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Whistleblower Allegations Timeline

The following is a timeline of relevant events related to this website’s report of numerous whistleblower allegations to MTY Food Group and the information posted to this website.

May 25, 2016 – MTY agrees to buy Cold Stone Creamery (CSC) and eventually pays $394.2 million, in part, for the brand. (CSC has been the company’s number one concept in terms of sales each year ever since.)

June 19, 2016 – Forbes publishes an article that was critical of MTY’s purchase, in part, of CSC. The article stated, among other things, “[t]he number of U.S. CSC outlets shrank 7% to 1,035 in 2015 from 1,111 in 2013….

January 2020 – An attorney, acting on behalf of, reported numerous whistleblower allegations to MTY on many different topics. For example, despite prohibition by the U.S. Federal Trade Commission (U.S. FTC) against franchisors “making statements that contradict” the requirements of its Franchise Disclosure Document (FDD), CSC repeatedly markets to investors while making false claims regarding, among other things, the company’s growth, store closure rate, location totals related to its U.S. franchise network, projected growth, etc. We also made numerous allegations regarding the company’s “Financial Performance Representations” as defined by the U.S. FTC and or franchisee profitability.

February 13, 2020 – A U.S. attorney speaking on behalf of MTY responded and acknowledged receipt and review of the whistleblower allegations. The attorney also warned of potential legal consequences if we published the allegations.

February 14, 2020 – One day after the attorney communication above, MTY issued a press release announcing the postponement of its fourth quarter results based on allegations by a “whistleblower employee”. It asserted it believed the claims were “baseless and frivolous”. The announcement was followed by numerous negative media publications. The stock also “tumbled as much as 13%, its biggest intraday decline [at the time] since October 2005”. In addition, the investment community expressed concerns and criticized the lack of transparency by MTY.

February 23, 2020 – On Sunday afternoon, MTY announced it would issue its Q4, 2019 results at 6:00AM EST the following morning and hold its postponed investor conference at 8:30AM EST the same day.

February 24, 2020 – Prior to the market opening, MTY issued a press release quoting Gary O’Connor, Chairman of the Audit Committee, claiming the board of directors had investigated the whistleblower allegations and determined, among other things:

  1. They were made by an “active employee”.
  2. They were found to be “baseless”.
  3. They were previously “evaluated and dealt with”.
  4. The company cannot give further details about the allegations.

February 24, 2020 – Prior to the market opening but following the press release above, MTY held its investor conference. During the conference, CEO Eric Lefebvre confirmed O’Connor’s statements above. In addition, following one analysts’ question regarding pace of CSC’s closures, Lefebvre stated, “[O]bviously, there’s always going to be more store openings than more store closures for Cold Stone just because it’s such a big brand…. [T]hings are going to go well” (“Lefebvre’s Statement” or “Statement”). Lefebvre also repeatedly stated it would pause its focus on acquisitions to prioritize stabilizing franchisee profitability.

February 24, 2020 – Following MTY, Lefebvre and or O’Connor’s statements that the whistleblower allegations were “baseless”, “dealt with” and that CSC would always grow, MTY’s stock soared 9% in trading on the good news. This was despite that Restaurant Brands International Inc., MTY’s nearest competitor, and the market were -1.6% and -2.0%, respectively, and analysts were underwhelmed with MTY’s financial performance. Therefore, it appears that investors were relying on the statements of MTY, Lefebvre and or O’Connor that all is well.

March 9, 2020 – Forbes published a second article that questioned the truthfulness of statements made to investors by MTY, Lefebvre and O’Connor regarding the whistleblower allegations.

February 13, 2020 – March 18, 2020 – MTY’s stock fell from $59.73 on February 13, 2020—the day before the company announced the whistleblower allegations—to a low of $16.58 on March 18, 2020. Shareholders lost nearly $1.1B in value. (Some investors may be inclined to attribute these losses to COVID. However, we estimate that, depending on when those investors sold or sell their holdings, as much as more than half of that loss was due to the negative consequences and MTY’s struggles to recover resulting from MTY’s management’s and board’s handling of the whistleblower allegations.) The overwhelming majority of those losses occurred after investors had the opportunity to rely on MTY, Lefebvre and O’Connor’s statements.

March 27, 2020 – CSC published its 2020 federal disclosures mandated by the U.S. FTC. The document included numerous whistleblower allegation changes. In addition, CSC claims its total international locations grew by 13 to 341 stores in 2019.

MTY Food Group Executives & Other Photos