Tim Hortons: The Canadian icon Canadians won’t work for

Tim Hortons can’t keep opening stores on every other corner forever

Peter Jones/Reuters

Peter Jones/Reuters

Last week, the CEO of Tim Hortons laid out part of his case for why the chain needs to be able to hire temporary foreign workers. This is what Marc Caira told Bloomberg News: “If you don’t have access to some of the foreign workers where they are required, it will ultimately also impact on the Canadians that work in that area, because we can’t really deliver on the promise that we want in terms of delivering quality service.”

Translation: Let us import these workers, or the double-double gets it.

When you’re a national icon, on par with the beaver and hockey, it makes sense to play to your base when embroiled in a scandal like the temporary foreign worker (TFW) imbroglio. So, in the wake of Employment Minister Jason Kenney tightening the rules for companies using foreign labour—including a ban on using TFWs for low-wage restaurant jobs in areas where unemployment is six per cent or higher, and caps on the number of TFWs at work sites—the company has warned of longer wait times and mixed-up orders, perhaps on the assumption that Kenney lies awake at night wondering if your Extreme Italian sandwich did indeed arrive with the onions held.

Tim Hortons graph

And yet Caira is not wrong, in that Tim Hortons is a Canadian icon a great number of Canadians don’t want to work for. It’s not just Timmies that’s having trouble finding domestic workers, of course. Across the country, restaurants complain they can’t fill openings. Much of the focus has rightly been on the question of whether restaurants should be paying more to attract Canadian workers. But at the core of the issue is a problem that’s been mostly overlooked: Many restaurant chains now rely on a business model based on blanketing the landscape with locations in order to generate growth. It’s a fundamentally flawed strategy, and Tim Hortons is only the most obvious example.

You can see this play out by looking at the chain’s same-stores sales figure, which reflects the performance of only those stores that have been open for at least 13 months. It’s a handy measure that lets investors peer through all that dust from new-store construction to gauge the underlying health of a chain. In the case of Tim Hortons, average same-store sales have been deteriorating for years. In its most recent quarter, Tim Hortons posted overall sales growth in Canada of five per cent. But same-store sales grew just 1.6 per cent. Were it not for the 160-odd new stores added over the previous 12 months, Tim Hortons sales and profits would likely have been considerably less.

Tim Hortons’ chief coffee slinger knows he has a problem. In February, while unveiling a new growth plan, Caira warned that opening more stores can’t be the company’s only path to growth. More product innovation is needed, he said, and he vowed that Tim Hortons’ long-struggling expansion into the U.S. would finally start to pay off, with profits rolling in by 2018.

Then, to no one’s surprise, Caira announced another massive round of expansion: 500 more stores in Canada over the next five years. (The chain already operates 3,600 locations here, almost all of them owned by franchisees, up by half from a decade ago.) The message was clear: The old growth strategy may be broke, but while we fix it, here’s another restaurant 500 m closer to wherever you happen to be right now.

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Now here’s why this matters to the TFW debate. A growth model that relies on opening vast numbers of new stores every year also relies on nearly unfettered access to cheap labour to keep profit margins from getting crushed. Tim Hortons has regularly said as much in its annual reports, in the section where it lists all the potential risks to its business: Any labour shortage due to “the cessation or limitation of access to federal or provincial labour programs, including the temporary foreign worker program,” could lead to declining revenues, profits and brand reputation.

In the past, Tim Hortons has said it employs around 4,500 temporary foreign workers, equal to about five per cent of its 100,000-strong workforce. That may not seem like a lot, but think of that temporary labour force as a release valve when local labour markets overheat with the addition of new stores. Then multiply it by all the other chains pursuing a similar strategy. You quickly arrive at an industry dependent on TFWs to fuel its exponential expansion. The question is: Since when did it become the job of government to subsidize flawed business models?

OK, scratch that question. This is Canada, after all, where governments at all levels and of all stripes love nothing more than to ride to the rescue of industry. But, in this instance, at least, Kenney is on the right track. In a conference call with the Calgary Herald editorial board last week, Kenney said Alberta—where restaurant owners are particularly angry—faces a market problem with its scarcity of labour. “We believe there should be a market response,” he said.

That’s going to mean higher wages. It will also mean higher prices. Neither is going to be good for Tim Hortons customers or shareholders. But that’s Tim Hortons’ problem, not Ottawa’s.




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Tim Hortons: The Canadian icon Canadians won’t work for

  1. “That’s going to mean higher wages. It will also mean higher prices. Neither is going to be good for Tim Hortons customers or shareholders. But that’s Tim Hortons’ problem, not Ottawa’s.”

    Exactly. It’s amazing how the laws of supply and demand make perfect sense until they affect wages. At which point the discussion completely changes. This TFW debate has had plenty of snark along the lines of “well, you people complain about unemployment, but you’re too good to work for Tim Hortons?”

    Maybe if the minimum wage were a living wage, this problem would go away. In the meantime, we need to stop distorting the market with cheap imported labour and let wages find their own level. Canada doesn’t owe Tim Hortons cheap labour any more than its coffee suppliers owe it coffee beans at below-market prices.

    • Cutting off cheaper foreign workers?

      Tsk, not at all capitalist. Shame on Steve.

      Won’t force anyone to pay higher wages either,

      Timmies [or any other coffee or food outlet] doesn’t owe anyone a ‘living wage’. They pay what the job is worth.

      • And they don’t pay taxes to support able bodied freeloaders on social assistances.

