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The association has said many franchisees would be in financial straits after paying a higher minimum wage because head office will not allow them to increase retail prices. Head office has control over menu prices and the costs of supplies that franchisees must buy from it. The most recent small price increases were put through in August, and were not related to the minimum wage hike. Those corresponding costs have forced some franchisees to cut paid employee breaks and paid benefits, according to the GWNFA.

“It’s hard to understand why they thought this was a good idea,” MacLean said. “Perhaps they did understand there would be negative fallout and they hoped that would force the hand of head office. If that was the strategy, it was a very high-risk, scorched earth policy and it’s burned the brand.”

It comes as Tim Hortons has faced ongoing industry pressure from McDonald’s Canada, whose market share in coffee has climbed in the past five years thanks to a reformulated house blend and new espresso drinks, as well as multiple free coffee giveaways.

McDonald’s franchisees appear to have another advantage in light of the minimum wage hike — they are allowed to set their own menu prices.

“Franchisees are independent business owners and have control over many aspects of their business, including pricing,” said spokesman Adam Grachnik. “Prices for menu items may vary by restaurant.”

Miziolek believes Restaurant Brands International needs to make a concerted effort to repair its damaged relationship with franchisees in Canada, or the Tim Hortons brand will deteriorate.

“I know they want to expand Tim Hortons in the U.S. and elsewhere, but I really think they have taken their eye off the brand in Canada where it started,” he said.

“Brands communicate on the emotional front and the rational front. This is screwing around with the emotional side of what this brand means to Canadians.”

Financial Post

hshaw@nationalpost.com

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