"Ah, Timmies - Northern Exposure"

[Kathryn41 3,205]

Northern Overexposure

(Photo by Jim Ross for The New York Times:A chocolate doughnut from Tim Horton's doughnut coffee shop in Oakville, Ontario.)

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By IAN AUSTEN

Published: September 8, 2007

OAKVILLE, Ontario — Tim Hortons conquered Canada long ago. The doughnut chain boasts one outlet for every 12,700 Canadians — by comparison, one McDonald’s exists in the United States for every 21,000 Americans and one Dunkin’ Donuts for every 56,000 Americans.

After years of strong growth, Tim Hortons is running out of places to expand in Canada. French-speaking Quebec is an exception.

(photo by Jim Ross for The New York Times: A to-go order of Tim Hortons doughnuts at a shop in Oakville, Ontario. In the company’s Ontario market, doughnuts make up less than 10 percent of sales._

A survey this summer by a group promoting Canadian historical literacy found that 40 percent of Canadians under 34 consider Tim Hortons’ miniature doughnuts, the Timbits, a national symbol.

Tim’s, as it is affectionately known, sells 78 percent of the nonsupermarket coffee and baked goods sold in Canada. That is both the good news and the bad news.

“We’re at penetration in a lot of markets,” said Paul D. House, Tim Hortons chief executive, president and chairman. “There’s still high growth in Quebec. But in some of these other areas you’re not going to put the stores there as in the past.” On Sept. 30 of last year, Wendy’s International fully divested itself of its interest in the chain. Tim Hortons, which has its headquarters here in Oakville, promised growth in the United States: from 336 stores to 500 by the end of 2008. Today it has 345, a slow pace that Mr. House insists will pick up, with the company adding 60 to 80 stores this year, and 154 by the end of 2008.

Despite the meager pace in the United States, since its initial public offering on March 24, 2006, the company’s stock has risen from its initial $28.17. [it closed Friday at $33.32.] That is in part because price increases and new products have allowed the chain to continue to increase revenues.

But over the long term, Mr. House says, Tim Hortons can grow only by going abroad, and that means expanding into the largely unconquered United States. Trouble is, successful Canadian retailers have often found that the United States is unconquerable.

The best example is Canadian Tire, which, despite its name, sells a vast range of nonautomotive products. It has been one of the few general merchandisers to prosper since Wal-Mart arrived in Canada. But its two forays into the United States, in the 1980s and 1990s, were both short-lived.

Mr. House points to the Tim Hortons history of adapting in order to survive as proof that it can crack the American market. In early 1985, he left an executive position at the Canadian arm of Dairy Queen to become the chief operating officer of Tim Hortons, named for its co-founder, the Canadian hockey star Tim Horton, who died after wrecking his sports car in 1974.

Mr. House says Tim’s was a mess by the time he joined. He recalls Mr. Horton’s longtime business partner, Ron Joyce — a retired policeman who franchised the first Tim’s in the steel towns outside Toronto — saying, “You know what, Paul, we’re the best of a bad lot.”

Mr. House did not disagree.

“We had smoky stores,” he said in a recent interview. “We were male-dominated at the time and we were strictly a coffee-and-doughnut offering. We primarily did our business in the morning with a little bit through the day. You either had to make it before noon or you were done.”

Mr. House and Mr. Joyce decided to make the stores more attractive to women; the chain was among the first in Canada to isolate smoking to small sealed rooms, and then to ban it outright. (Smoke, Mr. House noted, is readily absorbed by baked goods.) Gradually, the company dropped the word “do-nuts” from its name and added sandwiches, yogurts and soups to its menus — joining the dutchies, Vanilla Dips and the sour cream glazed doughnuts behind the counter. The stores banished the bar stool counters, long their chief architectural feature, replacing them with family-friendly tables and chairs.

A result is that the chain has gone from about 200 outlets at the time that Mr. House joined to 3,078 today. Not only did the changes in the stores appeal to women, they also gave Tim Hortons a client base that crossed all income groups and ages.

“The wonderful thing in the parking lot is that you’ll see Mercedes-Benzes and you’ll see pickup trucks,” Mr. House said. “It cuts right across the whole social fabric of this country.”

The nondoughnut food offerings were not only profitable, but a major ingredient in driving revenue growth. Today, in the Ontario market, doughnuts make up less than 10 percent of sales.

