Tim Hortons is scheduled to open its first Houston location this summer, signaling the Canadian coffee chain's strategy to move further south for the next phase of its US expansion.
The Restaurant Brands International chain has more than 600 locations in the US, making it the third largest coffeehouse chain in the country, behind Starbucks and Dunkin'. But it's a distant third, and the chain is struggling to catch up with American consumers, despite earlier attempts going back decades when it was still owned by Wendy's. Still, Tims tries to close the gap and overtake Dunkin. In 2021, the chain saw its strongest growth in new restaurants in the US since 2016.
Jose Cil, CEO of parent company RBI, said in an interview that the chain's packaged coffee business in the United States is growing "pretty strong" through direct sales on its website and in grocery stores.
“It's a good indicator of awareness and demand for our products, so in the US there are a number of markets south of our restaurants further south — places like Texas, like Florida,” he said.
Most of Tim's current US locations are in states that border Canada: New York, Michigan and Ohio. The next phase of expansion in the US will focus on markets such as Texas and Florida, according to Cil.
“Between snowbirds and people who have moved to Florida permanently, there are over 3.5 million Canadians, so brand awareness is really strong. The demand is strong. We just have to be there to deliver it," Cil said.
In recent years, the company has reconsidered its business model. Remodeled many of its Ohio locations with smaller square footage. Cil said that the new format is faster to build and has better economic units than the previous model. New American restaurants are also focusing on beverages, baked goods and hot breakfast sandwiches, in contrast to Canadian stores that are going for lunch and dinner.
"We're not a full-fledged [fast food restaurant], we focus on what we do best," Cil said.
The United States is not the only international market seeing aggressive expansion for Tims. The chain recently opened its 400th location in China, less than three years after opening its first.
In its home market of Canada, Tims has had to deal with a number of difficulties. Before the pandemic, the company was in recovery mode, upping its coffee and grocery offerings and launching a loyalty program in the face of faltering sales growth. The covid outbreaks are putting additional pressure on his comeback.
However, the chain reported fourth-quarter same-store sales growth in Canada of 11.3%, helped by sales from loyalty program members and popular promotions such as a collaboration with singer Justin Bieber.
Shares of Restaurant Brands rose more than 3% in afternoon trading on Tuesday after the company released its fourth-quarter results. Its earnings and revenue topped Wall Street estimates, a rarity this quarter for restaurant companies facing higher expenses.