One of the most popular coffee shop chains in Canada is launching an ambitious expansion effort in the U.S., including Indiana. Tim Hortons Inc. (NYSE: THI) is planning 15 locations in the Fort Wayne area. It is part of an initiative to open approximately 300 U.S. restaurants by the end of 2018. February 26, 2014
OAKVILLE, ON, Feb. 25, 2014 – Tim Hortons Inc. (TSX: THI, NYSE: THI) will today outline at an investor conference our 2014-2018 strategic roadmap “Winning in the New Era” which will also include our longer-term financial aspirations.
“Consumers are highly inter-connected and have increasingly evolving needs. Our strategic roadmap is ambitious but achievable, and is designed to capitalize on our strengths while allowing us to rapidly adapt to deliver on those changing consumer needs. We are 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,” said Marc Caira, president and CEO.
Key themes and trends shape the “new era” facing consumer companies and the direction of our new strategic plan:
the evolution of consumer tastes and preferences, including new flavours and an increasing desire for balanced menu options to address interest in health, wellness and nutrition;
a continued shift in demographics, including an aging population, increasing ethnic diversity and the growing importance of 'Millennials' as a consumer segment; and
the emergence of technology and data to drive both consumer marketing and menu insights and to respond to increasingly inter-connected consumers.
Each of our geographic markets plays a different and important role in our strategic plan. We have defined a set of strategic pillars and initiatives within each business unit that are designed to deliver on our shareholder value creation commitments.
Canada: Lead, Defend and Grow
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.
Delivering the ultimate guest experience: defending our core business by delivering on the ultimate guest experience more consistently with a focus on flawless restaurant-level execution.
Leveraging technology: embracing technology as a key business driver, and becoming one of the industry's most consumer-centric companies, enabling us to aggregate guest insights and connect and transact with them in new and innovative ways.
Differentiated innovation / pursuing new occasions: delivering differentiated innovation in products and services using guest insights to anticipate and act upon evolving needs and expectations. Our focus includes new proprietary food platforms that transcend dayparts, coffee and food category leadership that responds to consumer demand spaces and occasions, and a focus on consumer interest in health, nutrition and wellness.
Narrowing average cheque gap: narrowing the gap between our average cheque and the sector average, while protecting our core value brand positioning. We believe we have significant opportunities to increase items per order primarily by focusing on combination product offers and evaluating size and premium options.
Continued restaurant development / channel extensions: developing approximately 500 net new locations by 2018, and additionally extending our brand reach through new restaurant formats and sizes that target under-represented captive audience settings such as office, sporting venue and health care settings. We also see opportunity, working together with our restaurant owners, to go beyond our restaurant footprint in alternative channels.
U.S.: Must-Win Battle
As the largest quick service restaurant market in the world, and one that is still growing, we are committed to the U.S. Our proprietary research demonstrates that we have made significant inroads and progress in building consumer brand awareness and convenience in our core and priority markets. Our planned initiatives for the U.S. market include the following:
Driving average unit volumes in existing restaurants: leveraging the strong awareness and convenience we have created in our core and priority markets to drive average unit volumes and enhance returns.
New and differentiated beverages, snacks and meal items, and compelling combos, to grow order size and make us more relevant to a broader number of U.S. consumers.
Leveraging technology, marketing and promotional initiatives to appeal to consumer needs, different dayparts and occasions, all designed to drive sales and traffic. Our view on the U.S., similar to the Canadian market, is that we have significant opportunities to grow average cheque while delivering value to consumers.
Developing restaurants: optimizing our business model and restaurant-level economics with the goal of generating increased profit and growth. Focused on our core and priority markets, through a less capital intense model, we expect an increase of approximately 300 restaurants in the U.S. by the end of 2018. Our development plans will be complemented by brand and channel extensions to drive brand awareness and penetration.
Traditional franchising development: to complement our own development, pursuing traditional franchising development such as Area Development Agreements and Master Licensing Agreements, where partners deploy their capital and local market knowledge. We have signed our first development agreements consistent with this strategy, with close to 100 (mix of standard and non-standard) units over the next five years in: St. Louis, Missouri (40); Youngstown, Ohio, 25 (all non-standard to complement our existing development); Fort Wayne, Indiana (15) and Fargo and Minot, North Dakota (15).
We expect this multi-layered, disciplined approach to developing our U.S. business will result in substantial progress in the U.S. segment and U.S. operating income of up to $50 million by 2018.
International: Grow, Learn, Expand
We are adopting a pragmatic and disciplined approach to continued international growth. We intend to do this through:Further expansion in Gulf Cooperation Council (GCC): continuing to learn and grow in the GCC where we have demonstrated initial success and have a roadmap to approximately 220 locations.
Validation of international market opportunities and approach: refining our existing market research, business assessments and views on market opportunities.
Position for potential market entries: prioritize markets and develop due diligence to position us to enter new international markets in 2015.
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“We are setting out to be bold, different and daring. We envision a Tim Hortons that is one of the industry's most consumer-centric brands, leveraging technology to build our understanding of emerging consumer insights and to connect with them in new and innovative ways. We are focusing on flawless execution and creating the ultimate guest experience. We are asserting our coffee and food leadership, simplifying our operations and pursuing differentiated innovation. Our team is aligned, focused and committed to strong execution and market leadership,” added Caira.
Tim Hortons Inc. Overview
Tim Hortons is one of the largest publicly-traded restaurant chains in North America based on market capitalization, and the largest in Canada. Operating in the quick service segment of the restaurant industry, Tim Hortons appeals to a broad range of consumer tastes, with a menu that includes premium coffee, hot and cold specialty drinks (including lattes, cappuccinos and espresso shots), specialty teas and fruit smoothies, fresh baked goods, grilled Panini and classic sandwiches, wraps, s