Tim Hortons Turmoil Turning Brand Toxic?

Canadian restaurant chain Tim Hortons woes seem to be only mounting. However, most of the company’s troubles seem to be self-inflicted amid a public feud with its aggrieved franchisees, alleged deterioration in food quality, and falling share prices.

Tim Hortons was acquired by Brazilian private equity firm 3G Capital for $12.5 billion in 2014. 3G Capital owns Restaurant Brands International Inc. (QSR, QSR.TO), a U.S. company that oversees the day-to-day management of Tim Hortons.

Complaints of deterioration in food quality have popped up following Tim Horton’s sale to 3G Capital.

According to a recent Angus Reid Institute poll, more than one third, or 35 percent of Canadians said that their view of Tim Hortons has worsened over the last few years. 21 percent of poll respondents also said that food quality has worsened at Tim Hortons.

Tim Hortons has also got involved in a controversy regarding the minimum wage increase. Some Tim Hortons’ franchise owners in Ontario slashed workers’ benefits as well as paid breaks in response to the Ontario government’s minimum wage hike.

3G and RBI are alleged to be making changes at Tim Hortons to cut down on costs and boost profits, but in the process are pitting local franchisees against the owners and also making the business go out of touch with its customers. Several franchises have sued the parent company alleging bullying and intimidation.

Shares of Tim Hortons are currently down 20 percent from their October 25, 2017 high of C$86.20 per share.

On Monday, Restaurant Brands was downgraded by equities research analysts at BMO Capital Markets to a “market perform” rating from an “outperform” rating previously.

BMO Analyst Peter Sklar said in a note to clients that due to the ongoing negative press on Tim Hortons, and Restaurant Brands International, BMO Capital conducted an online survey to assess whether the company’s traffic and same-store sales results would be impacted in the upcoming quarters.

Based on customers’ perception in the online survey, BMO Capital believes that Tim Hortons Canada’s same-store sales results could be negatively impacted by the decline in brand perception, as consumers may be choosing to frequent Tim Hortons less often.

by RTTNews Staff Writer

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