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Tim Hortons is a legacy in the fast-food restaurant chain. Having associations with profound brands like Wendy’s, Burger King, Coldstone Creamery has helped Tim Hortons to cover a long successful journey. For aspiring entrepreneurs or expansion opportunities, buying a Tim Hortons franchise may look like an investment plan. However, is it a safe bet?
Tim Hortons, the Canadian coffee shop chain with over 4,500 locations worldwide, was founded by hockey player Tim Horton in 1964. The first store opened in Hamilton, Ontario. Before shortening it to just Tim Horton’s, it originally expanded into fast food using the Tim Horton Donuts brand name. Then it adopted its present name of Tim Hortons after partnering with fellow citizen Ron Joyce.
It is Canada’s biggest quick-service restaurant chain, with outlets in 957 cities of Canada; at least one outlet in every territory. There are a total of 4,932 restaurants in 14 countries. The number of Tim Hortons franchises is now more than twice the number of Mcdonald’s in Canada, eventually surpassing market leader McDonald’s and becoming the largest foodservice operator in a foreign land.
The love for Tim Hortons skyrocketed even in the US market, and its franchises spread rapidly even there.
On 18 October 2021, Tim Hortons opened its new branch in Boldon; also, many franchise owners enthusiastically participated in a smile cookie campaign that added value to society.
Considering buying a Tim Hortons franchise, but not sure if they are a good investment? Consider evaluating the pros and cons of owning Canada’s best coffee shop franchise.
We assess businesses using relevant data for each industry. For the restaurant business, we evaluate financial points like projected revenue growth and net profit margins and operational factors like region-specific customer satisfaction rates and overheads like rent and labor costs. We are not biased with one company over another, but we offer insight franchise buyers can use to make their own informed decisions.
Reasons Why Not To Buy The Tim Hortons Franchise
In this era where everybody loves fast food, a franchise of Tim Hortons looks very productive. Nevertheless, it is not what it looks like; buying a Tim Horton franchise is not a gateway to a profitable business. Like every other brand, there are some drawbacks to this brand also.
After doing thorough research on all the market trends of fast-food restaurants, identifying their company policies, and analyzing their franchisees, We came across a few points that could indicate why one should not buy the Tim Hortons franchise.
#1 Initial Franchise Investment Is Too Hefty
Starting a Tim Hortons franchise requires heavy investment. Many new franchisees face hurdles in raising capital, getting profit, paying taxes, finding a suitable location, and many other things.
The initial investment for setting up a Tim Hortons franchise is as follows:
- Initial Franchise Fee: $25,000 to $50,000
- Equipment: $18,000 to $435,000
- Professional and License Fees: $1,500 to $10,000
- Royalty: 4.5% – 6% of gross sales or more under limited circumstances
- Advertising Contributions: 4% of gross sales
- Minimum Net Worth – US$ 1500,000
- Minumum Liquid capita l-US$ 500,000
In the United States, the total investment to start the Tim Hortons Restaurant is somewhere around $680,900 to $1,906,300. It is a considerable investment, and Returns on Investment in the first few months is not known to be very good. It can get hard to profit in the first few years unless your branch becomes one of the most successful franchises.
#2 Lawsuit Charges Against Tim Hortons
Tim Hortons has been facing legal allegations of a fraudulent business scheme from its US franchisees. The Great White North Franchisee Association USA Inc is a group that represents most of the American Tim Hortons franchisees. They filed a lawsuit against Tim Hortons and its parent company, Restaurant Brands International (RBI), alleging that they indulged in unfair practices by selling them supplies at much higher rates.
Tim Hortons has also faced a class-action lawsuit in Quebec over data collection of people via their food ordering app. The class-action lawsuit can cause some distrust among the customers regarding the brand. Moreover, the allegation of overpriced supplies is a major deal-breaker for buying a franchise as it will lead to less or no profits for franchise owners.
#3 Pandemic Effects On Fast-Food Chains
Covid-19 had a drastic impact on food chains. Many restaurants were shut down during the pandemic as the owners had trouble paying mortgages and running their restaurants. In the lockdown, restaurants were shut for months. Even after lifting the lockdown, restaurants still faced slow recovery.
Tim Hortons franchisees also faced the impact of the pandemic very hard. Few reports state that there was a profit decline of 37% compared to the earlier year. However, the business took up with time but still has not reached its full potential. Opening a new franchise at such a time does not seem like a good idea when even old and successful franchisees are struggling for good revenues.
#4 Merger With Burger King Botched The Sales
After a merger with Burger King in 2014, Tim Hortons sales decreased 10% per store. Many Canadians were upset that Tim Hortons was selling unhealthy fast food like Burger King and moving away from their Canadian roots.
According to a few reports, Tim Hortons parent company RBI attempted to threaten a few franchisees that filed a lawsuit against them into leaving the organizations. The clause via which they were intimidating the franchisees was by issuing default notices, the franchisor’s legal seizure of a franchisee’s restaurants. Furthermore, in 2018, RBI shut down four restaurants from David Hughes.
Conclusion
Tim Hortons is a renowned fast-food chain. To become a Tim Hortons franchisee is a significant investment on your part, to enjoy the benefits that include:
- You get instant recognition and trust on buying the Tim Hortons franchise.
- You are associated with a stable and leading fast-food chain.
- Tim Hortons has a legacy of over 57 years.
- You get an already set up revenue-generating model.
But with time, it is losing its touch and customers to other food chains. Buying a franchise is a big financial commitment. With all the lawsuits going on and the relationship of its parent company with its franchisees is an impasse.
Sources:
https://globalnews.ca/news/6611289/tim-hortons-us-franchisee-lawsuit/
https://www.barrons.com/articles/burger-king-tim-hortons-restaurant-brands-51556599490