Wendy Evans, a retail consultant who heads Evans & Company Consultants in Toronto, praises both the Tim Hortons strategy and its execution. “Their marketing is really tremendous,” she said. “Tim’s is so predictable that if you’re on the road, you’re going to stop there.”

Not everything has worked perfectly for the company. The end of a tax benefit meant that after-tax profit in the most recent quarter fell by 11.9 percent, to 67.2 million Canadian dollars, despite a 14.4 percent jump in revenue, to 465.3 million Canadian dollars ($441.7 million). A relatively new distribution and baking center in Ontario has also suffered start-up problems, with costs higher than expected.

Those sour notes do not disturb Irene Nattel, an analyst at RBC Capital Markets, who rates the company outperform.

Mr. House is mindful of how the far more competitive United States market has humbled other Canadians. But he said the company has had a long, if very limited, presence in the United States.

Decades ago, it opened two Florida shops mostly intended to cater to Canadians escaping the winter. Decades ago, the company set up stores in Buffalo, which is down Queen Elizabeth Way from its headquarters, a former warehouse and doughnut shop in a light industrial district here in Oakville, a Toronto suburb.

At the beginning of this decade, Mr. House began a more deliberate expansion into the United States, starting in areas like Buffalo and Detroit where the brand enjoyed some cross-border spill-over recognition. Mr. House, who personally vets many of the prospective American franchise owners, warns them that they face an uphill fight.

“What you see in Canada is not what you’ll get in the U.S.,” he said, “We’re working toward that, but that’s not what’s there today.”

So far the Canadian invasion has made little headway. Both the Florida stores closed long ago. And a look at the Tim Hortons online store locator shows its stores in the United States are all within driving distance of the Canadian border. Most important, perhaps, the only concerted effort the company has made previously to enter the United States market had, Mr. House admitted, dismal results.

When it was still owned by Wendy’s, Tim Hortons purchased Bess Eaton, a 42-store doughnut chain in New England. “Quite frankly it hasn’t worked out too well for us to date,” Mr. House said.

For the Canadian company, the chief attraction is that the purchase provided a way into the market around Boston, an epicenter of doughnut consumption. Nearby Quincy, Mass., is the birthplace of Dunkin’ Donuts. Mr. House acknowledged that the large number of Dunkin’ Donuts shops in the region, a unit of Dunkin’ Brands, provided stiffer competition than expected.

Tim Hortons has not even been able to franchise the former Bess Eaton stores, though about 99 percent of the Canadian outlets are franchised.

Another problem, Mr. House said, was the segmentation of advertising markets in the United States. Canadian broadcast and cable television’s national footprint allow advertising to reach parts of Canada well in advance of the arrival of Tim Hortons outlets. But, in the United States, the company found that its success in Buffalo meant nothing when the chain moved on to Rochester, just 75 miles away.

The Tim Hortons operation in the United States, not surprisingly, remains unprofitable. Sales at stores open more than a year rose just 3.8 percent in the last quarter, compared with 6.5 percent in Canada.

Dunkin’ Donuts would not comment on a competitor’s plans, but in a statement said that it was starting an expansion of its own: aiming to triple the number of stores in the United States to 15,000 by 2010.

Mr. House is still determined to prove that Tim Hortons can succeed where so many Canadian companies have failed. “It took us 43 years here,” he said. “We’ve only been at the U.S. seriously for a few years.”

http://www.nytimes.com/2007/09/08/business...;pagewanted=all

[L_n_O 3]

that donut looks yummy!

[Krikit 1,164]

Awwww. I'm from Oakville. I had a huge pang of homesickness when I saw that.

[lynamon 0]

I'm from where Tim Hortons was born ... Hamilton ... I miss my xlarge triple milk two sweetners in the mornings ...

[L_n_O 3]

Oliver is sad every time he goes to a Dunkin Donuts and tries to order a "Regular Double Double" and the guy is like "huh?????"

He is always excited when he's in Toronto and make the order that way...

[Krikit 1,164]

Oliver is sad every time he goes to a Dunkin Donuts and tries to order a "Regular Double Double" and the guy is like "huh?????"

He is always excited when he's in Toronto and make the order that way...

You mean they don't know what a regular double double is?

I had a craving for a donut and decided to try the DD's down the street. Bleh. Won't be going back there again.

