Minimum Wage Prompts Cost Cutting at Local Tim Hortons

The Tim Hortons on Division Street has issued a letter to employees advising of a cutback in benefits that effectively reduces their wages.  The move is blamed on the change in the minimum wage – most employees were getting $13 an hour but will now get $14.  The franchise is owned by Ron Joyce Jr. and his wife Jeri-Lynn Horton-Joyce who are the son and daughter of the chain’s founders. The issue got into the National Press (see links below) and now Kathleen Wynn is blasting the owners calling them bullies and said: “if the owners want to challenge Ontario’s new minimum-wage policy, they should come directly to me and not take it out on workers”.

Employees have said that the benefits are why they like working at Tim’s and one was quoted as saying that the net effect to him is a reduction in pay.

Tim Hortons on Division Street
Tim Hortons on Division Street

The changes are that breaks will no longer be paid and employees will now have to contribute to some of their benefits.  Each employee was given a letter outlining the changes and asked to sign it. 

The letter includes the reasoning:

These changes are due to the increase of wages to $14.00 minimum wage on January 1, 2018, then $15.00 per hour on January 1, 2019, as well as the lack of assistance and financial help from our Head Office and from the Government [my emphasis].

Tim Horton’s corporate response to CBC when they asked about the issue was:

“Almost all of our restaurants in Canada are independently owned and operated by small business Owners who are responsible for handling all employment matters, including all policies for benefits and wages, for their restaurants.”

“Restaurant Owners are expected to comply with all applicable laws and regulations within their jurisdiction.”

Tim Hortons corporate was bought in 2014 by the owners of Burger King but many franchise owners are unhappy with the new management.  They formed  the Great White North Franchisee Association (GWNFA) to band together. City News reported that a GWNFA spokeswoman “declined to comment on the letter and said the Joyce family would not be making a comment to media.” However, City News also reported that “the association’s board of directors released a statement Thursday saying Ontario’s Liberal government has put its members in a “difficult situation” by implementing the minimum wage increase.”

MacLeans reported:

The GWNFA, whose membership hit half of all Canadian Tim Hortons franchisees last October, said its goal is to mitigate job losses.

But without help from their parent company in lowering food costs, raising prices and reducing couponing, the association said franchisees have been forced to take steps to protect their business.

“While other competitors have received concessions from their franchisors, unfortunately our chain has not,” the GWNFA said. “Many of our store owners are left no alternative but to implement cost-saving measures in order to survive.”

Employees were quoted as saying that the owners are currently in Florida.

Most of the media jumped on the bandwagon when Premier Wynn made her comments.

City News quoted her:

“I’d be happy if this man were making a statement about the government or about the policy,” she said. “What I think is really unfair, and where I think the bullying comes in, is that he’s taking this out on his employees. He’s behaving in a way that I think is so unfair to his employees, people who are trying to make ends meet.”

I’d suggest that given that all competing businesses have the same problem, actions coordinated by Tim Hortons corporate (like a small price increase) would go a long way to resolving this issue.

The letter to employees finishes with:

“Once the costs of the future are better known, we may bring back some or all of the benefits we have had to remove.”

Links

Update Jan 5, 2018 – 2:30pm

A CTV video with the latest (Starts with a short commercial).

Update January 6, 2018

The following report from the Financial Post seems to be relevant to the discussion.

The Great White North Franchisee Association (GWNFA) says that McDonald’s, Cara Foods and Starbucks have all announced price increases to help offset additional costs, the association says. Parent Company Restaurant Brands International (RBI), meanwhile, is not allowing its franchisees to put through price increases, nor has the parent company offered reductions in food or paper costs to its franchisees.

Looks like the big issue is a fight between GWFNA and RBI.  That’s why it’s Tim Hortons in the spotlight and not other businesses.

 

Click to Notify me of
Ben

The protest has just jumped a notch – Andrea Horvath has announced her attendance at the site tomorrow.

Wally Keeler

Ben, what time of day?

