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Tim Hortons to add 500 Canadian locations by 2018; grow internationally

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Freshly-brewed coffee sits on a hot plate in a Tim Hortons outlet in Oakville, Ont. on Sept.16, 2013. THE CANADIAN PRESS/Chris Young

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Freshly-brewed coffee sits on a hot plate in a Tim Hortons outlet in Oakville, Ont. on Sept.16, 2013. THE CANADIAN PRESS/Chris Young

TORONTO - Tim Hortons Inc. (TSX:THI) is planning a flurry of changes to its operations, including healthier food choices and the addition of 800 new stores over the next several years as it looks to maintain its edge in an increasingly competitive market.

Chief executive Marc Caira, who took the helm of the popular coffee and doughnut chain eight months ago, says speed will be a key component, saying he wants to see the company "move and move quickly."

"The plan is aggressive but very achievable," Caira said during an investor day in Toronto.

"It's a very pragmatic plan where we need to make choices. We will not do everything, we cannot do everything. It's a plan that forces us look at our business differently, but with a very high sense of urgency."

The plan includes a big focus on Canada, where the company is seeking to improve the customer experience at its stores and make better use of technology.

"We believe that our enviable guest loyalty, strong restaurant base and differentiated brand position, coupled with initiatives planned in our strategic plan, will present significant opportunities to grow our Canadian business over the next five years," said Caira.

But the company is also "energizing the Tim Hortons brand in all of our geographic markets and we are focusing on driving long-term, sustainable profitable growth, which we believe will return us to above market total return to shareholders."

Tim Hortons plans to add 500 locations in this country and 300 in the United States by 2018.

It expects between 215 and 255 new restaurants will be added this year, including between 140 and 160 in Canada, building on the 3,588 restaurants Tim Hortons currently has in its Canadian system, the 859 in the United States and 38 in the Persian Gulf region.

Canadian competitor Second Cup operates more than 350 coffee shops across the country, while Starbucks has more than 1,300 stores in Canada and is planning to open 100 stores per year over the next five years.

Caira says he has no doubt he'll be able to implement the changes, adding that while there may be some "fine tuning" as a result of the strategical changes, he doesn't expect any major restructuring to follow.

The company has been paying close attention to customer preferences and says improved menu selection as well as packaging products in ways that increase the number of items purchased per visit will help drive store profits.

Tim Hortons will also look to extend its brand reach through new restaurant formats and sizes that target specific locations such as offices, sports venues and hospitals and find ways to tap into both the aging population and the millennial market.

The company, which came under pressure in June from shareholders calling on it to revamp its U.S. expansion plans and borrow money to buy back shares, also said its U.S. expansion will include a new push to drive brand awareness and develop more franchises.

Among franchises it has lined up south of the border are 40 in St. Louis, 25 in Youngstown, Ohio; 15 in Fort Wayne, Ind. and 15 in Fargo and Minot, N.D.

Beyond North America, its international approach will be "pragmatic and disciplined," and seek further expansion in the Persian Gulf region where it has had initial success. It has a road map for adding about 220 locations in that area over the same period.

The changes come after Tim Hortons said last week that it was pulling the Cold Stone Creamery brand from its Canadian restaurants and removing about two dozen items from the menu to simplify operations as it tries to make service faster and the customer experience easier as it attempts to boost profits.

The company reported last Thursday that its fourth-quarter profits grew marginally to $100.6 million from $100.3 million a year earlier, with earnings increasing to 69 cents but falling below analyst estimates of 77 cents per share, according to Thomson Reuters. Revenue grew 10.7 per cent to $898.5 million from $811.6 million.

It expects diluted earnings per share in the range of $3.17 to $3.27 for 2014, with same-store sales growth of one to three per cent in Canada and two to four per cent in the U.S.

Tim Hortons shares were up 33 cents at $58.27 Tuesday afternoon on the Toronto Stock Exchange.

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