COVID eats at Tim’s sales
Parent company cites lockdown measures, disrupted daily routines for dip in profit
Canadians might still enjoy their double-doubles, but we’re sipping a lot fewer of them thanks to the COVID-19 pandemic.
Sales at Tim Hortons were down 11 per cent in the fourth quarter of 2020 compared with the same period a year earlier, parent company Restaurant Brands International announced Thursday while reporting quarterly earnings had plummeted.
That’s the biggest drop of RBI’s three brands; Burger King was down 7.9 per cent, while Popeyes Louisiana Kitchen saw sales drop 5.8 per cent.
Fourth quarter profit for RBI fell 45 per cent to $138 million.
The biggest reasons Tim’s fared worse that its corporate siblings, says RBI executive Duncan Fulton, are the more stringent lockdown measures in Canada than in the U.S., and the fact coffee and doughnuts are tied more to daily routines, which have been disrupted during COVID.
“The economy in most parts of the U.S. is fully open. It’s a completely different scenario there,” said Fulton, RBI’s chief corporate officer, acknowledging that the bulk of Tim’s locations are in Canada, while the other two brands are tilted for heavily toward the U.S.
Canada’s biggest coffee chain also saw less than spectacular growth in new
stores; Tim’s saw its network of stores grow by just 0.3 per cent in the fourth quarter compared with a year earlier.
While that’s better than the 1.1 per cent shrinkage experienced by Burger King, it’s still nowhere near the growth experienced by Popeyes, which saw its store network grow by 4.1 per cent.
The pandemic came at a time when Tim Hortons was already experiencing something of a sales slump.
Fulton said the company is still hopeful it can turn the numbers around, partly through new menu offerings and improvements in quality, and partly through investments in things such as digital menu boards and its Tims Rewards loyalty program.
“This can still be a growth story. Popeyes has been around for 40 years, but look what happened when we introduced the chicken sandwich. It’s a good example of how investment in menu quality can lead to growth, even in a mature company,” said Fulton.
In 2020, Canadians shifted roughly $8 billion in household spending from restaurants to groceries. Fulton expects much of that spending to shift back when the pandemic winds down.
“It’s reasonable to assume much of that will come back to restaurants, and we think we’re in an excellent position to capitalize on that,” Fulton said.
When the economy does reopen, Tim’s will also be in relatively stronger position than archrival Starbucks thanks to its network of franchisees, Fulton argued. While franchise owners have often been a thorn in the side of RBI, they’re now a big advantage over chains dominated by company-owned stores, such as Starbucks, he said.
“I know Tim’s is a big brand. But the entrepreneurial spirit and determination, and the local knowledge of our franchisees is a competitive advantage over a bunch of corporate people sitting around a board room table determining which stores should open or close,” said Fulton.
Last year, Starbucks announced it would be closing 300 company-owned stores across Canada by March.
The Seattle-based company said it would be adding more drive-through locations, as well as converting some stores to pickup only. While those plans were in the works before COVID, they were accelerated by the pandemic.