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Vehicles line up at the Tim Horton drive thru shop on the Third Line on Dorval Rd. in Oakville, Ont. on Feb 15.Fred Lum/The Globe and Mail

Tim Hortons sales returned to prepandemic levels in the second quarter for the first time in more than two years, but parent company Restaurant Brands International Inc. QSR-T signalled that there is still room to improve, because many Canadians have yet to return to offices – and their morning coffee stops – on a full-time basis.

“Mobility in the downtown core is still a work in progress,” RBI chief executive officer Jose Cil told analysts on a conference call Thursday to discuss the company’s financial results. Some restaurants in urban centres are still seeing sales down by a percentage in the “high teens,” he added.

But there was some improvement in morning traffic which, coupled with growing demand for lunch and dinner items as well as specialty and cold beverages, boosted Tim Hortons’ performance. The coffee-and-doughnuts chain saw comparable sales – an important metric that tracks growth at stores open a year or more – increase by 16.3 per cent to USD$661-million in the three months ended June 30.

Tim Hortons was hit hard by work-from-home trends during the COVID-19 pandemic. But while fewer people grabbed coffee or lunch on the go, the company renewed its marketing partnership with pop star Justin Bieber to attract customers, and introduced new menu items – such as wraps and bowls – to increase sales later in the day.

Those Tim Hortons stops are costing Canadians more. Prices have increased at all of RBI’s fast-food chains – including Tims, Burger King, Popeyes Louisiana Kitchen and Firehouse Subs – as the parent company has passed on higher commodity costs to franchisees. RBI generally prefers to keep price hikes roughly in line with the increases in the consumer price index – a basket of goods used to track rising prices.

“We’ve had really close communication with our franchisees on the impact of commodities to their costs, and the overall changes in pricing for Canadians,” chief corporate officer Duncan Fulton said in an interview Thursday. “They understand where we’re at. We’re all seeing the impacts of inflation.”

Toronto-based Restaurant Brands reported that net income was down in the second quarter, to USD$346-million or 76 cents a share, compared with USD$391-million or 84 cents in the same period last year. The decline was owing to an income tax expense this year while the company received a boost from a tax benefit last year, as well as foreign exchange effects and increases in share-based compensation and non-cash incentive expenses, according to the company.

The company’s total revenue grew by 14 per cent to USD$1.6-billion in the quarter, driven by increased sales at Tims, Burger King and Popeyes, and by the acquisition of Firehouse.

The company also saw significant growth in Burger King’s international sales, which were up 18 per cent in the quarter. However, sales in the U.S. market were flat. Restaurant Brands reported that Burger King’s business in Russia – where a main franchisee has refused the parent company’s request to close the chain amid that country’s invasion of Ukraine – had a slight negative effect on profits. The company reported that it does not expect to generate any profits from those restaurants this year. RBI owns a 15-per-cent stake in the Russian Burger King business, which it has been attempting to sell in order to exit the market.

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