Tim Horton's Analysis

Tim Horton’s Analysis
Tim Horton’s Inc. is a Canadian coffee shop known for its coffee and doughnuts. It was founded in 1964 in Hamilton, Ontario by Canadian hockey player Tim Horton and Jim Charade, after an initial venture in hamburger restaurants. In 1967, Horton collaborated with investor Ron Joyce, who quickly took over operations after Tim Horton died in a car crash in 1974, and expanded the chain into a multi-million dollar franchise. Jim Charade left the organization in 1966 and briefly returned in 1970 and 1993 through 1996. This paper will evaluate the business and its products. The evaluation will also include the target customers, the main competitors as well as some marketing strategies.
As of December 30, 2007, Tim Horton's and its franchisees operated 2,823 restaurants in Canada and 398 restaurants in the United States. The firm's principal business is the development and franchising of quick-service restaurants. The bulk of its revenues come from retail sales at its owned restaurants, from distribution of wholesale baked, refrigerated and frozen products to Tim Horton restaurants, as well as from the consolidation of a limited number of franchised restaurants (66% of revenues). The company also owns or leases the land and/or the building for the majority of its restaurants, and leases or subleases the real estate to its franchisees, collecting both rent from franchisees as well as, royalties from franchisees, based on a percentage of gross sales (29% of revenues). In addition, the company receives fees upon the opening of new franchised units(5% of revenues). Revenues over the past 3 years have increased 30%, but operating margins have tightened 4% during 2007. This is because of spikes in commodity prices, the relief given to franchisees in the US about rent and royalties, and the increased costs of their new product mix. Essentially, their operating costs have increased at a faster rate than sales during 2007. At the same time, costs in the...