Tim Hortons CEO brushes aside skepticism of ambitious U.K. expansion plans

Tim Hortons
Tim Hortons

The CEO of the parent company of Tim Hortons is brushing off skepticism that the British will embrace its double-doubles and Timbits as it readies to open its first location in the United Kingdom next month.

The coffee-and-doughnut chain may be a national institution in Canada, but in the country synonymous with tea time, it has received a mixed reception.

On social media and in London’s tabloids, some have slammed the company ahead of its debut in Glasgow, Scotland. “Welcome to the world of weak coffee!” screamed a headline in the Daily Mail.

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“I don’t know that we’re going to get to eight out of 10 cups any time soon, but we have big, big ambitions,” said Daniel Schwartz, CEO of Restaurant Brands International (TSX:QSR). Tim Hortons says it pours 80 per cent of the cups of coffee sold in Canada.

To broaden its appeal, the coffee giant has expanded its menu with offerings that may be a better fit for the British palate, such as chai lattes and an espresso-based drink known as a flat white.

Some sandwiches will be served on a brioche bun. Canadian restaurants, by comparison, serve sandwiches on ciabatta or what’s described as homestyle soft buns.

Still, Schwartz said he believes staples like Timbits will find their way into British stomachs and hearts, adding that the reaction has been overwhelmingly positive.

The foray is one of several for Tim Hortons, which has been trying to grow its brand beyond Canada with master franchise agreements in the U.K., the Philippines (where it has two locations) and most recently, Mexico. Master franchise agreements allow an individual or group of investors to grow the brand in a specific region.

The Glasgow opening, touted as a good fit partly due to the city’s high student population, is the first to come from the company’s U.K. agreement announced last August.

Tim Hortons plans to expand to a number of other locations in the U.K. over the next 12 months, though London is not among them.

“We’ll look to ramp up the pace of development pretty quickly from there,” said Joshua Kobza, RBI’s chief financial officer.

He declined to provide specific targets, but said the company aims to become one of the biggest competitors in the countries where they operate, pointing to the number of Starbucks locations in the U.K. as a reference.

The Seattle-based coffee chain had 898 stores in the U.K. as of Oct. 2, 2016, according to its most recent annual report. Other rivals include Costa Coffee, which operates more than 2,000 stores in the country, and Caffe Nero, which has more than 600 globally, though most are in the U.K.

The U.K. coffee shop market rose 37 per cent to 3.4 billion pounds (about C$6 billion) between 2011 and 2016, according to market-research firm Mintel. It’s expected to reach 4.3 billion pounds (roughly C$7.7 billion) by the end of 2021.

Schwartz said he believes Tim Hortons can capitalize on that growth, saying entering a growing market with a great product and experience will be “pretty good” for the company.

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