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Tim Hortons Fast Food Restaurants
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Tim Hortons - power play


  Tim Hortons
power play
by Renée Alexander
October 10, 2005


Tim Hortons may be a fast-food institution in Canada, but the brains behind the brand have realized the company's history north of the border has no impact on its ability to expand to the south.
 
 

Named after its founder, Tim Horton, a legendary hockey player for the Toronto Maple Leafs, there is little question that, with more than 2,500 coffee shops across Canada, Tim Hortons has become part of the country's retail and social fabric during its 41 years of operation. (The vast majority of its growth has taken place after Horton himself was killed in a car accident in 1974.)

Non-believers need only pull out a recent copy of the Canadian Oxford Dictionary to find "double double" (the Tim Hortons phrase for coffee with two creams and two sugars) has been added because the term has permeated the lexicon from coast to coast.

Or watch the company's advertisements, which are based on real letters from actual customers, one of which depicts a Canadian making his way across Europe having his nationality recognized not because of the Maple Leaf on his backpack but because of the Tim Hortons travel mug dangling from one of its straps.

Cathy Whelan Molloy, vice president of marketing and merchandising at the TDL Group Corp., which operates Tim Hortons for its parent company, Ohio-based Wendy's International Inc., says while expansion in Canada is largely a factor of setting up stores in relatively underserviced markets, growth in the US isn't nearly as easy and takes considerably longer.

First, there's the fact that outside of perhaps Buffalo, New York, where Horton played his last two hockey seasons, the chain's namesake is a virtual unknown. Coupled with the lack of popularity of hockey in the US (outside of a few traditional markets, it hasn't nearly reached the religious fervor with which it's held in Canada) and millions of Canadians' habit of pulling into a drive-through to get a coffee on their way to work each morning, it's easy to see why a different strategy on either side of the border is a must.

So, Tim Hortons set out to differentiate itself in the US from its competitors, which include chains such as Dunkin' Donuts and McDonald's, and gas station convenience stores. It placed an emphasis on a commitment to providing the freshest products. The chain has three main menu offerings, beverages, baked goods and lunch, with coffee, which is always less than 20 minutes old, as its core item.

"You have to be true to your brand. Who Tim Hortons innately is and what it stands for is its ‘always fresh' proposition. Everything else stems from there," TDL Group's Whelan Molloy says, noting the company's signs were changed from Tim Hortons Donuts to Tim Hortons Always Fresh in 1990.

In order to make an impact in the US, she says the company had to launch an introductory advertising campaign about the brand and what it stood for.

"In Canada, there's an established out-of-home coffee market. So not only do we have an awareness challenge, we have a category that wasn't developed," she says, noting that as awareness of Tim Hortons grows, more and more people are making out-of-home coffee a part of their daily lives.

She notes there are also economies of scale in branding. For example, Tim Hortons does not want to enter any US markets with a single store. Instead, the plan is to blanket the area.

"We know we have to enter the market in a big way, we can't just open up one store. If we wait for one store to build, we can't support it with advertising. We need a strong enough store base to support it with marketing," she says.

Thus far, she says the strategy appears to be working. Today, 265 of its locations are in ten US states—Connecticut, New York, Ohio, Maine, Pennsylvania, Massachusetts, Rhode Island, Michigan, Kentucky and West Virginia—and it's currently focusing on building its brand out along the Great Lakes states, an area encompassing about 90 million people, or almost three times the population of Canada. The plan is to have 500 Tim Hortons locations in the US sometime in 2007.

"People are very accepting of us. They love the concept, they say they don't have anything like it in their market. They see us as a step above fast-food because we're fresh and not fried. We're seen as good food served fast but we're not classified along with hamburger places. They see Tim's as more of a gathering place," she says.

"It's an unpretentious brand. It's very similar to how you would think of a Canadian: friendly, caring, dependable. That's our brand character," she says.

Whelan Molloy notes Tim Hortons has handled this kind of expansion challenge before. She says its approach in the US isn't dissimilar from its 1990's strategy in building beyond its traditional Canadian strongholds in Ontario and Atlantic Canada.

"Our stores in Western Canada had a tough go at first. We didn't have a lot of money for regional advertising. Now we can't build stores quick enough for our west coast friends," she says. "The advantage we have in Canada is they've heard of us, but we still had to build the category there and in (predominantly French-speaking) Quebec."

All that said, Rob Warren, director of the Asper Centre for Entrepreneurship at the University of Manitoba in Winnipeg, doesn't have high hopes for Tim Hortons' expansion plans south of the border.

"What American has ever heard of Tim Hortons? What's the tie to the local area? I just don't see it," he says.

He says the brand is essentially irrelevant if it's peddling products that Americans don't want to buy, or at least not as much as Canadians do. For example, Tim Hortons' double double may not interest an American population that enjoys its coffee black.

"The double double is Tim Hortons' mainstay, but I'm not sure if Americans will go for it," he says.

He says donut consumption is also significantly lower in the US, as demonstrated by the fact that Tim Hortons has franchise penetration in Canada per thousand people that is ten times that of Dunkin' Donuts' in the US.

"Look at the last donut franchise that tried to expand across the US," he says, referencing Krispy Kreme, which is currently experiencing a restructuring.

 
     
  

Renée Alexander is a freelance business and lifestyle writer based in Winnipeg, Canada.

  
     
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