Article

Tim Hortons increasing kiosk presence

Nontraditional locations are part of aggressive growth strategy for Canadian company.

September 2, 2010 by Alicia Kelso — Editor, QSRWeb.com

Tim Hortons is as Canadian as a maple leaf, but the Oakville, Ontario-based restaurant chain is rapidly growing its presence in the U.S., as well. 

In outlining its aggressive expansion plans in March, the company announced a goal of 900 new locations in North America between 2010 and 2013.

A major catalyst of that strategy relies on nontraditional locations, such as hospitals, universities, airports and ballparks. These kiosk spaces complement the company’s “we fit anywhere” philosophy and have thus far contributed to a very successful year – including a system-wide 9 percent sales increase over 2009.

Same-store sales in the U.S. grew by 3 percent in the second quarter, buoyed by 21 openings, 15 of which were kiosk locations. 

QSRweb.com talked to David Clanachan, COO of Tim Horton’s U.S. and International, about the benefits of these spaces and how they’ve translated into increased brand saturation, as well as successful numbers. 

Why did Tim Horton’s decide to focus so much on kiosk locations?

We think it works well, and one of the reasons it works well is because it’s a flexible and scalable concept. These smaller spaces can deliver the same offerings, but manage in 100 square feet. Once we get a location that is 400 square feet, we can deliver our full menu. So, we have our same products and our same service, and we have more flexibility on where to open.

Why do you think other chains haven’t tapped into this model as much?

I think the main reason is if you can’t get the full menu offerings, then your Annualized Unit Volumes (AUVs) are challenged. The key is to re-engineer the back of the house; to take down the kitchen space that is required in a traditional store. We’ve done a good job of figuring out that code. Again, it all comes back to being flexible and scalable.

How can there be benefits to compromising kitchen space at a restaurant?

By re-engineering the back of the house, the product is delivered fresh on demand. So, the number one benefit is the consumer gets the best-in-class products throughout the day. We’re constantly baking, so they hopefully get the freshest product. The old style thinking is to bake it and they will come. With this model, it’s bake on demand.

That leads to the second benefit, which is the operator is in complete control of their inventory. The operator can maximize sales and minimize any costs around waste, all the while respecting the standards of merchandising. They’re working in ebb and flow mode. When you re-engineer your technology, you can make your labor most efficient. There is also more of a food cost control, since there should be less or no waste. 

Because the units are significantly smaller, is there a smaller carbon footprint involved, as well?

I think technically they’re more energy efficient, but it’s hard to measure. We have the same pieces of equipment, but maybe less of them. But on the other hand, we’re baking on demand, so the amount of energy used per output probably doesn’t change much. 

What we are doing along those lines, however, is taking our brand to where people live, work and play. A traditional QSR is built in a big store, and people come to them. Our world doesn’t work like that anymore. We all want everything now, on our own terms, so being able to proliferate the brand to where people live, work, and play, helps a lot. It helps with our brand exposure, too.

How do these nontraditional spaces help with brand exposure?

We’ve been doing these locations for a long time in Canada, and used it as somewhat of an infill approach. Now, in the U.S., because it’s newer, we’re able to literally get people exposed to our brand in the process. In other words, rather than infilling a space, we can enter a space as a strategy to build up our market. The concept makes you look bigger than you really are. 

We have more than 100 of these nontraditional units in the U.S. now. They can be anywhere from military bases to sports stadiums. We have a kiosk at Joe Louis Arena, in Detroit, but we’re open all year, not just during the hockey season. We have a few in Columbus, Ohio, at its hockey arena and baseball stadium. We’re just launching some locations with colleges and universities, hospitals and office towers. So, people are able to take an elevator down to the main floor at work or take a break at the game and get a cup of coffee. It’s convenient for them, and it’s appealing. And, it is brand exposure for us because otherwise they’d have to go elsewhere.

When you’re dealing with a nontraditional area, there is a captive audience that is really already there. So you have a number of potential customers and you can almost predict your day in sales.

Are there any downfalls to having these units?

The biggest issue is that the economics have to work. You have to make it work within certain areas. These spaces require traffic and having the right brand in the right space. Many have tried and have struggled because the whole picture didn’t work.

The other part is that the format of operation has to work, and with restaurants it can get complicated. Frying hamburgers and french fries is done in a different context, so that concept has to be approached differently.

Do the kiosk units feature full menus?

Most of them do. Our smallest is about 100 square feet, which usually has beverages and baked goods. But most of them are a bit bigger, and when we get to 450 square feet, we can offer the full menu, including our soups and sandwiches.

How much have the kiosk units contributed to your success this year?

We don’t split up our sales results to know that exactly. But, anytime you can continue to advance your brand it will help in the overall scheme of things.

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