Tim Hortons stood out for all of the wrong reasons on Monday.
The Toronto-based coffee chain said that its same-store sales declined 1.4% in the third quarter ended Sept. 30. That’s bad enough. But it came during a period when sister chains Popeyes and Burger King both saw their best performances in years.
It also came despite several quarters of intense focus on the part of the brand and parent company Restaurant Brands International (RBI), which has struggled to generate consistent performance in recent years.
“Our result at Tim Hortons were not where we want them to be,” Jose Cil, CEO of RBI, said during the company’s third-quarter earnings call on Monday. He called the quarter “challenging” for the brand.
The company blamed the problem in part on tough comparisons. Tim Hortons launched its Breakfast Anytime effort a year ago, which led to strong sales. But the brand’s cold beverages didn’t perform well.
Neither did hot beverages, for that matter.
Tim’s results came despite a host of initiatives, including its Tim’s Rewards loyalty program that now is involved in half of the chain’s transactions. It has also remodeled restaurants and added new products.
For instance, Tim’s added a breakfast sandwich made with Beyond Sausage in May. That product has since been pulled back and has been pulled from some restaurants’ menus in Canada.
That’s disappointing, considering the strong performance Burger King enjoyed in the third quarter with the introduction of its Impossible Whopper—U.S. same-store sales for the burger chain rose 5% and the company believes the burger will be a “platform” for continued innovation.
As a result, RBI executives that had been cheering the strength of Burger King and Popeyes—which had its best quarter in years thanks to the chicken sandwich—instead spent much of the earnings call defending Tim’s results.
“We remain extremely confident in our Winning Together plan,” Cil said, referring to the strategy the company is using to turn the brand around. “We’re creating a strong foundation to drive sales growth over the long run through improvements in image, technology, product quality, the drive-thru and overall customer experience. These things don’t happen from one day to the next. It takes time.”
RBI’s stock declined more than 3% on Monday.
While Tim’s has just 4,900 locations—less than a third of that of Burger King—the brand accounts for 60% of RBI’s revenue because the company collects rent from operators and sells them products. As such, its performance is vital to Restaurant Brands’ overall results.
Tim Hortons has several strategies in place designed to improve its overall performance. One of the biggest is the addition of new coffee brewers into its restaurants designed to improve the quality and consistency of coffee drinks. The brewers feature a water filtration system.
“Coffee is at the core of Tim’s brand identity,” Cil said. "It’s absolutely critical to serve the best cup of coffee in Canada, period.”
The chain also believes that improving the quality of its food will help. It opened an Innovation Cafe in Toronto, generating long lines of customers. It is also improving its doughnut line and added a new premium “Dream Donut” line, including a Maple Bacon Dream Donut.
Tim Hortons is remodeling restaurants, including adding double drive-thrus at many locations. It is also opening a new “super urban” location this quarter and believes more urban areas will be a major source of growth.
The company also believes that its loyalty program will be paramount to generating future sales, by enabling Tim Hortons to market to customers directly. “We’re already collecting a tremendous amount of insight,” Cil said. “We expect to be able to leverage this information to engage one-to-one with our guests and provide promotions tailored to their preferences.”
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