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4 Feedback

7 The Rant Old World heritage sites have become tourist theme parks from hell. It’s time to limit admissions

11 The Exchange Shopify founder Tobias Lütke would prefer to exist in the CP conceptual realm, but ents he’s now a real-world ORRIN)

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POULSEN 14 Panorama

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Y time for Ottawa to invite ND in foreign giants FEATURES SA BY 17 McGugan 18 Revenge of the nerds 26 Fall of the romaine empire

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MA in many countries for serious readers—mostly young expand so quickly and then wilt so B

RO are electing clowns— women. Now it’s using its data fast? Its brash young founder and CEO, R

FO literally. Can anything and authors to take on the major Matthew Corrin, has a lot to do with Y restore serious faith in Hollywood studios. /By Sean Silcoff both. /By Joe Castaldo democracy? USIVEL CL EX

T 40 Last Word

SHO As the son of immigrants, Flex like a billionaire

APH retiring Deloitte Canada Islands, jets, golf courses, racehorses, yachts,

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JULY/AUGUST 2019 / REPORT ON BUSINESS 3 July/August 2019, Volume 36, No.1 Feedback Editorial Editor, Report on Business DEREK DECLOET Decline of a factory town Assistant Editor DAWN CALLEJA Senior Editor JOHN DALY Charles Wilkins wrote about the town of Perth, Copy Editor MICHAEL BARCLAY Ontario, which is about to lose its largest private Research CATHERINE DOWLING, employer—an auto-parts plant owned by Magna ANNA-KAISA WALKER Art Art Director DOMENIC MACRI - Mr. Gilgan wants government Associate Art Director to “get out of the way.” And Send us your thoughts at BRENNAN HIGGINBOTHAM the agents of foreign money robmagletters@ Director of Photography globeandmail.com, CLARE VANDER MEERSCH - Canadians are not miraculously laundering in housing want tweet us @ more skilled, intelligent or hard- government to stay out of the way. robmagca and Contributors working than Chinese workers. —Joel Banks follow us on STEVE BREARTON, TREVOR COLE, Instagram @ SARAH EFRON, TIM KILADZE, IAN MCGUGAN, Or Indonesians or Bangladeshis rob_magazine JOANNA PACHNER, JUDITH PEREIRA, ERIC or people living in Uganda. The - The Greenbelt was set aside REGULY, RITA TRICHUR, LUIS MORA seven billion people who do not to preserve the last remaining Advertising have First World living standards shreds of green space, forests Chief Revenue Officer, VP Advertising want what we have—which will and farms in southern Ontario, ANDREW SAUNDERS actually mean that “our” living and to prevent low-density, Managing Director, Creative Studios and Ad Innovation standards decline as economies car-dependent urban sprawl from TRACY DAY equalize. —Panaguy1 extending across the lower half Senior Manager, Special Products ANDREA D’ANDRADE Product Manager RYAN HYSTEAD But Ontario is open for business. Production Managing Director, Print Production Hasn’t Magna heard the slogan? SALLY PIRRI Production Co-ordinator —Conservative For Life ISABELLE CABRAL

Publisher PHILLIP CRAWLEY Editor-in-Chief, The Globe and Mail - This was a beautifully written of the province. There remain DAVID WALMSLEY portrait of a town under siege. If huge amounts of undeveloped Managing Director, Business and Financial Products only the misery in Alberta could land not in the Greenbelt. Study GARTH THOMAS garner such vivid attention. after study has shown that land —Delphioracle scarcity has nothing to do with Report on Business magazine is published the spike in housing affordability 10 times a year by The Globe and Mail Inc., 351 King Street E., Toronto M5A 0N1. Telephone - After three or more decades in the Golden Horseshoe. 416-585-5000. of globalization, people are Yet, here we have a man who Letters to the Editor: [email protected]. still surprised when companies has made billions building The next issue will be on June 28. Copyright 2019, close plants and move to more urban sprawl arguing that The Globe and Mail. favourable jurisdictions. It Ontario should eliminate the last Indexed in the Canadian Periodical Index. sounds as if this decision was in remaining protected areas so his Advertising Offices Head Office, The Globe and Mail, the making for a long time as the private company can make more 351 King Street E., Toronto M5A 0N1 company changed ownership profit. A textbook case of private Telephone 416-585-5111 or toll-free many times and just wasn’t interests trying to undermine 1-866-999-9237 Branch Offices viable compared to other places public goods. —envirodefence Montreal 514-982-3050 that provide the same product Vancouver 604-685-0308 for less money. - Why do so many people feel the Calgary 403-245-4987 Email: [email protected] The workers of today will be need to bash those who have been United States and countries outside of displaced when AI can write successful and have actually built North America: AJR Media Group, 212-426-5932, code faster and better than they something ? —Neil Den Tandt [email protected] currently do. Workers will have Publications mail registration No. 7418. to be flexible to keep up. - So a guy who’s made billions The publisher accepts no responsibility for unsolicited manuscripts, transparencies or other —Outsider22 building housing thinks there’s material. Printed in Canada by Transcontinental nothing an individual can do Printing Inc. Prepress by DMDigital+1. A bit rich? about homelessness. Do any of Report on Business magazine is electronically available through subscription to Factiva.com from Factiva, Peter Gilgan urged Ontario to let his houses come with mirrors? at factiva.com/factiva or 416-306-2003. him build houses in the Greenbelt. —Allan Ross tgam.ca/r

4 JULY/AUGUST 2019 / REPORT ON BUSINESS

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torontopearson.com/CountOnPearson ILLUSTRATION KAGAN MCLEOD this month to av ing boom ha A ing fill glob And ailab Cr ve the Th va industry ba al oat been cancies. e hot dl wa tr all le wo ian y av sn jobs tha spots of needed st el rld’ ’t ec eer pr visit ga t all onomist we A wa s ov me ed on it big mo re s ided or fo wa , to bef the and seasonal re s. chunk st wa s or ign a Dalma cr onc We alluring scar rd we e ack the in br The e lc of ce need ed ve oad ex and ome tian dar the pub stment. pl up er at ained k lo co boost rev to to lic side ec w- tr ast be. enues onomic actions do re pa Bu to soon of sour to ying, Su a t me modern tourist a re be unemp we ce struggling disc , re lea wh tt the s ar nt fo er we ving y e ove to rms. rev lo Th the mas job buckling re major ye re iv di e import co d d s al of ec Ra ve to tha Cr untry’ of onom rt managing nt urism pl oat ed a t ed aye man onc under ians tha s y, labour rs to became e-thri at y t urism in of co tr lur act the trap uld the the ed our to v- - pr va ess so TV br loca the it thanks of pa bigg JUL luable y ought infull ar Dubr Y/ ur small of AU series. tions est ed e GUS Game to of ov dr y by public de T visib medie aw used nik, the an 20 Th 53% vo 19 s. e endle of te enormous one le / It in number REPOR va d in as to Thr happened fa the l of the the se port ns ss T the ones, ts bl ON inhabit flocking fi deluge ockbust of to co BUSINE rs popular- visit ga t untry’ wh in thr wk ants pa SS ich or ee er to at rt 7 s s th fa 20 their mar the co at pa nu ing their to cr ent port the ou other sion tha joined number pa sit denc pa during a long include 8 a months cr ec so other industry ec si ag still an insensiti and to flo dri ing rier enues, dar of eag bomb ve ye mous Th Glob To Th It JUL ow ow onom aring a rk e—ou me % ss onomic ss e pr is Bali Of the wing, td mb ve ef ds t er number dail s, tr ne co time ke re might ar has Y/ -time eng gr eng urism ke ep is in fo the e oor e e fr d r, ficials ds, dail av ly lists—t AU month cr fa UNESC er of mar nsumer w sidents fr t la om in booming ow and pr rt to eping as siz Cr ar ear al aring the Dubr ar y beck el GUS st acking om the y, pur er te ar er alr housing ve vit beha tw of of neg of fr ob ting ove fr lobb e to of the re dment, y, -gr oat to millions th e. and ke 27% re st s hell. cheological lier—and s om om T to has not ss le ne ficials y, ea eigh dist st sued lem thous ships this calm of No and urism this tr 20 ar sidents, Th (5 ons. ts ow of vying re at ov he ia’ els rw fo ear impr en viour xt aur vit pl y dy s no av 19 sou ,0 e to O one cruise ba iv sear as of ha r rth do s Airbnb and ey nik gr ent ing vir ortions, helmed hist fiv / is no will 00) cruise w el ly al urism the fight ye ye the ke e bec sieg llooned Wo in ant Th REPOR the ve ands oup servic co wn we ve ’v fr (t ove ’s e tha onment aspects—hug mor ha cr . America y w 19 ar to mor ch magnets ar eping re in e om lo an oric wo) e ye nir sts ine co ra ome of wh rl be allo ll. ow positi e , 90s, ve wa urist sea ships. tha gions also . on capping w- fo glob t det alone up fr co T d ar And and pid disemb ef e me sect and e A ba the industry vit st sit Bar r cap ON and es-r o ded to om te co s cit He servic peop and we illeg ncluding t fo ting. ta indepen- with ands erior cultur fr endur gr gg fr a rs fr ta ab es al doesn slashed pa BUSINE al st to dollar rt looting ex xe ve or y ce ab destina om ge et other it’ theme ela om ow rit d the ag port bs and other wh le oc y fr dam- ac al ce ha and to to s pa this s s. lona le le t int last the tha ar at e and Bu ag the te the om and ing imp the ean onl co 17 es, on tal ntr 31 home ile ed ve Wo In ge n- of SS to with k- ing al d ex ’t Eur o e .8 e to s 4 t t online mmoda arri stunning if ye pric ner y ex es, schlepping tr tions act ships pects fe fleet rl million another tr go go ar av ope d ports es, va rising ad at re gr / Po cit visiting without St by ba le popularit adv fo to Jap /Hokk one under wr Ta HO ac changed lack island of visit Olympic Th and sp wine-lo nor / moder spect sce lis e of ve ing el Tr ac Sa Po l e sse r e fo urism nt ill, t ea ces ac ck ke rt y is is , mas est limiting of dis most tr at rnments an th only nery bug. the it tr anc av co tion ba in lt bu T rt ugal’ or wa of re r of als es wa pr ther t to av ave pr we ac and a the r le appr sible cheaper grun the ye will . o ve markable is el a beck at SPO unt lanc inc muse ov na magne s Eu , t aido cr e kno s ve te el oject hor ular to with old-gr bec 0. s. 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PHOTOGRAPHS (LEFT) GETTY Canada’s space odyssey On the 50th anniversary of the lunar landing (with Canadian technology playing a supporting role), we trace this nation’s long history of space innovation iest museums for a day and leav- ing an hours-long line of dejected JULY 20, 1969 Mona Lisa aficionados in the lurch. NOV. 13, 1981 Apollo 11 commander Neil Armstrong After five years of “The Louvre is suffocating,” their becomes the first man to walk on the development, the union said in a statement, noting Moon. The landing gear on the 15-metre Canadarm Eagle lunar module was built by Héroux blasts off aboard that more than 10.2 million people Aerospace of Longueuil, Quebec Space Shuttle tramped through the place last Columbia year. “This represents an increase NOV. 9, 1972 of 20% since 2009, but the palace Canada’s first communications JAN. 17, 1976 satellite, the Anik A1 satellite, owned Canada launches has not grown,” and the workforce by Telesat Canada, is launched Hermes, the most has been reduced. powerful satellite Similar woes afflict tourist hot- of the time beds from Cambodia’s Angkor APRIL 25, 1990 SEPT. 1982 Wat to Iceland’s Golden Circle, The Canadarm NASA invites a Canadian to fly Bali’s beaches, Japanese temples helps deploy the Hubble Space in space, thanks and even Mount Everest, which Telescope to the success of has become dangerously over- the Canadarm crowded because the cash-hun- JAN. 22, 1992 Astronaut Roberta Bondar gry Nepalese government is issu- becomes the second MARCH 18, 1986 ing too many climbing permits. Canadian and first Canada becomes a full Canadian woman partner in the International One unintended consequence: in space Space Station program A mountain regarded as holy by the citizenry is turning into the MARCH 24, 1992 world’s highest garbage dump. The feds privatize OCT. 5, 1984 Marc Garneau Telesat Canada, Declaring war on tourists isn’t becomes the selling remaining first Canadian the answer to these problems. shares to Alouette in space, as a Governments must do a better Telecommunications payload specialist job of managing their valuable public assets, both natural and NOV. 4, 1995 APRIL 19, 2001 human-made, that keep people Radarsat is Chris Hadfield boards Endeavour to deliver coming and spending. This means launched— Canadarm2 to the ISS and becomes the first AUG. 1, 2002 Canada’s first Canadian to perform a spacewalk Canada unveils its first devising effective regulations, Earth-observation space telescope controlling crowds and applying satellite reasonable restrictions on access. NOV. 12, 1995 OCT. 7, 2004 It makes good sense for the over- Chris Hadfield The world’s largest becomes the fourth commercial whelmed targets to tell cruise Canadian in space communications operators to send their super- satellite, Telesat’s sized floating resorts somewhere Anik F2, begins MARCH 11, 20200808 full operations else, clamp down on abuses by Canada’s ttwowo-armed Dextre owners of rental properties, and robot heads toto the ISS raise the costs of admission to MAY 25, 2008 help cover their hefty price tags A Canadian meteorological station lands on Mars for conservation, preservation MAY 27, 2009 DEC. 20, 2012 Astronaut Robert Thirsk lifts off and protection. Hadfield embarks on a five-month mission for six months on the ISS Keeping in mind the heavy to the ISS, becoming the first Canadian price of being too successful at commander of the space station DEC. 3, 2019 David SaSainint-Jacques heads toto the tourism game, officials in the the ISS ffoorr a six-month sstatay most desirable markets would be wise to follow the lead of the $2.3 billion JUNE 2019 Dutch, who have responded to Space sector’s contribution Canada launches three EaEarrtth-obh-observation sasatteellitllites, to Canada’s GDP (2017) known as the Radarsat Constellation, aboard a record-breaking tourist numbers SpaceX FaFalclcon 9 rorockcket—a $1.2-billion project by ending their travel marketing. “Instead of destination promo- $5.6 billion CANADARM tion, it is now time for destination Total revenue in the Canada’s top 30 space management,” the Netherlands Canadian space sector 90 944 organizations accounted for 97% of Board of Tourism and Conven- Shuttle missions days in space revenues, 81% of space tions declared in May. “More is 21,828 employment, but not always better, certainly not 624 million Number of jobs only 32% of inventions everywhere.” /Brian Milner kilometres travelled

