04-Tim Hortons-Case Study PDF

Preview

Summary

Download 04-Tim Hortons-Case Study PDF

Description

TIM HORTONS With over 4300 locations, Tim Hortons is the best-known and most successful coffee franchise in Canada. So popular is the company, that when it put only 15 percent of the firm up for sale in March 2006, the initial public stock offering fetched nearly $1 billion! This put the total value of the company at about $6.6 billion – making it more valuable than such corporate giants as Air Canada and Bombardier. So how did this company, founded by legendary hockey player and a Hamilton, Ontario, police officer, manage to grow to a point where its sales exceed McDonald’s in Canada? Some marketing experts say that the several strategies employed by Ron Joyce (the Hamilton police officer) have been instrumental in growing Tim Hortons from its first outlet (opened in Hamilton in May 1964) to the over 4,300 outlets that it has today, with sales volume growing past $3 billion. Most important to its success, Tim Hortons has maintained its made-in-Canada appeal, even though there are more than 800 Tim Hortons outlets outside of Canada today. “They still have the persona of small-town Canada”, says Gordon Hendren, president of Charlton Strategic Research. The company markets its roots in advertisements that feature Canadian travellers in distant places yearning for a cup of Tim Hortons’ coffee and through its sponsorship of youth hockey in almost every town across Canada. “Tim Bits, the community-based support program for young hockey players, is promoted at NHL venues across the country”, noted Mr. Hendren. Tim Hortons reaches out to Canadians in many other ways as well. For example, Canadian troops serving in Afghanistan got a taste of home through the Canada Forces Personnel Support Agency (CFPSA), which brought Tim Hortons coffee and doughnuts to the troops. The commander of Canadian forces in Afghanistan, Major-General Doug Langton, to the soldiers, “This is about serving you as you continue to do the outstanding job Canada asks of you. We hope that this little piece of home makes your lives in Afghanistan just a little bit easier”. The annual “Roll Up the Rim to Win” contest “has become a bit of a cultural touchstone”, according to Gordon Hendren. “They have captured the element that everybody can win a prize. They have high participation in it and they have good prizes.” A second very good element in the success of Tim Hortons was the decision by Ron Joyce in the late 1980s to expand the Tim Hortons menu beyond coffee and doughnuts. The menu expansion started with chilli, soup, and bagels. The big jump in revenue and profits, though, came with the addition of sandwiches in the 1990s. The soup and sandwiches additions expanded Tim Hortons sales dramatically beyond the normal coffee hours. “Sandwiches were a risk for them, and you have to give them credit for working it out operationally so that it wouldn’t be an issue with people waiting in line,” said Ken Wong, a marketing professor at Queen’s University’s School of Business. Today, Tim Hortons is the largest seller of soup among food services in Canada and sells one of every two bagels sold through restaurants in Canada.

To expand breakfast sales, Tim Hortons added a $2.49 breakfast sandwich. The success of the breakfast sandwich and fresh wraps has contributed to the nearly 7 percent increase in same-store year-over-year sales that Tim Hortons has been achieving. Most recently, Tim Hortons has added Cold Stone Creamery ice cream to a growing number of outlets in British Columbia, Alberta, Nova Scotia, New Brunswick, Ontario and Quebec. Importantly, as with their coffee and doughnuts, all new food items have to be of the same high Tim Hortons quality whether being sold in Vancouver, Toronto, Montreal, or Yellowknife. That type of consistency is important in a successful franchise, whether in the food offering or in the wait times to be served. Finally, realizing the importance of time and convenience, Tim Hortons led the movement to drivethrough windows in Canada. Ten years ago, one in 10 quick-service meals were bought at a drivethrough window; now it is one in four, largely due to the efforts of Tim Hortons. All together, these product and marketing strategies have resulted in many very loyal Tim Hortons’ customers. Over 40 percent of customers visit a Tim Hortons’ outlet four or more times each week! Whether it’s wide market coverage through over 4300 outlets, consistent product quality and customer service, catering to its Canadian heritage, or successful promotional programs and an expanding product line-up, Tim Hortons’ focus on always fresh quality products, good customer value, and community leadership has allowed it to grow into the largest quick-service restaurant chain in Canada. Tim Hortons is now looking at major international growth. Although there currently are 290 self-serve kiosks in Spar convenience stores in Ireland and England, Tim Hortons does not have the international presence of a competitor like Starbucks, which has outlets in 51 countries.

Source: Marketing – Lamb, Hair, McDaniel, Faria, Wellington...