Why Tim Hortons can’t rrroll into the United States

James Cowan explains why America doesn’t want our donuts

This is a big week for Tim Hortons. We’ve entered “RRRoll Up the Rim to Win” season and the company will unveil its 2012 year-end results on Feb. 21. And while the company’s success continues to rrroll ahead—revenue increased 10.3% in its last quarter alone—it is also on the rim of some serious trouble.

As Jeff Beer recently wrote, analysts are worried Tim Hortons has reached its saturation point in its domestic market. There were 3,365 Hortons in Canada as of Sept. 30, 2012; the company has consistently said there’s room for about 4,000 in total. With 44 new ones opening in the last quarter alone, they may soon need to open donut shops inside of donut shops to keep growing.

Which is why international expansion is so important for Canada’s premier donut depot. The company has been without a permanent CEO since May 2011, when Don Schroeder unexpectedly left the company. Most assume it’s searching for a replacement with American experience to help it navigate a U.S. expansion. Finding the right person has proven difficult; acting chief Paul House indicated in an interview last year that he might still be around at the end of 2013.

The company clearly needs help developing a strategy in the U.S. market. Missteps in the New England region forced it to close 36 stores in 2010. American growth continues to lag, with just 22 new restaurants opening last quarter, half as many as on the other side of the border.

Regardless of who next leads Tim Hortons, betting on an American expansion to maintain growth seems unwise. It took 27 years for Tim Hortons to open its first 500 outlets. Over that time, the brand built an emotional connection with Canadians, supporting charities, backing amateur hockey teams and serving as the default community centre for many small towns. Perhaps most importantly, the brand was unabashedly patriotic, from its hockey rink-laden advertising to its support of Canadian troops in Afghanistan. Underneath the folksy, homespun image is a finely calibrated brand identity, one that’s earned notice from both Ad Age magazine and the Reputation Institute. By the time the company began expanding aggressively in the mid-nineties, even if you didn’t love Tim Hortons, you likely had a hockey buddy, coworker or far-flung relative willing to drive miles for a double-double.

But here’s the fundamental problem for Tim Hortons. Its current brand identity—particularly the Canuck iconography—doesn’t help it in the United States. Without the brand identity, Tim Hortons is just another donut shop. America’s got plenty of those already.




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Why Tim Hortons can’t rrroll into the United States

  1. I think the “just another donut shop” comment is actually unsupported. (Quick disclaimer: don’t have shares, don’t have friends that work at Tims, rarely go there.)

    Anyone who’s driven across the States, esp. on the blue highways, will know that getting a decent cup of coffee is hit and mostly miss. Where Tim Hortons is excellent is on execution; its competitors even in Canada have trouble with that; and the biggest donut shop in the States, Dunkin, has tremendous variations in quality from store to store.

    I think Tim Hortons’ greatest strength in its expansion to the States will be on quality execution at its price point.

    • I have to agree that Tim’s main strength is consistency and quality (sound a bit like McD’s?). They haven’t gotten their marketing mojo right in the US and a great ad agency could help them. They need a Go Big or Go Home attitude in the US. Open 2,3, 400 corporate-owned stores and keep opening them. As they start to support themselves sell them off as turn-key franchises with a customer base and keep opening stores. The US love a winner and seeing stores open monthly across the country would support that vision and propel them forward. Labatts Blue is a well-known brand there and it is because they dumped the “Where’s Chuck” Canadiana and just advertised the hell out of it as GREAT BEER.

      So advertise Tim’s as great coffee and focus on their core strengths – coffee made fresh every 15 minutes, great donuts, great food and great service. And do it in every small town in America and then move into the major centres

      But honestly forget the US and go to India – they are seeing an explosion of Western-style and based fast food coming up and they love coffee and sweets.

      • actually small towns (that don’t already have a coffee place) could be just the ticket.

        • That’s what I was thinking. Hit rural America hard. Have an image as a folksy coffee shop and develop a consistent,repeatable experience. From there expand to highway stops,.partner with regional gas stations to set up mini time outlets and then move into larger centres, but carefully and only where it makes sense. Man I should be an executive. Have a strategic mind :)

  2. If Panera Bread would open more stores in Canada they would hurt Tim Horton, much better place to heat.

  3. Do not like timmies coffee at all

    • Funny I keep reading comment after comment from people who claim to hate timmie’s coffee and prefer McDs, yet every time I drive pasta timmies there are 10 cars in the drive thru and many times long lines inside.

      • their cream and sugar is really good…

      • They pay people to drive through their drive throughs and stand in their lines. You didn’t know that?!

  4. when in the states I drink Dunkin Donuts,it’s much better and their donuts actually have a filling inside,something Tim’s doesn’t have.There donuts are boring,especially their timbits,they never change or bring out new flavours.Boring,boring.