Walter Luedtke

The share of Ontario workers toiling for minimum wage has more than doubled from 4.3 per cent to 9 per cent since 2003. They are more likely to be women, visible minorities and immigrants, and young workers.
But almost 40 per cent are 25 or older.
Cobourg likes to present itself as ‘The Feel Good Town’ with lots of quaint shops, unique boutiques and family businesses.
But our retail trade is dominated by over 200 franchises. Those are hard-nosed corporations and ‘Feel Good’ is
not part of their business plan. Minimizing labour costs, — getting by with as few employees as they possibly can — is what profit-maximizing employers do 24 hours a day. It is practically all they think about.
There was a time when lots of working folks had union protection. That is long gone.
So it is up to Government – of whatever political flavour – to protect the most vulnerable workers by assuring a living wage, supplemented by an aggressive skills training programme to keep our young people on a real career path.

Walter Luedtke

BTW Tim Hortons franchise owners have formed a ‘union’ – Great White North Franchisee Association (GWNFA) – the largest single-brand franchisee association in Canada.
GWNFA’s goal is to protect the interests of store owners, and address mismanagement of franchise operations by The TDL Group Corp and its parent company Restaurant Brands International.
Solidarity Forever!
Time for TH workers to do the same!

Frenchy

“Time for TH workers to do the same!”
Absolutely agree. Onward and upward!

Frenchy

“There was a time when lots of working folks had union protection. That is long gone.”

Why is it long gone? Where did it go?

Ben

That’s a very simple question that has a very complex answer. But throw stagnant wages caused by neoliberalism into the destruction of the manufacturing base due to offshoring and you have a start to the answer.

Frenchy

“The share of Ontario workers toiling for minimum wage has more than doubled from 4.3 per cent to 9 per cent since 2003. They are more likely to be women, visible minorities and immigrants, and young workers.
But almost 40 per cent are 25 or older.”

Are those numbers current Walter?

Ben

more timmy math:
CBC National had a piece by a fellow who has written a book about the system. He told Ian H that the system strives for a ROI of 13% and the books are set up so that the owners pay themselves salaries, wait for it – $400,000.

Now tell me that they cannot afford to pay it; the minimum wage increase.

An article in the Financial Post describes the Corporation that owns Tims – http://business.financialpost.com/news/retail-marketing/at-tim-hortons-its-not-business-as-usual-profits-are-up-but-so-is-franchisee-discontent

This article describes the group that started the whole problem with the letter outlining the cuts. It is obvious when reading the piece that this group of disgruntled franchisees has a beef with 3G.

The article also quotes
“Overall revenue rose to US$4.2 billion in 2016 from US$4.05 billion a year earlier, while the company managed to cut its total operating costs and expenses by 14 per cent to US$2.47 billion from US$2.86 billion.
As a result, its operating margin, the amount of revenue generated after paying operating costs, was 40 per cent in 2016,”

I stand by my previous statements that this dispute is an internal problem and the workers are being used as ammunition.

perplexed

Try being self employed Franchise or not you put everything on the Line and you have to differentiate between the Franchise and the Operator / Independent Operator owner No matter how you look at it the Govt. is simple downloading their obligations to the small business operator in ONT>

Spidey

They lowered the tax rate for small business owners….

Walter Luedtke

Good to see perplexed, dubious and gerinator singing out of the same ‘tea-party’ hymn book.

Kate

No disrespect to John, but I think the Beaverton covered this story perfectly;)

https://www.thebeaverton.com/2018/01/tim-hortons-heirs-encourage-minimum-wage-employees-inherit-coffee-chains/

Ben

More Timmy math:
On their website they boast of selling 8 out of 10 coffees sold in Canada. That amount quoted is over 2 BILLION cups per year. Average price = medium $1.75 = $3.5 BILLION per year. Spread across the 3,665 Canadian Stores that means on average each store will gross $954,979.53 just on coffee sales.

Add in the large margins on donuts and cookies and you understand that if any Franchisee is crying poor they will be crocodile tears.

Oh and btw a quote from Google – must be right it is Google! “The most expensive part of the coffee was the coffee beans used — 64 cents worth. The cup cost 13 cents, and the lid was three cents. An average cup also has four cents worth of sugar and takes 33 cents worth of labor to make for a total cost of $1.17.” So there we have it profit on a medium cup is 58 cents. $545,702 per year on coffee alone.

Chew on that folks when you defend the downtrodden franchisee!