[Reba 2]

So far the Canadian invasion has made little headway. Both the Florida stores closed long ago. And a look at the Tim Hortons online store locator shows its stores in the United States are all within driving distance of the Canadian border.

Did they close the Kentucky, West Virginia and Ohio stores then? I wouldn't exactly consider those 3 states "within driving distance"

[Flames9_RN 358]

I have had Timmies in RI and it sucks!! usually goto Dunkins!! As well you lok at the size of Tims biggest coffee (a large) and Dunkins largest *(xl) and the Dunkins I bet is twice as big for around the same price,and it tastes better!! In june on my way from RI to VA, stopped at timmies (3 am, only coffee shop open) picked up 2 donuts, and yuck!! threw them out.

Was back in RI over labor day weekend, noticed the Timmies near Newport is no longer open 24 hrs!! Will probably never go back to timmies when in RI.

[Reba 2]

They don't seem to have the same policy in the US for coffee freshness that they have in Canada. Although, when we stopped at one in Ohio last year (can't remember which city), it was pretty good, but the pot was just finished dripping. That was about noon-time.

[cmartyn 0]

They don't seem to have the same policy in the US for coffee freshness that they have in Canada. Although, when we stopped at one in Ohio last year (can't remember which city), it was pretty good, but the pot was just finished dripping. That was about noon-time.

I was in the one in Mystic CT, and it was almost exactly the same. I was never a big Timmies fan but DD coffe doesn't taste better, it doesnt taste like anything. Its so weak, its not even worth ordering. But a bad timmies, Ugh.. I hate those. Or a leaker with floaters. Yummy Tims.

[Flames9_RN 358]

Ifind Dunkins super strong!! in My XL (which is a lot bigger than Tims) I need 6 cream and 1 sugar!! lol

[KarenCee 3]

So far the Canadian invasion has made little headway. Both the Florida stores closed long ago. And a look at the Tim Hortons online store locator shows its stores in the United States are all within driving distance of the Canadian border.

Did they close the Kentucky, West Virginia and Ohio stores then? I wouldn't exactly consider those 3 states "within driving distance"

As of April this year it was still open in Parkersburg WV. Joel and I made a couple stops there while we visited with RebeccaJo and Wes. Not as good as Tim's in Canada, but it'll do.

They don't seem to have the same policy in the US for coffee freshness that they have in Canada. Although, when we stopped at one in Ohio last year (can't remember which city), it was pretty good, but the pot was just finished dripping. That was about noon-time.

Now I have to agree with ya there. The cup I got at Tim's in WV wasn't all that fresh, but it was waaaaay better than some of the Charbucks I've had recently. Yes, I got desperate for coffee and since I'm out of my canned Tim's, I broke down. There aren't any Second Cups down here either. *sigh*

I also had a cuppa Krispy Kreme coffee a few months back...I thought I was being poisoned. YECK! It was some seriously nasty coffee. I haven't tried the Dunkin Donuts coffee yet...not sure I want to either.

Please...Tim's...come to Georgia!!!!!!!!

[Reba 2]

I had some DD coffee a couple years ago out in Wilmington I think it was. Wasn't too bad.

I guess it really depends on where you go. I know franchises are all supposed to be exactly alike, but after having worked in a food franchise (Domino's) and looked even at buying one, I can say, each one is different, simply because of the people who work there. But one bad experience can give a bad name to the entire organization. I haven';t eaten Domino's anything since I quit working there. And after we've seen the new commercials for their stupid Oreo cookie pizza, we're *really* glad we didn't buy one!

[Kathryn41 3,205]

Hey Karen,

DD's coffee is probably the closest I have been able to find to Timmie's here. It isn't the same nor as good, but it is decent coffee. I like to buy the vanilla flavoured actually, then load it up with cream and sweetner. Yum! Very different in a good sort of way.

Sure wish Timmie's would come to GA as well - although I want it to be the Canadian type of Timmies, not the US type. I visited several in Michigan and no, they are not as good.

Ohio is about an hour's drive from Windsor, Ontario and Kentucky is several hours drive - so I guess they could be said within driving distance. West Virginia? That would be a really LOOOOOONG Drive!

[~Nini~ 2]

So far there's one or two Timmie's in PA, but nowhere near close to where Bee lives. Also whether they're the same quality as what you'd find here in Vancouver is probably another story.

Now y'all have me thinking about taking some sealed tins of Timmie's with my stuff...

Edited September 16, 2007 by Nini & Bee