Tim Hortons Running at a Loss: Only When the Government is in Charge!

Tim Hortons boasts total revenues in 2010 of $ 2.53 billion, and employs nearly 85,000 people across Canada.  This company is more than a coffee and doughnut shop- it is a Canadian icon.  As Canadians, we love our “Timmies” (especially at “Roll Up The Rim” time!).  We are willing to wait in line-ups out the door for our favourite food and beverage.  Given the national obsession for their products, it would seem like a simple task: open a Tim Hortons, and turn a profit. All you need is some basic business sense, a hot pot of coffee, and a selection of treats.  Eastern Health decided to do just that and opened a Tim Hortons in a St. John’s hospital.  They anticipated enough profit to pay for 7 nurses, or 11 support staff.  Alternatively, the money could go back into cancer treatment.  Customers felt good knowing the profits were supporting local healthcare, while they enjoyed their double-doubles and old-fashioned glazed.  The only flaw with this business model was the $28 wages paid to the employees.

“Let me tell you why (the hospital franchise loses money),” Vickie Kaminski, President and CEO of Eastern Health Authority begins “We charge you a buck-ninety-four for that large coffee, but we insist that the staff who are pouring the coffee are Eastern Health staff, and they get paid $28 an hour. No Tim Hortons pays that.”  She hits the nail on the head, it is unfortunate that this was not realized sooner though, given that last year the coffee shop lost approximately $260,000.  In 2008-2009 the shop lost $296,110.  Critics- myself included- see this as a cautionary tale of what happens when the public sector tries to run a private enterprise.  In short it fails.  However, a more detailed analysis would conclude that it is the lack of accountability that is the greatest contributor to the losses incurred by the public sector.

The government should have a role in the delivery of essential services, and services that benefit the greater public but are too costly to be taken on by private enterprise.  Examples of services that are currently best delivered by the government include EMS, police, public transit, rural northern bus routes, and libraries.  Although there is debate about how many services should be delivered, I think that reasonable people can agree that your morning coffee is best delivered through private enterprise.  We must not stick to notions of the past- that something is a public service because it has always been so.  As a society we must be vigilant, and question why that is the case.  75 years ago it would be out of the question to have any company other than Bell deliver a phone service, but now we have many other service providers including Rogers and Telus.  As a consumer I enjoy being able to make the choice that is best for me.  As technology progresses we must be open to privatization of certain services.  If the government truly is the best provider, it will become evident.  If it is not, somebody else will find a way to drive down the price.  It really is win-win!

In order for a business to be efficient, innovative, and profitable it must be held accountable.  Where is the accountability when the government pays the losses?  Clearly the franchise was able to function in this irresponsible manner because the tax payer was footing the bill.  Any sound business person would see the losses and change the business model.  It may have taken 17 years, but on Tuesday the Eastern Health authority announced it would turn the location over to the private sector.  In the private sector, the average Timmies rakes in $265,000.  Surely one of the first changes to the business model will be changing the wage of the employees, although there must be more ways to make this a more efficient operation.

As a society we must determine where to draw the line between what should be private, or public services.  I think that the private sector should provide most services, and only in instances that there is a gap between something that genuinely benefits the public and the private sector’s willingness to cover it should the government step in.  This instance leads me to question where else the tax payer’s money is being wasted, and where we can find savings through efficiency.  I think that there is a strong case for the private sector’s involvement in the delivery of public services, but more than that, I think there is a stronger case to be made for the public sector to cease involvement in the delivery of private sector services.  Indeed, only a Tim Horton’s run by the public sector could run at a loss in Canada.

-Alanna Newman

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