Day for tears at Tim Horton's

Howell said she lost her house and car as a result of the Tim Hortons situation. She had to hire an attorney to get the company to pay what it owed for the takeover but received only $4,000 rather than the $35,000 she had expected, Howell said. "The franchise owners are going to come out with almost nothing," said Howell.

http://www.theday.com
November 12, 2010

Day for tears at Tim Horton's
Lee Howard

Tim_Hortons.jpg

Amanda O'Meara, right, an employee, hugs Sierra Forster, 12, the daughter of the owners of Tim Hortons in Pawcatuck, as Rebecca Elwell, left, talks to fellow employees at the Pawcatuck store. Abigail Pheiffer/The Day

10 local stores closing as chain of coffee shops decides to pull out of Connecticut, Rhode Island

As many as 750 Tim Hortons employees and franchise owners lost their jobs Thursday when the Canada-based coffee-shop chain announced the closing of 36 stores in New England, including 10 locally.

The chain, named after a famous former Maple Leafs hockey player, said it is closing all of its 34 stores in Connecticut and Rhode Island, as well as two shops in Portland, Maine, and 18 self-serve kiosks. A company website listed 10 shops within a 50-mile radius of New London: three in Westerly, two in Groton and one each in Norwich, Pawcatuck, North Stonington, Ashaway, R.I., and Charlestown, R.I.

According to a former Tim Hortons franchise owner, the local shops likely employed between 150 and 200 people, most of them part-time.

"Almost all of the (local) franchise owners just got their franchise in the last two years," said Angela Howell, who with her husband, Jerry, ran Tim Hortons shops on the Norwich-Salem Turnpike in Norwich and Route 184 in Groton until the company took over the stores within the past year because of poor sales.

Howell, the first Tim Hortons franchisee in New England, said the new owners of the Norwich coffee shop started their business just two months ago, the franchise coming as a wedding gift from their parents. Neither the franchise owners nor their employees had a warning about the closing, she said.

"They were in tears, just crying," said Howell, whose son worked in the Norwich store. "I feel bad for these guys. It is sad."

Howell said she lost her house and car as a result of the Tim Hortons situation. She had to hire an attorney to get the company to pay what it owed for the takeover but received only $4,000 rather than the $35,000 she had expected, Howell said.

"The franchise owners are going to come out with almost nothing," said Howell.

In 2004, Tim Hortons bought 42 Westerly-based Bess Eaton coffee shops out of bankruptcy for $41.6 million. Two years ago, citing $2.1 million in operating losses, Tim Hortons said it was closing fewer than half of its 30 company-owned stores in southern New England and planned to convert some of them to franchises.

The first two local stores that Tim Hortons closed, according to Howell, were former Bess Eaton franchises in Waterford and New London.

Howell said Tim Hortons couldn't compete with Dunkin' Donuts. It was partly a taste issue - Tim Hortons' coffee is very strong, she said, more to the liking of Canadians than New Englanders - and partly a matter of not being able to change people's habits. In addition, she said, the company wouldn't alter any of its strategies to conform to local preferences.

"They kept saying, 'The customers will get used to it,' " Howell said.

Tim Hortons defended its move to close local stores by pointing to the bottom line.

"We believe this step removes a significant impediment to our long-term growth and development," said Don Schroeder, president and chief executive of Tim Hortons Inc., in a statement. "These restaurants represent a small portion of our overall system in the U.S., but had a disproportionately large negative impact on earnings."

Tim Hortons said average sales volume per store for its shops in the Providence and Hartford markets was about half of what it has seen in other parts of the country.

"The restaurants that are closing had a negative impact of about $4.4 million on operating income year-to-date to the end of the third quarter," the company said.

Calls to local Tim Hortons stores Thursday either resulted in no one picking up the phone or, in the case of stores in Norwich and Westerly, a crisp "no comment." David Morelli, listed as the Tim Hortons media contact, did not respond to an e-mail and phone message asking about the closings.

The company took a $20.9 million charge against earnings to close up shop in Connecticut and Rhode Island. An additional charge, not exceeding $30 million, will be taken in the fourth quarter related to lease terminations and other location-closing costs, the firm said.

"We are profitably growing our U.S. business in our core Northeast and Midwest U.S. markets and overall we are seeing sales develop consistent with our expectations and long-term views of success," the company said. "The restaurants we are closing in the New England region have detracted from that performance and our overall development in the U.S."

Nevertheless, the company reported an operating loss of $17.5 million for all of its U.S. locations. Tim Hortons has more than 560 shops in the United States, but it expects to open 300 more stores chainwide in the next three years and is expanding rapidly in the Midwest.

"We plan to reinvest a portion of the expected earnings improvement from these closures to increase our brand profile in our U.S. core growth markets where we are building critical mass," company CEO Shroeder said in a statement.

http://www.theday.com/article/20101112/BIZ02/311129865/-1/BIZ


Risks: Business model had never created adequate investor returns, Cannon fodder, Franchisor takes franchisee store, resells to new dealer, Termination of franchisee, mass, Uncharacteristically shy with media requests, United States, 20101112 Day for

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