As troubles brew in Canada, Tim Hortons owner plans to expand chain to Spain

Same-store sales fall for second consecutive quarter amid franchisee dispute

Tim Hortons
Tim Hortons

Tim Hortons plans to expand to Spain, its fourth venture abroad in recent months, as it tries to overcome lagging sales and an internal revolt from disgruntled franchisees in Canada.

Restaurant Brands International (TSX:QSR), the parent company of the coffee-and-doughnut chain, said Wednesday it has signed a deal with a joint venture partner to set up shop in one of the largest cafe markets in Europe.

Chief financial officer Josh Kobza said Spain provides an intriguing opportunity for RBI in its quest to be a dominant player in the global coffee industry following forays into Mexico, Britain and the Philippines.

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“We’re building a lot of momentum in the international business,” Kobza said in an interview.

“Some of our other potential partners are starting to see how well the Tims brand is resonating in other countries outside of Canada around the world.”

The announcement coincided with RBI’s results that showed same-store sales at Tim Hortons, an important metric in retail measuring sales at locations open for at least a year, fell for the second consecutive quarter.

They were down 0.8 per cent from a year ago, driven by falling sales in Canada of baked goods and lunch items, a sign that the Tim Hortons brand may be losing its appeal in the country where it was made famous.

During RBI’s earnings conference call, an analyst asked whether the decline had anything to do with the company’s festering dispute with its Canadian and U.S. franchisees. Some franchisees have accused RBI’s head office of penny pinching, driving up their expenses and overall mismanagement – allegations the company has denied.

CEO Daniel Schwartz said he didn’t want to speculate on what, if any, impact the franchisee dispute may be having on sales.

But the Great White North Franchisee Association, a rogue association of frustrated franchisees, said the results are proof that RBI’s approach isn’t working.

“The lacklustre quarterly earnings they announced this morning are just one more indication that RBI needs to adjust the methods they employ in managing the various organizations under their umbrella,” association president David Hughes said in a statement.

Tim Hortons also raised prices Wednesday for some breakfast items and hot beverages in select markets. In a statement, it declined to say what prompted the hike but added that it always reviews its prices.

For its second quarter ending June 30, RBI, which keeps its books in U.S. dollars, said it earned a profit attributable to common shareholders of US$89.5 million or 37 cents per diluted share. That’s down slightly from a profit of $90.9 million or 38 cents per diluted share a year ago.

On an adjusted basis, the company earned $241.7 million or 51 cents per share, up from $192.4 million or 41 cents per share in the same quarter last year.

Revenue totalled $1.13 billion, up from $1.04 billion a year ago, boosted by the acquisition of Popeyes.

Headquartered in Oakville, Ont., RBI, which also owns Burger King, has more than 23,000 restaurants around the world.

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