Canada has yet to hit Peak Tim Hortons, execs say

Tim Hortons said sales at established restaurants continue to climb in Canada.
New store openings in Canada come as sales are spiking, too, partly thanks to price increases. CANADIAN PRESS/Chris Young

Canada has yet to reach Peak Tim Hortons. Executives for the iconic coffee chain said Monday store openings across the country have actually accelerated.

With more than 3,800 coffee shops from Newfoundland to British Columbia, Tims is the largest restaurant chain in the land – by far. But the company says it stepped up the pace of store openings in the latest three-month stretch, adding 46 locations between April and the end of June.

That’s more than double the number of openings in the same timeframe last year.

“Despite our restaurant penetration, we saw an acceleration of restaurant growth,” Daniel Schwartz, the CEO of parent firm Restaurant Brands International, said on a conference call.

The 3,819 locations in Canada compares to the 1,400 or so operated by McDonald’s, Canada’s second-largest restaurant chain.

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And Tims looks like it could actually widen the gap with its chief competitor. With McDonald’s confronting a slowdown in its North American operations, the coffee-chain rival plans to introduce more stores both in Canada and the United States this year.

“[We] have a solid pipeline of openings in place for the second half of the year,” Schwartz said.

Sales up

The store openings in Canada come as sales are spiking, too, partly thanks to price increases.

Sales at established restaurants are up 5.5 per cent, company officials said. That’s the fastest clip since 2011 and breaks sharply with industry expectations of sluggish gains over the next several years.

In its latest fast-food outlook, market researcher NPD Group said it expected sales growth of about 1 per cent through 2017 as the market faces saturation and consumers shift eating habits to incorporate options considered more health conscious.

MORE: Tim Hortons reviewing in-store TV ads after boycott controversy 

Sales at established restaurants, or locations opened at least a year ago, are a key metric that strips out new locations to better reflect the ongoing pace of purchases and customer demand.

The introduction of new “premium” products also got customers spending, the company said. Pastries filled with Nutella as well as a new “Creamy Chocolate Chill” beverage and new lunch items provided a boost. The company’s dark roast blend also continues to be a hit.

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Tims management said the chain grew all store formats between April and June. Tims is looking to “densify” the number of locations in urban areas, the company said, by launching “non-traditional” formats like kiosks in areas with lots of foot traffic, such as hospitals and universities.

U.S. lull

In contrast to the Canadian business, Tim Hortons opened no new locations in the United States in the last quarter, according to quarterly documents.

That might be a surprise given how vocal parent company Restaurant Brands International has been since acquiring Tim Hortons about expanding in the United States, which it calls a “must-win” market.

‘We could jump in and sign a bunch of agreements but we’d rather take our time, sign the right ones’

Tim Hortons operates 892 U.S. locations. A July 10 research report from Scotia Capital suggested the number of Tims U.S. locations could grow “at least” eight fold under the new management.

“In our opinion, the brand has serious untapped potential,” the Scotia report said.

Schwartz said Restaurant Brands International won’t be rushed, recalling on the call that it took about a year before Burger King began signing new franchisees following its 2010 acquisition by 3G Capital, the firm that brought Tims and Burger King under the same roof late last year.

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“It’s about making sure we do it right,” Schwartz said.

“We could jump in and sign a bunch of agreements but we’d rather take our time, sign the right ones that are going to be long-lasting and enable us to grow and bring that great Tim Hortons guest experience all around the world.”

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