JULY/AUGUST 2019 / REPORT ON BUSINESS 9 CELEBRATING THE 2019 CANADIAN BRANDED EXPERIENCE & MEDIA LIONS ACTIVATION LIONS Awarding Jury Shortlist Jury Karine Courtemanche, CANNES Alexis Bronstorph, President, Executive Creative Director, Touché PHD LIONS TAXI JURORS

FILM LIONS PR LIONS DESIGN LIONS Shortlist Jury Shortlist Jury Awarding Jury Mike Dubrick, Marie-Josée Gagnon, Lisa Greenberg, Partner, Creative Director, CEO & Founder, Executive Creative Director, Rethink CASACOM Leo Burnett

DIRECT LIONS MOBILE LIONS RADIO & AUDIO LIONS OUTDOOR LIONS Awarding Jury Awarding Jury Awarding Jury Awarding Jury Nellie Kim, Ian Mackenzie, Lyranda Martin-Evans, Carlos Moreno, Partner, VP, Executive Executive Creative Director, Vice President, Executive Global Chief Creative Officer, Creative Director, lg2 FCB/SIX Creative Director, DentsuBos Cossette

Each June, the advertising and marketing community gathers at the Cannes Lions International Festival of Creativity. As the global hub for ideas, insights and emerging trends, the Festival defines and shapes the creative marketing agenda for the year ahead. This year through the coveted Lions awards, global industry leaders pored over 40,000 submissions to identify the most creative work, set the global benchmark for excellence, and shape the future of the industry. Congratulations to the leaders who were named to the 2019 Cannes Lions juries, and represented Canada on the world stage.

The Globe and Mail is proud to be the official OFFICIAL FESTIVAL REPRESENTATIVE CANADIAN PROGRAM PARTNERS Festival representative in Canada for the Cannes Lions International Festival of Creativity. Learn more about our commitment to supporting marketing creativity and innovation in Canada, visit globelink.ca/cannes PHOTOGRAPHS SHALAN + PAUL Shopify ex plains on ho CE his w O lif To e-c e bias has Shop ommer Lütk changed ce e by Th bemo co e Tr no mp Ex evor ans change w an lif tha Cole y’ Ca s t lack nada’ he ter ’s of a s multibillionair pr de ofi ar th ts and of ambition, dishe e s JUL All we hea of pot is to entr of mor sell e-c fo Inc. dif as pos champion suc ec his Bu in spotlight, re So-so with Th all So the and co thr has gr called Shopif keeping worried As Eve so willing qualit pr idea It int co Y/ ’s fi rc mind ows a ob ft onom , nc mp the thous sit if fe t AU angib I is, her ough ommer how’s ential ce spok te ce of har dquart sib price n ve wa a pr the e recall, e epr solu wo the re than ab erns GUS each am do unique so . along an not ss than y tha ry re oducts in e y’s le the Pe mor re nc d ly uld to mor eneur , , co ev to T wn y, y. about ands e mind alm , their le tions the to pr Shopify’ the -as-a-servic re ha riodicall has e t 20 and that lends stock onl to to To in mak wh And ent mp ery pa fa er ce wo mak after of na in e 4, al ov pr imagine 19 ve with with e mak ir articula clu his s. quiet bias German-born of 000 , ss y go abilit and tur entr ich the / ert than iding ef an of s one online on rk bu minds go behind at built mar es REPOR your in ing es as ar the price er ne tte itself your lar y small-busines e t on ain ing? e their this is Lütk a emp it ound li the Lütk s epr gr it in a Lütk y tha of to a r and up y ke ve ye most, demeanor ge Ot co —no seem unkno the fa something I employees fa T ow of ma a an the , to te . off the ex e ha t s ar eneurial IPO wo ON oc t it cilit to ta Since nc over scina and lo e CEO Shopify e. es va busines e of we industry co pr carv ing the te abstr ist to has wa ve wh in ye casion, of BUSINE this eptual. Ca w and Th rl senc pr lue , gi rial hundr at ob nt ols at wa d you mood ar es— pur the to 1, with ene oduct. ve wo na ting mor e the or Lütk ained e then, times of lems 000%. e of act bl to e. n dian SS tha el rl were and ve s s e. a the eds e d. y y e 11 r t this month SHOPIFY’S STOCK HAS SOARED 1,000% SINCE THE IPO IN MAY 2015 $400 (TSX) Then there’s also this Wall Street software. And I think customers construct called the current stock are going to get to choose. price, which is trying to guess You have an interesting dance at the fair market value but is 300 going on with Amazon. Your completely unrelated. There’s a software is used in their rule around the office that if you Marketplace. But your COO, are caught checking the stock 200 Harley Finkelstein, recently spoke price during work hours, you about the danger of allowing a have to buy Timbits for your team few monolithic players to control the next day, and I periodically 100 commerce, which was obviously see boxes of Timbits. I actually a reference to Amazon. Are they a recently had to buy one. But it’s competitor or are they a partner? not that common. (1) 0 I think they are a massive factor With all its growth, Shopify hasn’t in the world of commerce. We 2015 2016 2017 2018 2019 yet posted an annual net profit. are actually partnering across (2) I know you don’t care about a lot of things with them. Lots traditional financial ratios or goals Let’s talk about competition. of people fulfill their products but at what point does showing a 2. Shopify mushroomed in a vacant with Amazon. Lots of people use profit become important? space, to some degree, and now Amazon’s payment system, and I mean, it’s hugely important, REVENUE it feels like the space is filling up that works really well on Shopify. because that’s what companies 2017 2018 with competitors. How challenging Lots of our customers sell through are basically for, at some point. is the landscape becoming for you? Amazon Marketplace. But I didn’t expect Shopify to be You’re absolutely right that there marketplaces are different from doing this so successfully for was a lack of competition for online stores in very meaningful BILLION so long. (3) In fact, I think as we 1 Shopify. Now, we’re competing ways. You own your online store. passed $1 billion in revenue, we $1. with Adobe, Salesforce, SAP— This is your home. On a sale, you did so with the highest growth more entrenched, mature make full margin. What you are rate of any software-as-a-service companies, especially around our attempting to do is create new company ever. We’ve built a trust Shopify Plus product. It’s actually relationships with customers. relationship with the investor MILLION harder to build a company with When you’re selling on a base that they agree we can use 73 a lack of competition than when marketplace, you’re not actually $6 the money we have in the bank one has significant competition. acquiring a customer; you are to invest in growth. And I think It’s the same as the difference making a transaction. You will we’ve been doing this fairly between intrinsic and extrinsic not get the customer information. prudently. Shopify happens to be motivation. It’s much harder to be You have no way of contacting one of those kinds of companies intrinsically motivated to work the person. You will never hear which—we have a gas pedal. It’s on your own betterment. Wanting if people liked your product, if MILLION a real gas pedal. We can go off MILLION to relentlessly create a better people saw it immediately, how .6

it and we’d be wildly profitable. -$40 product every day is much easier people inspected it. All these

But I think the right mode for the -$64 when you are under threat by things are opaque to you on any company, and I think the investor NET LOSS some competitor. marketplace. A lot of people community agrees, is to invest in So your life is getting easier. aren’t aware of that. the growth. 3. Shopify’s In a way. I can now point and say, If Amazon ceased operations, You mentioned building trust, software “Hey, those guys want us dead, would that help or hurt you? and you’ve done that by topping allows retail- and we clearly don’t agree. How [Long pause] That’s an excellent ers to create market expectations 16 quarters in online stores do we compete with those guys?” question. I think it would a row. What happens the first time under unique And I don’t have to go around actually hurt us. The important you don’t? brands. The making up arbitrary deadlines thing for the small businesses platform [Chuckles] Well, a friend of mine now has for things. Increasingly more we represent is that they rely once told me that you’re not really more than companies understand what on online shopping becoming a public company until you miss 800,000 this space is, how to be of value, a larger part of the total retail stores. a quarter. So I guess we really and how to build good software experience. (4) Amazon provides go public then. I’ve managed to within it. And either we will be convenience especially across all avoid this for 16 quarters in a row. the best ones to do this or we will the products that people need— Is it only 16? Sorry for a flippant not. If we are, then we will win toilet paper, laundry detergent answer. But I mean, this is bound the market. And if not, then we and all these kinds of products. to happen. And we’ll find out. It’s won’t. I tend to be fairly fatalistic For that, Amazon is unbeatable, basically a stroke of good luck about this. The only thing we and without that I think consumer that it hasn’t happened. can control is the quality of the behaviour would change. The

