Tim Hortons on growth trajectory

by Eric Schroeder
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Tim Hortons Nutella offerings, Restaurant Brands
Tim Hortons saw success with its Nutella-based treats, which are set to return this spring.

BOSTON – Reflecting on 2015, the success of same-store sales at Tim Hortons was a significant driver in earnings performance at parent Restaurant Brands International, Inc. That trend is expected to continue into 2016 and beyond, said Josh Kobza, CFO of Restaurant Brands International, in a March 9 presentation at the UBS Global Consumer Conference in Boston.

Kobza said Tim Hortons’ performance during 2015 was not an anomaly, and instead is part of a 20-plus year track record of growing same-store sales every single year.

Joshua Kobza, Restaurant Brands International
Josh Kobza, CFO of Restaurant Brands International

“For me, it really speaks to the strength of the brand,” Kobza said.

Several aspects of the company’s business, including coffee, are driving that strength.

“We have an incredibly strong coffee business in Canada, and we continue to build on that,” he said. “We built on that by launching dark roast and continued to build that business in 2015 while still maintaining the rest of our coffee business. And that was a big, big accomplishment for us.”

Tim Hortons also was successful in building out its baked goods business, Kobza said. Last April, the company began selling a Nutella donut and other Nutella-based treats, a limited-time offering that is set to return this spring. The company also introduced filled cookies, which are a simple variation upon a core piece of Tim Hortons’ product mix.

Another big contributor during 2015 was AM/PM grilled wraps.

Tim Hortons dark roast coffee, Restaurant Brands
The chain built on its coffee business in Canada with the introduction of dark roast coffee.

“It’s something we launched in Q3 and allowed us to build both on our breakfast business, but also lunch,” Kobza said. “And I highlight that one in particular because I think it was a great way to leverage equipment we already had in the store. Relatively operationally simple innovation, but something that’s allowing us not just to build our base breakfast business, but also to utilize the restaurant more throughout the day and build our lunch business as well.”

Tim Hortons AM/PM grilled wraps, Restaurant Brands
Tim Hortons' AM/PM grilled wraps were also a big contributor in 2015.

Beyond innovation, Tim Hortons is building its presence in the United States. Kobza described Tim Hortons’ expansion in the United States as “perhaps our most exciting development opportunity all around the world.”

Tim Hortons currently has more than 600 restaurants in the United States, giving it a good base to build off of, Kubza said.

“It’s (the United States) the largest quick-service restaurant market in the world and it’s one where people love to consume coffee and baked goods,” he said. “So I think it’s clearly a market where there’s a huge opportunity for us to succeed.”

Tim Hortons restaurant, U.S., Restaurant Brands
Tim Hortons currently has more than 600 restaurants in the United States.

Kubza said Restaurant Brands spent a significant portion of the beginning of 2015 developing a strategy for Tim Hortons to address the US market and to accelerate the pace of growth. In the back half of 2015 he said the company began to make progress in engaging with partners and starting to structure the first area development agreements.

“Over the last few months I’m really pleased with the progress that we’ve made,” he said. “We’ve now signed up new partners in places like Columbus (Ohio) and Cincinnati and Indianapolis. And in each of these cases, we’ve found partners who really believe in the brand, who are well capitalized and are committed to building the brand out to the levels of density in their markets that we know that they need and that we need to be really successful and to build a really profitable model that’s very convenient for our consumers. So that we can replicate the success that we first saw in eastern Canada, that we built out in western Canada, that we built in some of the early US markets in places like Buffalo, and that we now want to replicate across a number of additional markets in the US.”

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