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.
Wednesday, February 20, 2013