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

• Section I – Estimated initial investment (franchise costs) for a Tim Hortons franchise, based on Item 7 of the company’s 2022 FDD

• Section II – Initial franchise fee, royalty fee, and marketing fee for a Tim Hortons franchise, based on Items 5 and 6 of the company’s 2022 FDD

• Section III – Number of franchised and company-owned Tim Hortons outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD

• Section IV – Background information on the Tim Hortons franchise opportunity, including relevant news updates

• Section V – Presentation and analysis of Tim Hortons’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:

• Section VI – Key ratios, comparables, computations, and analyses for the Tim Hortons franchise opportunity (exclusive content for Platinum subscribers)

• 2021 average, median, highest average, and lowest average monthly gross sales for the 549 standard Tim Hortons shops that were open as of December 31, 2021 and reported to Tim Hortons at least 10 months of sales for 2021

• 2021 average and median monthly cost of goods sold and labor expense for the 473 standard Tim Hortons shops that were open as of December 31, 2021 and reported to Tim Hortons at least 10 months of cost of goods sold and/or labor expense for 2021

• 2021 average, median, highest average, and lowest average monthly gross sales; average and median monthly cost of goods sold and labor expense for the 6 Tim Hortons shops built under Tim Hortons’ New Model that were open as of December 31, 2021 and that reported to Tim Hortons at least 10 months of sales for 2021

• 2021 average and median same-store sales growth (daily average) for the 558 standard Tim Hortons shops and 6 New Model Tim Hortons shops that reported comparable sales for the same day of 2020 and 2021 and that were open as of December 31, 2021

Section I – Tim Hortons Franchise Costs

• Tim Hortons franchise costs, based on Item 7 of the company’s 2022 FDD:

• Initial Franchise Fee:  $50,000
• Real Estate Taxes, Personal Property Taxes, and CAM Charges:  $5,000 to $70,000
• Equipment:  $337,000 to $375,000
• Real Estate:  variable
• Planning and Development and Design Costs:  $20,000 to $100,000
• Site Development Costs:  $100,000 to $230,000
• Building Costs:  $476,000 to $504,000
• Training:  $20,000 to $27,000
• Start-Up Supplies and Initial Inventory:  $7,000 to $14,000
• Professional and License Fees:  $1,500 to $10,000
• Insurance:  $2,500 to $21,500
• Security Deposits:  $0 to $15,000
• Additional Funds:  $25,000
• Total Estimated Tim Hortons Franchise Costs:  $1,044,000 to $1,441,500

Section II – Tim Hortons’ Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Tim Hortons’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:

• Initial Franchise Fee:  $50,000
• Royalty:  4.5% to 6% of Gross Sales
• Advertising Contribution:  4% of Gross Sales

Section III – Number of Franchised and Company-Owned Tim Hortons Outlets

Franchised

2019

• Outlets at the Start of the Year:  727
• Outlets at the End of the Year:  656
• Net Change:  -71

2020

• Outlets at the Start of the Year:  656
• Outlets at the End of the Year:  633
• Net Change:  -23

2021

• Outlets at the Start of the Year:  633
• Outlets at the End of the Year:  637
• Net Change:  +4

Company-Owned

2019

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2020

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2021

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section IV – Background Information on the Tim Hortons Franchise

14 Things You Need to Know About the Tim Hortons Franchise

Announces C$80 Million Investment to Support Its Back to Basics Plan

1.  In mid-March 2021, Tim Hortons announced an C$80M corporate investment in Canada for 2021 to supercharge advertising expenses, highlight menu improvements in product quality, and support continued enhancements in the digital guest experience, including the Tims Rewards program.

2.  Around the time of the announcement, Tim Hortons had launched three new quality upgrades to its menu as part of its Back to Basics plan, including a new dark roast coffee, Craveables lunch sandwiches, and freshly cracked Canadian eggs in breakfast sandwiches. Part of the corporate investment will support awareness of these launches and additional menu quality initiatives planned for 2021.

3.  Guests at Tim Hortons are increasingly interacting with the brand through its digital channels. The Tim Hortons mobile app in Canada has seen monthly active users grow approximately five-fold since 2018 and about one-third of all Canadian adults have used the Tims Rewards loyalty program in the last 18 months. The investment will support the Tims Rewards loyalty program and other strategic digital initiatives to continue building a best-in-class digital experience for guests.

4.  This investment in 2021 will also provide a substantial increase in overall advertising throughout the balance of the year – all intended to highlight taste and quality, great value for money, and continuing to strengthen the love that Canadians have for the Tim Hortons brand. In addition to the C$80M corporate investment, advertising contributions from restaurant owners in Canada will be increasing by 0.5% of sales to historical levels permitted under the current contracts, leading to a sustained, increased level of investment in advertising, community, and digital initiatives in 2022 and beyond.

5.  Jose Cil, chief executive officer of Restaurant Brands International, said, “The efforts behind our Back to Basics plan are starting to deliver results. The plan focuses on building an experienced, talented and stable leadership team, investing in product quality, becoming an industry leader in the digital guest experience, delivering great value for money, and continuing to build our strong, iconic brand in communities across Canada. With an exceptional leadership team now at the helm, early successes in our digital journey and encouraging results from our investments in product quality, we are confident the business is heading in the right direction. Our investment today reflects that confidence and our optimism in the plan.”

