When Burger King announced that they would be buying Tim Hortons, Canadians across the continent rebelled, and the largest riot in the history of the country was created.
Well, maybe it wasn’t that dramatic. But it is true that Canadians are not happy with the merge, which will link the coffee-and-doughnut chain to one of the largest international fast-food restaurants. Tim Hortons, or “Timmy’s”, has in the past couple years branded itself as distinctly Canadian, and although its success is quite impressive (25% of all food service transactions in Canada are from the chain), that success hasn’t quite made the global stage. Tim Hortons has reached the northeast US and Persian Gulf, but has expanded very little elsewhere.
Criticism lies in two main groups. The first are the Canadians, who are worried that merging the two companies will ultimately take away some of the authenticity of the beloved chain. Pierre Berton, who has written a book on the history of Tim Hortons, has said on the matter that “In so many ways the story of Tim Hortons is the essential Canadian story…of success and tragedy, of big dreams in small towns, of old fashioned values and tough-fisted business, of hard work and of hockey.” Burger King and Tim Hortons have both declared that the restaurants will be managed independently, but that has done little to assuage Canadians.
Another group with complaints would be the financial-savvy, who see this merge as an offshoot of the growing problem of tax inversion. Tax inversion is when an American company bases their headquarters in a foreign country, such as China or Canada. By doing so, the company is subject to the country’s tax rates, which are lower than that of the US. This does not mean that the tax rate of the US is changed; rather, it lets the company pay less in taxes for foreign earnings. The tax rate in the US is a fixed rate for all countries, while in other countries they are lower or higher in various percentages, unique to each country.
This is not the first time that Tim Hortons has merged with an American company. It used to be owned by Wendy’s, another fast-food chain, before splitting up in 2006. It doesn’t seem that that particular purchase had made as big of a controversy as the Burger King one has, but then again, with the recent debate over tax inversion, every big transaction from now on will be scrutinized and criticized.
But as long as Burger King stays with Tim Hortons, it should let Timmy’s be Timmy’s. No sense in ruining a perfectly good business strategy.
By Claire Kim
