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FDD Talk 2015: The Tim Hortons Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on July 1, 2015

in Donuts Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings

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Tim Hortons Photo by Mark 2400

In this FDD Talk 2015 post, you’ll learn the following:

  • Section I – Background information on the Tim Hortons franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Tim Hortons franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Tim Hortons’ financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average gross sales for all franchised Standard Tim Hortons Restaurants that were open and operating for at least one year as of December 28, 2014 in Indiana, Kentucky, Maine, Michigan, New York, North Dakota, Ohio, Pennsylvania, Virginia, and West Virginia, respectively

Section I – Background Information

The purchase of the Canadian Tim Hortons by the American Burger King has been one of the biggest stories in franchise news in the past year.

Burger King purchased Tim Hortons, Canada’s largest quick-service restaurant chain, on Aug. 26, 2014, for $11.4 billion USD, and the two companies reorganized as Restaurant Brands International, now the third-largest restaurant-chain operator in the world. 3G Capital, Burger King’s previous majority owner, owns a 51 percent stake in the new company; the remaining 49 percent is publicly traded in both the U.S. and Canada.

The newly created RBI, which is based in Canada, has about $23 billion in system sales while operating more than 18,000 restaurants in 100 countries. Tim Hortons’ headquarters remains in Oakville, Ontario, and Burger King retains its Miami headquarters. The two chains operate independently of each other. Tim Hortons closed its U.S. headquarters in Dublin, Ohio, in May 2015 as part of the reorganization.

U.S. Growth

Growth in the U.S. is a high priority for Tim Hortons, which added its 100th U.S. restaurant in 1998 in Columbus, Ohio, and its 500th in 2008 in Detroit, Michigan. U.S. stores began popping up in the 1980s, mostly as expansions across the border, such as in Maine and particularly in Buffalo, New York, where Horton played hockey with the Buffalo Sabres from 1972 to 1974.

The Real Tim Horton

Canada’s largest quick-service restaurant chain, Tim Hortons was started in 1964 by Tim Horton, a Canadian professional hockey player, and Jim Charade. Horton played in the NHL from 1949 until he died in a traffic accident in 1974. The first store, in Hamilton, Ontario, was called Tim Horton Donuts and was later shortened to Tim Horton’s. The apostrophe eventually was dropped.

After Horton’s death, then-partner Ron Joyce bought out the Horton family’s shares and became sole owner of 40 stores. He expanded the chain aggressively, opening the 500th store by 1991.

Tim Hortons merged with Wendy’s International in 1995 and was spun off as a separate company in 2006.

The chain, which celebrated its 50th anniversary in May 2014, has more than 4,700 locations, including more than 3,700 in Canada and nearly 900 in the U.S. Tim Hortons opened its 1,000th location in 1995 in Ancaster, Ontario; its 2,000th in 2000 in Toronto, Ontario; and its 3,000th in 2006 in Orchard Park, New York.

Agreement Joins Tim Hortons and Nutella

In May 2015, Tim Hortons and Nutella formed an exclusive partnership in which the hazelnut spread was added as a bagel topping and in new pastries. While the exclusive pact ends in July, the Nutella pastries are expected to stay on the menu. The addition is expected to be a significant draw for U.S. customers.

The chain, which originally sold only coffee and donuts, has significantly expanded its menu over the years, with a variety of food and beverage offerings. In 2014, Tim Hortons added Frozen Green Tea in May and introduced dark roast coffee in August.

Mobile Payments Added

In May 2014, Tim Hortons introduced mobile barcode payments in U.S. and Canadian restaurants via the TimmyMe App, available for all four major mobile platforms: iOS, Android, Windows and Blackberry10. Windows 8 mobile users, who have had the TimmyMe App since June 2014, can use voice commands, saying “TimmyMe pay” to pay their bills.

Section II – Estimated Costs

  • Please click here for detailed estimates of Tim Hortons franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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