Tim Hortons: always profitable - Macleans.ca

Tim Hortons: always profitable

A court battle over frozen doughnuts offers a rare glimpse inside the books of Tim Hortons franchises

by
Always profitable

Photograph by Andrew Tolson

Anyone who has ever waited in a winding Tim Hortons lineup (i.e. every Canadian with a pulse) has shared the same fantasy: imagine owning this place. Brew. Sell. Repeat. Count. Ronald Joyce—the man who built “Timmy’s” into the national icon it is today—confirmed as much in his autobiography. “If there was ever a sure thing,” he wrote, “owning a Tim Hortons franchise was it.”

Joyce’s book doesn’t provide specific dollar figures, and the company isn’t in the habit of disclosing the annual earnings of individual franchisees. But a nasty court battle in Ontario has provided a rare glimpse of exactly how much cash the average Hortons store owner pockets in a year: $265,558.That’s 170,000 large cups of profit. Or, more fittingly, 332,000 frozen donuts.

As Maclean’s reported in September, a small group of angry franchisees has filed a $1.95-billion proposed class-action lawsuit against the Hortons head office, claiming the company’s decision to scrap in-store deep fryers and introduce “par-baked” goods (manufactured at a warehouse, then trucked frozen to stores) has taken a gigantic bite out of their bottom lines. A preliminary hearing was scheduled for this month, but it’s been postponed until August.

In the meantime, though, the company has filed a detailed breakdown of average store profit margins between 2002 (when the so-called “Always Fresh” system was first introduced) and 2008. The conclusion? Frozen donuts have actually been good for business. Extremely good.

During that seven-year span, the average Hortons outlet earned nearly $1.5 million (before interest and taxes) and watched profits grow from $174,280 in 2002 to more than $265,000 in 2008. Shops in Saskatchewan were especially lucrative; a typical franchisee in that province earned more than $396,000 in 2008—a 105 per cent jump from 2002.

Surprisingly, the lowest profits were recorded in Nova Scotia, where Tim Horton is practically a patron saint. The typical owner there earned just $203,721 in 2008, more than double the take from 2002.