Why Tim Hortons Struggles In The United States

Summary

Tim Hortons, a Canadian coffee chain deeply embedded in the country's culture, faces challenges in the U.S. market despite its popularity in Canada. The brand, part of Restaurant Brands International, has struggled with saturation and competition from established American coffee and fast-food chains. Efforts to expand beyond the Canadian border have been met with mixed results, and while strategies like offering plant-based options have been successful in Canada, the U.S. market remains a tough nut to crack. Analysts suggest that Tim Hortons should consider simultaneous product launches in both countries and possibly explore growth in markets where competition is less fierce.

Takeaways

• 🇨🇦 Tim Hortons is a quintessentially Canadian brand, deeply ingrained in Canadian culture, and is perceived as more Canadian than Coca-Cola is American.
• 📈 In 2018, Tim Hortons accounted for over 60% of the revenue for its parent company, Restaurant Brands International, which also owns Burger King and Popeye's.
• 📊 As of 2015, there was one Tim Hortons for every 9,800 Canadians, indicating a high saturation level within the country.
• 🗺️ The success of Tim Hortons in the United States is closely tied to its proximity to the Canadian border, with better performance in states closer to Canada.
• 🚫 Despite attempts, Tim Hortons has struggled to establish a strong presence in the U.S. market, facing challenges such as production issues and lack of brand awareness.
• 🏪 The U.S. expansion strategy has relied heavily on franchising, with 98% of U.S. locations concentrated in eight states.
• 🤔 Market saturation in the U.S. poses a significant challenge for Tim Hortons, as it competes against entrenched brands like Starbucks and Dunkin' Donuts.
• 📉 In 2010, Tim Hortons closed 36 locations in New England due to poor performance, resulting in a loss of $4.4 million that year.
• 💰 Burger King's acquisition of Tim Hortons for $11 billion in 2014 led to the establishment of Restaurant Brands International with headquarters in Toronto.
• 🌐 Despite commitments to expand in the U.S., RBI closed 234 U.S. locations in 2015, citing the need to build a foundation for future growth.
• 🚀 Analysts suggest that Tim Hortons could benefit from introducing premium coffee, plant-based options, and healthier breakfast items to the U.S. market.

Q & A

What is the significance of Tim Hortons in Canada?

Tim Hortons is deeply ingrained in Canadian culture, being as iconic as Coca-Cola is in America. It is a one-stop shop for coffee, breakfast, lunch, and doughnuts, and its brand DNA reflects Canadian stereotypes such as politeness and hockey.

How does Tim Hortons' revenue compare to its parent company's total revenue?

In 2018, Tim Hortons accounted for over 60 percent of the revenue of its parent company, Restaurant Brands International, which also owns Burger King and Popeye's.

What was the ratio of Tim Hortons locations to the Canadian population in 2015?

In 2015, there was one Tim Hortons location for every 9,800 Canadians, indicating a high saturation of the brand within the country.

Why has Tim Hortons struggled to succeed in the United States?

Tim Hortons has faced challenges in the U.S. due to market saturation, strong competition from established brands like Starbucks and Dunkin' Donuts, and a lack of brand awareness among Americans who are not close to the Canadian border.

What was the outcome of Tim Hortons' early attempts to expand in the U.S.?

Tim Hortons' initial expansion attempts in Florida in the 1980s struggled due to production issues and a lack of brand awareness among Floridians, leading to the closure of both locations in 1995.

How has Tim Hortons' geographical proximity to the Canadian border affected its success in the U.S.?

The closer an American city is to the Canadian border, the better Tim Hortons performs, as Canadians crossing the border for shopping are more likely to be familiar with the brand and support the business.

What was the strategy Tim Hortons used for its rapid expansion in the U.S. in the 1990s?

Tim Hortons used a franchise model for its rapid expansion in the U.S. during the 1990s, focusing on states close to the Canadian border.

What was the impact of Tim Hortons' market saturation in the U.S. on its growth?

Market saturation in the U.S. has been a significant problem for Tim Hortons, as being the 15th company to offer coffee and doughnuts in the market has made it difficult to gain mindshare among consumers.

Why did Tim Hortons close 36 locations in New England in 2010?

Tim Hortons closed 36 locations in New England due to poor performance, which cost the business $4.4 million that year, indicating a lack of success in those markets.

What was the significance of Burger King's acquisition of Tim Hortons in 2014?

Burger King's acquisition of Tim Hortons for $11 billion in 2014 led to the establishment of the combined company, Restaurant Brands International, with its headquarters in Toronto, and a commitment to continue expanding Tim Hortons in the U.S.

What strategies have been suggested for Tim Hortons to improve its performance in the U.S.?

Strategies suggested for Tim Hortons include offering premium coffee, healthier breakfast options, and keeping up with trends such as plant-based meals, which have been successful in Canada and could potentially be introduced in the U.S.

Why might Tim Hortons consider expanding beyond the U.S.?

Tim Hortons might consider expanding beyond the U.S. due to the highly competitive nature of the American market and the potential for growth in areas where Starbucks and Dunkin' have not yet dominated, such as Mexico and the Philippines.