Tim Hortons aims to ‘refocus’ in year ahead after 2019 performance disappoints

Tim Hortons is planning to “refocus” in the year ahead, after dragging down sales growth of parent company Restaurant Brands International Inc. in 2019.

RBI raised its dividend on Monday after reporting revenues of US$1.48-billion in the three months ended Dec. 31, up from US$1.39-billion in the same period the previous year. The company will increase its quarterly dividend to 52 US cents per share, from 50 US cents.

The company’s performance was boosted by growth in Burger King restaurants and the popularity of a new chicken sandwich launch at Popeyes Louisiana Kitchen. But Tim Hortons’ performance lagged. The coffee and donuts chain’s comparable sales were down 1.5 per cent in the twelve months ended Dec. 31, the company reported on Monday, while its other fast-food chains grew: sales at Burger King grew 3.4 per cent in 2019, while Popeyes had 12.1-per-cent growth. (Comparable sales are counted at restaurants open more than a year, an important measure to show growth that is attained not just through opening new restaurants. At RBI, the term is applied for restaurants open 13 months or more in the case of Tim Hortons and Burger King, and 17 months or more for Popeyes.)

“At Tim Hortons, our performance did not reflect the incredible power of our brand and it is clear that we have a large opportunity to refocus on our founding values and what has made us famous with our guests over the years, which will be the basis for our plan in 2020,” RBI chief executive officer Jose Cil said in a statement on Monday.

Tim Hortons is the largest driver of total revenue for Toronto-based RBI through store sales and franchise and property revenue, even though it has far fewer stores than Burger King. It contributed US$872-million in the fourth quarter, compared to US$462-million for Burger King and US$145-million from Popeyes. Tim Hortons had 4,932 restaurants as of Dec. 31, while Burger King had 18,838 and Popeyes had 3,316. But the company is investing more heavily in expanding the store count of the other two banners as part of its plan to grow to more than 40,000 stores within eight to ten years. Burger King accounted for 1,000 of the 1,342 net restaurant openings in 2019.

Meanwhile, Tim Hortons will spend the coming year focusing on “fundamentals” to fix lagging performance in Canada, the company said on Monday.

Recently, a group representing Tim Hortons franchisees that settled lawsuits with the parent company last year, has regrouped and launched a recruiting drive under a new name. The Great White North Franchisee Association, which was formed in 2017 to represent restaurant owners’ concerns to management, is now called the Alliance of Canadian Franchisees. Tim Hortons has an advisory board made up of franchisees elected by other restaurant owners. It consults with the advisory board on business strategy and to hear franchisee concerns. At recent meetings with company executives, the new Alliance encouraged members to raise concerns that included low sales volume at some locations; glitches in the payment system; and frequent changes to the menu that complicated operations, slowed down service, and added to stores’ costs. One of those menu experiments was serving Beyond Meat imitation meat products in burgers and breakfast sandwiches. The burgers were offered for just three months, but the breakfast sandwiches stayed on the menu in B.C. and Ontario until late last month, when the company confirmed they would be phased out.

On Monday, RBI reported system-wide restaurant sales of US$8.9-billion in the fourth quarter and US$34-billion in 2019, representing full-year growth of 8.3 per cent, driven partly by 5.2-per-cent growth in the number of restaurants.

Net income for the three months ended Dec. 31 was US$257-million or 55 US cents per share, compared to US$301-million or 65 US cents per share in the same period in 2018. Its 2019 net income was US$1.1-billion, roughly flat compared to the previous year.

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