12 JULY/AUGUST 2019 / REPORT ON BUSINESS $18.8 TRILLION TOTAL RETAIL SALES GLOBALLY 4. ($U.S.)

TOTAL E-COMMERCE SALES $2.9 TRILLION

world of buying products you Um, not that much. I had a lot of 5. At the Does that mean not giving any want, from small business energy in the form of time and 2006 Winter money away? Olympics—a boutiques, is on the coattails of attention before, and now I have year after No. I will absolutely give most of purchasing the necessities. a third form of energy, although Own the the money away. I mean, there’s You once said that you’re not much less potent than people Podium too much to spend. Like I said, launched— motivated by money, you’re might imagine, which is money. Canada won it’s a form of energy. I will use all motivated by solving problems. I have to get used to that. I’m 24 medals, sources of energy I have available One problem is Canada. And— somewhat uneasy with money. up from 17 to help however I can help. in 2002. At Why is that a problem? That I never really set out to make Vancouver I’d like to tap into the sounds like an opportunity to me. a lot of money, and I’m reluctant 2010, knowledge you’ve gained about Canada won Okay. As Shopify expands to think a lot about it. 26 medals, entrepreneurship in general. around the world, what are you One thing society expects its including 14 What’s most important to an learning about where Canada’s billionaires to do is to give some of golds—more entrepreneur’s success—is it the golds than opportunities lie, or where our their money away to causes. Have any other idea, money, confidence? issues lie? you thought about what you will country. Coachability. Basically the There’s no silver bullet, as you do philanthropically? question is, why are you going 6. Lütke can imagine. Partly it’s cultural. There’s a couple of causes I’m holds 55% into this? Do you have a goal? It’s just an unfortunate truth really interested in, like mental of Shopify’s Do you want to make a certain that Canada is, at best, a “go-for- health and computer literacy. But Class B amount of money? Do you want shares, and bronze” society. Just in terms of there is a general pattern that I has a net to get a certain status? Or is there its ambitiousness. This is why find is unfortunate. There’s sort of worth of something you want to get done? these amazing companies are the Rockefeller progression: Build roughly $3.5 Are you interested in the learning billion. being created and then sell way an evil empire, a monopoly, take that comes from a journey like too early, usually to American no prisoners along the way, and this? Are you willing to listen to investors. I want to find the best then rewrite your own story by advisers, suppliers, customers? Canadians I can and tell everyone, being exceptionally beneficial to If you’re coachable, and you have “We are allowed to go for gold. the world. Carnegie did the same. that open mind and you’re going Try to build a world-beating I hope it’s possible to not need into it to learn, that is by far the company. If you try, it tends to do the two-phase approach. biggest predictor of success that to work.” This is what Canada You can build companies that are I’ve ever encountered. If I could learned, at least when it comes to simply good for society, without ever find out how to take someone sports, with the Own the Podium the pollution or the negative who goes into this with a money program. We need an Own the externalities of monopolistic objective and convert their Podium program for the business activities. I’m a systems thinker. mindset into a personal growth world. (5) I try to think about Shopify objective, I think that would crack If somebody wanted to start that inclusive of all its externalities, the code of entrepreneurship to a program, would you be involved? positive and negative. And I very meaningful degree. Absolutely. I think that would be try to design the company in fantastic. such a way that I simply don’t Trevor Cole is the award- Something else that’s happened need, afterwards, to go on a winning author of five books, including The Whisky King, since we spoke last is that you’ve multidecades philanthropic a non-fiction account of become a multibillionaire. (6) journey to make up for the Canada’s most infamous How has your life changed? damage I might have caused. mobster bootlegger.

JULY/AUGUST 2019 / REPORT ON BUSINESS 13 Smart Cities Steal these ideas

hen Google and the City of Toronto unveiled privacy activists accuse Google of surveil- their Sidewalk Labs project for Toronto’s lance-state ambitions and chastise the city for waterfront in 2017, the intention was to build handing public assets to a private company a living model of the smart city of the future. with insufficient oversight and transparency. GETTY The neighbourhood would be outfitted with Whatever happens to Sidewalk Labs, the the latest in sensors and gadgets, the data of smart city is on its way—and in some places, ALIA/ ON its day-to-day activities crunched to provide parts of it have already arrived. Here are five ORB services without equal. Two years on, the next-generation city-building tools already ) project is mired in controversy and delay, as making cities work better. /Chris Turner ONA CEL AR (B ; 2 ALAMY G) CITY | West Hollywood,

California HENBUR OT

SMART | Bus shelters (G

become community hubs OOD ; YW Getting more people to use public transit is often HOLL a central goal of smart- ST WE

city plans, and in WeHo, a OF handful of bus shelters have become the most visible CITY SY

feature of an ambitious TE strategy. The shelters UR CO themselves aim to be )

community hubs rather OOD than simple waiting spots, YW

with USB ports, free WiFi, (HOLL screens showing real- S;

time bus and community TURE PIC

bulletins, and stylish seating S

and roofs. And they’re just ANO CITY | Jinan, China one piece of a larger plan

SMART | Highway surfaces that gather data and transfer energy that includes on-demand SHEN/P shuttles for short transit

1 QILAI The bedrock of many smart- and a transparent top material trips; embedding sensors, )

city plans is the street itself. that can be embedded with digital communications and HINA By transforming inert asphalt sensors and wires. more in street lamps; and (C

into a surface that can gather The full suite of technologies changing the way data is APHS information and provide to be tested hasn’t yet been gathered and shared across GR TO services, the next-generation unveiled, but officials are the small municipality. PHO road promises to provide the discussing everything from most important platform for sensors to gather data about smart-city building. traffic and weather to digital In the industrial city of messaging for passing vehicles Jinan, north of Shanghai, the and on-the-fly charging for prototype for that platform is electric cars. The Chinese now in place. A one-kilometre government’s “Made in China stretch of expressway has been 2025” plan emphasizes building

paved with a three-layer surface both the electric vehicles that APH designed to host a wide range will use such roadways, and GR TO of technology, including solar the gadgets and software to panels to generate electricity, operate them. PHO

14 JULY/AUGUST 2019 / REPORT ON BUSINESS this month

CITY | Columbus, Ohio SMART | A unified transportation app in a single tap

What if a trip from Point A to Point B were as tidy as a Google Maps search? That’s the idea behind the transportation planning app being developed in Columbus. The app will allow trip planning across all options—conventional transit, taxis, ride-sharing, car- and bike-sharing—and users will be able to select their CITY | Gothenburg, Sweden preference and pay for the whole trip in a single tap. SMART | Moving people by driverless electric transport The app, still in development, was the centrepiece of a “Smart Columbus” plan that beat out cities like San Francisco and Austin to The shuttle bus, The test is part win the U.S. Department of Transportation’s Smart City Challenge. manufactured by a of Gothenburg’s It will eventually produce citywide electric vehicle charging, 4 French company called ElectriCity project, driverless-car infrastructure, data upgrades and more. Navya, seats only 10 a partnership of 15 passengers, and its organizations, including maximum speed is a Volvo, Ericsson and the mere 20 kilometres Swedish government. per hour. Still, the little Another project runs vehicle, which plied the three fully electric streets of Gothenburg and 12 hybrid buses in the summer of 2018, on busy commuter carries a substantial routes. There’s also a load. The bus is powered “demo arena” for next- by electricity and has generation projects and no driver. And Swedish a growing transport officials hope it is one research hub. Sweden of many signs that boasts some of the Gothenburg—where world’s most ambitious Volvo was born—is climate targets, and the global epicentre initiatives like ElectriCity of smart, clean are hoping to lead transportation. them there.

CITY | Barcelona SMART | Dividing congested urban sections into superblocks

Sometimes the most transformative plans are about priorities and policy more than technology. That’s certainly the case for Barcelona’s “superblocks,” which aim to liberate streets and public spaces from congestion, pollution and dangerous, car-centred urban design. The concept divides the dense Spanish city into four-block- by-four-block sectors, and then limits traffic to local and service vehicles at 10 kilometers per hour. In the five superblocks already in place, the streets have become pedestrian promenades, playgrounds, parks and street markets. And as the superblock network expands, it could reduce vehicle traffic enough to make the whole city’s transport system work better.

JULY/AUGUST 2019 / REPORT ON BUSINESS 15

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Singer Pia Mia, who has a supporting role in After, poses with fans at the premiere in L.A.

SHRIEKS FILL THE LOBBY OF THE PACIFIC THEATRES AT THE GROVE IN LOS ANGELES AS THE STARS OF THE YOUNG-ADULT ROMANCE FILM AFTER ARRIVE TO WALK THE RED CARPET.

There’s singer and social media influencer Pia Mia, glamor- ous in a yellow strapless gown, strolling by a corralled crowd of 120 excited girls. She stops to take group selfies, eliciting a fresh wave of hysteria. More unbridled enthusiasm greets co-stars Hero Fiennes Tiffin and Josephine Langford, two of Hollywood’s Next Young Things, as they make their entrance, her sparkling red suit drawing the paparazzi’s attention. Inside the theatre, one teenager starts to freak out as she realizes she’s standing in the same room as Anna Todd, the author whose books served as the source for the movie. “Is she there?” the girl says loudly to a friend, pointing toward Todd, seated close by. “Oh-my-God, Oh-my-God! One-two- three! One-two-three!” she recites quickly, trying to control her anxiety before exclaiming, “Anna!” Six years ago, Todd was an aimless 24-year-old military wife living in Texas when she began tapping out After on her smartphone in a Target checkout line. It started as a piece of fan fiction based on the boy band One Direction, and it the platform, mostly on their phones, writing a combined 200 made her a publishing superstar. The After series, which million comments and messages. The average session lasts follows the intense relationship between college good-girl 37 minutes—10 minutes more than Snapchat or Instagram. Tessa Young and troubled bad boy Hardin Scott (inspired by Wattpad’s ability to hold the attention of notoriously hard- Harry Styles), was published by Simon & Schuster and has to-reach millennials—who knew so many young people star- sold more than 15 million copies, topping bestseller lists in ing into their phones were actually reading fiction?—has several countries. Cosmopolitan has called Todd “the biggest made it a draw for advertisers, which account for most of its literary phenom of her generation.” estimated US$25 million-plus in annual revenue. But this night in early April really belongs to the Toronto That’s just a start. Wattpad has ambitions far beyond ad- company that exposed Todd’s story to the world in the driven social media. Its readers are throwing off billions of S first place: Wattpad Corp. After is the first Hollywood film points of data a day—a vast, real-time trove of insights that REP adapted for the big screen from a story published on Watt- reveal what kinds of stories speak to them and how. By using ZE

pad’s online platform, which connects writers with readers. artificial intelligence algorithms to mine that data, Wattpad ON/FU Since its launch in 2006, Wattpad has become a social net- believes it can determine which of its stories could hit it working star, with more than 70 million users, predominantly big as books, movies or shows. “You can view Wattpad as NICHOLS young women from 13 to 35 (the company estimates its user an intellectual property factory that can generate entertain- Y ND

base includes one in three teenage girls in the U.S.). And it ment properties organically and in large quantity,” says co- SA

has redefined the solitary acts of reading and writing as col- founder and CEO Allen Lau. Writers “might not realize they ION lective experiences. Wattpad’s four million authors upload have a big hit on their hands, but the numbers will not lie.” AT TR roughly 500,000 posts a day (the site has a catalogue of 565 The big question now is how many more Anna Todds Watt- US million stories), allowing readers to not only consume their pad can find among its crowd-sourced content and whether it ILL content, mostly for free, but to interact with writers and fel- can capture a piece of the action. To that end, in 2016 it estab- TO PHO low readers via votes, direct messages and comments. These lished Wattpad Studios, devoted to striking licensing deals ; FF

range from emojis to one-word reactions like “LMAO” to with outside publishers and studios, acting as an agent for CO thoughtful feedback occasionally written in full sentences. the writers and wresting co-production roles for itself. SIL

