Tim Hortons' (NYSE:THI) new CEO says that expanding into the U.S. is essential as competition from other quick-service chains—including McDonald's (NYSE:MCD)—squeezes the Canadian doughnut king at home, according to the Globe and Mail.
The problem in Canada is slowing growth. When CEO Marc Caira took over in July, Hortons had 3,468 restaurants in Canada, almost at the 4,000 number that previous management said was the most Canadian restaurants the chain could support. Caira has pushed for service efficiency, saying some stores now move a customer through their drive-in windows every 25 seconds. Caira is also questioning whether Hortons needs 63 varieties of doughnuts and is pushing for more lunch and dinner items as well as healthier fare.
But while Hortons is dominant north of the border (it serves three out of every four cups of restaurant coffee; McDonald's spent the last four years doubling its share to 10.7 percent from 5.4 percent), in the U.S. its much smaller chain is struggling. The 807 U.S. stores make up 18.8 percent of Hortons' total store network but only bring in 6.1 percent of Hortons revenue, according to Bloomberg.
Improving that situation may mean offering master franchise contracts to experienced U.S. franchisers, who would then resell franchises and also manage advertising and other elements that haven't worked well being handled from Canada.
Caira, who was previously a Nestle's executive, told Bloomberg he saw other revenue opportunities for the Tim Hortons brand, including sales through grocery stores and vending machines. "If you work in an office, why should you not have some Tim Hortons' products in your office?" he asked. "Why can't you have Tim Hortons in vending machines?"
That would put Hortons in head-to-head competition with Starbucks (NASDAQ:SBUX) in grocery stores, while Hortons is still fighting to make headway against the dominant U.S. doughnut chain, Dunkin' Donuts (NASDAQ:DNKN). While Dunkin' insists it is now primarily a beverage chain, it's not likely to let any competitor walk away with its pastry business either.
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