Tim Hortons owner Restaurant Brands International makes aggressive U.S. expansion of coffee chain a priority

TORONTO – After a strong 2015, Restaurant Brands International says it’s prepared to grow Tim Hortons aggressively in the usa this year, something the company continues to be planning to do since its inception.

“The (U.S.) may be the world’s largest quick-service restaurant market and that we only have 600 Tim Hortons, and we are really looking forward to the pace of future growth in the U.S.,” chief executive officer Daniel Schwartz said within an interview Tuesday because the company released full year and fourth-quarter results that topped analysts’ expectations.

It marked the very first twelve month of financial results because the $12.5-billion merger of Mcdonalds and Tim Hortons formed Restaurant Brands International in late 2014. At the time, Tim Hortons’ potential to expand within the U.S. and globally was cited as a main factor behind the merger by Restaurant Brands’ majority owner, Brazilian private equity firm 3G Capital.

Store expansion is a key priority if Tim Hortons would be to grow its business within the U.S. within the year ahead

“Store expansion is a key priority if Tim Hortons would be to grow its business in the U.S. within the year ahead,” Neil Saunders, chief executive of recent York-based research firm Conlumino, said Tuesday.

But in fiscal 2015, Restaurant Brands opened just 13 net new Tim Hortons stores within the U.S.

While guest traffic and overall roi grew for U.S. Tim’s franchisees in 2015, the network still had some laggards to get rid of, a legacy of middling expansion efforts underneath the company’s prior ownership. Restaurant brands closed 27 underperforming Tim Hortons in Portland and Syracuse within the fourth quarter.

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Restaurant Brands executives remained mum on how many U.S. outlets they would like to open this season. But they say they are on very solid footing with their latest U.S. development deals, featuring local partners who contribute more capital than Tim Horton’s U.S. franchisee partners did previously.



Since October, the organization has signed development deals for Tim Hortons in Cincinnati and Columbus, Ohio, and on Tuesday announced a partnership deal with Luke Group of Brands to spread out Tim Hortons restaurants within the greater Indiana area.

“We wish to focus our resources around the markets where we see the biggest potential and opportunity to grow in a profitable way,” said chief financial officer Josh Kobza. “We are very convinced that we are going to have the ability to replicate the success that we have been on Canada with the approach that we’re taking.”

Tim Hortons in the U.S. will be promoted in the same manner it is in Canada, focusing on value and accessibility for purchasers. “Our goal really is to scale up and make more restaurants to create that convenience component that Tim’s offers our Canadian guests,” said Schwartz. “From an advertising and marketing perspective, there aren’t any major differences.”

On Tuesday, Restaurant Brands reported net gain of US$51.7 million, or US25 cents per share, compared with a loss of US$510.8 million, (US$2.50), a year earlier.

Adjusted profit was US35 cents per share, beating analysts’ average estimate of US29 cents, based on Thomson Reuters. Overall revenue was US$1.06 billion, topping analysts’ US$1.03-billion estimate.

Restaurant Brands performed well at its Tim Hortons and Burger King banners, growing sales at stores open for more than a year by 6.3 per cent and three.9 per cent, respectively. Tim Hortons sales rose on beverages and new product offerings including Nutella pockets and grilled wraps.
Meanwhile, Burger King saw is a result of sticking with its junk food roots, adding new flavours in the quarter to the popular Chicken Fries. The chain announced last week that it’ll start selling beef hotdogs.

“The simple the fact is that although Americans like hotdogs, not many national fast-food chains sell them,” said Saunders of Conlumino, even though the move looks contrarian within an industry where current menu changes are focused on making junk food menus healthier. “This step helps Mcdonalds to stand out, and in our view, will probably be successful.”

Analysts say value deals have also been an important technique for Mcdonalds – selling 10 chicken nuggets for US$1.49, and a new two for US$5 sandwich deal – particularly as McDonald’s menu diversification has opened up the door to more premium offerings.

Shares rose a lot more than five per cent in afternoon trading Tuesday.

Financial Post
hshaw@nationalpost.com
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