These franchisees are now facing more heated competition, particularly from McDonald’s, and especially in the crucial coffee segment of the menu. “McDonald’s has woken up to the coffee business,” Mr. Murphy acknowledges. More than ever, the company will need the grassroots energy that built this fast-food colossus in places like PEI.
Big things have small beginnings
Prince Edward Island is the smallest of small markets, with 140,000 people scattered across its red-dirt fields and windswept beaches – and for years it was an afterthought for any expanding retail or food chain.
That worked out well for Danny Murphy. Like most quick-service food concepts, Tim Hortons saw real estate as an intrinsic part of its business model, and insisted on choosing the sites and then owning them. But Mr. Murphy was the rare franchisee who got to pick and own the real estate. As Ron Joyce was preoccupied with opening franchises for the chain he had co-founded with the late hockey great Tim Horton, he gave Mr. Murphy a lot of freedom on the island. Mr. Murphy suspects PEI was not a big part of the Tim Hortons game plan, and the real estate became a useful asset in a business where store owners have limited opportunity to build equity.
Always a good operator, Mr. Murphy was given a lot of leeway in carving out his own territory and then expanding outside Tim Hortons. “When you have a Tim Hortons or McDonald’s, you aren’t really allowed to be running around in other businesses,” he explains. “I was an exception, and they never came to me and said, ‘You should be paying attention.’ ”
He gives Mr. Joyce huge credit for making him what he is today. At times, he accompanied the Tim Hortons co-founder as he flew around the country – on his plane, which was called Doughnut One – picking out locations. “He was something to watch,” Mr. Murphy says. “He would fly in to Goose Bay or Moose Jaw, and he’d be looking at the streets [for new sites] and he was relentless.”
In time, Mr. Joyce’s obsession with growth and fresh coffee and doughnuts turned Tim Hortons into a cash machine, and Mr. Murphy rode the wave – convincing three other brothers, D’Arcy, Joey and Stephen, to get into the business in Saint John and the Ottawa area.
Danny does not underestimate the role of luck. He has seen pizza joints and burger bars come and go, but he had the good fortune to grab on to the one concept that was a winner. “Imagine if I had gone into friggin’ anything else except Tim Hortons,” he marvels.
But as the years passed, the relationship between Ron Joyce and Danny Murphy became strained, particularly in the period after Mr. Joyce sold his Tim Hortons control stake to Wendy’s in 1995. One factor in the falling out was Danny’s decision to go into Portland, Me., with two Tim Hortons outlets to take on the established Dunkin’ Donuts. “I got my pants kicked” before pulling out after nine difficult months, Danny says.
Mr. Joyce, no longer the majority owner, opposed the move from the start, feeling it was doomed. And he was right. “The [U.S.] Northeast is Dunkin’ Donuts territory,” Mr. Joyce says. It was a microcosm of Tim Hortons’ continuing challenges in cracking the U.S. market.
But Mr. Joyce speaks warmly of Mr. Murphy as a good store owner who was the front-runner in the chain’s movement to non-smoking outlets (although he temporarily had to back-track because of strident customer resistance), and an early adopter of Tim Hortons-Wendy’s combo stores. “He was always willing to step up to the plate,” Mr. Joyce says.
All in the family
If Mr. Joyce was Danny’s mentor, the Murphy family, with its PEI roots going back to the early 1800s, has been his rock. Kevin and Danny talk almost every day, even though they do not do any business with each other. And that may also be the formula for harmony – very early, the brothers went their own ways in business.
As Danny was making strides at Tim Hortons in the early 1980s, Kevin got out of university, and their lawyer brother Shawn suggested they get into hotels. The three brothers bought a couple of hostelries in Charlottetown. In the first hotel deal, Danny was able to delay some regular deposits to Tim Hortons, preserving that cash so that the brothers could make the hotel down payment.