Why Tim Hortons Struggles In The United States

You know that old joke that there’s a
Starbucks on every corner in the United States. In that Dunkin’ Donuts slogan,
America runs on Dunkin’. Well, there’s a Canadian coffee chain
that makes those look like quaint little neighborhood cafes. Meet Tim Hortons, Canada’s one stop shop
for coffee, breakfast, lunch and doughnuts. In 2018, it supplied over 60 percent
of the revenue of its parent company, Restaurant Brands International; which also
owns Burger King Popeye’s. More importantly, it’s been a
company darling among Canadians. The DNA of the brand is Canadian. It’s hockey. It’s “oh, we’re polite.” It’s all the stereotypes that Canadians,
you know, love that they have. It’s every bit as Canadian and even
more so than Coca-Cola is American. In 2015, the last year that Tim
Hortons made its store count publicly available, there was one Tim Hortons
location for every nine thousand eight hundred Canadians. These are the same figures for Dunkin’
in Starbucks in the United States. But this success is
quickly becoming a problem. They have probably definitely reached a
saturation point with in Canada. The company needs
to expand elsewhere. And the U.S. has long been a
target, but they’ve struggled here for decades. Which raises the question, why can’t this
Canadian icon win over its southern neighbors? The first ever Tim Hortons
opened in 1964 right here. And the first successful
location in the U.S. opened just across this
border 20 years later. A few years earlier, Tim Hortons opened
two locations in these two Florida beach towns, hoping that vacationing
Canadians would both support the business and bring in Americans. But these struggled because of
production issues and because Floridians lacked the brand awareness that Americans
closer to the Canadian border have. Bottom line is this the closer
the geographical proximity of an American city to the Canadian border, the
better off Tim Hortons does. Both of the Florida Tim’s close in 1995
and the brand has stuck close to the border ever since. The company expanded rapidly across these
states using a franchise model in the 1990s and listed on the U.S. stock market in 2006. Tim Horton’s kind of just jumped into
the franchise, opened up a couple hundred stores in the U.S. fairly quickly. Using data from their subsequent public
filings, we can see that 98 percent of Tim’s locations
in the U.S. were in just these eight states. Why did both recognition and recall. The closer you are to the Canadian
border, the theory would would say that you are going to be more likely to
cross the Canadian border for a weekend shopping. There’s a Tim Hortons on
every on every block. It’s not bad stuff. They like it, you
know, go back across the border and if Tim Hortons is there, you know,
the more likely be a consumer. But even these border states couldn’t
cushion Tim Hortons against their biggest problem in the U.S. – market saturation. If you’re the 15th company that’s
entering an American market offering coffee and doughnuts, you’ve you’re so
far back in terms of mindshare. And Tim Hortons does not have huge
dollars in comparison to some of the other competitors or the entrenched regional
players that maybe there or national players like
Starbucks, for example. Anyone can name their near Starbucks
or maybe their nearest Dunkin’ Donuts. So in the U.S., it’s facing a lot of competition. For Canadians, Tim Hortons is a go to
spot for many food items, hot and cold, coffee, drinks, breakfast sandwiches,
lunch wraps and soups, fruit smoothies and, of course, doughnuts. But Americans have
many other options. Dunkin’ and Starbucks, of course, but
also Panera Bread, Jamba Juice, McDonalds or one of the other estimated 58
thousand coffee and snack shops in the U.S.. And these all have far
better brand recognition among Americans. Humans are creatures of habit. If you have an option between a
Starbucks, Dunkin’ Donuts and a Tim Hortons, you’re probably going to go to
Dunkin’ Donuts because you know that product. You know what your
order is; it’s familiar. In 2010, Tim Hortons closed 36
locations throughout New England after their poor performance cost
the business 4.4 million that year. This included a complete retreat from
Connecticut, Rhode Island, and Massachusetts. Burger King bought Tim Hortons in 2014
for 11 billion dollars and the combined company, Restaurant Brands
International established its headquarters in Toronto. Analysts told CNBC as part of the
agreement to locate the company Canada, the Tim Hortons segment promised to
continue expanding in the U.S. They had to prove that they
were going to expand internationally, especially if the U.S. and get their brand to grow further
and not just be concentrated and saturated within Canada. But in 2015, the very next year,
RBI closed 234 locations in the U.S., telling CNBC in an emailed statement
that the closures were part of building a foundation for future
growth in the United States. Starting in 2016, they’ve stopped breaking
out the Tim Hortons growth, specifically in the U.S. as focused just because of the heat
they’ve been getting in terms of performance of Tim Hortons
in the United States. RBI did not respond to CNBC
requests for comments or an interview. So no word on exactly
what their plan is. But analysts point to a few trends or
strategies the brand could use going forward. Like premium coffee and dormant
options or healthier breakfast sandwiches. RBI has been at the forefront of
the plant based meal trend, including Impossible burgers at Burger King and
Beyond Meat sausages at Tim Hortons in 2019. It also struck a deal in July 2019
to test just brand plant based eggs at some Canadian Tim Hortons locations. But some think RBI is waiting too long
to launch these items in the U.S. Something they should consider doing is
launching the products that they launch in Canada. At the
same time in the U.S., because it’s not like they
don’t have the infrastructure. And some wonder whether RBI should
look beyond the U.S. altogether. Outside of the U.S., Tim Hortons is growing
quite popular, right? So they have introduced
stores in Mexico. The thing is, the Philippines, they
just started launching in as well. So anywhere where Starbucks and or
Dunkin’ hasn’t completely taken over, I think might actually be a
better fit for them. I know the U.S. is the big gym
for any company that wants to create an international brand or grow biggest
consumer market in the world. But it’s also the most competitive
and that’s a very tough market.

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