Tim Hortons is slated to open its first location in Houston this summer, signaling the Canadian coffee chain’s strategy to move further south for its next phase of U.S. expansion.
The Restaurant Brands International chain has more than 600 U.S. locations, making it the third-largest coffee chain in the country, trailing behind Starbucks and Dunkin’. But it’s a distant third place, and the chain has struggled to take hold with U.S. consumers despite past attempts, dating back decades ago when it was owned by Wendy’s. Still, Tims is looking to erase the gap and overtake Dunkin. In 2021, the chain saw its strongest new restaurant growth in the U.S. since 2016.
Jose Cil, chief executive of parent company RBI, said in an interview that the chain’s packaged coffee business is growing “quite extensively” in the U.S. through direct-to-consumer website sales and in grocery stores.
“It’s a good indicator of awareness, as well as demand for our products, so there’s a number of markets in the U.S., south of our southermost restaurants: places like Texas, like Florida,” he said.
Most of Tims’ current U.S. locations are concentrated in states that share a border with Canada: New York, Michigan and Ohio. The next phase of U.S. expansion will focus on markets like Texas and Florida, according to Cil.
“Between snowbirds and people that have moved down to Florida permanently, there’s more than 3.5 million Canadians, so brand awareness is really strong. Demand is strong. We just need to be there to meet it,” Cil said.
In recent years, the company has rethought its business model. It rebuilt many of its Ohio locations with smaller square footage. Cil said the new format is faster to build and has better unit economics than the old model. The new U.S. restaurants are also focused on beverages, baked goods and hot breakfast sandwiches, unlike its Canadian stores, which have been pushing into lunch and dinner.
“We’re not a full-blown [quick-service restaurant], we’re focused on what we do best,” Cil said.
The U.S. isn’t the only international market seeing aggressive expansion from Tims. The chain recently opened its 400th location in China, less than three years after opening its first.
In its home market of Canada, Tims has faced a fair share of struggles. Prior to the pandemic, it was in turnaround mode, upgrading its coffee and food offerings and launching a loyalty program in the face of stagnating sales growth. Covid outbreaks put additional pressure on its comeback.
However, the chain reported Canadian same-store sales growth of 11.3% for the fourth quarter, aided by sales from loyalty program members and popular promotions, like a collaboration with singer Justin Bieber.
Shares of Restaurant Brands were up more than 3% in afternoon trading on Tuesday after the company reported its fourth-quarter results. Its earnings and revenue both topped Wall Street’s estimates, a rarity this quarter for restaurant companies as they face higher costs.