  5. I am from the US and living in Canada now. I find Tim Horton’s coffee and donuts to be terrible. That said, I eat there on occasion due to it’s cheap cost. I could say the same for Dunkin Donuts (DD) in the USA. Cheap and available. Timmies will never be a real success in the USA. The article says it all in the last two sentences. Timmies has no brand identity appealing to a nationalistic attitude in the US. I’ve been told even the name is from a famous Canadian Hockey player. They would have to compete against DD, Krispy Kreme (KK), and other regional coffee and donut companies. They might have a chance against DD in the Northeast; same ole frozen (Par-baked) donuts that are microwaved at the store. Problem is saturation. Stand on a corner in Boston and look around, you will see at least 2 DD stores. KK will eat Timmys lunch in the South. At KK, you can at least watch the donuts being made – and they even turn on a neon sign to let you know when they are coming out of the oven. I used to live near a Shipleys donuts (Texas chain) that baked donuts fresh in the morning and simply closed the doors for the day when they ran out. No supply of frozen donuts at Shipleys. Sorry Timmy, stay out of the US – you will get beat up.

    • This comment was deleted.

      • Relax, and go easy on the caffeine. Mauvilla is right: Hortons has mediocre coffee and their donuts are heated from frozen. Day-old KK taste better than “baked” Hortons donuts, IMO, and I grimace when I hear a Horton-zombie gush how “they’re a mess without their ‘timmies’ “. Ugh. And I, for one, have never understood the supposed fervent canuck “patriotism” arising from sloughing down fast food from a national chain, that up to a couple of years ago, was foreign-owned.

        However, it’s all a matter of taste, and if you or anybody else loves TH, then fine: exercise your free choice and buy what you like. Same with anybody who prefers Starbucks. But no need to be a jerk, either; I’m Canadian-born and am pretty ambivalent towards TH, so should I leave the country too?

        Grow up a bit.

        mhb23re

    • All valid points. Tim Horton’s is very regional. In BC where I use to live the store is virtually unknown in Vancouver and Victoria. It plays a role in small communities where the options are very limited. In Ontario, there seems to be a conservative/liberal divide, with the latter favouring Starbucks. I find Pete’s comment to be highly amusing because if you walk into any given Starbucks in Canada you will find it packed, often more crowded than American ones, along with our Walmarts, Costcos, Home Depots, Lowes; the list of American companies goes on. Their success speaks volumes.

  6. Americans have been promoted with Dunkin’ Donuts in the last month with many new stores opening up.
    This was Canada’s donut chain in the 1980′s. Americans are always so far behind the times.

  7. what are you talking about????? this is the best test I have ever had! whats wrong with it?????

  8. Hmm. I don’t know of any buddies of mine willing to drive miles to get their double double. Kilometers maybe, but not miles!

  9. It’s because the coffee is terribly bland, and ever since they stopped baking donuts in house, they taste stale.

  10. The filthiest restaurant I have ever been in was a Tim Horton’s on Bridgeport Road, in Richmond, B.C. The restroom was disgusting – urine soaked floors, flooded toilet, etc. I told one of the workers there that it should be cleaned up and she just shrugged “not my job”. It was so disgusting that my daughter and I put down our coffees and our donuts, and left, disgusted. I truly regret to this day that I did not call the department of health to make a formal complaint. I have never had a Tim Horton’s coffee since. And, their donuts are frozen, not freshly made. This company is a fraud.

    • I visit Tim Horton’s regularly and have always found them clean and bright. Their coffee is good and the food is as good as you’ll find in any fast food restouant

  11. aFirst off the “Yankee go home” is uncalled for. As an avid fan of Tim Hortons for over 25 years and and also a native born US citizen I find timmies to be the best place on earth to have coffee outside ofmy kitchen. Starbucks is way overpriced for their product and most of our “native donut chains” are horribly inconsistant. That being said, their is nowhere here in the states outside of Tim Hortons where one can get a canadian maple and a cup of fresh brew. Mcky D’s can’t compare. If TH wants to compete they need to become the official doughnut of the NFL and NASCAR. At least if I were CEO of Tim Hortons that’s where I would start.

  12. Tim’s coffee and food are mediocre, but they do appeal to a certain segment of Canadians who like bland everything. Maybe they were just born without taste buds? Just sayin’

  13. I live in the US, and go to Timmie’s because it’s Canadian (but then, I wish I were Canadian).

  14. In the past I used to stop at a Tim’s once in awhile but the 2 outlets in Kamloops on Highway one have the worst service you could imagine. Maybe that accounts for the long line-ups. The fact that the dough is trucked from Ontario and microwaved turned me off as well.In my mind nothing copares to McDonalds coffee since they upgraded a few years ago.

  15. I like Tim Horton’s – not classy but good coffee and muffins. Starbucks coffee is bitter.

  16. Could someone with a business background please explain this “necessity to keep expanding”? If the Canadian market is saturated, why not cement your hold on that market with truly superior products. When a competitor goes under, it could be added to the chain. Would this not build both loyalty and better quality. Has anyone estimated the costs of expansion: real estate costs, legal / leasing / franchising costs, more distribution costs, training costs, marketing costs – both advertising and the search for new franchisees? Thanks!

  17. Don’t care to eat frozen donuts trucked 3000 miles then microwaved.

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