Tighter Tims
Squeezing savings helps RBI beat expectations,hike dividend.
• A relentless focus on controlling costs will help Tim Hortons resonate and grow more aggressively in the U.S. and international markets, the coffee and baked goods chain’s new owners said Monday.
Cost discipline — what chief financial officer Joshua Kobza of Restaurant Brands International Inc. refers to as an “ownership over cost” philosophy for franchisees — helped spur Burger King’s international rollout and the same strategy has led to “significant savings” thus far at Tim’s, he said after the company beat analyst expectations in the second quarter.
Same-store sales, a key measure of restaurant performance tallying volume at locations open for more than a year, rose 5.5 per cent at Tim Hortons in the period ended June 30, and 6.7 per cent at Burger King as customers responded to new products such as dark roast coffee and chicken fries. Same-store sales were up 5.4 per cent at Tim Hortons locations in Canada and a robust seven per cent at the coffee chain’s U.S. restaurants.
“We have seen a very positive performance (at Tim Hortons U.S.) year-to-date,” Kobza said in an interview Monday. “We are seeing our franchisees’ profitability improve with the sales performance, and the unit economics of those restaurants are improving dramatically, which really helps the case for expanding the brand in the country.
“It helps as we look to find additional partners and new franchisees to fill in our existing markets and develop additional density, and look for new partners for some of the adjacent markets that we want to build out.”
Restaurant Brands, majority owned by Brazilian investment firm 3G Capital, recently opened its first of 40 Tim Hortons outlets in the new mar- ket of St. Louis, Mo., said CEO Daniel Schwartz, and executives were encouraged by its strong performance.
“It’s a new market, a little bit further away from the (Canada-U.S.) border, (and) has been one of our best-selling restaurants in a while.”
He said executives were also optimistic about stepping up growth for Tim Hortons in the Middle East, where it has about 50 restaurants. In India, the firm has opened 20 new Burger King restaurants in the last six months, targeting local tastes with items such as the Veg Whopper and Paneer King Melt.
Kobza told analysts on a conference call that Restaurant Brands has been gaining traction with its “zero-based budgeting” strategy at Tim Hortons, which requires head office to analyze the most profitable initiatives each year when coming up with an annual budget, a principle which helped revive the fortunes at Burger King. The burger chain has stepped up its expansion to open 700 restaurants annually around the globe up from a pace of 150 per year since 3G Capital bought it in 2010.
On an adjusted basis, the fast-food giant earned US$142.7 million, or 30 cents per share. Analysts were anticipating earnings of 25 cents, according to mean estimates from Thomson Reuters.
The company saw revenue of US$1.04 billion, up from US$261.2 million in the second quarter last year before the acquisition. It also hiked its quarterly dividend to 12 cents per share, up from 10 cents, the third consecutive quarter of dividend increases.