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FDD Talk 2016: The Tim Hortons Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on April 25, 2016

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

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Tim Hortons Photo by Mark 2400

In this FDD Talk 2016 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 2016 FDD
  • Section III – Presentation and analysis of Tim Hortons’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average gross sales for all franchised standard Tim Hortons shops that were open and operating for at least one year as of December 31, 2015 in Indiana, Kentucky, Maine, Michigan, New York, North Dakota, Ohio, Pennsylvania, and West Virginia, respectively

Section I – Background Information

Back in 1964 National Hockey League legend Miles G. “Tim” Horton decided to open his own little restaurant in Hamilton, Ontario, featuring just two items on the menu: coffee and donuts, with each costing just ten cents.

Ron Joyce was the first franchisee for the budding chain, and became full partners with Horton in 1967. When Horton was killed in an automobile accident in 1974, Joyce became the sole owner.

In the original donut line-up were the Apple Fritter and the Dutchie, items that are still on the menu today.

The chain grew rapidly into a true Canadian behemoth. As of December 31, 2014, there were 4,671 system-wide restaurants, including 3,729 in Canada, 884 in the United States, and 58 in the Gulf Cooperation Council.

An Evolving Menu

In 1976 the company introduced its wildly popular Timbit bite-sized donut holes. The menu continued to expand significantly throughout the 1980s with the addition of muffins (1981), cakes (1981), pies (1982), croissants (1983), cookies (1984), and soups and chili (1985). The 1990s saw the addition of bagels, sandwiches, and several new coffee beverages. The last decade has seen the addition of Yogurt & Berries, the Cinnamon Roll, and the Hot Smoothee.

Joining Forces with Burger King

In 2014, Burger King acquired Tim Hortons for $11.4 billion and began operating it as a subsidiary of holding company Restaurant Brands International, which is controlled by Brazilian firm 3G Capital.

Tim Hortons has retained its company headquarters in Ontario, and in fact the holding company, Restaurant Brands International, moved its headquarters there as well to take advantage of the tax inversion process and Canada’s lower corporate tax rates.

The two brands continue to operate independently.

This isn’t the first time Tim Hortons was acquired. Wendy’s took it over in 1995, but ten years later it once again became independent.

Tim Hortons is Huge

It’s no surprise that U.S. companies have shown interest in the Tim Hortons brand over the years. People in the U.S. tend to overlook just how strong the brand is.

Tim Hortons has traditionally had earnings that exceed Burger King and Dunkin’ Donuts combined. With more than 3,700 locations, the per capita concentration of Tim Hortons restaurants in Canada outstrips that of McDonald’s in the U.S. by more than twice. Tim Hortons’ revenues are more than twice that of Burger King even though BK has three times the number of locations. And Tim Hortons’ profits outstrip those of Dunkin’ Donuts by a factor of three.

Making a Difference

Tim Hortons does a lot for people, their communities, and the planet. It has extensive sustainability initiatives, perhaps the most important one being its coffee partnership to help small-scale coffee farmers produce their crops sustainably.

The Tim Hortons Children’s Foundation provides meaningful camp experiences for more than 17,000 children every year.

And its Timbits Minor Sports Program supports more than 300,000 children on teams in hockey, soccer, ringette, lacrosse, softball, and baseball leagues in Canada and the United States.

Section II – Estimated Costs

  • Please click here for detailed estimates of Tim Hortons franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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