TORONTO – Following a strong 2015, Restaurant Brands International says it’s ready to grow Tim Hortons aggressively in the usa this season, something the company has been likely to do since its inception.
“The (U.S.) is the world’s largest quick-service restaurant market and that we have only 600 Tim Hortons, and we’re really excited about the pace of future development in the U.S.,” chief executive officer Daniel Schwartz said in an interview Tuesday as the company released full year and fourth-quarter results that topped analysts’ expectations.
It marked the very first full year of financial results since the $12.5-billion merger of Burger King and Tim Hortons formed Restaurant Brands International at the end of 2014. At that time, Tim Hortons’ potential to expand within the U.S. and globally was cited as a key factor behind the merger by Restaurant Brands’ majority owner, Brazilian private equity finance firm 3G Capital.
Store expansion is a key priority if Tim Hortons would be to grow its business within the U.S. over the year ahead
“Store expansion is really a key priority if Tim Hortons would be to grow its business within the U.S. within the year ahead,” Neil Saunders, leader of New York-based research firm Conlumino, said Tuesday.
But in fiscal 2015, Restaurant Brands opened just 13 net new Tim Hortons stores in the U.S.
While guest traffic and overall return on investment grew for U.S. Tim’s franchisees in 2015, the network still had some laggards to weed out, a legacy of middling expansion efforts underneath the company’s prior ownership. Restaurant brands closed 27 underperforming Tim Hortons in Portland and Syracuse in the fourth quarter.
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Restaurant Brands executives remained mum on how many U.S. outlets they want to open this season. However they appear at first sight on very solid footing with their latest U.S. development deals, featuring local partners who contribute more capital than Tim Horton’s U.S. franchisee partners did previously.
Since October, the organization has signed development deals for Tim Hortons in Cincinnati and Columbus, Ohio, and on Tuesday announced a partnership cope with Luke Family of Brands to spread out Tim Hortons restaurants in the greater Indiana area.
“We want to focus our resources on the markets where we see the largest potential and chance to grow in a profitable way,” said chief financial officer Josh Kobza. “We are very convinced that we are going to have the ability to replicate the success that we have had in Canada with the approach that we are taking.”
Tim Hortons within the U.S. is going to be promoted in the same way it’s in Canada, focusing on value and accessibility for purchasers. “Our goal really is to scale up and build more restaurants to create that convenience factor that Tim’s offers our Canadian guests,” said Schwartz. “From a marketing perspective, there aren’t any major differences.”
On Tuesday, Restaurant Brands reported net gain of US$51.7 million, or US25 cents per share, in contrast to a loss of revenue of US$510.8 million, (US$2.50), last year.
Adjusted profit was US35 cents per share, beating analysts’ average estimate of US29 cents, based on Thomson Reuters. Overall revenue was US$1.06 billion, topping analysts’ US$1.03-billion estimate.
Restaurant Brands performed well at its Tim Hortons and Mcdonalds banners, growing sales at stores open for over a year by 6.3 percent and three.9 per cent, respectively. Tim Hortons sales rose on beverages and cool product offerings including Nutella pockets and grilled wraps.
Meanwhile, Burger King saw is a result of sticking with its fast food roots, adding new flavours in the quarter to the popular Chicken Fries. The chain announced a week ago that it’ll start selling beef hot dogs.
“The simple the fact is that while Americans like hotdogs, very few national fast-food chains sell them,” said Saunders of Conlumino, although the move looks contrarian in an industry where current menu changes are centered on making fast food menus healthier. “This step helps Burger King to stand out, and in our view, will probably be successful.”
Analysts say value deals have also been an important strategy for Burger King – selling 10 chicken nuggets for US$1.49, along with a new two for US$5 sandwich deal – particularly as McDonald’s menu diversification has exposed the doorway to more premium offerings.
Shares rose more than five per cent in afternoon trading Tuesday.
Financial Post
hshaw@nationalpost.com
Twitter.com/HollieKShaw