You won’t see J.K. Rowling or Salman Rushdie among Wattpad has since signed deals with production giants in SEAN Wattpad’s largely amateur cadre of writers, but you’ll find Europe, Asia and Canada, and with Sony Pictures Television OP) every imaginable genre, from children’s literature and sci-fi in Hollywood. Streaming service Hulu has ordered two sea- (T to horror and Great Gatsby fan fiction. Looking for Filipino sons of a show based on Wattpad young-adult horror story APH taxi stories, Muslim romances or explicit erotica? They’re all Light As a Feather, Stiff As a Board. And Netflix’s chief con- GR TO on Wattpad too. Users spend 22 billion minutes a month on tent officer, Ted Sarandos, said last year that its filmed adap- PHO

20 JULY/AUGUST 2019 / REPORT ON BUSINESS tation of Watttpad’s The Kissing Booth was “one of the most watched movies in [the U.S], and maybe the world.” On the publishing side, Wattpad has helped writers strike hundreds of deals, and this year it will start publishing under its own imprint. Other experiments in monetization are under way. The company’s vision—backed by US$117 million raised from top venture capital firms in Canada and the U.S., and Eva, in turn, inspired Lau to take an entrepreneurial path. from Chinese Internet giant Tencent Holdings—is to upend Frustrated by the bureaucratic nature of his first post-univer- the traditional Manhattan publishers and Hollywood pro- sity employer, IBM, he followed Eva, who’d graduated from ducers, which greenlight books and movies based on gut U of T engineering a year behind him, to a startup called instinct. In Wattpad’s view, that’s inefficient, biased and risky. Delrina. Eva was having all sorts of fun working at what was Its data-based approach, says venture capitalist and Wattpad then one of Toronto’s few software success stories, making a board member Peter Misek, can “effectively de-risk the con- program that enabled personal computers in the Internet 0.0 tent-creation process at all levels.” era to communicate with fax machines. (Symantec bought The company has had a couple of hits already, but there’s Delrina for US$415 million in 1995.) Working for Delrina con- a lot riding on After. Producer Aron Levitz, the fast-talking, vinced the young couple they were startup people. glad-handy head of Wattpad Studios, sums it up best as he Lau stayed at Symantec until following Eva again in 2000 to stands outside the Pacific Theatre: “I’ve got naches and shpil- Brightspark Labs, an incubator run by two Delrina founders. kes and everything right now.” In one gig, Lau worked for his wife; in another, she worked for him. When Eva got pregnant in 2002, she left (the couple now has two daughters, and Eva runs venture capital firm Two Small Fish). Lau went on to become chief technology officer ALLEN LAU, THE STAR OF THE WATTPAD SAGA, is a quiet, slender of game-maker Tira Wireless. Hong Kong immigrant whose thoughtful manner and owlish By the mid-2000s, he’d started to lose interest in Tira. In his features (not to mention his orange cable-knit sweater and downtime, he dusted off a program he’d built on a lark earlier brown leather fanny pack) belie a take-on-the-world confi- that decade: a rudimentary app to read books on his Nokia dence. “My superpower, if I have to pick one thing, is that I’m cellphone. His first upload was the Book of Genesis, but he able to see things most other people cannot yet see,” he says couldn’t bear reading on the tiny screen. “I knew it was not during an interview at Wattpad’s Toronto headquarters. feasible, and no one would use it,” he says. Lau’s journey to the top of the Canadian startup scene Then came the Motorola Razr phone, whose screen was starts with a love story. One summer night in 1988, he was big enough to fit 10 lines of text. Lau decided to revive his app, out with some friends in Toronto when he met 18-year-old thinking there might be demand for the reading equivalent of Eva Tsang, another new arrival from Hong Kong. She was YouTube, which had debuted a year earlier, in 2005. Coinci- outgoing; he was not. Her first impression of Lau, a year older dentally, a former Tira employee named Ivan Yuen showed than her and heading into his second year at the University of Lau a reading app he was developing—one that enabled peo- Toronto’s engineering school: “What a nerd!” ple to upload their own writing as well. “I hadn’t thought of Months later, when Lau finally asked her out, she declared this,” says Lau. They agreed to start Wattpad together. she was only interested if he had intentions to marry. They’ve To fill the app, Lau and Yuen uploaded thousands of clas- been together ever since. When she was in her early 20s, Eva’s sics available free in the public domain. A year later, they had father died. “A llen was literally holding my dad’s hand and just 1,000 users reading novels like Pride and Prejudice. In said, ‘You go at peace—I’m taking care of your family,’” Eva mid-2007, they received a cheque from Google for $2—the recalls. “That emotional support meant everything to me.” grand total of their advertising revenue for the month—and considered shutting down. But since their costs were so low, they stuck it out. Within a year, Wattpad started coming alive as the missing ingredient showed up: writers. Their first hit came in November 2008, when a teenager in Britain call- ing herself @RedFlame uploaded a Victorian vampire novel called Blind Truths and invited her friends to read it. Her 150 Wattpad followers told their friends, who told some more, “and it started to snowball,” says Lau. By early 2009, Wattpad had launched an iPhone app, and hundreds of writers were posting chapters. Lau had made it a habit to read every user comment. But that summer, he found he couldn’t keep up. “It was like I was walking into an endless town,” he says. “That’s when I realized we were really taking off.”

JULY/AUGUST 2019 / REPORT ON BUSINESS 21 EVA LAU DESERVES MUCH OF THE CREDIT for putting Wattpad on its current path. As the community grew, Wattpad writers began accus- ing others of stealing their ideas or creating fake accounts to goose the popularity of their stories. Comments turned Eva Lau nasty. “Most of our users were female and very young,” says gets credit for creating Lau. “It was kind of awkward for me and Ivan to interact with Wattpad’s them.” He and Yuen (now Wattpad’s chief product officer) inclusive turned to Eva for help. ethos Calling herself Wattpad’s “webmother,” she established content guidelines and a strict code of conduct, influenced in part by her background (“Chinese culture is not very confron- tational—harmony is a big trait”). Of utmost importance was establishing what Eva calls “basic human respect” by crack- ing down on mean-spirited attacks and limiting criticism to the constructive variety. Social-engineering tweaks helped, WATTPAD’S STORY MIGHT BE NON-FICTION, but it does have a like changing the name of the “review” field to “comment” fairy godmother. In October 2011, Wattpad was getting ready and restricting feedback to 2,000 characters to cut down on to open the doors of its new headquarters in Toronto’s north rants. They banned trolls and closed accounts, including that end. The company had sent an invite to Margaret Atwood, of one of Wattpad’s most popular but vituperative writers. though nobody counted on the legendary Canadian writer There was blowback, says Lau, “but it was the right decision.” actually showing up. But suddenly, there she was, playing Today, Wattpad relies on 15 employees—more than 10% of foosball and talking innovation with Lau (Atwood is a tech- its staff—and 500 volunteer “ambassadors” to ensure Watt- savvy entrepreneur herself, having helped develop a remote- padders uphold the community’s standards so that nascent signing technology called LongPen). She took a shine to the writers feel comfortable expressing themselves. Some pro- company and started calling herself its “fairy godmother”— hibited content slips through: If you look hard enough, you Lau even made up business cards for Atwood that said so. A can find stories about bestiality, incest and sexual enslave- few months later, she wrote a column in The Guardian extol- ment, and some parents have complained on family-values ling Wattpad’s virtues, noting the platform emulated the par- watchdog sites about inappropriate content. But Wattpad’s ticipatory nature of video games while encouraging writers commitment to inclusivity sets it apart from other sites that to shape their stories based on reader feedback, as Charles have allowed toxicity to fester. Donald Trump might be the Dickens had done. She even released some of her own work king of Twitter, but he wouldn’t last a day on Wattpad. on Wattpad and presided over a poetry competition called Eva Lau’s legacy is evident at WattCon, a Wattpad-spon- the “Attys”—all voluntarily. Wattpad, she tells Report on Busi- sored fan convention in midtown Manhattan this past Octo- ness, is “a literacy facilitator. It’s also an entrance point for ber. The vast majority of the 350-odd attendees are women, people who are quite young.” If it had existed in her youth, and many, if not most, are people of colour. (Women account she adds, “I would have been on it in a shot.” for the majority of Wattpad staff and 50% of its leadership Atwood was the first famous writer to endorse Wattpad. But team, while almost half of its employees are non-white.) On a others were noticing its star-maker qualities. Earlier in 2011, tall whiteboard, attendees are invited to finish the sentence: Wattpad had surpassed two million users and raised US$3.5 “Wattpad is…” Many write: “Home.” million in a financing led by New York’s Union Square Ven- Several writers in attendance, including some of Wattpad’s tures. While other VCs asked for spreadsheets with financial most popular, say the positive feedback they received on the projections, USV wanted Wattpad to shut off its only source site encouraged them to stick with it. “The community is so of revenue. Wattpad was generating about $500,000 a year in young and so inviting, you forgive the mistakes,” says Bronx- advertising sales, but Union Square partner Albert Wenger based Tyronickah Buckmire, a 24-year-old Grenadian immi- argued that running generic and often tacky ads debased the grant who wrote her first young-adult fantasy story on 2016 user experience. USV specialized in backing firms that har- under the handle Teace Findlay. nessed network effects, like Twitter, Stripe, Etsy and Kick-

Lindsey Summers was an unemployed 20-something living starter; Wenger wanted Wattpad to focus on attracting writ- MAIL;

in her parents’ garage in Los Angeles in 2013 when she posted ers and readers, and worry about monetizing later. Lau didn’t AND a chapter under the handle DoNotMicrowave. Readers loved agree, but could see Wattpad’s future depended on expand- OBE the story, about two teen strangers who fall in love after acci- ing beyond advertising to generate revenue. GL dentally swapping cellphones, and urged her to keep writing. Meanwhile, publishers were reaching out directly to Watt- /THE

By the time she posted her 12th chapter, The Cell Phone Swap pad’s popular writers. Teenager Abigail Gibbs got a six-figure OV AR

had been read eight million times. (Like YouTube, each sepa- advance from Harper Collins to turn Dinner with a Vampire TS rate visit to a Wattpad story counts as one read.) It has since into a series of books, while Beth Reeks, a 15-year-old from KA

topped 100 million and debuted in book form in 2017. Sum- Wales who writes as Beth Reekles, scored a three-book deal PHER U mers has also earned money writing content for brands that with Random House U.S. for her young adult romance The TO

advertise on Wattpad. “I think my parents were just relieved I Kissing Booth after it got 19 million reads on Wattpad. ONNEA was actually doing something with my life,” she says. All these deals were great for Wattpad’s profile but not its OP)CHRIS (T Wattpad’s director of creator development, Samantha Pen- finances. Like other self-publishing sites (including FanFic- CHARB APH

nington, is overcome by all the positivity as she ends the first tion.net, where 50 Shades of Grey debuted), Wattpad didn’t ERIC day of WattCon. “I can’t believe this is my job,” she tells the own its writers’ intellectual property, and publishers often GR TO audience tearfully. “I am so humbled and moved by all of you.” had stories pulled off the site. (RIGHT) PHO

