Tim Hortons Owner Locked out of his Own Store?

[HiTempguy1]

https://business.financialpost.com/news/retail-marketing/tim-hortons-seizes-ownership-of-4-locations-from-outspoken-franchisee

Maybe somebody can explain franchises a bit to me? I really don't understand how this is possible, I always assumed that the owner "owned" the property (or at least leased it), how a company can lock someone out of their own store is a mystery to me?

[TomcoPDR]

I doubt the locked out owner held the lease. IMO would be head corporate, and you’re just reimbursing corporate for renting the store locations.

max_boost restaurant guru

[ExtraSlow]

Don't know the specifics of this situation, but a franchisee, has very little freedom, and in many ways isn't really a business "owner". In most matters they are really "business operators" on behalf of the franchise owner.

[vengie]

Don't know the specifics of this situation, but a franchisee, has very little freedom, and in many ways isn't really a business "owner". In most matters they are really "business operators" on behalf of the franchise owner.

Exactly this.

Franchisee's can't deviate at all from the base business plan/ model at all.

They have no freedom to be "unique".

This may be different for smaller franchise's but for a large one like timmy's thus would be accurate.

[Xtrema]

https://business.financialpost.com/news/retail-marketing/tim-hortons-seizes-ownership-of-4-locations-from-outspoken-franchisee

Maybe somebody can explain franchises a bit to me? I really don't understand how this is possible, I always assumed that the owner "owned" the property (or at least leased it), how a company can lock someone out of their own store is a mystery to me?

You don't own anything. Everything has been decided, in term of location, lease rate, all the food and equipment, store design and renovation cost are dictated by HQ.

The allure is that you invest $1M to get a $100K/yr job managing a store for them. Once traffic picks up, you may make more $ than that. And once you have 4 stores, you are rolling in it. At least that was before RBI took over.

I think most Timmy's franchisees will run multiple stores because existing franchisees has first right of refusal on any new locations, so noobs can be hard to break into the market unless it's a brand new town/city.

[Rocket1k78]

Don't know the specifics of this situation, but a franchisee, has very little freedom, and in many ways isn't really a business "owner". In most matters they are really "business operators" on behalf of the franchise owner.

Exactly! I couldnt even imagine what a TH contract is like but i would bet its got them covered and then some.

[ZenOps]

I've heard that you can't even second source the sugar packets.

[Xtrema]

I've heard that you can't even second source the sugar packets.

The only franchise that you seems to do whatever the hell you want is Choices.

[HiTempguy1]

Very interesting, thanks for the info guys. So essentially, as a franchisee, you "invest" in the restaurant chain, and in return, you get the profits (minus their cut, of course) of running the store.

I figured there wasn't much control, but I didn't realize that the building itself would be leased through the restaurant chain.

[JRSC00LUDE]

The only franchise that you seems to do whatever the hell you want is Choices.

At least they live up to their name.

[Buster]

Franchise agreements can come in many different forms - loose ones in terms of rules, leasing, and cost, the expensive ones where the operator doesn't hold the lease, has strict rules, and pays royalties on revenue, etc.

Generally speaking for big food outlet type franchises, the franchisee has little control over the location, and the operations. Indeed, the location/building deal is signed LONG before the franchisee gets involved. The franchise model works because they can see at least some degree of benefit from their sweat equity, and the franchisor doesn't have to worry that there is some salaried hack taking the day off if it snows. But I don't consider most franchise owners to be business owners at all. Franchisors take advantage of some immigrant cultural preference to be "business owners" for status within their communities or at home. The quality of the business that is "owned" is secondary in this case.

Smart players in the franchise market tend to be guys that can bring capital and expertise to a franchise that is just entering a new market. Not because you can get a better franchise agreement, but because you can often secure a larger geographical area ahead of time. Like the guy that secured IHOP rights in all of Calgary or southern alberta or whatever. Decent play there. But in the end, these types of franchises are designed to be turn-key and generally idiot proof. And if any knuncklehead can do it, then basically the laws of supply will ensure that a franchisee will always be just an indentured servant with risk, a shit ton of work, and limited upside. Nobody ever got rich doing a job that anybody can do.

[max_boost]

I doubt the locked out owner held the lease. IMO would be head corporate, and you’re just reimbursing corporate for renting the store locations.

max_boost restaurant guru

I'm not the Franchise. That title belongs to TYMSMNY

[TYMSMNY]

https://business.financialpost.com/news/retail-marketing/tim-hortons-seizes-ownership-of-4-locations-from-outspoken-franchisee

Maybe somebody can explain franchises a bit to me? I really don't understand how this is possible, I always assumed that the owner "owned" the property (or at least leased it), how a company can lock someone out of their own store is a mystery to me?

- These locations are 99% of the time leased (rented for 5-10 years... lots of variations of terms here). So essentially the franchisee is subleasing it from corporate. If rent or anything goes into arrears, the property owner is able to essentially lock the doors and prevent it from opening until monies are received. rates, terms, location are all negotiated by corporate unless you've got some "in" like owning the strip mall yourself.

- all franchisees sign an agreement outline terms and such. There are terms that basically prevent the franchisee from "ruining the reputation of the brand" which is sort of what the TH franchisee did there. corporate always protects itself first.

- suppliers are in place for the franchisee. the whole idea of a franchise is for it to be straight forward and turn-key operations... not go source your own products/produce from Wholesale or Nofrills. Depending on the franchise, the % of specific goods bought from specific suppliers vary. Mcds would be 100% from their own corporate supplier, no outside buying. Yogen Fruz can only buy a specific yogurt from a specific supplier. I mean you could save $3-5/20kg bag of sugar if you move it yourself vs delivery... but is it worth it? again, back to the whole point of a franchise... it's turn-key operations.