Sales at Tim Hortons fell last year, parent company says

The parent company that owns Tim Hortons and two other prominent restaurant chains says sales declined at the coffee chain last year, even as it continued to add locations.

Restaurant Brands International, which owns Tim Hortons, Burger King and Popeyes Chicken, revealed in its annual earnings release on Monday that Tim Hortons sold a little over $6.7 billion US worth of coffee, donuts and other food items last year, a decrease of 1.5 per cent from the previous year's level.

Tim Hortons had 4,932 stores as of the end of 2019, a slight increase from 4,846 locations as of the end of 2018.

At Tim Hortons Canadian locations, sales fell by 4.6 per cent in the last quarter of the year compared to the same period a year earlier.

Tim Hortons normally makes up almost two thirds of RBI's entire revenues, but the sales slump at Tims comes at a time when the other two franchises are growing.

Burger King saw its sales grow by 3.4 per cent last year, while Popeye's grew by 12.1 per cent. Growth in those two chains coupled by the sales slump at Tims has prompted the company to rethink its strategy and get back to basics, the company said in a release.

It plans to accelerate a roll out of fresh coffee brewers for better-tasting and more consistent coffee quality, said CEO Jose Cil said.

The chain also plans to start offering more than one type of milk for customers, including skim milk and a dairy alternative, almond, starting this spring.

"These adjustments may seem basic, but that's the point: being the absolute best at the basics that we're already famous for," said Cil.

On the breakfast front, Tim Hortons is working to improve the quality of bacon in its sandwiches.

The company will transform nearly all its drive-through boards to digital from paper, he said, which will allow it to tailor offerings based on location, time, weather and other factors.

Tim Hortons is also shaking up its loyalty program, which it says has more than 7.5 million active members but only about a quarter who shared contact information. The new program will be based on points rather than visits and make most of the menu items available for redemption.

When the company starts the Roll-up-the-rim contest in the coming weeks, it will have been updated to tie into its digital focus, and will help drive digital adoption and loyalty registration.

The rewards program is expected to continue to drag down sales for several quarters.

"Burger King delivered its strongest year of restaurant growth in the last two decades," Cil said. "Popeyes launched an iconic Chicken Sandwich that has proven to be a game changer for the brand in every way."

"At Tim Hortons, our performance did not reflect the incredible power of our brand and it is clear that we have a large opportunity to refocus on our founding values and what has made us famous with our guests over the years, which will be the basis for our plan in 2020."

Across all of its brands, RBI reported net income of $257 million or 54 cents per diluted share for the quarter ended Dec. 31, down from $301 million or 64 cents per diluted share in the same period in 2018.

Despite the lower profit, RBI hiked its dividend policy for 2020. It will now pay 52 cents per share per quarter.

The company did not say whether Tim Hortons, which has about 30 stores in China mostly in the Shanghai region, has seen any impact from the ongoing novel coronavirus outbreak.