Double, double and doughnuts: Tim Hortons seeks return to its roots amid sales slump
Tim Hortons is plotting a return to its roots as a simple coffee and doughnuts chain, backing away from the frenzied menu experiments that have complicated its kitchens, slowed down its drive-thru and confused its customers.
Executives from the chain are unveiling their new strategy for 2020 in a series of town hall meetings with franchisees across the country this week. The plan is to remaster the Tim Hortons basics — coffee, baked goods and breakfast — while upgrading its drive-thrus and loyalty program.
“While it’s interesting to test in burgers and cereal, it’s not what we’re famous for,” said Duncan Fulton, the chief corporate officer at Tims parent company, Restaurant Brands International Inc.
We tried to be everything to everybody and you just can’t
Rick Murray, a franchisee
The change in strategy, after years of “on-trend innovation,” appears aimed at turning around the chain after a string of difficult quarters that saw sagging sales, public missteps and a management shakeup.
The discussions with franchisees come as an independent franchisee association, which had remained silent following the settlement of a bruising lawsuit against Tims, appears reinvigorated — with a new name, a new leader and new concerns.
The Alliance of Canadian Franchisees — formerly the Great White North Franchisee Association — recently released a list issues for franchisees to ask about at the town hall events this month, including concerns about the flurry of menu changes.
“A day does not go by where I’m not on the phone or visiting with an owner who’s not worried about the business and the future of our brand,” ACF’s executive director, Nick Javor, said in a recent communiqué to franchisees, obtained by the Financial Post. “RBI is trying to make efforts to turn this around and they need your help. So ask the questions that can help them help you and the brand.” Javor, a former Tim Hortons executive who took the helm of the association last year, declined to comment to the Financial Post.
Fulton said Tims’ 2020 strategy is addressing franchisee concerns, which had already been raised by the chain’s 19-member elected franchisee advisory board — the only body of franchisees that Tim Hortons officially recognizes.
“Every single issue that could possibly be raised by (ACF) has absolutely been raised by us,” said Rick Murray, a franchisee with seven Toronto locations who chairs the advisory board.
Murray said the advisory board raised concerns, for instance, about the number of menu experiments, called limited-time offers (LTOs) in fast-food industry speak.
Tims released roughly 60 new menu options last year, more than double its usual annual rate of 20 to 30, including a much-maligned Beyond Meat burger, a crispy chicken sandwich and a Timbit meant to taste like a double-double coffee.
Late Tuesday, Tims announced that it was pulling the Beyond Meat burger from its menus in Ontario and B.C., killing the experiment altogether.
Alex Macedo — whose departure as Tim Hortons global president was announced this month — was a proponent of heavy experimentation, telling the Financial Post in August that his plan was to push ahead with “on-trend innovation” and be the first, or close second, to bring new products like Beyond Meat to market.
But sales suffered in Tims most recent quarter late last year, with the chain posting a 1.4 per cent decline in same-store sales.
“We tried to be everything to everybody and you just can’t,” Murray said in an interview Tuesday. “I think it became a little bit confusing for our guests because there was just too much going on in the restaurant.”
The new items also complicated operations in the kitchen.
“A lot of our employees are students that only work one or two days a week. So every time they come in, you’ve got to kind of retrain them on everything that’s going,” Murray said. “I think it became operationally very complex for our team members.”
That made for slower drive-thru times — a crucial metric at Tim Hortons. The standard is 25 seconds from the time a customers pulls up to pay at the window, to the time they pull away with their order. If the average time takes longer than 25 seconds, franchisees can expect a drop in sales.
“There’s a high correlation between speed of service and sales,” Fulton, at RBI, said. “By reducing the number of LTOs this year and focusing on the products that we’re famous for … it’s going to improve service levels, it’s going to take complexity out of the kitchens.”
With its condensed roster of LTOs in 2020, Tim Hortons is temporarily giving up its chase of market share at lunchtime. The chain has been intent on increasing its lunchtime performance, taking chances on items that would traditionally have fallen well outside of the Tim Hortons realm, such as burgers. Fulton said for most, Tims is still a place to stop for coffee and a baked good on the way back to the office, after having lunch somewhere else.
“Our long-term plan for lunch is we need to have a menu that is going to attract people,” he said.
A team is working on that strategy “behind the scenes,” he said, but it won’t be ready to roll out in 2020. Instead, Tim Hortons will focus this year on growing sales and making improvements in its core categories: coffee, baked goods and breakfast.
“Those are all things that our customers would expect us to innovate in and grow in,” he said. “So a big message for 2020 is we need to be the absolute best at our fundamentals and can never let anyone beat us in our fundamentals.”
The first attempt at innovating core categories started with doughnuts, with Tims launching its gourmet Dream Donuts line earlier this month. The new doughnuts, including Dulce de Leche Crème and Chocolate Truffle, have proven to be “incredibly powerful as a sales driver,” Fulton said.
The last pillar of the 2020 strategy involves updating some of the Tim Hortons infrastructure, including a switch from printed menu boards to digital ones at the drive-thru. The chain is also working to convince more people to register their loyalty cards, so Tims can glean more consumer insights and send targeted product offers to customers.
On Thursday, Fulton and the Tim Hortons executive team will give their third presentation to franchisees, this time in Toronto, after meetings in Vancouver on Monday and Calgary on Tuesday. The meetings include an opportunity for franchisees to ask the executive questions.
In Vancouver, he said, that portion lasted for more than an hour.
“We stayed on stage for an hour and 20 minutes taking every single question that the owners had,” he said.
Fulton said the presentation is also about introducing a spate of new executives who have boosted the chain’s “very strong Canadian bench strength” — including Hope Bagozzi, a Canadian, who Tim Hortons hired away from McDonald’s as its new chief marketing officer this month.
Asked if the intros were in response to concerns over a lack of Canadian executive leadership at the coffee chain, Fulton said it’s “certainly something that’s come up in the media from time to time.”
In 2014, 3G Capital Inc., the massive global investment firm, bought Tim Hortons and merged it with Burger King to form Restaurant Brands International.
“It’s some spin that over a couple of years has grown and not been countered,” he said. “Every single time the media come out and suggest we’re not a Canadian company, we’re going to respond pretty aggressively and say, ‘Of course we are.’”