Tim Horton’s falls under the services sector, in the restaurant industry. In Canada, Tim Horton’s is wildly popular, and they are expanding into the US. Their main goals are: “1. Increasing same-store sales through daypart, marketing and menu opportunities. 2. Investing to build our scale and brand in new and existing markets. 3. Growing differently in ways we have not grown before. 4. Leveraging our core business strengths and franchise system.” (Retrieved from http://annualreport.timhortons.com/#our-strategy/plan August 28, 2012).
Watch this YouTube video to get a brief overview of Tim Hortons (click here).
Monday, September 3, 2012
Company History
The first Tim Hortons was opened in 1964 in Hamilton, ON. In 1967, Tim Horton partnered up with his first franchiser, Ron Joyce, who continued running the company when Tim Horton was killed in a car accident in 1974. They have grown significantly through the years, as shown on the below timeline:
Today, Tim Hortons is a public company, headed up by its president and CEO Paul House.
Company Production
Tim Hortons main products are coffee and donuts. The target market for Tim Hortons is really all Canadians. Their new “Time for Tims” campaign targets the adult demographic, while the Sidney Crosby commercial with the TimBits hockey players speaks to the youth of Canada.
This year, Tim Hortons introduced new sizes for their coffee cups. They introduced a new Extra Large size that, at 24 oz, rivals the larger sizes served by the competition, namely, Starbucks. The supply of this larger coffee size responds to the customer demand for more caffeine. (Retrieved from http://www.businessreviewcanada.ca/business_leaders/tim-hortons-introduces-new-coffee-cup-sizes August 30, 2012).
Each individual Tim Hortons restaurant is involved in the tertiary stage of production. Daily, staff prepares their coffee, donuts, sandwiches, and other food items fresh to serve to their customers.
Productivity is import to Tim Hortons. Surprise “audits” are performed on individual stores to check on customer wait time. In the drive-through, fast food business world, productivity is the key to success. The emphasis on productivity is also evident in the turnover of 12 Dunkin’ Donuts locations to Tim Hortons locations in NYC. At the close of business on Friday, the overhaul of 12 Dunkin’ Donuts locations in Manhattan began. By the open of business that Monday, the new Tim Hortons locations were up and running. (Retrieved from http://www.theglobeandmail.com/report-on-business/rob-magazine/how-tim-hortons-will-take-over-the-world/article580880/?page=all August 30, 2012).
Company Costs and Profits
The price for a cup of Tim Hortons coffee runs from $1.13 for a small to $1.65 for a large. Donuts are sold at $0.80 each or $5.75 for a dozen. (Retrieved from http://www.muchmenus.com/timhortonsmenu.htm August 31, 2012).
Some of Tim Hortons' fixed costs are rent/mortgage on the buildings, insurance, and the cost of salaries for company executives. Some of their variable costs would include the cost of coffee beans and produce required to produce their donuts, sandwiches, bagels etc. Utilities can vary during different months of the year, as well as price fluctuations for oil, etc. and so this would be a variable cost. Labour is also a variable cost.
Tim Hortons is a very profitable company, as seen in the table below. Revenue is shown to be at $2,853 million with an operating margin of 19.6% as per their 2011 annual report.
The Competition
Tim Hortons strongest competitor is Starbucks. In the Canadian market, there’s not much of a competition there, as Tim Hortons has “76 percent of the Canadian market for coffee and baked goods, based on customers served” (Retrieved from http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVbau_WUTixk&refer=news_index August 30, 2012).
While they may not have those kind of numbers to report in the U.S. market, they have had some success as of late, boasting an operating income that is 23 percent higher than the same period last year, and opening 7 new stores, bringing the total number of stores in the U.S. up to 721. (Retrieved from http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/tim-hortons-us-growth-slowly-panning-out/article4105700/ August 30, 2012).
One of Tim Hortons biggest competitive advantages is their price points. Compared to Starbucks drinks of the same size, Tim Hortons is much more affordable. Starbucks drink prices vary by location, but they are generally higher than Tim Hortons prices. Another competitive advantage is their simple menu. Some people get confused when trying to order at Starbucks when they’re not used to having to pick the type of roast of the bean, how many shots of espresso, what kind of milk, and sizes that aren’t the typical small, medium and large but tall, grande and venti. Tim Hortons menu is simple, which their customers appreciate.
Summary
Tim Hortons has succeeded over the years because it is consistent, reasonably priced, fast, and the product tastes great. They have placed focus on meeting existing customer demand by introducing a new, larger drink size and also by introducing a more varied drink menu.
One possible weakness is that Starbucks product is seen as having a more gourmet selection. Even with the introduction of lattes and more varied drinks at Tim Hortons, with their lower price points they are still seen as less “swanky” than the Starbucks version, and so may not appear to the more urban demographic. Overall though, at least in Canada, Tim Hortons still reigns in the coffee world.
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