Burger King’s $12.5-billion takeover of Tim Hortons Inc. is partly billed as a way to give the coffee-and-doughnut chain a long-sought foothold in the United States.
But the company that is beloved in Canada has a long history of expansion and retreat in the crowded U.S. market, which is home to a handful of dominant fast-food brands, including Dunkin’ Donuts, McDonald’s and Starbucks.
Alan Middleton, a marketing professor at York University’s Schulich School of Business in Toronto, said Tim Hortons faces many hurdles in cracking the U.S., and that the new owners might not give the company time to establish itself.
The company struggles to stand out in the U.S. because its products – coffee, sandwiches and deep-fried treats – are no different from those sold elsewhere, Prof. Middleton said.
Earlier this year, Tim Hortons said it planned to open 300 stores in the United States over the next five years, a timeline Tim Hortons chief executive officer Marc Caira said Tuesday would be accelerated under the new ownership.
“We are very very confident that we can grow much quicker in this must-win battle for the U.S. with our partners than we would have otherwise on our own,” Mr. Caira said.
The company will open standalone stores in the U.S., and will not simply sell coffee at Burger King outlets, Mr. Caira said.
Tim Hortons’s success in Canada has been built over 50 years of being part of local communities, Prof. Middleton said. The company’s charitable work, children’s hockey and soccer sponsorships, as well as becoming the de facto community centre for many towns and neighbourhoods, have ingrained the chain and its products into the national psyche.
“If they had a unique coffee or a unique way of doing things, then you could say, ‘Okay this stuff can be built around the brand a little more quickly.’ But nothing Tims does is unique. It’s the whole collection of things they do within the community that builds their power,” he said. “Could it be done? Absolutely. Will they be allowed the time to do it? And will the management in the States be Tim Hortons management or Burger King management?”
Tim Hortons’s U.S. footprint widened under former owner Wendy’s International Inc., which owned the company between 1995 and 2006.
But facing sluggish sales, Tim Hortons closed 12 U.S. stores in 2008, another 54 in 2010. Today, 900 of its 4,500 shops are in the U.S., most of them in the northeastern part of the country. Last year, the chain came under pressure from some big shareholders over costs associated with it U.S. expansion.
But the chain that dominates the Canadian coffee and fast food market needs the U.S. if it is to grow.
On Monday, the company tried to differentiate the Burger King deal from the Wendy’s years. On a conference call with analysts, Mr. Caira described the new takeover as simpler, with a more efficient structure.
“What’s different about this particular deal is the confidence I have in the Burger King organization, the confidence I have in 3G … being young, aggressive partners, and leveraging their infrastructure,” he said.