Ewok

Ben – other “hidden” costs for many business owners include utilities, property taxes, franchise fees, special marketing costs, insurance, WSIB, repairs, building and maintenance costs, etc……this is a nickel and dime low margin business (like retail grocery) driven by volume…

Ben

All of which sound really expensive until you take all of those expenses and run them through the tax forms. Let’s talk net expenses against half million profit on coffee not to mention probably the same on donuts and cookies and don’t forget the accumulating equity in the franchise fees.There are always two sides to any statement EWOK.

Dubious

So Ben, what is the bottom line for the franchisee? Why are you qualified to determine if that profit is acceptable?

Deborah OConnor

Looks like the Revolution will be late coming around here!

Anyone wishing to join us at a rally for the workers next week? Starts at 5 pm Wednesday at the now infamous Timmie’s on Division Street. See you there! In the meantime perhaps we can contemplate why our sympathy lies with the millionaire business owners and not the workers trying to get by on below poverty level wages. Something about this is very, very wrong.

Elaine

Wait a minute; didn’t the business tax rate get cut to balance this out???

Richard Looye

Great Debate Folks
BUT, If I had to raise a family on anything less than $20.00 an hour plus benefits, I would still be a “working poor” person. Poverty brings with it all manner of social problems which in the end we” rich” tax-paying citizens have to fund.
I will gladly pay double for my daily double /double if I know my friendly hatch-order person’s labour is properly remunerated for her/his services.

gerinator

I don’t get it. What on earth did the Libs think was going to happen. Stuff is going to happen. I congratulate these franchise owners for communicating their position, identifying cause and outcomes. Then ends the communications with a promise to review their position. What else can employees expect. When the head Libber starts tossing around words like ‘bullying’ to describe a here-to-fore highly regarded company, and its ethos, that is a big problem. What is next government trying to tell business how to operate – PLEEEEASE – like they are so good at the business of government.

jane

I’m quite sure that these billionaires could afford to pay their employees a wage that at least approaches liveable. You do realize that $14/hour adds up to $560 for a 40-hour week (if they’re lucky enough to get 40 hours). Is your income less than that?

gerinator

Jane, and others, please acknowledge that anything less than 100% agreement with your unequivocal approach to this topic is to be dismissed. Therefore not a discussion at all but a pointe-finale or a dictum if you will, which I dismiss as I favour a conversation including opposing views. You’ll note I make no comment with respect to a living wage, I make no comment regarding billionaires and their capitalist leanings. My comments related to TH communication and the naivete of the Lib government. The former relates to many of our (yours included I wager) experiences with poor corp communications ending with something like ‘take it or leave it’ and staff being let go. The latter relates to Lib gov expecting that business, regardless of size, will tow the (political – I want to get reelected) line. I trust the employees of this TH franchise to do what is in their best interest. I also trust that business will also follow this same mantra, and their is no doubt that this publicity hurt both TH-HQ and the TH-franchisee.

perplexed

I AM HAPPY TO SEE SOMEONE IS STRONG ENOUGH TO STAND UP TO WYNNE AND THE WAGE INCREASE as we all know the weaker small business owners won’t or can’t

What did the Govt. expect to happen when they dipped into employers pockets and bottom lines
Not all small business owners are a Tim Hortons but I am happy to see them taking steps to keep their business a float . The Govt. didn’t give any breaks to employers to off set this cost .
In fact our Govt has not done much to address many of its citizens needs When was the last time you saw a Real increase in your OAS / CPP or ODSP cheques that we paid into for years .

I am not against the wage increase by any means its certainly needed to keep apace with the soaring costs of living here in Ont. Can. But keep in mind those soaring Costs hit the Business owner as well.

Keep up the Battle

Dunkin Donut

They lowered the tax rate for small business…

Dunkin Donut

Despicable move. I can understand this hurting small operation but these people are dirty filthy rich, the extra cost would have minimul impact on them. Glad they are getting the backlash they deserve.

Frenchy

How “dirty filthy rich” are they?
If they were “dirty filthy rich”, why would they even bother with Tim’s franchises? Why not just live a “dirty filthy rich” lifestyle without all the hassle of running a small business?

Dunkin Donut

They do. They have not been available for comment as they are at their home in Florida.

Ben

Probably to be able to write off their other income with business expenses!