22 JULY/AUGUST 2019 / REPORT ON BUSINESS M

Lau recruited a handful of outsiders, starting in 2012, to help him figure out how to build a business around a platform that now had four million users. (Eva left in 2013 after community management became too much of a strain on family life.) One key arrival, Candice Faktor, who had led Torstar Corp.’s digi- tal innovation business, oversaw early monetization experi- ments as Wattpad’s general manager. “We were clear we MIDWAY THROUGH 2013, Wattpad staff noticed a spike in refer- were an enablement platform. There was a lot of passion and rals coming from the search term “after.” “What is ‘after?’” purpose on the leadership team, but there was no clear view Faktor remembers them all thinking. “It was just such a weird on how we were going to exactly get there,” says Faktor, who term.” Millions of other referrals streamed in as users texted stayed at Wattpad until 2016. Monetization schemes, the team a Wattpad link to their friends. “Then we realized, ‘Oh my agreed, had to deliver value for its writers, the publishing God, After is actually a story that’s going viral, and lots of industry—which initially regarded Wattpad with suspicion or people are looking for it.” indifference—as well as advertisers and other partners. Wattpad had promoted stories before, but this one was a Efforts included a Kickstarter-type crowdsourcing cam- force of its own. Todd’s story accounted for 10% of overall paign to fund writers (it didn’t catch on) and a brand-pro- traffic and racked up hundreds of millions of reads; it even motion program that enlisted crashed the site. Wattpad executives wanted to popular Wattpadders to write meet the author, who went by the handle Imagi- short stories on the site tied to nator1D. “This was so big,” says Lau. “We could products like Sour Patch Kids smell it. When you see a unicorn, you know this candy. Millions read the stories, is a unicorn, but how can we make it a win-win?” but the program was “difficult Faktor and her team sent several emails to Todd, to scale,” says Lau. but she initially ignored them, assuming they were Early on, Faktor led her col- from pranksters. When she finally did respond, leagues on a strategic visioning Faktor arranged to meet the writer at a rooftop exercise to imagine a magazine patio in Hollywood. It turned out she was a fan-fic- cover story about Wattpad five tion junkie who had become obsessed with “punk years later: What would it say? edits” of the boys from One Direction, created by “We all had some version of this AFTER EFFECTS rabid fans superimposing tattoos and piercings idea that one of these writers on onto digital images. One day, she decided to write our platform becomes a world- PRODUCTION BUDGET a story on Wattpad, imagining the band members renowned breakout star,” she US$14 MILLION as punks in college and casting singer Harry Styles says. “A nd it’s all because Watt- GROSS BOX OFFICE RECEIPTS SO FAR as the lead. She wrote thousands of words a day, pad got her there.” US$67.2 MILLION and kept fans engaged in the rocky relationship between Hardin and Tessa with regular cliffhang- ROTTEN TOMATOES CRITIC SCORE ers (What is Hardin yelling about? Will Hardin and 15% Tessa shower together? Who’s Molly?). She also ROTTEN TOMATOES AUDIENCE SCORE responded to messages and feedback, at one point correcting the colour of a car after a sharp-eyed 77% reader noted it was different in an earlier chapter. OPENED NO. 1 IN “It was like, ‘Wow, this person has nailed the way in GERMANY, which our platform works best,’”says Faktor. FRANCE, SWEDEN, “A s a reader, if I tried to contact my favorite SWITZERLAND, writers 10 years ago, no way would they have even known I existed,” says Todd. “Now, I have readers ITALY, ISRAEL, LATVIA, who not only comment on the story, they direct- GREECE AND NINE message me every day. It breaks down the barrier OTHER TERRITORIES from writer to reader, and I’m really happy I can be part of that.” COPIES OF ANNA TODD’S AFTER SERIES OF BOOKS THAT Wattpad’s execs told Todd that they wanted to HAVE BEEN SOLD WORLDWIDE help turn After into something bigger—both for 15 MILLION her and for the company. “We were very mind- ful and thoughtful about creating a relationship,” Cosmo has called says Faktor. “This was our first foray into the entertainment After author business.” Anna Todd “the Todd and Wattpad struck a deal that would be a model for biggest literary subsequent arrangements. Wattpad would help land Todd phenom of her generation” a publishing deal (while keeping the original story online) and take a cut of book sales. It would also help sell screen

JULY/AUGUST 2019 / REPORT ON BUSINESS 23 J

rights to the story while securing a producer role for itself, with all the related financial incentives that go along with it: producer fees, plus a share of box office and distribution rev- enue. After’s engagement statistics landed Todd representa- tion by United Talent Agency, a film deal with Paramount and a US$500,000 advance from Simon & Schuster. When the first book came out in 2014, it was a publishing sensation and proved that leaving the story on Wattpad didn’t cannibalize book sales. “It was the first time that, if you were in the publishing industry, you couldn’t ignore Wattpad,” says Melissa Night- JOANNA KERNS LEAPS OUT OF HER DIRECTOR’S CHAIR, beneath a ingale, who ran global marketing for Wattpad from 2014 to cramped black canopy in a Santa Clarita skate park, as two 2016. “To end up with a New York Times and international actors finish their 12th take of a scene. “That’s it! Twelve is bestseller from an author you hadn’t heard of, who didn’t fantastic,” barks Kerns, a veteran TV director and actor who have a PhD in English literature, who hadn’t worked with co-starred in Growing Pains. “Ladies and gentlemen, I need a traditional publishing company to get a deal, was a really all this to move.” Within 10 minutes, the tent, monitors and interesting moment for the company and the industry. If you crew have relocated to a different vantage across the park. didn’t know who Wattpad was before, it was very hard to It’s the morning of the After premiere, and 50 kilometres ignore after After.” from Hollywood, in this sun-scorched bedroom community, Halfway around the world, Wattpad had another hit. In filming is under way on Light As a Feather’s second season. 2014, the Filipino network TV5 proposed shooting a series The shoot is fast-paced and lean, with fewer than 75 people based on Wattpad stories, called Wattpad Presents. The Phil- on set, compared to 200 or 300 on a typical production. The ippines was already Wattpad’s second-largest market behind Emmy-nominated show, about teen girls who start dying off the U.S., and the series was a sensation, running for 200 epi- in the manner foretold during a party game, has helped put sodes and improving TV5’s ratings by 30%. Wattpad didn’t Wattpad on the Hollywood map, and it’s at the vanguard of have to do much and earned a seven-figure sum from the deal. industry changes. Light As a Feather airs on Hulu, one of the Inside Wattpad, the monetization strategy began to take digital streaming services reshaping how entertainment is shape, inspired by Chinese reading and writing site Cloud- delivered. Hulu hasn’t shared viewer figures with Wattpad ary, which had attempted a similar scheme. (Cloudary is now or with Awesomeness, the Viacom-owned production com- part of China Literature, which has 213 million active users pany that makes the show, but they assume it’s doing well, and US$734 million in revenue, and is controlled by Wattpad since Hulu renewed it for a second season. investor Tencent.) Wattpad continued to earn millions off The show’s cast includes YouTube stars and young actors advertising. It explored ways to get users to pay for content almost guaranteed to draw millennial viewers, and produc- that had been free previously. And in April 2016, it launched ers have responded to fan feedback on social media, for Wattpad Studios to co-produce Wattpad stories for print, example by writing in a love interest for gay character Alex. film, TV and digital platforms. Most important is that the series is based on “a piece of IP”— Its biggest challenge was that the company didn’t own the Hollywood-speak for an original story—which streaming underlying IP—the writers did. To lock in some value from services have indicated is “a really important element to sell- that content, Wattpad had to persuade them it would act as ing a project,” says Melanie Krauss, the Awesomeness execu- effectively in representing their financial interests as it had tive overseeing the shoot. “Wattpad is invaluable because hosting their stories. they have tons of original IP.” And Wattpad did have some IP of its own: the engagement The executive charged with transforming Wattpad into an data generated by stories on its platform. Wattpad knew entertainment giant is Aron Levitz, a 30-something mechani- who was reading what, and could pinpoint popular trends cal engineer who once worked at BlackBerry, negotiating and story preferences. It knew which stories readers loved strategic partnerships with mobile music, video and gaming and which moments resonated the most, based on their com- brands. He also did stints at Kobo and Xtreme Labs before ments. Only Wattpad could walk into a room with a publish- joining Wattpad in 2013 to help develop some of its early ing house or studio armed with data about how and why cer- monetization efforts. Levitz carries himself like a cocksure tain stories connected with audiences. young producer, with a signature look that includes a vest, “That’s the proprietary IP—the data we own,” says Lau. tie, sneakers and white-framed glasses. “One big distinction with Facebook is that there is no pri- “We never ask, ‘Do I like that story?’” says Levitz, the gen- vacy concern with Wattpad, because this is about how people eral manager of Wattpad Studios. “It’s, ‘Do we understand consume the content. It’s not about where you live—we don’t why the audience liked it, and is there a TV show within that care about that.” But while the data belongs to the company, that we can structure?’” it’s also “helping [the writers’] IP become more valuable,” All that data has encouraged some of Wattpad’s production says Lau. “Ultimately everyone wins,” since Wattpad benefits partners to experiment. Canada’s Entertainment One Ltd. when its writers do. “Our goal is to help creators on our plat- signed a development deal with Wattpad in 2017. For its first form make money and build a nice career out of this.” project, a series adapted from dystopian Wattpad story The Well, maybe a bit more than that. “It’s obvious that we’re not Numbered, eOne plans to run a draft of the pilot script by a just building an app or a community,” Lau wrote in a blog post group of “superfans” on Wattpad. “It’s completely innovative to commemorate Wattpad’s 10th anniversary, in November for us” to incorporate fan feedback into the production pro- 2016. “We’re building a global multiplatform entertainment cess, says Jocelyn Hamilton, eOne’s president of television company…Hey Mickey Mouse: The next Disney is coming.” in Canada. “We don’t want to distance the fans. We want to

