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Why Tim Hortons Struggling to Survive?

Tim Hortons is Canada's one-stop-shop for coffee, breakfast, lunch, and donuts.


It is the second-largest coffee chain in the world after Starbucks. Its parent company is Restaurant Brands International (RBI) which includes other famous brands such as Burger King, Popeye's, and Firehouse Sub. On August 26, 2014, RBI agreed to purchase Tim Hortons for $11.4 billion (USD). Tim Hortons has 4,846 restaurants in 14 countries.


History


It was founded by Tim Horton, who played in the National Hockey League (NHL), from 1949 until his death in an auto crash in 1974. Tim partnered up with his friend Ron Joyce to open more stores and quickly became a business partner.



Upon Horton's death in 1974, Joyce bought out the Horton family's shares for $1 million and took over as sole owner of the existing chain of 40 stores, quickly and aggressively expanding the chain in both geography and product selection.


Merger


In 1992, Roy Joyce sold Tim Hortons to Wendy's and in 2006 the company got separated from Wendy's and got listed on Canadian Stock Exchange to raise more money for expansion. In 2014, Burger King bought Tim Hortons for $11.4 billion (USD) and became Restaurant Brands International. Shortly thereafter, the company tried its best to up the coffee shop's profits and decrease its costs. That sounds like a good, rational business plan, right? Not quite. In doing so, it seems like RBI cut a few too many corners, at the cost of alienating its franchisees.



According to the Financial Post, RBI introduced a stricter management system to the company, which franchisees weren't used to. Employees largely felt dissatisfied with the new direction — especially after a round of layoffs shattered employee morale.



In 2018, Tim Hortons contributed more than 60% of the total revenue of Restaurant Brands International, See the chart given below. Source - Company Annual Report


Lawsuits


In 2019, U.S. Tim Hortons franchisees filed a lawsuit in federal court against parent company Restaurant Brands International (RBI), accusing it of price gouging and disguising the franchise system as a supply chain business.


In 2017, Half of all the café's franchisees in the United States decided to take legal action against RBI, After alleging that the company collected around $700 million from franchise owners for marketing and promotional materials, but actually used it for other expenses largely unconnected to Tim Hortons.



Declining Growth


A survey conducted by the Canadian news magazine Maclean's revealed that Tim Hortons is no longer the favorite coffee shop in Canada — in fact, it's not even second or third, trailing in at fourth behind McDonald's, Second Cup, and Starbucks. With a recent, unexpected drop in sales at the end of 2019, the once-popular coffee shop appears to be headed into a slow and unfortunate decline.



Tim Hortons has tried to expand in the US many times but failed due to extreme completion from Starbucks, Dunkin Donuts, and other 53,000 local coffee shops. RBI is now focusing on expanding outside of the US in China, Russia, and Europe.

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