Tim Hortons – How much is goodwill and customer loyalty worth?

Tim Hortons, with more than 2,750 outlets across Canada, is Canada’s largest and most popular coffee and donut shop. Since its inception in 1964 it has become a Canadian institution, as much a part of the nation’s psyche as hockey, fitting since it was started by the late Toronto Maple Leafs player Tim Horton.

It also prides itself on being a good corporate citizen. Tim Hortons sponsors children’s camps through the Tim Horton Children’s Foundation and contributes to programs like the Timbits Minor Sports Program, the Smile Cookie Program, and the Earn-a-Bike Program. It gives away millions of dollars of food, beverages, and prizes during its annual Roll Up The Rim To Win promotion.

You’d think that a company with such a meritorious policy of generosity would do a better job of communicating this philosophy to its middle management. Unfortunately, that doesn’t seem to be the case.

In May of this year, a front-line employee at a Tim Hortons restaurant in London, Ontario gave away a Timbit (essentially the hole from a donut) to the baby of a regular customer. At the time, the employee thought little of the event. After all, the store regularly gives away day-old donuts to patron’s dogs.

However, two days later the employee was called into a meeting with three managers who explained that her “theft” had been caught on security cameras. She was promptly fired.

Reaction when the dismissal hit the news media was immediate and vehement. By far, the majority of Tim’s customers were outraged. Many vowed never to eat at Tim Hortons again, or at least not at the restaurant where this woman worked.

The next day, Tim Hortons’ corporate head office sprang into action to put out the fire, issuing a statement apologizing for the dismissal, insisting that it was an inappropriate action by the manager of that store, and promising that the employee would be rehired at another store just down the street from where she used to work.

Here’s the problem: While the head office said there’s not yet a policy on giving away free food, a district manager said that doing so is against the rules, whether it’s a Timbit or ten sandwiches.

Why the confusion?

Tim Hortons needs a clearly defined policy and it needs to communicate this to all levels of management. While the spokesperson for the head office said the franchisees are free to set their own policies and run their businesses as they choose, there are obviously some rules they have to follow. Giving their employees some room for discretion should be one of those rules.

The front-line worker in this case clearly recognized the customer as a regular and took a step that would, if anything, have encouraged greater customer loyalty. Yes, it would have cost the company something. But anyone in business should appreciate the value of goodwill, far greater than the price of a Timbit they sell for 16 cents but that probably costs them less than half that to make.

Lesson: Build goodwill and encourage customer loyalty by giving something away for free. Make it reasonable, but make it meaningful. Give your employees some latitude. Communicate your policies and your corporate philosophy to all levels of management.