24 JULY/AUGUST 2019 / REPORT ON BUSINESS J

translate their fandom over to another medium, and we want their blessing and feedback along the way.” Wattpad has invested in machine learning to root out sto- ries that share attributes with popular works and genres. Its “Story DNA” program then analyzes data around each one to determine how and where readers have responded to it and to benchmark their engagement in relation to time spent reading. That helps to “significantly improve the success rate AFTER’S JOURNEY TO THE BIG SCREEN took some dramatic turns. of a project as Wattpad stories are brought to life on other Paramount initially commissioned a script, but sat on it for platforms,” says Lau. a year and a half before returning the rights on the condi- But it can take a long time to get a show into production, tion that the film be financed outside the studio system. Indie and there’s still no guarantee a popular Wattpad story will production company CalMaple Films signed on, the script work in another format or that fans will embrace adaptations changed, and the film lost its original female lead. At the last that stray from the source material they love. Besides, Hamil- minute, Langford stepped into the role of Tessa just before ton acknowledges much of the writing on Wattpad “is pretty shooting began in the summer of 2018, with CalMaple and amateur,” which means identifying IP that deserves the two other production companies putting up the film’s thrifty screen treatment is akin to finding “a needle in a haystack.” $14-million budget. Wattpad has a longer track record in publishing, where it The off-camera drama hasn’t dampened Levitz’s excite- has helped hundreds of writers land book deals, ment. “This is one of the first fan- 90% of which earned out their advances within 4 MILLION driven, data-driven stories to hit a year (more than four times the industry aver- screens,” he says. age). Lau’s team noticed that publishers had a AUTHORS The audience reaction to After’s pre- habit of picking stories they liked, rather than miere is enthusiastic, with plenty of the ones Wattpad data showed audiences pre- 565 MILLION cheers and applause (particularly for ferred. So, the company decided to become a STORIES UPLOADED a cameo appearance by Anna Todd, publisher itself. Wattpad Books will publish six whose fans calls themselves Afterna- books in 2019 across North America, starting 70 MILLION tors). The critics, meanwhile, trash it. in August with The QB Bad Boy & Me, a teen MONTHLY ACTIVE USERS WORLDWIDE Germany’s Bild calls it “50 Shades of romance story by Tay Marley with 28.7 mil- Puberty,” and reviewer Oliver Kube lion reads online. “This is an evolution of what 22 BILLION says the film features “beautiful young we’ve been doing for a few years,” says Ashleigh MINUTES SPENT PER MONTH people with mosquito-sized problems Gardner, who oversees Wattpad Books. “It ON THE PLATFORM from which they make elephants.” Vari- absolutely lets us capture more [value] by being 200 MILLION ety forecasts it will earn between US$3 the publisher as well.” With a built-in audience million and US$12 million in North on Wattpad, “the chances of failure are lower COMMENTS AND MESSAGES America when it opens on 2,138 screens POSTED MONTHLY because we’re able to make better predictions on April 12, up against the DC Comics about what will sell.” 1 IN 3 superhero blockbuster Shazam!, then Wattpad is also hoping some readers will in its second week. After’s co-producer ESTIMATED PORTION OF TEENAGE GIRLS pay to use its platform. In 2017, it began offer- IN THE U.S. WHO USE WATTPAD Mark Canton, best known for action ing a premium service that allows subscribers fare such as 300, isn’t worried. “I think to read Wattpad stories ad-free for US$5.99 US$117 MILLION internationally, it’s going to be a total a month, and last October it started testing a AMOUNT WATTPAD HAS RAISED juggernaut,” he says on the red carpet. program that makes readers pay for chapter- SINCE 2010 FROM INVESTORS He’s right. The opening-weekend by-chapter access to select stories, taking a IN CANADA, THE U.S. AND ASIA tally is a ho-hum US$6 million in North small cut. America, reaching US$12 million by So far, Wattpad says the program has been late May. But overseas, After opens at a success—The QB Bad Boy & Me, one of the first and most No. 1 in 17 territories and generates US$55 million-plus in successful stories in the paid program, has generated tens non-North American receipts after six weeks, surpassing of thousands of dollars for New Zealand-based Marley. Paul Shazam! in France, Germany, Italy and Poland, and making Kingston, a Canadian-born comic and writer in L.A., says his After the top-grossing indie film of 2019 so far. On May 19, horror story, Goats From Lambs, provides “a nice little instal- Todd tweets out a picture of a script for After We Collided, ment—though I’m not paying rent with it.” But some read- writing: “We’re getting a sequel guys.” Within 20 minutes, ers have complained about the fee. “YouTube went through her followers have “hearted” the post 3,700 times. That day, this,” says Kingston. “I would just chalk this up as growing international distribution rights to the sequel go on sale. pains. But I definitely see this as a big step for Wattpad.” “In our gut, we knew After would do well; it was just a mat- “I think we’re in a very good place,” adds venture capital- ter of how well,” Lau says a week later. “I don’t think anyone ist Wenger. “Wattpad is growing multiple and differenti- would question whether Wattpad can make money any more. ated revenue streams, and is on a path to profitability. It was Now it’s three things: scaling, scaling, scaling.” maybe longer in the making than other things, but I’m feeling very good about things that we’re now getting to work.” With additional reporting by Tara Deschamps.

JULY/AUGUST 2019 / REPORT ON BUSINESS 25 FALL

OF THE

ROMAINE

EMPIRE

SLINGING SALAD FOR THE MASSES MADE FRESHII A MARKET DARLING. BUT THINGS HAVE BEGUN TO WILT. IS THE COMPANY’S BRASH CEO PART OF THE PROBLEM? BY JOE CASTALDO PHOTOGRAPHS BY JUSTIN POULSEN

26 JULY/AUGUST 2019 / REPORT ON BUSINESS

On the website of Freshii Inc., amid lavish photos of avocado slices and shredded cabbage, each member of the executive team has filled out a brief bio, and answered questions about their favourite Freshii meal and workout routine. They also offer a quote to live by. A couple of executives were inspired by the words of published authors, while the company’s former chief financial officer wrote: “Bad stuff first, good stuff last.” He credited the line to Matthew Corrin, Freshii’s founder, chairman and CEO. Chief operating officer Adam Corrin, who is Matthew’s younger brother, lives by the maxim: “Talk is cheap, execution sets you apart.” That one comes from Matthew Corrin too. Matthew Corrin, incidentally, has also been an inspi- ration to Matthew Corrin. His quote to live by reads, “‘Never peak’ ~ Matthew Corrin.” If you’re not familiar with the proverbs of Corrin, you probably at least know his company. Freshii, the healthy fast food chain, has spread like some kind of nutritious weed, sprouting up between restaurants better known for burgers and fries than kale and qui- noa. The Toronto-based company now has nearly 450 stores in 16 countries, including far-flung locations such as Saudi Arabia, Colombia and Ecuador. (The majority are still in Canada.) Corrin, who opened the first Freshii in 2005 at age 23, had the foresight to rec- ognize the appeal of quick, fresh food and the hustle to aggressively expand the concept. since then and trades around $2 today. (Buyers of He now has visions of transforming the company the IPO paid $11.50.) The decline is all the more stun- from a mere restaurant chain to a “health and well- ning considering healthy eating is the still the hottest ness” brand, pushing his products through any venue trend in the restaurant industry, and Freshii was one possible (and offering Freshii-branded swag, such as of the first to market. Competition has intensified in sweatshirts and toques, as well). Freshii wraps and the past decade, sure, but even that doesn’t explain the avocado toasts are already available on some Air Can- depths of Freshii’s troubles. Corrin, on a conference ada flights, and through 100 Walmart stores across the call in May, gave the impression of a founder who had country. Motorists in the Greater Toronto Area can searched his soul for an explanation and was prepar- pick up Freshii green juices and deconstructed taco ing to offer himself as a sacrifice. “I recognized that the boxes at Shell Canada gas stations. To foist healthy skills that allowed me to lead the brand to where we got eating upon children, the company rolled out a school are different from the skills required to get us where lunch program, where students order in advance and we want to be,” he said. “So in short, I fired myself.” local franchises deliver the meals. He paused, “I then rehired myself as a new CEO.” Freshii rocketed to an initial public offering in Janu- And that might just be Freshii’s biggest problem. ary 2017 with bold plans to more than triple its store Corrin, now 38, built the brand from scratch and scaled count in a few short years. The company hit a valua- it into a sizable player, but his performance since the tion of close to $400 million and boasted quarter after IPO, and his brash style, have eroded credibility with quarter of strong same-store sales growth, a rarity in public markets, according to analysts. Freshii has a sluggish industry. For Corrin, it was a definite high missed financial targets, laid off staff and seen its once point. One might even say it was the peak. stellar same-store sales turn negative. Corrin declined Freshii’s stock price has collapsed more than 80% interview requests and did not respond to a detailed

28 JULY/AUGUST 2019 / REPORT ON BUSINESS list of questions. (We did go for an off-the-record jog at his suggestion, though—five to 10 kilometres, he specified. All I can report is that I am sadly out of shape, while he didn’t break a sweat.) Instead, Freshii sent a statement through an outside public relations firm. “We have confidence in our team and our abil- ity to drive business priorities,” the statement read in part. “A ll of us are focused solely on driving the busi- ness forward and delivering value and profitability to Freshii was going to help people live better, health- our shareholders and franchise partners.” ier lives. And it worked. “They nailed it when they “Investors have said he’s a very polarizing figure,” launched,” says Jeff Dover, president of fsStrategy, a says John Zamparo, an analyst with CIBC World Mar- foodservice and hospitality consulting firm in Toronto. kets. “They have asked what the future of this com- Corrin opened the first nine stores on his own in pany is and whether he is the right person to lead it.” the next two years, and then moved to Chicago to start building a U.S. beachhead. He had his sights on global expansion early on—he never wanted Freshii to be pigeonholed as simply a Canadian brand—and Intense is usually the word people use to describe franchised the concept. For would-be owners, Freshii Corrin. He’s got a steely gaze and a firm commitment had a lot of appeal. Not only was it unique, but the to eye contact. He’s a health fanatic (favourite work- startup costs were lower than a pizza joint or burger out: “Run. Fast.”) and once installed a pull-up rack in chain. The focus on fresh food meant franchise own- his office, even boasting of his upper body strength for ers didn’t have to invest in expensive kitchen equip- a Globe and Mail reporter in an interview a few years ment or large retail spaces. ago, unprompted. He’s typically stylishly dressed and To help market franchises in the U.S and abroad, sports carefully groomed stubble, his bro-ish swagger Corrin struck a deal with a company in Virginia called at odds with Freshii’s bohemian marketing mantras. Fransmart LLC in 2008. And then the trouble started. “Let’s be good to the earth. Let’s let the earth be good Freshii was obligated to fork over a share of its revenue to us,” reads one slogan on its website; it’s hard to under the terms of the contract, but in 2010, it stopped imagine a sentiment so earnest coming from Corrin’s paying, and Fransmart sued in a Virginia court. As part chiselled face. Around the office, he’s been known of its defence, Freshii alleged the owner of Fransmart, to tap employees on the shoulder to acknowledge a Dan Rowe, had misrepresented the financial health of recent accomplishment. If he can’t do it in person, he his company. Fransmart claimed that since Freshii had records a short video message and sends it over email. matured, it no longer wanted to share revenue and was Another word that comes up when talking about Cor- simply trying to wriggle out of the contract. rin is arrogant, which he has readily acknowledged, Corrin was later grilled by Rowe’s lawyer during a recounting to an interviewer that he was once called deposition. “You’re the CEO of an international fran- an “arrogant little prick” in his younger days. “You’ve chisor, aren’t you?” the lawyer asked him. “You make got to learn when to fight hard, when to be an arrogant it sound so sexy,” Corrin said. little prick and when to be humble,” he said. In 2011, the case was grinding along when Rowe A little arrogance is practically a requirement to asked Corrin to get together in Toronto. Rowe wanted open a restaurant with zero experience, as Corrin did to avoid a trial and salvage the relationship. They met with Freshii. He grew up in Winnipeg, where his father in a private lounge at a downtown hotel, and after worked as a dentist and his mother as a nurse, and he some brief small talk, Corrin instead offered $300,000 completed a degree in media, information and tech- to settle the lawsuit and part ways. Rowe told Corrin noculture at Western University. After graduation, he wanted them to keep working together. Besides, he and his then-girlfriend moved to New York, where Corrin’s offer was less than he felt he was owed. she attended the Fashion Institute of Technology and Corrin, according to court documents, told Rowe Corrin worked in the public relations department for that if his offer was not accepted, he would drag out Oscar de la Renta. He’s said the idea for Freshii struck the lawsuit and stir up “very visible, high-profile trou- him while observing the salad counters at mom-and- ble” for Fransmart. “Corrin threatened that he would pop delis in New York City. Despite the poor branding go public in every way, making it his ‘full-time mission and customer service, people were lining up. to destroy Fransmart,’” Rowe claimed in court. “Cor- It might be hard to remember now, when you can’t rin said he had already ‘killed’ four Fransmart deals... walk 10 feet without passing celery juice and spinach and would ‘kill’ four more.’” The meeting lasted less wraps, but options for quick, healthy fare were much than 10 minutes. more limited in 2005. That’s the opportunity Corrin The next day, Corrin blind-copied Rowe on an email exploited. He was lucky to have supportive and gener- he sent to a new Fransmart client, one that Rowe had ous parents, who loaned him $250,000 to help launch mentioned to him in their meeting. Fearing that Cor- his concept. The first location opened in downtown rin was preparing to make good on his alleged threat to Toronto under the name Lettuce Eatery, and Corrin torpedo deals, Rowe went to court to get a temporary attached a world-changing mission to slinging salad: restraining order preventing Corrin from contacting

