Tim Hortons: On the Road to Recovery?

Case Code: BSTR647
Case Length: 16 Pages
Period: 2014-2022
Pub Date: 2023
Teaching Note: Available

Price: Rs.400
Organization : Tim Hortons Inc.
Industry : Food & Beverage
Countries : Canada
Themes: Turnaround Strategy, Brand Revival, Crisis Management,Leadership and Change Management

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

This case discusses the revival of Canada’s largest fast-food restaurant chain Tim Hortons, founded by the hockey superstar of the same name in 1964. The store, which started out as a small mom-and-pop storefront with just two doughnuts on the menu, had grown into a global coffee chain with over 5,100 restaurants across 13 countries including the US, Mexico, Spain, the UK, the Middle East, China, Thailand, and the Philippines as of March 2022.

Tim Hortons’ slide began in 2014 after its management got into a bitter fight with franchisees in Canada as its parent company Restaurant Brands International (RBI) began cutting costs in order to increase operational efficiency and boost profits. After RBI took over, Tim Hortons was perceived to be acting in a way that seemed antithetical to Canadian values. Many store owners were unhappy with what they saw as self-serving measures by the parent company to increase its margins at the franchisees’ expense. Not only did the very public rowing between the Tim Hortons parent company, franchisees, and employees hurt the brand’s reputation, but it also hurt sales. Moreover, declining product quality, little innovation, inadequate marketing, proliferation of new products, and COVID-19 related repercussions led to a decline in same-store sales. Same-store sales growth rate declined by 29.3% globally and by 29.9% in Canada for the quarter ended June 2020, the steepest fall the brand had ever experienced.

However, in early 2020, Jose Cil (Cil), CEO of RBI, reinvigorated the brand with a Back-to-Basics plan. That plan included a refocus on its core coffee and breakfast platforms and extensive investments in technology, including massive changes to its loyalty program, and a US$100 million investment in drive-thru menu boards. Tim Hortons also expanded overseas and opened more stores in the UK, Spain, Mexico, and the Middle East. In fiscal 2021, Tim Hortons’ sales were US$ 6.5 billion, a 19% increase compared to the US$ 5.5 billion registered the previous year. Despite the recovery, the brand is likely to face some challenges going forward such as intensive competition, labor shortages, supply chain issues, inflation, and rising costs of raw materials. However, for Tim Hortons to regain its place in the Canadian psyche, it needs to focus a lot more on its home market.

Issues

The case is structured to achieve the following teaching objectives:

Identify the key success factors of Tim Hortons.
Understand the reasons behind its downfall
Understand the scope for a required strategic change in an organization
Understand the elements of a successful turnaround
Understand the issues and challenges involved in turning a company around
Identify the challenges faced by Tim Hortons going forward. Explore additional measures Cil should take to boost sales and drive profits