MILAN – Sales and franchisee profits at Tim Hortons fell in its most recent quarter, prompting parent company Restaurant Brands International Inc. to launch a back-to-basics approach to revamp and streamline its business. Restaurant Brands International, which owns Tim Hortons, Burger King and Popeyes Chicken, revealed in its annual earnings release on Monday that Tim Hortons sold a little over $6.7 billion US worth of coffee, donuts and other food items last year, a decrease of 1.5 per cent from the previous year’s level.
Intense competition from other mega-chains such as Starbucks and Dunkin’ Donuts have affected sales, as well as the surge in third-wave independent coffee shops
Tim Hortons normally makes up almost two thirds of RBI’s entire revenues, but the sales slump at Tims comes at a time when the other two franchises are growing.
In the fourth quarter same-store sales at Tim Hortons in Canada, a measure that tracks the performance of locations that have been open for 13 months or more, fell 4.6 per cent. This was partly due to the large number of coffee giveaways through the Tim Hortons loyalty program, a rewards scheme the company now plans to overhaul.
System-wide sales for the quarter fell 2.9 per cent at Tim Hortons, whose parent company keeps its books in U.S. dollars, at US$1.679 billion.
Franchisee profitability also fell compared to last year, due to lower sales and pressure from labour costs in parts of Canada, reported the company.
Tim Hortons had 4,932 stores as of the end of 2019, a slight increase from 4,846 locations as of the end of 2018.
The company called the results “disappointing,” and blamed them on changes to that loyalty program as well as weak sales of its food product.
“There is clearly a sizable gap between what this brand is capable of and the performance we’ve delivered,” said CEO Jose Cil during a conference call with analysts Monday.
“We’ve attracted far more guests to our loyalty program far more quickly than we had planned,” Cil also said.
Later this month, Tims Rewards will shift to a points-based loyalty system. Customers will earn 10 points for every purchase, which they can eventually use to redeem free products.
The move is an attempt to extract more value from the program, which appears to be testing the patience of franchisees.
The Alliance of Canadian Franchisees, an independent group of Tims store owners, recently complained that the program hasn’t provided any benefits despite the massive number of giveaways.