JULY/AUGUST 2019 / REPORT ON BUSINESS 29 promised were ambitious. By the end of fiscal 2019, according to Freshii’s prospectus, the company would have up to 840 stores, a 244% increase. That works out to approximately one new store every couple of days. Still, the story was enticing. Canada’s restaurant industry is fairly mature, with established companies eking out meagre gains each year. Overall, the $60-bil- lion market grows between 2% and 3% annually, according to Robert Carter of the NPD Group, and traffic is relatively flat. Freshii, in contrast, churned out quarterly same-store growth that was regularly north of 6%. “The guy does a phenomenal job of pre- senting, and they’re all great ideas,” says Stephen Takacsy, president of Lester Asset Management in Montreal, who attended a sales pitch. “But we found it ridiculously overvalued.” Freshii’s aggressive targets left little room for error, and the company was valued at around 30 times trailing 12-months EBITDA, more akin to a frothy tech company than a restaurant chain. That wasn’t enough to dissuade Bay Street. The four equity analysts following the stock in early 2017 all slapped a buy rating on Freshii, which started trad- ing around $12 per share. Target prices were as high as $19.50. “There was excitement for a new, trendy, rel- evant brand in food service,” says Elizabeth Johnston, an analyst at Laurentian Bank Securities. She thought any clients and spreading negative information. A it would be challenging for Freshii to hit its store count lawyer for Corrin later told the court that the Freshii target, but she was encouraged by the strong interest founder “would not continue to engage in the con- from franchise owners—a sign the brand had cachet. duct giving rise” to the lawsuit, making the restraining The more franchises Freshii established, the more order moot. (Rowe declined to comment.) royalty revenue head office could rake in. Meanwhile, Freshii lost the contract lawsuit and was But Freshii had trouble meeting its store growth count ordered to pay Fransmart more than US$500,000, plus almost immediately, which the company later blamed interest. on the “unpredictability” of selecting sites, obtaining permits and taking possession of properties. In the second half of 2017, Corrin introduced a curious new metric. On an analyst call, he hyped an “exciting new The legal setback did not stop Freshii’s growth. By opening strategy” called “enhanced openings.” Stores 2017, the company had nearly 250 locations, carried in that weren’t actually open yet could generate revenue part by Corrin’s appetite for publicity. He showed up by offering juice cleanses, meal boxes and catering ser- for television interviews wearing a Freshii letterman vices for delivery, even though the order would actually jacket, appeared on Undercover Boss and starred on a be fulfilled by an existing location. spinoff of CBC’s Dragons’ Den. One of his more nota- Corrin said the company opened 31 stores in the ble gambits was taunting his ostensible competitors, past quarter, 11 of which were “e-openings.” Analysts, such as McDonald’s, through open letters. “The real- having never heard of this concept before, were left ity is that McDonald’s is stagnating and your growth baffled. Finding a way to help franchise owners gener- days are over,” he wrote. Media outlets lapped up Cor- ate sales before opening is not a bad idea, says John rin’s bombastic style, although one missive urging fro- Zamparo at CIBC, but the company fumbled the deliv- zen yogurt franchisees to come into the Freshii fold ery. “You shouldn’t sell it to people as a store that has earned the company a $10-million trademark lawsuit opened,” he says. “‘Disingenuous’ was a word I heard from the owners of Yo gen Früz, who accused Freshii a lot,” Zamparo says of his conversations with inves- of using false and misleading statements to promote tors. Freshii soon abandoned the concept entirely, and itself. (It was settled last year.) Corrin said on a later call that he promised the CFO he The time seemed ripe to go public, and CIBC Capi- would never talk about e-openings again. tal Markets and RBC Dominion Securities led Freshii’s In the months following the IPO, Corrin met with $125-million offering. During the roadshow, the story investors to drum up interest. He didn’t always leave Corrin told was of a rapidly growing company with a a good impression. One fund manager who met with unique offering that was ready to conquer the world. him said that if Corrin was asked a question he didn’t Freshii had already hit 200 locations in less time than like, he would defer to the CFO and stare at his smart- either McDonald’s or Subway, and more growth was to phone. When the fund manager tried to explain that come, according to the prospectus. The targets Corrin as head of the company, he would have to answer

30 JULY/AUGUST 2019 / REPORT ON BUSINESS DOUBLE TROUBLE Corporate governance experts may frown on the practice, but many Canadian companies use dual-class share structures

PERCENTAGE PRINCIPAL OF VOTING SHAREHOLDER RIGHTS

Rogers Rogers Control Trust, of which Communications Inc. family members of the late Ted 92% Rogers are beneficiaries One of Corrin’s pieces of advice to aspiring entrepre- neurs is to “build a company with a killer culture, not a Quebecor Inc. President and CEO Pierre Karl culture that kills a company.” He has heavily promoted Péladeau the open, transparent vibe at Freshii, along with its 73.6% unlimited vacation policy and free food for employ- ees at head office. That office in Toronto, which has employed as many as 80 people, is overwhelmingly Bombardier Inc. Members of the Bombardier and Beaudoin families young. Freshii prides itself on its millennial (and now 50.9% Gen Z) workforce, which also makes up its customer base. At a conference last year, Corrin said he spends a disproportionate amount of time thinking about peo- Shopify Inc. Founder and CEO Tobias Lütke ple and culture, suggesting it’s a competitive advan- 33.8% tage. “You cannot knock off the culture,” he said. Some found Corrin to be an encouraging, even inspiring boss. “He put a lot of trust in me,” says Jona- Empire Co. Ltd. Class B Holdings Ltd., which than Truong, who spent more than seven years at is owned by members of the Freshii and left his role as creative director in Decem- Sobey family 92.7% ber for a startup. It was Truong’s first professional gig, and he quickly found himself with a lot of responsibil- Aritzia Inc. Canada Retail Holdings and ity. But even when he once made a costly printing error Sixth Berkshire Associates, 50.8% for some marketing materials, Corrin didn’t chew him managed by Boston private out. “He allowed me to learn from that mistake,” Tru- equity firm Berkshire Partners ong says, “and that’s something I’ve taken to heart.” Torstar Corp. A voting trust comprising five Not everyone had the same experience. Corrin can families, including executors of be blunt and direct, and with his reluctance to break 99% the estate of long-time Toronto eye contact, he can read as intimidating, especially Star publisher Joseph Atkinson when he’s displeased about something. At times, according to three former employees, he has dis- played behaviour they viewed as bullying, and made belittling remarks about their contributions or the questions from public shareholders, Corrin bristled quality of their work. During a meeting with other and said he had people who could take Freshii private, executives, he called one individual’s efforts “redun- even though the company had just started trading sev- dant” and told another employee after a presentation eral months prior. she had given that it wasn’t worth his time. Two of the The rush to open stores put a strain on head office, former employees say interactions with Corrin left especially as Freshii entered multiple new markets. them in tears. The company’s approach to international growth was Another former employee says Corrin’s bluntness less driven by a strategy than by franchisee demand, seemed like a persona of sorts, like something he which led Freshii to many disparate locales, such as gleaned from one of the many business books he reads South America, the Middle East and Ireland. Mean- and decided to apply to Freshii. Indeed, one book he while, other efforts seemed to suffer. Analysts noted has recommended to staff is Principles by hedge fund Freshii was slow to implement mobile and digi- titan Ray Dalio, who practises what he calls “radical tal ordering, and to ensure the process functioned transparency.” Dalio recommends managers be bru- smoothly. As part of his due diligence on Freshii, tally honest with themselves and their employees. Zamparo frequently used the company’s app to get “While most people prefer compliments, accurate food, only to show up at a store and discover his order criticism is more valuable,” Dalio writes. He also was never received. Worse, sometimes the store was advises managers to “evaluate accurately, not kindly.” closed. “It was very poor execution on the online and Corrin was so taken with Principles that he called out mobile front,” he says. Freshii retooled and relaunched an employee at a meeting for not having read it. its app last year, and while the design was improved, Freshii’s struggle to hit its targets ultimately took a the overhaul felt superficial, Zamparo says. He still toll on morale too. In September 2017, the company had trouble getting his banana nut smoothie. reduced its projected store count from 840 to 760 and “That’s the problem with a company that has put cut estimated systemwide sales to US$285 million significant growth targets and is struggling to meet from US$365 million. Investors drove the stock down them,” Zamparo says. “Your priority becomes opening accordingly. Last November, the company withdrew up more stores rather than making sure the stores you guidance altogether. have are functioning.” The next blow came swiftly, as Freshii cut 20% of

JULY/AUGUST 2019 / REPORT ON BUSINESS 31 this spring, with radio spots and billboards, which it hasn’t done much of in the past. Johnston says the company has a strong brand to capitalize on, and the campaign could help attract more customers. The company is also renewing its focus on limited- time offers, an important way to lure people into stores. Corrin admitted earlier this year to mistakenly pausing development on that front. “I totally blew it,” he said on a call. It has debuted new menu items too, such as immune elixir shots, two flavours of kombu- cha and charcoal lemonade. Even in a more competitive market, Freshii has advantages, according to Jeff Dover at fsStrategy. He points to the company’s scale, strong brand recog- nition and customer loyalty. “I don’t think anybody would dispute the market leader in this category is Freshii,” he says. “From everything I hear, the CEO is making the right calls.” its staff at headquarters to help drive profitability. The Investors are far more skeptical. One of the main cuts came not long after Freshii moved into a sleek reasons is Corrin and his executive team. “Ideally you new office down the street in Toronto’s ritzy Rose- would like to see individuals who have a long history dale neighbourhood. Corrin’s brother, Adam, who still of success in that business,” says Raymond Lam, a sports the built physique of the hockey player he was portfolio manager at Laurus Investment Counsel in in university, took it upon himself to address the mal- Toronto. “There doesn’t seem to be any individual on aise. He rose during an all-staff meeting, according to that team with that track record. He himself doesn’t.” five people who were there, and told employees to “get The leadership team is turning over too: Both the chief your heads out of your asses.” The pep talk, such as it financial officer and the chief people officer left the was, did little to lift spirits. company in May. (Neither responded to requests for comment.) Nobody on Freshii’s board of directors has expe- rience at a large-scale restaurant franchise, either. The strange thing is that, despite the plummeting Both the Corrin brothers are on the board, along with stock price and operational turmoil, Freshii’s finan- serial entrepreneur Michele Romanow and Marc Kiel- cials are still relatively solid. The company is opening burger, who co-founded We Charity. Another board locations—69 new stores last year—with another 140 member, Neil Pasricha, is an author of books on hap- stores in the pipeline. It has about US$27.6 million in piness and leadership who has been called “one of the cash. Though same-store sales fell 1.2% last year, at most popular TED speakers.” least the depth of the decline is shrinking: Last quar- When a fast-growing company stumbles and inves- ter, same-store sales dipped 0.9%. Corrin’s talk of rapid tors flee, there are a few things that can happen. Some- international expansion has waned as the company times a buyer swoops in. Other times, a shareholder focuses on fixing its core North American operations. activist whips up dissent and tries to overthrow the Lately, Corrin has cited the worst-performing 10% of CEO. (Indeed, one fund manager says Freshii is prob- Freshii stores for dragging down the rest of the chain, ably worth more than the market pegs it at today, but and the company is working to shut them down or unlocking that value would require a determined transfer ownership. In the past four quarters, Freshii activist.) And in rare instances, the CEO, thoroughly has closed 43 stores. Corrin has said there is no one chastened, recognizes new leadership is required and factor affecting the underperformers and instead put voluntarily steps aside. the blame on the franchise owners themselves. “Part None of these outcomes seem likely for Freshii. Cor- of the bottom 10% is partners who are not doing the rin’s voting control means he decides the company’s right things,” he said last November. The next quar- fate. Sell to a competitor? Resign? That would be defeat ter, Corrin said Freshii would be “more measured” in (unless he rehires himself again). For now, Corrin selecting store owners. It’s worth noting the prospec- seems intent on restoring Freshii back to growth him- tus from two years ago already emphasized the com- self, even if the market has abandoned him. He is no pany’s “rigorous vetting and selection process” of its longer the young, swaggering 20-something who can franchise partners. impress with a better idea for fast food. He’s reached Analysts are not ready to label Freshii spoiled the limits of hustle. What remains now is the less glam- goods. “When they have a specific plan, we’ve seen orous work of fixing the operations and reversing the they’ve been able to execute,” says Johnston at Lau- decline in same-store sales, quarter after quarter, and rentian Securities. “I’m definitely optimistic. But it’s proving he can deliver results again. We already know going to take time.” A few initiatives give her hope. Corrin can run. Fast. But getting investors to take him Freshii launched a traditional marketing campaign seriously again? That’s a long run indeed.