Ewok

Seems so cliché that we vilify or demonize successful people who demonstrated being a good employer and good corporate citizens. Where was everyone when they originally granted these extended benefits to employees – why wasn’t there a blog or newspaper article congratulating them. Where is the frustration, emotion, outrage and anger over the Province’s mishandling of our tax dollars…where is the organized rally at Lou Rinaldi’s office or the office of Kim Rudd?

Jeff B

These people didn’t work their way up from the bottom. They’re living off inherited wealth, and penalizing those who can least afford it. It is bullying and they should be called out.

Ben

“I’d suggest that given that all competing businesses have the same problem, actions coordinated by Tim Hortons corporate (like a small price increase) would go a long way to resolving this issue.”

Hmm I would think given the wealth of the owners these stores would be ‘play money’ for them. In that case a small hit to the bottom line would be easily absorbed. As it stands now this instance makes a good case for unions!

Ben

CBC watch: The CBC report on TV tonight broke it down that ‘ all in’ cost for this raise would be about $7,000 a year raise per full time employee +another $1.00 raise next year. If you had 30 employees, that would add up to approx $250,000 per year. it was concluded that a jump from $11.60 to $14.00 would cost the owner of a 30 person payroll $7K per year gross per employee The CBC did not calculate the net amount after tax deductions from overall business yearly income! The local empire owned by the Joyce family would only jump by one third of that $13 to $14. Thus the impact of the wage increase could be only $2.3K per year. If that is offset by the reduction of benefits how much real impact on the bottom line is there? The actual impact on the workers is a $25 loss on the paycheque per week. How much will the Joyce empire really suffer? I would suggest that this whole affair coming from the letter, probably faxed from the Florida mansion (sarcasm) is a political ploy designed to embarrass the Liberal Government. Unfortunately it punishes the grunts on the line,… Read more »

Frenchy

Fuzzy math reporting indeed. When I watched The National they used an example of 35 employees not 30.
Why would the Joyce “empire” only be hit with a third of your total figure?
Is it possible that the “empire” is trying to not suffer any hit on their bottom line?
If you watched all of that segment you would have heard an interesting statement… someone has to pay for that increase, will it be the employer, the employee or the customer? Try putting yourself in each of their shoes and give us an answer.

Ewok

Frenchy – the answer is all of them (us) will pay. We are only at the end of the first business week of January and more and more employers are making difficult business decisions. Employees will pay as hours are reduced, automation introduced in more significant ways and benefits cut. Employers will pay as they can’t staff effectively, margins are reduced and they are demonized for having to make these business decisions. Customers will pay as the cost of goods continue to increase under the crushing pressure of minimum wage increases, 2 paid sick days per year, increased fuel costs, “green” fees and alarmingly high hydro costs. There was a right way to increase the minimum wage over a longer period of time however in an effort to pander to voters and with complete disregard for what the business community the Liberal force fed this unreasonable increase on employers in this Province.

Stay tuned there will be more shared hardship to come!

What\'sUpDoc

EWOK mentioned two paid sick days a year. I wonder how many paid sick days a year Government and Town workers get. Those on low incomes more than likely cannot afford the good, nourishing food higher paid people consume. Therefore it would appear more likely that the lower the pay, the more paid sick leave would be needed.

Ewok

I agree – and now ALL employees in Ontario are entitled to 2 paid Personal Emergency Days per year including those government employees you just referenced. Doc – there is only one winner in all of this and it is the Provincial Government through increased income tax and HST….employees are going to pay, employers are going to pay and all of us as consumers are going to pay.

Ben

“Why would the Joyce “empire” only be hit with a third of your total figure?”

Because their employees already earn $13ph – read John’s post.

Dubious

You are ignoring the impact of the additional sick days the all employees get.

Dunkin Donut

What’s the impact of people working sick? Sure isn’t good for the healthcare system if sick people are serving up food at their local Tims

Dubious

Quite true but why should the employer be forced to accommodate sick people at her expense?

Donut Dunkin

Because it’s the right thing to do and that’s exactly how it’s done in most of the western world. Ontario is just catching up. And again the government lowered the tax rate on small business to help offset these measures. Not sure how it all balances out but you keep ignoring that fact

Dubious

I’m not ignoring anything. The minimal rate reduction is not even close to “balancing it out” but if you admit that you are unsure then why do you mention it? Besides, a lowered tax rate is only relevant if you make a profit.