Tim Hortons announces back-to-basics plan to reinvigorate the brand after weak sales

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Same-store sales at Tim Hortons fell 4.3 per cent year over year in the fourth quarter in 2019 in all markets and 4.6 per cent in Canada.


Same-store sales at Tim Hortons have slipped again — prompting the CEO of its parent company to announce a back-to-basics plan to reinvigorate “one of Canada’s best loved brands.”

“We have dissected every part of [the Tim Hortons] business,” said Jose Cil, CEO of Restaurant Brands International (RBI), during a conference call with analysts Monday after the company released its fourth-quarter and full-year earnings.

“Over the past several months, I’ve made Tim Hortons in Canada my top priority,” Cil said. “We have not performed to expectations and have not properly put the strength of the Tim Hortons brand to work.”

He said executives have worked to identify the underlying causes of sales weakness — and opportunities to accelerate growth after same-store sales at the coffee-and-doughnut chain fell 4.3 per cent year-over-year in the fourth quarter in all markets, and 4.6 per cent in Canada.

Franchisee profitability also fell compared to last year, said Cil, though the company did not provide a figure. He attributed the drop to lower sales, as well as pressure from labour costs in parts of Canada.

Results for Burger King and Popeyes, the other two brands owned by RBI, were much stronger with Burger King delivering the best year for restaurant growth in the last two decades and Popeyes Louisiana Kitchen delivering a dramatic surge in same-stores sales, which shot up by 34.4 per cent on the back of what Cil called a “game-changer” chicken sandwich.

As a result of the performance by Burger King and Popeyes, RBI’s consolidated sales grew 8.3 per cent annually in 2019, and its quarterly adjusted profit rose to $0.75 (U.S.) per share for the quarter ended Dec. 31 from $0.68 a year earlier. Analysts, on average, were expecting $0.73 in adjusted earnings per share. Revenue totalled nearly $1.48 billion, up from nearly $1.39 billion.

For the full year, net earnings were $1.11 billion on $5.6 billion of revenues, compared with $1.2 billion on $5.59 billion of revenues in 2018. Adjusted profits equalled $2.72 per share, one cent better than estimates.

The company also announced its quarterly dividend will rise two cents to $0.52 per share.

Cil said the company’s plan to reinvigorate Tims will focus on the informal “founding values” of freshness and quality, value for money, personal relationships and a tradition of giving back to the community that made it a leader in coffee and breakfast baked goods categories since its founding in 1964.

He said Tims will overhaul its loyalty rewards program so that it is based on points rather than visits and make most of the menu items available for redemption. He added that the Roll-up-the-rim contest will be updated in the coming weeks to give it more of a digital focus, which will help drive digital adoption and loyalty registration.

The chain will also refresh its drive-through with an accelerated move to digital menu boards which will allow it to tailor offerings based on location, time, weather and other factors. In addition, RBI will boost spending on marketing to extol Tims coffee and commit to “serving absolutely the best products in Canada.”

Tim Hortons in 2020 will also slow and simplify experimental offers while speeding a rollout of fresh brewers for better-tasting and more consistent hot beverages, he said. It will start offering more than one type of milk for customers, including skim milk and a dairy alternative, almond, starting this spring.

“These adjustments may seem basic, but that’s the point: being the absolute best at the basics that we’re already famous for,” said Cil.

Alan Middleton, professor of marketing at York University’s Schulich School of Business in Toronto, said he believes the measures laid out by Tim Hortons management could be effective in strengthening what remains a powerful brand in Canada. But he said the test will be in the execution.

“I give them credit for one thing: they have finally fessed up to years of continuous errors with far too many menu items, franchisees cutting work on local promotions, the list goes on.”

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He said the appeal of Tim Horton has not been in experimental menu items, but in the comfortable relationship between staff and customers, a relationship that now may be strained.

Restaurant expert John Gordon, founder of the Pacific Management Consulting Group, said it remains to be seen if Tims has suffered a “brand impairment,” suggesting that the measures announced may not be sufficient if its problems are more fundamental.





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