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Tim Hortons seeks to reclaim Canadian brand identity amid lukewarm sales

Hey there, time traveller!
This article was published 31/1/2020 (190 days ago), so information in it may no longer be current.

People walk past the newly renovated Tim Hortons in Toronto on Thursday, July 25, 2019. THE CANADIAN PRESS/Nathan Denette

People walk past the newly renovated Tim Hortons in Toronto on Thursday, July 25, 2019. THE CANADIAN PRESS/Nathan Denette

Tim Hortons franchisees gathered in Calgary earlier this week and erupted into applause after corporate executives promised to help reframe the public's understanding that the chain is a Canadian company.

Executives travelling the country to discuss its strategy for the new year have promised franchisees a directional shift that will see the chain reclaim its Canadian, coffee and doughnut roots, following years of sluggish sales, a frenzy of new products and multiple lawsuits between franchisees and their parent company.

"We're as Canadian as you get," said Tanya Doucette, a 42-year-old who owns eight Tim Hortons restaurants in Alberta with her husband and parents. She also serves on the company's franchisee-elected advisory board.

While Tim Hortons was born out of Canada, its history since then has crossed the 49th parallel.

Two Canadians, Ron Joyce and hockey pro Tim Horton, founded the chain in the 1960s and it opened its 1,000th restaurant in 1995.

Wendy's International Inc. acquired it that year, and in 2014 U.S.- and Brazil-based 3G Capital merged it with Burger King under a new parent company, Restaurant Brands International. These changes sowed accusations from some that the company was no longer Canadian.

Prime Minister Justin Trudeau recently fuelled this fire when he visited Oh Doughnuts, a Winnipeg bakery, to pick up treats for some meetings. He shared the purchase on his Twitter account with the hashtag ShopLocal.

While some social media users reproached the federal leader for choosing a pricey shop over a Tim Hortons, others praised Trudeau for avoiding an internationally owned chain to support a small business.

"That makes me crazy," said Doucette of suggestions her shops are not a local, Canadian business. That's the sort of commentary she wants to rebuff and is happy to see executives eager to tackle.

Chief corporate officer Duncan Fulton acknowledges that franchisees aren't happy that some consumers no longer view Tim Hortons as a Canadian company.

"We intend to start swinging back very hard everywhere that someone says that we're not Canadian," he said in an interview.

Restaurant Brands International is registered in Canada with a global head office in Toronto.

Three-quarters of the Tim Hortons leadership team is Canadian, as are its roughly 1,500 franchisees and some 100,000 employees.

"Everything about this company is Canadian," said Fulton — even the ownership.

3G's ownership share has fallen to 32 per cent recently, down from 51 per cent in 2014. Several Canadian owners fall within its top 20 shareholders, including Fidelity Investment Canada, the Royal Bank of Canada and Jarislowsky Fraser Ltd. But several large U.S. firms are also shareholders, including T.Rowe Price Associates Inc, Pershing Square Capital Management and Warren Buffett's Berkshire Hathaway Inc.

The push to be seen as Canadian comes as the fast-food chain works to boost sales.

For its most recent quarter, Tim Hortons saw the key retail metric of comparable-store sales in Canada slip 1.2 per cent. The company is set to release its fourth-quarter and full-year results next month.

Tim Hortons plans to focus on elevating its staples: coffee, breakfast, baked goods and doughnuts, said Fulton.

It'll continue to innovate, but in these core categories rather than the recent bevy of launches that included failures like plant-based protein burgers. In 2019, Tim Hortons launched nearly 60 new products, compared to its more traditional figure of half that. The limited-time offers created operational complexity and moved the company farther from its core offerings.

This report by The Canadian Press was first published Jan. 31, 2020.

Companies in this story: (TSX:QSR)

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