WATCH: Stock prices for Time Hortons jumped for a second day in a row. But questions persist, on both sides of the border, over taxes and where the company will be based. Mike Drolet explains.
For those whose daily routine involves a trip to Tim Hortons, you can rest easy. You’ll still be getting coffee your way, despite the fact that Burger King is gobbling up the iconic chain.
Tims execs say there are no plans to mess with how it operates here, wary of disrupting an already good thing.
“Tim Hortons will still be Tim Hortons,” Marc Caira, the donut chain’s boss, said on a call with media. “That’s the key point here, it’s business as usual.”
Asked whether there were plans in the works to blend Tim Hortons-branded coffee and food into Burger King’s menu and perhaps vice versa, Caira was clear: “The answer is absolutely not,” he said.
“These are two strong independent businesses that will continue to be run that way.”
New Canadian company
Still, Burger King is merging with Tim Hortons (and Caira isn’t going to be the operational boss in the new company). Experts speculate that it’s too early to tell what kind of product innovation or cross-promotion might be coming down the pipe.
What is clear is that Tims and Burger King are forming a new joint company that will be based in Ontario, where corporate tax rates are lower than in the United States – a facet that’s a key rationale for BK approaching Tims about a potential deal in the first place, experts say.
But on Tuesday, Burger King executives were busy downplaying that angle.
Daniel Schwartz, the young head of the U.S. fast-food company, said the key reason for establishing new corporate headquarters in Canada was that this country is the new firm’s biggest market.
“When you’re combining two companies, you have to think about what the natural place is for a global headquarters. It’s where the company’s largest market is and where its largest business will be,” the 34-year-old Schwartz said.
He cited market share, total sales, and number of employees. He didn’t mention the total number of locations, but Tims operates 3,600 Canadian restaurants, while Burger King has considerably fewer.
Internationally, Tims has about 860 U.S. locations and a few dozen more scattered throughout a handful of Middle Eastern countries. Burger King meanwhile has a worldwide network of nearly 14,000 locations.
Schwartz said Burger King’s blended tax rate of “around” 26 per cent was comparable to what the new company will pay in Canada.
“We don’t expect there to be meaningful tax savings, nor do we expect there to be a meaningful change in our tax rate,” the Burger King executive said.
But the move to Canada means the joint company will be subject to lower taxes than what Burger King would have paid otherwise, experts point out.
Canada’s corporate tax rate was dropped to 15 per cent in 2012, or significantly lower than the 35-per-cent rate big companies must pay in the United States. Under the terms of the deal, Burger King will remain stationed in Miami, Florida, but become a subsidiary of the Canadian parent.
In a separate scrum with media on Tuesday, federal Finance Minister Joe Oliver was asked to comment on on the deal. The minster said it was a positive reflection of Ottawa’s low-corporate tax policies.
“Canada’s become a very attractive destination for capital,” Oliver said.
© Shaw Media, 2014