financial information than do our United States neighbours.

How can we have informed public policy without publicly-available, agreed-to data?