Financial challenges for area Tim Hortons franchisee attributed to pandemic and changes to TFW program

It is business as usual at six local Tim Hortons outlets following the insolvency of their franchisee, which has also highlighted the role of the federal Temporary Foreign Worker (TFW) program in staffing fast food outlets.

On September 22, lawyers representing Alexandria-based MGB Ventures Inc. filed a notice of motion in Ontario Superior Court for restructuring proceedings under the Bankruptcy and Insolvency Act. The MGB-owned Tim Hortons locations are in Vankleek Hill, L’Orignal, the St-Isidore/Maxville exit on Highway 417, and Alexandria. The six locations collectively employ 156 people. An affidavit filed in court by MGB President, and sole director Paul Burke indicates the six Tim Hortons locations have 108 full-time employees, 41 part-time employees, and 41 TFW employees. Tim Hortons corporate name is the TDL Group, and its parent company is fast-food conglomerate Restaurant Brands International (RBI).

According to the notice of motion, MGB’s largest creditors are the Canada Revenue Agency for a proof of claim for $337,789.85 on account of unremitted employee payroll deductions (income tax, Canada Pension Plan, Employment Insurance), and for $1,270,675.98 on an unsecured basis, comprising corporate income tax and excise tax. The second-largest creditor is the Bank of Nova Scotia, totalling $1,084,676.59, plus accruing fees, interest and penalties. The motion confirmed that MGB is insolvent.

Burke’s affidavit attributes several factors to the insolvency. One is the significant reduction in sales experienced at all outlets due to public health restrictions between 2020 and 2022 resulting from the COVID-19 pandemic. MGB formerly operated a Tim Hortons outlet on Main Street in downtown Hawkesbury and closed it in 2021 after it experienced a 90 per cent decrease in revenue.

Another factor is the denial of access by MGB to federal and provincial wage subsidy programs. Burke attested that MGB was informed in 2021 it was ineligible for more than $500,000 in pandemic-related wage subsidies because some of the locations had opened during the pandemic, rather than before it began.

Burke’s affidavit attributes changes to the TFW program as a significant contributor to the insolvency. As part of restrictions imposed during the pandemic, the Government of Canada significantly restricted the TFW programs. As a result, MGB employed a lower number of TFW employees. As a requirement of the program, MGB must subsidize housing for TFW personnel, and was leasing properties from PGB Estate Developments Inc. (PGB), a company also owned by Burke. Restrictions in the TFW program caused inefficiencies in MGB’s housing subsidy program which had an adverse effect on its cash flow.

According to the court documents, the premises for the L’Orignal, Hawkesbury, and Alexandria restaurants are leased or subleased from TDL. The premises for the Vankleek Hill restaurant is leased from PGB Estate Developments Inc. (PGB), a real estate holding corporation owned by Burke. The location by Highway 417 is leased from Parkland Fuel Corporation.

MGB proposed to the court a restructuring plan including the sale of three, unspecified locations to another franchisee.

Tim Hortons Media relations issued a statement in response to questions from The Review. The statement implied the situation involving the MGB outlets is out of the ordinary.

It is extremely rare to see this type of situation, and it does not at all reflect the financial viability of the restaurants in question,” read the statement. “We are confident they will continue to be great Tims restaurants for their local communities with new ownership in place. The staffing figures at these restaurants in question do not reflect the local hiring reality across the vast majority of Tim Hortons in Canada,” the statement continued.

Meanwhile, the six Tim Hortons outlets remain open, serving coffee and food for people on the go. During the afternoon of Friday, October 2, a representative of a property inspection firm was at the Vankleek Hill location photographing and documenting other information about the site.