6.  Axel Schwan, president of Tim Hortons, added, “Despite the disruptions from COVID, our team maintained focus throughout 2020 and has delivered three consecutive product launches with encouraging early results, contributing positively to our sales. Our new dark roast coffee has received a higher guest rating than any of our previous recipes; our affordable, Craveables lunch platform – with the roast beef and crispy chicken sandwich – is receiving great feedback; and we are seeing meaningful sales contributions from our nationwide launch of freshly cracked, Canadian eggs in our breakfast sandwiches.”

7.  Schwan continued, “We are also seeing strong progress in digital with the adoption, usage and increasing level of guest engagement on our Tims Rewards program and app. In addition, we are continuing to work hard on improving personalized offers on the app and are rolling out predictive selling on our drive-thru menu boards across the country this year. This is all part of our goal to provide Canada’s best in class digital guest experience. And when it comes to our brand perception overall, we continue to see improvements – guest satisfaction has grown significantly driven by simplifying and improving the quality of our menu items plus guests are experiencing faster speeds of service. Community contributions by so many of our restaurant owners, bolstered by our branded coffee trucks traveling Canada and supporting front line workers with free coffee and baked goods, also had a key role in driving continued improvements in overall brand perception.”

Launches Timbiebs Timbits with Justin Bieber

8.  At the end of November 2021, Tim Hortons and Justin Bieber announced a partnership to collaborate on menu innovations and co-branded merchandise, all inspired by Justin’s fanatical love of the Tims brand. The limited-edition lineup of Justin Bieber’s Timbiebs Timbits was available at participating Tim Hortons restaurants in Canada and the U.S., along with a lineup of exclusive merch. Participating Tim Hortons restaurants across Canada and the United States sold a limited-edition selection of Timbiebs Timbits in Chocolate White Fudge, Sour Cream Chocolate Chip, and Birthday Cake Waffle flavors.

9.  Bieber shared with the Tims team that Timbits are his favorite item on the menu, which led to a multi-stage, iterative journey with Chef Tallis Voakes, Tim Hortons’ director of culinary innovation, to experiment with different flavor combinations and collaborate on the recipes that guests could try for themselves. Bieber said, “Doing a Tim Hortons collab has always been a dream of mine. I grew up on Tim Hortons and it’s always been something close to my heart.”

10.  Participating Tim Hortons restaurants also sold the Timbiebs merch lineup, which was developed in collaboration with Bieber and featured a cozy beanie, a fanny pack, and a tote bag. Tim Hortons is thrilled with how Bieber has been all-in on this partnership, said Hope Bagozzi, chief marketing officer of Tim Hortons, including filming a fun TV commercial for the Timbiebs launch.

11.  Bagozzi added, “What’s amazing about working with Justin is he has an authentic, lifelong relationship with Tims and he was so invested in working on Timbiebs and our future plans together. He knows exactly what our guests already love about the Tims brand and he’s helping us deliver new menu innovations that we know they’re going to love. We’re really looking forward to what’s next.”

Company History

12.  Tim Hortons was founded in 1964 by legendary Canadian hockey player Tim Horton and his business partner Jim Charade in Hamilton, Ontario, Canada. Not long after opening the first store, Horton met Ron Joyce, a former Hamilton police constable. Joyce became one of the first Tim Hortons franchisees. Due to his business savvy, Joyce became heavily involved with the operation of Tim Hortons.

13.  Following Horton’s death in 1974, Joyce bought the Horton family’s shares for $1 million and took over as sole owner of the existing chain of 40 stores. Under Joyce’s leadership, Tim Hortons grew rapidly across Canada. In 1984, the first Tim Hortons outside of Canada opened in the United States in New York. By the early 1990s, there were 500 locations in operation in North America.

14.  In 1995, Tim Hortons merged with American fast food chain Wendy’s. Despite initial fears that the merger would hinder Tim Hortons’ operations, the chain continued its rapid growth in Canada. Tim Hortons grew so much that it overtook McDonald’s as Canada’s largest food service operator.

15.  Tim Hortons broke off from Wendy’s in 2006, but less than a decade later, it merged with another U.S. chain, Burger King, under a new parent company, Restaurant Brands International, which is majority owned by Brazilian investment company 3G Capital. Today, Tim Hortons has locations across 15 countries.

Entrepreneur’s Franchise 500

16.  Tim Hortons did not rank on Entrepreneur’s 2022 Franchise 500 list.

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Tim Hortons Franchise (Item 19, 2022 FDD)

Part 1 – Monthly Gross Sales, Cost of Goods Sold, and Labor Expense

• This section describes monthly Gross Sales, Cost of Goods Sold, and Labor percentages in 2021 for certain franchised Standard Shops as described below.

A.  Monthly Gross Sales Information

• The Gross Sales information in this section was taken from 549 Standard Shops (the “2021 Shops”). The 2021 Shops were open as of December 31, 2021 and reported to Tim Hortons at least 10 months of sales for 2021.