      • Politely, no, ‘Capitalist’ isn’t a matter of just paying the absolute least to get the most return. It’s about incurring as little cost as possible – and cost has more variables than just dollar value.

        There’s a public backlash against the brand, because they’ve cheaped out, and cut too many corners, including in their hiring practices, and as such, there are customers boycotting the brand, until the temporary foreign workers issue is long-since out of their memory – and that could be as much as a year alienating otherwise viable capital resources.

        When you make less money because of a stupid decision, that’s not good capitalism. Tim’s doesn’t ‘owe’ anyone any sort of wage – but it would take a piss-poor capitalist to suggest that paying a little more to insure your profits.

        Politely, Emily, you should keep your money well away from the food industry. Not because it’s not a safe investment. Because you aren’t the sort to spend where you need to.

        • If you think paying fast food workers more is ‘spending where you need to’, you shouldn’t be investing at all. There are other options.

          • Politely, don’t question how I invest. I’m doing well for myself, and I’ll suggest you’re not taking the time to investigate what you invest in.

    • How about we slash bailouts for corporate welfare bums first? Businesses whose models are built on starving their employees at below-subsistence wages don’t belong in business. You’ll note that many TFWs are often provided with the flights to Canada and accommodations; take those subsidies for the TFWs and put it toward the wages they pay Canadian workers and they might just be able to hang onto some a bit longer.

  2. Ok, if we kick out tax paying TFW that do something for their money, can we revamp Canaisn social porgrams as well and fix the huge social problem of having 2+ million on one social program or another that are able to work?

    A suggestion, do like many socialist countries do, no able welfare, just workfare that pays 75% of minimum wage, comes with relocation assistances if included for better jobs like $14/hr for McDonalds or Tims.

    Time social assistance programs to all idle able people be decreased and replaced with workfare and not compete with businesses.

    Get these freeloaders of the backs of productive taxpayers. Necessity improves peoples ability to evolve and grow, time to kick the freeloaders into taking jobs and ignore the belligerent whiners. They steal form the disabled that really need it.

    • Dave stop hijacking threads to do your tax rants.

    • Any conservative who argues against paying our government it’s due is arguing against the value of investing within our nation – and any conservative who’d suggest that Canada isn’t worth the investment is a piss-poor capitalist, and an anti-nationalist.

      Which is to say, not a conservative, at all.

  3. Tim’s has a far more serious problem. The quality of its food is declining terribly. It is no longer as healthy or nutritious as it once was. They’ve eliminated fresh egg salad and other options I used to consider acceptable for my kids. Even the Timbits have changed for the worse. We bought a small box on Canada Day to celebrate the nation’s birthday and not one was considered edible. Tim Horton’s we want to love you but, if it weren’t for the quality of the coffee, we’d never go back. Fix yourself up.
    kathyjw, Ontario

    • It’s a coffee and donut shop, not a health food store!

      • It’s a money factory for its shareholders and upper upper management. The menu is just a front.

        As a money factory Timmy’s is obliged to increase its profit every quarter, a trick it can do only by increasing prices and/or decreasing costs of material and labour. Or expanding its number of outlets to increase overall revenue.
        But as this article points out, the Timmy’s market — heck the coffee shop/fast food market in general — is pretty much maxed out. So reduce the cost of ingredients by buying lower-quality goods, pay the lowest possible wage… And then next quarter?

        You see where this goes.
        The irony here is that under free market theory, profits in mature truly free markets go to zero where we’re producing the highest quality product at the lowest possible price. Page one of the Free Markets chapter in introductory economics.

        It’s hard to think of a market more saturated than coffee outlets, so what’s going on? Shareholders (hey! rhymes with freeloaders) expect their money to grow just because they have money and if that money doesn’t grow then – well – serve the peasants swill, pay them less.

        Something’s rotten. But that comes as news to no-one.

        By free market theory, in a mature market profit goes to zero ( first year econ )

        • Well Bill…..just buy some shares in Timmies, and then you too can live on Easy St….and discover your economics 101 is wrong.

        • I’d suggest you take second year econ.

          • LOL economic development is my field, and I do very well at it, thank you.

          • I’d suggest you note that it was Marx who said it.

  4. of course, if timmy’s would actually hire full time workers and PAY them a decent wage, they would have no problem with hiring.

    • Timmie’s is a part-time job for students.

      Not a full-time job that enables you to have 3 kids, a house and a car.

      • Well Emilyone, perhaps if Tim’s paid beyond “part-time wages for students,” they wouldn’t be in a conundrum where they required foreign workers to get by as a business.

        • If they paid beyond what the job is worth….they wouldn’t be in business at all.

          Wiping tables and pouring coffee is not a career.

          Keep it up, and Timmies will be automated.

          • It is just not feasible for the entire world to be well-paid doctors, bankers, and politicians; someone has to wipe the tables and pour the coffee, clean the toilets and empty the garbage. No matter how many people go on to further their education and better their circumstances, there will always be a hierarchy of job status and monetary reward. But in this day and age, treating every worker with a proper living wage and dignity is something Canada should actually strive for, and those working “service” jobs should not be sneered upon.

        • Are you trying to say that people do these jobs out of the goodness of their heart?

          And because of that they should be treated as special?

          Because the world won’t get ahead that way.

          And rewarding lazy people with good-paying jobs won’t help us either.

          All those jobs can be automated.

          • Are you trying to say that everyone who currently works at Tim Horton’s or similar venues is lazy?
            And by automated, you mean a vending machine?

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