On a recent Thursday morning, as thousands of Canadian coffee lovers waited in line for their daily fix of Tim Hortons, the company’s head office unveiled its latest quarterly earnings report. The figures confirmed—yet again—that when your brand is the closest thing to a national religion, filling the collection plate is never a problem.
Total revenue: $639.9 million. Total profit: $94.1 million.
That same morning, Aug. 12, Hortons executives made another lucrative announcement: the company had just sold its 50 per cent stake in Maidstone, the Brantford, Ont., bakery that mass-produces donuts and muffins for every “Tim’s” in the country. Originally launched as a joint venture in 2001, Maidstone now belongs to the Swiss food giant Aryzta AG, which paid a whopping $475 million for Hortons’ half of the operation (and has agreed to continue supplying the chain with fritters and biscuits until at least 2016).
For Tim’s shareholders, the deal is sweeter than a honey dip, as the company promised to pour every penny back into their pockets. For the rest of Hortons’ “shareholders”—those countless loyal customers whose ownership is strictly sentimental—the bottom line is this: your chocolate Timbit, a scrumptious ball of Canadiana, is now produced by a company from Switzerland. And it is still “Always Fresh” (i.e., frozen and reheated).
Tim’s regulars may have a hard time swallowing the news that their maple dip is no longer produced under the Maple Leaf. As national symbols go, a Hortons donut is second only to a Hortons coffee. But Timmy’s selling baked goods from a freezer? That’s standard operating procedure, and has been for quite some time.
Yes, it was certainly a scandal back in 2003, when Hortons co-founder Ron Joyce confirmed the truth: that the company he built (and had recently left) replaced its in-store deep fryers with frozen globs of dough trucked in from a factory. “This is not a philosophy that I would have embraced if I still owned the company,” he famously boasted. One Hortons spokeswoman, convinced that she could stop the unflattering headlines, famously told a reporter that “until I confirm or deny anything, it simply doesn’t exist.”
It did exist, of course. And the backlash was swift. (Joyce’s words were especially damaging. “I’ve tried them,” he said of the new donuts. “And they’re certainly not the same.”) In time, though, most people eventually forgot—or simply stopped caring—where their honey crullers came from. Truth be told, many customers still have no idea that the donuts on display have to be defrosted.
But that is about to change. In the coming weeks, Tim’s devoted disciples will receive a very fresh reminder about just how much their donuts have evolved. Hortons’ historic decision to go frozen is now at the heart of a proposed $1.95-billion class action lawsuit that has exposed a bitter—and very personal—battle inside the country’s favourite coffee shop. Scheduled for a hearing in November, the high-stakes case pits store owners against senior executives, store owners versus each other, and even relative against relative. And no matter how many spokespeople try to control the message, the spat is sure to have some patrons pining for the old days, when the smell of deep-fried Dutchies hung in the air at their local shop.
Officially, the case is about a few disgruntled franchisees who claim their profits are shrinking because the company, via Maidstone, is charging “inflated” prices for those frozen goodies. But flip through the court file—through thousands of pages of exhibits and affidavits—and a much deeper storyline emerges: an old-fashioned power struggle between those who are still loyal to Ron Joyce, and those who replaced him at the top.
The lead plaintiff is a Burlington, Ont., store owner named Archibald Jollymore, Joyce’s former executive vice-president (and his cousin). One of Jollymore’s primary targets is Paul D. House, Joyce’s successor as president (and a man who garnered zero praise in Joyce’s recent autobiography). Both men have different philosophies, to say the least. House and his colleagues claim Jollymore is a poor businessman, and if his Hortons outlet is truly losing money, it has nothing to do with frozen products. Jollymore claims he has been “intimidated and bullied” by head office, and that the executive chairman personally threatened his life. “If I had a gun,” House allegedly said, “I’d shoot the bastard.”