32 JULY/AUGUST 2019 / REPORT ON BUSINESS Congratulations to theserecent appointees

Phillip Crawley, Publisher & CEO of The Globe and Mail, extends best wishes to the following individuals who were recently featured in the Report on Business Section of The Globe and Mail newspaper. Congratulations on your new appointments.

Jason Stephen Philip Homan Carol Leaman Vito Ciciretto Lesley Gallinger, to President to Board of Directors to Board of Directors to CEO MBA, CPA, CMA, The Canadian Real Coril Holdings Ltd. Coril Holdings Ltd. Dynacare CPA (Illinois) Estate Association to President & CEO Elexicon Energy Inc.

Jean Raby Norman M. Paul Keenan, Dave Lehane Craig Neeser to Board of Directors Steinberg P.Eng., PE, CED, to Board of Directors to Board of Directors Fiera Capital to Board of Directors LEED AP Mosaic Forest Mosaic Forest Corporation Fiera Capital to President Management Management Corporation HH Angus and Associates Limited

Nancy Hill Paul Healy, P.Eng. Oliver Harrison P.Eng., LLB, to Executive VP to Senior VP, FEC, FCAE Redpath Mining Inc. Operations to President RioCan Professional Engineers Ontario

JULY/AUGUST 2019

To make arrangements for an Appointment Notice, please call 1-800-387-9012 or email [email protected] View all appointment notices online at www.globeandmail.com/appointments REAL ESTATE FLEX LIKE A

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JULY/AUGUST 2019 / REPORT ON BUSINESS 35 $27 $27 AUTOMOBILES PLANES,YACHTS AUTOMOBILES & PLANES,YACHTS 36 Lino ROLLING he 40 epon pa 57C rumour ss JUL st car ow ion Y/ or ymous Sa AU LUXURY s, es GUS ned ed put fo with at T r to 20 au by his o cheese 19 .5 .5 ow a Sr to / IN the hea REPOR pri . n ow (w mor va Ca IT vy T ner empir fo Owning oper DREAM to and co hose te ON na emphasis MILLION MILLION rmidably st 15% e BUSINE Au ship jus at dian te than ing ns fa t of e to a filling mil of the SS supery co to has mobiles pa ex 10 thous st BO bo his pensiv y’ int s 0 the on a at ca s acht car AT co ands er ’s net son n ta limit va be e: nk nst S s Je is Etce lue Annual wo and 10 ca Lino an-P antl % , ed-edition n rth te pa aul y ra Jr is id rev . au Th $7 Riopelle. Ya $2 ol to cht e

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84 m 88 m 96 m

JULY/AUGUST 2019 / REPORT ON BUSINESS 37 JULY 31 – AUGUST 7, 2019

The Globe and Mail invites you to experience Portugal like never before.

DAY 1 | JULY 31 DAY 2 | AUGUST 1 DAY 3 | AUGUST 2 DAY 4 | AUGUST 3 Porto Porto Régua Pinhão

MORNING MORNING MORNING Arrive in the beautiful city of Go behind the headlines with After an Insider Breakfast Porto and transfer directly to the our first Insider Breakfast with with Phillip Crawley and luxurious 5-star Scenic Azure, Phillip Crawley. Then, get ready Nathan VanderKlippe, choose where you can get settled in for a walking city tour with from one of four activities: your cabin, meet your butler, entrance into the Bolsa Palace. head to Monastery St. John of and relax on the rooftop deck. Tarouca in the wild Varosa Valley; MORNING Set sail to Régua, get to know your Globe hosts and attend the morning Insider Breakfast with Phillip Crawley while taking in the stunning scenery of the Douro Valley.

visit Mateus Palace with its full AFTERNOON repertoire of Baroque garden art; EVENING Visit the charming town of sip and savour at Quinta do Tedo Join your Globe hosts for Guimarães and Ducal Palace or travel with Beppi Crosariol an onboard welcome cocktail and with Nathan VanderKlippe, or to the heart of the Douro Valley attend our first port talk followed get a tour and tasting at Quinta wine region to visit Quinta by a special welcome dinner in da Aveleda. Alternatively, join do Crasto and Quinta Nova.†† the Crystal Dining Room. Tara O’Brady at a visit to a Portuguese sardine canning AFTERNOON factory. Or see the well-known As we head from Pinhão to Port house, Taylor Fladgate, for a Vega de Terron, participate in a winery tour and Port tasting. thought-provoking Globe Forum AFTERNOON with Nathan VanderKlippe. EVENING After arriving in Régua, visit the Enjoy the sounds of Portugal fascinating Museu do Douro, an with a classical concert at ideal introduction to the region’s São Francisco Church. wine, culture and identity.

*Additional costs may apply. Pricing subject to change. Terms and conditions apply. ††Wine tours to Quinta do Crasto & Quinta de Nova, on board spa and visit to Six Senses Spa are at an additional cost. Terms and conditions apply. Itinerary provided is a summary; certain activities have add-on costs. See website for pricing, full details, itinerary inclusions and exclusions and Portugal River Cruise terms and conditions. Cruise provided by Scenic Canada. All travel arrangements, reservations and bookings will be made with Scenic, a company wholly independent of The Globe and Mail. Dates, itineraries, program details and costs are given in good faith based on information available at the time of posting, and subject to change. The Globe and Mail does not guarantee the attendance of any particular host. See website for host schedule. The Globe and Mail, its affiliates, and their respective officers and employees, do not assume any responsibility for the financing, arranging or conduct of the cruise and will not be liable for any damages or financial loss to person or property of any description that might occur in connection with the cruise operated by and arranged through Scenic. Pricing based on double occupancy. Single supplement applies. Please see website terms and conditions for details at www.globedourocruise.com Experience Portugal with your favourite Globe personalities.

PHILLIP CRAWLEY DAVID WALMSLEY BEPPI CROSARIOL TARA O’BRADY NATHAN JOHN IBBITSON ERIC REGULY CEO & Publisher Editor-in-Chief Pursuits Pursuits VANDERKLIPPE Writer-at-Large European Columnist & Contributor & Asia Bureau Chief Wine Writer Food Writer Correspondent

STARTING AT $6,499* + AIRFARE + $370 PORT FEES PER PERSON

DAY 5 | AUGUST 4 DAY 6 | AUGUST 5 DAY 7 | AUGUST 6 DAY 8 | AUGUST 7 Salamanca, Spain Vega de Terron to Pocinho Pinhão to Porto Porto

MORNING MORNING First, an Insider Breakfast with Enjoy a final breakfast onboard David Walmsley and John Ibbitson, the ship before disembarking. as we head from Vega de Terron Saying adeus is the hardest part! to Pocinho. Then, get to know the Foz Côa Valley, a UNESCO World Heritage Site since 1998. Explore MORNING Palaeolithic art at the Côa Travel through the striking Douro Museum, go canoeing MORNING International Natural Park, home on the Sabor River, or Start your day at this morning’s to unique bird species and ancient enjoy a Côa Valley Insider Breakfast with David landscapes. Once in Salamanca, a almond and olive tasting. Walmsley and Eric Reguly. UNESCO World Heritage Site, visit A Scenic Luxury Cruise exclusive, the Plaza Mayor, one of the most visit the remarkable, mountaintop beautiful squares in Spain, and tour village of Provesende. Bask in the impressive, adjoined Old and stunning valley views, smells New Cathedrals. of freshly baked bread from the Padaria Fatmia, and the Morgadio da Calcada, a 17th-century manor house superbly restored.

AFTERNOON While heading from Pinhão to Porto, attend a Globe Forum AFTERNOON with John Ibbitson or simply Enjoy some free time. relax on the sun deck. EVENING EVENING EVENING Enjoy drinks and snacks with In Pinhão, a special evening of For our final dinner, we David Walmsley, John Ibbitson dining awaits at the picturesque have exclusive access to and Eric Reguly. DOC restaurant on the banks of The Graham’s 1890 Lodge, the Douro river! the famed Port house.

For more information, please visit GlobeandMailCruises.com Call Scenic at 1 (855) 863-8683 to reserve your cabin now and we had to take advantage of it. There was never an expectation of what that would look like, other than find a passion, apply yourself, make a difference, give back.

- I worked construction with my dad. It was the first job I ever had, and the hardest. Digging foundations with him, the time went by really slowly. Yet, he always had a view on what was being built, calculating, measuring and perfecting. I took that to other jobs— the sense it’s all about people coming together who share vision and values.

- When I talk about inclusion, a lot of people look puzzled and say, “Well, you’re a 50-something-year- old white man. I don’t get where this comes from.” But when I grew up, I felt like I was different. We spoke a different language at home. I brought funny sandwiches to school in things called panini.

- When I came into this role, my objective was, we need to become an organization where the composition of our people at every single level, from entry right through to the most senior level, fully represents the Canadian population. That’s in visible minority, gender, LGBTQ and so on.

- Inclusion happens one person at a time, and it’s about people being able to bring who they are—their whole self—to work. It can’t happen Last Word overnight, because if it’s not authentic, and you haven’t done the hard work to Frank Vettese ready people, you set up individuals, and sometimes groups, for failure. Former CEO and chief inclusion officer of Deloitte Canada. Family guy. Baseball fan - You have to step aside at times to create opportunity. I sat on our global board. A group of us decided - This is my last day in the office at Deloitte. That’s the hard we would have our seats represented by a senior woman part, because these are people I worked really closely with from our teams so the board would start to resemble our and mentored. It’s like the end of high school. communities. And it changed the conversation.

- The world now is expecting organizations to do more - Would I do anything differently? I feel that I devoted more than simply have a profit, growth or success orientation. of the best of me to the firm, which at times left more of the Organizations have a really important role to play in society. least of me for home. If I could have the chance to rebalance And that’s why purpose is so important. something, I’d certainly want to do that.

- Growing up, the focus was on family. Community mattered. - Now that I’m rolling off this job, I’m going to make sure I TEIN

My parents, as Italian immigrants, emphasized keeping that find enough time to both play sports and enjoy sports. If you SENS firmly in sight. Those same ideals find their way into the see me on a video, it probably won’t be a business video. It RO workplace for me. It’s about team and a broader purpose. might be on the large screen at the Blue Jays game, because MAX I’m just enjoying myself a bit. /Interview by Kristy Woudstra - My parents had high expectations. They believed we were in the best country in the world, with unlimited opportunity, This interview has been edited and condensed. PHOTOGRAPH

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