Harvard Case - RBI and the Great White North Franchisee Association
"RBI and the Great White North Franchisee Association" Harvard business case study is written by Vaughan Radcliffe, Mitchell Stein, Hashu Rahim. It deals with the challenges in the field of Accounting. The case study is 12 page(s) long and it was first published on : Mar 22, 2019
At Fern Fort University, we recommend RBI implement a comprehensive strategy to address the concerns of the Great White North Franchisee Association (GWNA). This strategy should focus on improving communication, transparency, and collaboration between RBI and its franchisees, while also addressing key issues related to profitability, cost management, and operational efficiency. This will involve a multi-pronged approach encompassing organizational restructuring, financial transparency, and a revised franchise agreement that fosters a more equitable partnership between RBI and its Canadian franchisees.
2. Background
This case study focuses on the growing tension between Restaurant Brands International (RBI), the parent company of Tim Hortons, and its Canadian franchisees, represented by the GWNA. The franchisees are dissatisfied with RBI's recent decisions, including price increases on key ingredients, changes to the loyalty program, and the introduction of new menu items that they feel are not resonating with Canadian consumers. They argue that these decisions are negatively impacting their profitability and threaten the long-term success of the Tim Hortons brand in Canada.
The main protagonists in this case are:
- RBI: The parent company, seeking to maximize shareholder value and expand its global footprint.
- GWNA: The franchisee association representing the interests of Canadian Tim Hortons franchisees.
- Tim Hortons franchisees: Individual business owners operating Tim Hortons restaurants in Canada.
3. Analysis of the Case Study
This case study can be analyzed using a framework that considers both the financial and strategic aspects of the situation.
Financial Analysis:
- Profitability: The franchisees are concerned about declining profitability due to rising costs and reduced sales. This can be analyzed using financial statements, specifically the income statement, to track revenue, cost of goods sold, and operating expenses.
- Cost Accounting: RBI's decision to increase prices on key ingredients has a direct impact on the franchisees' cost structure. Analyzing the cost of goods sold, particularly the impact of ingredient price changes, is crucial.
- Financial Performance Measurement: Key performance indicators (KPIs) such as same-store sales growth, customer satisfaction, and employee turnover are essential for evaluating the financial performance of individual franchisees and the Tim Hortons brand overall.
Strategic Analysis:
- Corporate Strategy: RBI's global expansion strategy, which includes acquisitions and brand extensions, can be analyzed in terms of its impact on the Canadian market and its relationship with franchisees.
- Franchise Model: The current franchise model, including the terms of the franchise agreement, needs to be examined for potential areas of improvement.
- Competitive Landscape: The Canadian fast-food market is highly competitive. Analyzing the competitive landscape, including the strategies of competitors like McDonald's and Subway, is crucial for understanding the challenges facing Tim Hortons.
4. Recommendations
To address the concerns of the GWNA and ensure the long-term success of the Tim Hortons brand in Canada, RBI should implement the following recommendations:
Improve Communication and Transparency:
- Establish a dedicated communication channel for regular dialogue between RBI and franchisees, including town hall meetings and online forums.
- Provide franchisees with timely and transparent information about strategic decisions, including pricing changes, new product launches, and marketing campaigns.
- Implement a system for feedback collection and analysis, ensuring that franchisee concerns are heard and addressed.
Revise the Franchise Agreement:
- Review and revise the existing franchise agreement to address key concerns raised by franchisees, including pricing of key ingredients, marketing support, and profit sharing arrangements.
- Consider implementing a more equitable profit-sharing model that takes into account the unique challenges faced by Canadian franchisees.
- Foster a more collaborative relationship between RBI and its franchisees, moving away from a purely transactional model.
Implement Cost Management Strategies:
- Conduct a thorough cost analysis to identify areas where costs can be reduced without compromising the quality of the Tim Hortons brand.
- Explore alternative sourcing options for key ingredients to mitigate the impact of price fluctuations.
- Implement activity-based costing (ABC) to identify cost drivers and optimize resource allocation.
Enhance Operational Efficiency:
- Implement best practices in operations management, including streamlined ordering processes, inventory management, and employee scheduling.
- Leverage technology to improve efficiency and reduce operational costs, such as online ordering systems, mobile payment options, and data analytics for customer insights.
Focus on Canadian Consumer Preferences:
- Conduct market research to better understand the preferences and needs of Canadian consumers.
- Develop and implement marketing campaigns that resonate with Canadian consumers, highlighting the unique aspects of the Tim Hortons brand.
- Encourage franchisees to adapt menu items and promotional offers to local tastes and preferences.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: RBI's core competency lies in its strong brand recognition and franchise model. Maintaining a strong relationship with franchisees is critical to its success.
- External Customers and Internal Clients: The recommendations address the concerns of both external customers (Canadian consumers) and internal clients (franchisees).
- Competitors: The recommendations are designed to enhance the competitiveness of Tim Hortons in the Canadian market by addressing the challenges posed by competitors.
- Attractiveness: The recommendations are expected to lead to improved profitability for franchisees, increased customer satisfaction, and enhanced brand value, ultimately contributing to higher shareholder value for RBI.
6. Conclusion
RBI must prioritize a collaborative and transparent relationship with its Canadian franchisees to ensure the long-term success of the Tim Hortons brand in Canada. By addressing the concerns of the GWNA through the recommendations outlined above, RBI can foster a more equitable partnership, improve profitability for franchisees, and enhance the overall value of the Tim Hortons brand.
7. Discussion
Other alternatives not selected include:
- Ignoring the concerns of the GWNA: This would likely lead to further dissatisfaction and potential legal action, ultimately damaging the brand's reputation.
- Terminating the franchise agreements with dissenting franchisees: This would be a drastic measure that could backfire, potentially leading to a loss of valuable franchisees and a negative impact on brand image.
The key risks associated with the recommended approach include:
- Resistance from RBI management: Some executives might be reluctant to make significant changes to the current franchise model.
- Difficulty in implementing the recommendations: Implementing these changes will require significant effort and coordination between RBI and its franchisees.
- Unforeseen challenges: The Canadian market is dynamic, and unforeseen challenges could arise that require further adjustments to the strategy.
8. Next Steps
To implement these recommendations, RBI should take the following steps:
- Form a task force: Create a cross-functional task force composed of representatives from RBI and the GWNA to develop a detailed implementation plan.
- Develop a communication strategy: Establish a clear and transparent communication plan to keep franchisees informed about the progress of the implementation process.
- Pilot test changes: Pilot test key changes in a limited number of franchise locations before rolling them out more broadly.
- Monitor and evaluate: Continuously monitor the impact of the changes and make adjustments as needed to ensure the effectiveness of the strategy.
By taking these steps, RBI can address the concerns of the GWNA, improve the profitability of its Canadian franchisees, and ensure the continued success of the Tim Hortons brand in Canada.
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Case Description
In March 2018, an analyst at an investment management firm in Toronto, Ontario, had to decide whether or not to recommend that his firm establish a position in shares of Restaurant Brands International Inc. (RBI). Formed after the merger of Burger King and Tim Hortons Inc., RBI was led by the private equity firm 3G Capital. RBI was a powerhouse-the third-largest, quick-service restaurant chain in the world. Although RBI was performing well and seemed to present an attractive investment opportunity, the company was facing issues from disgruntled franchisees, who were dissatisfied with the cost-cutting measures implemented at Tim Hortons Inc. as part of 3G Capital's acquisition. This led to class action lawsuits from franchisees as well as a business slow-down, as measured by same-store sales figures. With not much time left, the analyst had to determine and present a decision to the rest of his team on whether or not to invest in RBI.
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