Business·Analysis

Meet the kinder, gentler — and Canadian — face of Tim Hortons

The new CCO of Tim Hortons parent company on how to end the wars with the franchisees and get the company back on track.

Coffee chain's new exec weighs in on fights with franchisees, a soon-to-come kids menu and the path forward

Duncan Fulton was named the chief corporate officer of Restaurant Brands International Inc., the parent company of Tim Hortons, earlier this month. He joins the company as RBI has been fighting with disgruntled Tim Hortons franchisees on several fronts. (CBC)

The ongoing war between some Tim Hortons franchisees and their corporate parent is costing everyone. Sales have struggled for six straight quarters and the brand's reputation has plummeted.

But the new chief corporate officer of Restaurant Brands International (RBI) says the iconic coffee-and-doughnut chain is going to be just fine.

Duncan Fulton has come in as a gentler, kinder — and very Canadian — face of RBI.

"In a very, very competitive industry, every restaurant in the world would kill to have the kind of brand status that Tim Horton has," said Fulton, who started the job less than a month ago.

He's spent his career managing Canadiana. Fulton has worked as an adviser and spokesperson to former prime minister Jean Chré​tien, as well as former premiers Frank McKenna and Dalton McGuinty. He also spent a decade with Canadian Tire, working with that company's network of franchisees.

And that "Canadian" aspect is important, as Fulton's appointment comes as Restaurant Brands International attempts to improve its relationship with some Tim Hortons franchisees.

The Tim Hortons brand is owned by Oakville, Ont.-based Restaurant Brands International, which took over the chain in 2014. (Ben Nelms/Bloomberg)

The parent company — which was established after a high-profile merger with Burger King in 2014 and is majority owned by Brazil-based 3G Capital — is seen by many as a foreign carpetbagger, bent on forcing franchisees into cutting costs and finding efficiencies.

Ongoing disputes between RBI and some Tim Hortons owners have boiled over into public view, including allegations of mismanagement that devolved into multiple lawsuits and made headlines for more than a year.

The decision by some Ontario franchisees to cut employee benefits and paid breaks in response to the province's minimum wage increase further harmed the brand, resulting in online backlash, boycotts and public protests earlier this year.

While same-store sales — an important measure in retail that looks at sales in stores open for more than a year — have weakened throughout the prolonged and increasingly fractious disagreements, RBI's profits have soared.

The reputation of the Tim Hortons brand took a hit earlier this year after some store owners in Ontario said they were cutting back on employee benefits and axing paid breaks in response to the province's minimum-wage hike. The move resulted in swift backlash online, boycotts and protests. (CBC)

The new president of Tim Hortons, Alex Macedo, has admitted they could have done a better job, Fulton said.

"Undoubtedly, there's a ton of opportunity for growth, there's a ton of opportunity to build back a little bit of the slip the brand has had the last few years, and to rebuild their relationship with restaurant owners," he said.

The new CCO didn't go into detail of how to repair that image. But in an interview with CBC News, Fulton repeatedly came back to the importance of the franchise owners and the value of working together.

For months, the relationship between RBI and Tim Hortons franchisees was dominated by demands that franchises spend hundreds of thousands of dollars on renovations, or source their materials from specific suppliers, sometimes at higher costs.

Now Fulton is trying to focus on ventures the parent company and the franchisees can launch together. Case in point: Tim Hortons will launch a dedicated kids' menu in the coming weeks.

"We have more kids that come here with their parents than any one of our competitors," he said. "It's low-hanging fruit. Kids are already coming here: after soccer, after hockey, after baseball with their parents. It's just capturing the market that's already here."

Amid on onslaught of negative publicity, Tim Hortons is experimenting with several new concepts, including all-day breakfast and a soon-to-be-launched kids menu. (Jonathan Hayward/Canadian Press)

Even when discussing the company's ambitious international expansion plans, Fulton weaves in messaging about the paramountcy of the experienced, on-the-ground franchise owners.

Tim Hortons plans to launch 1,500 new stores in China over the next decade. When asked if the Tim Hortons experience can translate into Chinese culture and society, Fulton says the franchisees know how to tailor stores to local tastes.

"It has to be tailored for a local guest experience. There's a brand standard, but you have to be flexible," he said. "If you're in a market that wants a churro instead of a doughnut, you give them a churro. And that's what happens today in Spain."

The Great White North Franchisee Association — a group that says it represents about half of Tim Hortons owners in Canada and the U.S. — didn't comment for this story.

But franchise owners have already expressed deep concern about the new tone coming from RBI, as there has been a lot of bad blood and trust will be hard to rebuild.

Watch as Duncan Fulton talks about the chain's expansion to China and mending fences with Canadian franchisees:

Despite all the negative press garnered by the recent war between RBI and franchisees, retail analysts expect the two sides to be able to find common ground.

"In many towns, it is the gathering place," said strategy advisor Mark Satov. "That doesn't change because of some bad press about minimum-wage mitigation or franchisee wars."

The franchises are still enormously profitable for both the owners and the parent company, he says.

"The bigger question is whether their owners will actually give the new executive team the financial leeway to address the issues," said Satov. "Sears was fixable, too, if the CEOs had had their plans approved."

And Sears is just one example. The retail sector is littered with past companies that found themselves in trouble and forged a plan — but just couldn't execute that plan.

Despite the ongoing dispute, RBI is reaping enormous profits. But shareholders know those numbers can — and should — be higher.

The company will post its latest quarterly earnings on Wednesday, providing the latest look behind the numbers.

Expect shareholders to start pushing for more than just a kinder tone if sales continue to struggle.

Corrections

  • A previous version of this story mistakenly said that Restaurant Brands International is based in the U.S. In fact, it is based in Oakville, Ont.
    Jul 31, 2018 2:54 PM ET

About the Author

Senior Business reporter for CBC News. A former host of On the Money and World Report on CBC Radio, Peter Armstrong has been a foreign correspondent and parliamentary reporter for CBC. Twitter: @armstrongcbc

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