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Tim Hortons struggles while Popeyes surges

The chains, both owned by Restaurant Brands International, demonstrate divergent consumer and market shifts during the pandemic, says RB’s The Bottom Line.
Popeyes chicken sandwich
Photograph courtesy of Popeyes

The Bottom Line

On Thursday, Restaurant Brands International said that same-store sales at its Popeyes brand rose nearly 29% in the U.S. in the quarter ended June 30 as consumers flocked to the chain’s drive-thrus for chicken sandwiches and family meals.

On the other end was Tim Hortons, RBI’s largely Canadian coffee-and-doughnut chain where same-store sales in Canada plunged nearly 30%.

While those sales had improved, by the end of July they were still down “in the mid-teens.”

The massive gulf in sales results between the two brands illustrate the differences in consumer reaction to brands and dayparts. But the numbers also demonstrate some of the differences in markets’ response to the coronavirus pandemic that has upended industry sales and consumer reactions.

The 3,400-unit Popeyes has been on fire for months and has established itself as a major player in the growing market for chicken sandwiches. Its same-store sales hit a record in the last three months of 2019 and only briefly lost momentum during the pandemic.

After slowing to “flat” in late March and early April, same-store sales were up in the 40s in May before slowing to the 20s by July due to more difficult year-ago comparisons. Still, consumers flooded the chain’s drive-thrus—its drive-thru same-store sales were up 100% by April, executives said on Tuesday.

Its average unit volumes are now in the $1.7 million range “and still growing,” RBI CEO Jose Cil said.

“A large part of this growth can be clearly attributable to the chicken sandwich,” Cil said. But “we saw significant growth across every category of our menu.”

What’s more, Popeyes does not have a breakfast business. No daypart, outside of perhaps late night, has struggled nearly as much. And Tims relies heavily on the morning business for its sales.

Similarly, Burger King’s same-store sales declined 10% last quarter, improving to “flat” by the end of July. A big part of the reason for that underperformance was its breakfast business. “We underperformed in this category as American consumers put their routines on hold,” Cil said.

Tims relies on breakfast even more, and has two other challenges Popeyes does not have. First, it has fewer drive-thrus. Second, it’s mostly in Canada.

Tim Hortons has recovered more quickly in the U.S. than in Canada, an unusual scenario for a brand that has traditionally struggled here.

Cil noted that two-thirds of Tims in Canada have a drive-thru, while 90% of its U.S. locations have a window. Drive-thru sales have performed considerably better than non-drive-thru locations, Cil noted.

Then there is Canada. “Markets across Canada have generally followed a measured pace of reopening, which has helped effectively contain the virus, but has led to a slower pickup in activity and reestablishment of routines,” Cil said. “By contrast, the U.S. has progressed into later stages of reopening much sooner, which we’ve seen show up in mobility data as a significant differential in commuting traffic and patterns.”

There is also this: Tims did not have near the momentum that Popeyes did going into the pandemic. The chain’s same-store sales declined 4.3% in the fourth quarter of last year, the last quarter unaffected by the coronavirus. Popeyes’ same-store sales in the U.S. that period rose 38%.

Existing momentum has played a key role in whether brands performed well during quarantine, and the gap in performance between the two brands in reality hasn’t changed that much during the coronavirus.

Restaurant Brands executives said they have been more aggressive in trying to reinvigorate Tim Hortons’ sales. They are banking on Tims’ new loyalty program and have increased delivery to 1,200 of the chain’s nearly 4,000 Canadian restaurants.

It is also simplifying its menu and improving its beverages. “We’re not sitting back and waiting for reopening,” Cil said. “We’re moving, and we’re driving the business alongside our owners.”

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