Tim Hortons Inc.outlined its growth plans — which include 900 new North American locations over the next three years — at its investor conference today.
The Tim Hortons strategic plan targets investments and opportunities designed to leverage its core business strengths and business model to drive future growth.
"Our strategies will continue to transform Tim Hortons, not only adding significant scale but also introducing important additional growth layers to our business platform to extend our position as a leader in the North American restaurant industry," said Don Schroeder, Tim Hortons president and CEO, in a news release. "We are a growth company with significant long-term opportunities in Canada, and we are also excited by the prospects of continued profitable growth in the U.S., and potentially internationally in the longer term."
Growth catalysts and initiatives outlined at the investor conference include:
- Open approximately 900 locations in North America between 2010 to 2013. The development in Canada of approximately 600 new restaurants is focused on growth markets including Quebec, western Canada and major urban locations, in addition to continuing to build out Ontario. In the United States, the development of approximately 300 new restaurants will be focused primarily on existing major regional markets, such as New York, Ohio, and Michigan. We also plan to push into contiguous markets, with approximately 30 percent of the development activities planned to take place between 2010 to 2013 in markets adjacent to our existing footprint.
- Introduce new menu and product innovation targeted across restaurant dayparts to meet customers' needs, expand market share and drive same-store sales. The company is targeting further expansion of the breakfast daypart, and afternoon and evening snacking dayparts. Additionally, it will work to extend lunch daypart opportunities, including its sandwich and soup offering. The company also intends to expand its hot and cold beverage offerings.
- Focus in the United States on becoming famous as a cafe and bake shop destination. The company plans to significantly differentiate the brand through a new concept restaurant design that will be piloted in at least 10 existing locations. The new concept will more sharply define the concept's cafe and bake shop positioning, including enhanced finishes, fixtures and seating areas, and experiential changes. In addition, the company will be testing new product offerings and adopting innovative new marketing and branding initiatives aligned to cafe and bake shop brand positioning.
- Complement its standard restaurant development activity in both Canada and the United States with non-standard formats and locations, extending its reach in hospitals, universities and colleges, airports and other non-traditional sites, leveraging our "we fit anywhere" philosophy and capability. Our non-standard development is included in the development targets outlined above.
- Opportunistically pursue strategic alliances to take the brand to markets where the company has not yet established a presence, to complement its existing presence or to increase average unit volumes in existing locations. This may include co-branding or other initiatives.
- Extend its co-branding initiative with Cold Stone Creamery. The company secured exclusive development rights in Canada with Cold Stone Creamery in 2009, and together with franchisees plans to convert up to 60 locations in Canada in 2010 to include the Cold Stone Creamery concept. In the United States, the company plans to co-brand between 15 to 20 existing locations and open between 10 to 15 new restaurants as co-branded locations.
- Target smaller communities in Canada as part of its overall development strategy. Standard restaurants are the primary focus in smaller communities, but Tim Hortons will also test a new, flexible restaurant design as well.
- Extend the company's service-competitive advantage — demonstrated consistently by third party research — through a new Canadian hospitality strategy which will be developed in collaboration with the Disney Institute.
- Pilot a new restaurant format in Canada in one location designed to increase capacity and throughput while maintaining the customer experience.
As one of the most franchised systems in the North American restaurant industry, the company also plans to continue to focus on the relationships it has with franchisees and the success of the system. The company also seeks to leverage its strengths and capabilities to grow its business. Several initiatives support this focus in 2010, including:
- Continuing to work collaboratively with franchisees across a wide-range of initiatives and business matters
- Growing Canadian franchised restaurant sales to more than $5 billion
- Assessing additional vertical integration and supply chain opportunities to create value for franchisees and shareholders
- Selectively reviewing acquisition opportunities that leverage its core strengths and capabilities.
Performance and financial outlook
　
In support of the initiatives outlined above for 2010, the company has established the following objectives:
- EPS: $1.95 to $2.05
- Operating income growth: 8 percent to 10 percent (52-week basis)
- Same-store sales growth: 3 percent to 5 percent in Canada and 2 percent to 4 percent in the United States
- Tax rate: approximately 32 percent
- Capital expenditures: $180 million to $200 million
Beyond 2010, management has established an aspirational goal of 12 percent to 15 percent earnings per share (EPS) growth on a compound annual average growth rate basis for the duration of the strategic plan period from 2011 to 2013, and expects to open approximately 900 new locations in North America, with approximately 600 expected in Canada and approximately 300 expected in the United States.
A replay presentation of the conference will be available at the company's Web site for a period of one year.