• The first of the 2021 Shops opened in 1985 and the most recent opened in 2021.

• Included in the 2021 Shops are 6 Shops that are operating under Tim Hortons’ New Model.

• Tim Hortons did not include 33 Shops that operated its Operator Agreements, 31 Standard Shops that reported less than 10 months of sales information, 9 Standard Shops that provided inconsistent information to Tim Hortons, and 6 Shops that were self-serve locations.

• Included in the excluded Shops are 4 Standard Shops that closed during 2021. None of the Shops that closed were open for less than 12 months before closing.

• Average Monthly Gross Sales:  $99,020
• Median Monthly Gross Sales:  $94,341
• Number and Percentage of Shops That Exceeded Average:  253 (46%)
• Highest Average Monthly Gross Sales:  $303,656
• Lowest Average Monthly Gross Sales:  $3,574

B.  Cost of Goods Sold and Labor Information

• The Cost of Goods Sold (“COGS”) and labor expense information in this section was taken from 473 Standard Shops that were included in the 2021 Shops.

• Included in these Shops are 6 Shops that are operating under Tim Hortons’ New Model.

• 76 Standard Shops were excluded because they failed to report Cost of Goods Sold and/or Labor information or reported that information for less than 10 months.

• Average Monthly Cost of Goods Sold:  28% of gross sales
• Median Monthly Cost of Goods Sold:  28% of gross sales
• Number and Percentage of Shops That Exceeded Average:  241 (51%)

• Average Monthly Labor Cost:  31% of gross sales
• Median Monthly Labor Cost:  31% of gross sales
• Number and Percentage of Shops That Exceeded Average:  241 (51%)

C.  New Model Shops

• The table below shows monthly Gross Sales, COGS, and Labor expense information (in dollars and as a percentage of Gross Sales) for the 6 Shops built under Tim Hortons’ New Model that were open as of December 31, 2021 and that reported to Tim Hortons at least 10 months of sales for 2021.

• The first of these Shops opened in 2020, and the most recent opened in 2021.

• No Shops operating under Tim Hortons’ New Model closed during 2021.

• Average Monthly Gross Sales:  $87,858
• Median Monthly Gross Sales: $90,431
• Highest Average Monthly Gross Sales:  $100,901
• Lowest Average Monthly Gross Sales:  $63,416
• Number and Percentage of Shops That Exceeded Average:  3 (50%)

• Average Monthly Cost of Goods Sold:  $23,530 (27% of gross sales)
• Median Monthly Cost of Goods Sold:  $24,229 (27% of gross sales)
• Number and Percentage of Shops That Exceeded Average:  3 (50%)

• Average Monthly Labor Expense:  $22,916 (26% of gross sales)
• Median Monthly Labor Expense:  $24,211 (27% of gross sales)
• Number and Percentage of Shops That Exceeded Average:  3 (50%)

Part 2 – Same-Shop Gross Sales Standard and New Model Shops (2020-2021)

• The tables below show a comparison of the average and median same Standard Shop Gross Sales growth from 2020 to 2021 for the 558 Shops that reported comparable sales for the same day of 2020 and 2021 and that were open as of December 31, 2021.

A.  Total Standard Shops, Including New Model Shops

2020-2021

• Shop SSS Growth (Daily Average):  9.4%
• Total Number of Shops:  558
• Number and Percentage of Shops Exceeding Average SSS:  303/54%
• Median Shop SSS Growth:  10.9%

B.  New Model Shops

2020-2021

• Shop SSS Growth (Daily Average):  17.5%
• Total Number of Shops:  6
• Number and Percentage of Shops Exceeding Average SSS:  3/50%
• Median Shop SSS Growth:  14.4%

• Gross Sales include all revenues received by the Tim Hortons Shop, less refunds and sales taxes.

• Cost of Goods Sold includes food and beverages and supplies.

• Labor costs include payroll, payroll taxes, and benefits.

• In preparing these tables, Tim Hortons relied on the data contained in the unaudited reports submitted to it by its franchisees.

• The dollar amounts shown in this Item 19 have been rounded to the nearest dollar, the percentages shown for Cost of Goods Sold and Labor expense have been rounded to the nearest full percentage point, and the percentages showing same Shop growth have been rounded to the nearest tenth.

• The information appearing in the first two tables reflects the average and median Gross Sales results of individual Standard Shops, as well as average and median information concerning Cost of Goods Sold and Labor expenses. The information does not reflect all costs of sales, operating expenses, or other costs or expenses that must be deducted from the Gross Sales figures to reflect net income or profit.

• Moreover, this information should not be considered as the actual or probable sales results that will be realized by any franchisee or Tim Hortons Shop. Actual results vary from Tim Hortons Shop to Tim Hortons Shop and Tim Hortons cannot estimate the results of any specific Tim Hortons Shop.

• A new franchisee’s Tim Hortons Shop results are likely to differ from those of established Tim Hortons Shops.

• Some outlets have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.

Section VI – Tim Hortons Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️