Former policeman Ron Joyce was scrambling to build a national doughnut and coffee chain called Tim Hortons, and trouble was brewing in the little market of Prince Edward Island. The local franchisee, who had opened the island's first two outlets, was feeling family pressure to move back to Ontario, leaving a hole in Mr. Joyce's doughnut growth ambitions.
The PEI franchisee had a candidate in mind to replace him. But Mr. Joyce wasn't convinced Danny Murphy, a kid fresh out of university who at 24 was already itching to run his own show, was ready for the big leap from baker to businessman.
"I was reluctant to sell to him because of his age," Mr. Joyce says. But in 1980, he finally took a chance on the brash young man, who drew on family support and came up with the $255,000 price.
Thirty-two years later, Mr. Murphy is now a charter member of the Tim Hortons millionaires, the elite franchisees who have ridden the double-double wave through the past three decades to become huge success stories in their local communities. "It's been a great ride," the 56-year-old says.
A great ride, indeed, that has spawned a family network of 70 fast-food outlets across the country – 50 under the Tim Hortons banner – as well as a cluster of hotel, resort and restaurant businesses on Prince Edward Island that make the Murphy name the dominant factor in the island's hospitality industry.
It all spun out of the Tim Hortons phenomenon, where today owning one outlet provides a very good living, but four strong stores can net $1-million a year in profits for a hard-working owner, industry estimates suggest. In the Tim Hortons universe, it is common to own multiple outlets, although no one can touch Moncton's Gary O'Neill, Mr. Joyce's first franchisee in Atlantic Canada in 1974 and now the biggest Tims franchise operator with 34 restaurants.
Mr. Murphy is in that league, having gone from two smoky doughnut shops in Charlotteown to owning all 20 Tim Hortons restaurants in PEI, as well as 10 Wendy's stores in PEI and Montreal. More than that, he has drawn his large, striving family into the Tim Hortons camp: Danny and three brothers (he has six brothers and one sister) own a total of 50 Tims outlets, from Charlottetown to Saint John to suburban Ottawa. The Murphy tentacles even stretch west to Fort McMurray where Danny's wife Martie owns the two busiest Tim Hortons in the country.
In the fast-food industry, "Tims is Canada's great growth story," restaurant consultant Doug Fisher says. But the Murphys are distinctive in how they have leveraged that story into something much, much bigger. They played central roles in the astounding rise of Tim Hortons Inc. as a Canadian fast-food icon, helping to take it from 130 stores when Danny Murphy signed on to more than 4,000 today.
But Tim Hortons also played a crucial role in creating the legend of the Murphys. The outlets generated valuable early cash flow that sowed the seed of the Murphys' food and hospitality cluster, now the biggest collection of enterprises on the island, rivalled only by the New Brunswick Irvings who have potato processing and growing operations in PEI. The Murphys – all impossibly good looking with charm to burn – are the local power family, PEI's version of the Boston Kennedys, and are often referred to by first names alone: "Danny" or "Kevin" (a younger brother and a restaurant-hotel entrepreneur on his own) or "Shawn" (older brother, lawyer and former Liberal member of Parliament).
The Murphy story has outgrown its Tim Hortons roots to become a rare entrepreneurial saga in which everything the family touches seems to turn into a business venture, and everyone who joins the family circle seems to share an appetite for commerce.
Now the Murphys are poised to become more of a national story as Danny assembles a string of hotels throughout Atlantic Canada, while Kevin, the full-service restaurateur in the family, adds more pieces to his domination of the Charlottetown dining and drinking scene, which is a summer magnet for tourists and for travellers rolling off visiting cruise ships. And Kevin is hatching plans to take his microbrewery brand, Gahan Beer, across the country.
The Tim Hortons side of the story is not all roses – an Ontario franchise group sued the company over its conversion to more centralized baking, and U.S. expansion has failed to meet expectations. Still, Douglas Hunter, author of the book Double Double: How Tim Hortons Became a Canadian Way of Life, One Cup at a Time, points out that head office maintains a database of 3,000 aspiring store owners. Running a Tim Hortons is a lot of work, he says, but it is regarded, along with McDonald's Restaurants, as "the elite of the franchise experience in Canada."
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.
By the late 1980s, Kevin wanted to run his own business, and Shawn had a growing law practice. In tiny PEI, his practice kept bumping into conflicts with his brothers' expanding operations. And so they amicably split. Danny devoted his energies to quick service, and Kevin focused on his great passion for full-service restaurants and fixing up heritage buildings. He invested with other family members in an old downtown hotel property that became the Great George Hotel, a boutique inn now consisting of 16 buildings on a city block.
Danny owns the biggest business in the family, with 1,400 employees and revenue of close to $80-million a year. But Kevin's growing enterprise grosses about $20-million. These are not big businesses by global standards, but huge in PEI. And they don't include all the other Murphy-related interests across Canada, because the family keeps drawing kindred spirits into its orbit.
One of those spirits emerged when Danny visited Toronto for a Wendy's advisory meeting in 1985, and he got to know another franchise owner, a divorced Alberta woman named Martie Tollestrup. The two courted by long distance and married – not just a wedding but a fast-food merger, for the now Martie Murphy owns the two Fort McMurray units of Tim Hortons, as well as a brace of Wendy's outlets in Alberta. The couple have built a stone mansion on a 50-acre estate called Gingerwood near the Atlantic Ocean where they raise horses and hold charity events – for the Murphys are also known for giving back.
Last fall was a rough time for Danny, who was laid low by a mysterious virus and grappled with an outbreak of the Norwalk virus at his Stanhope Beach Resort, which forced an early closing to the seasonal inn. But his health is back, Mr. Murphy insists, and the resort is ready for its regular opening next year.
And what about the next generation of Murphys? Danny's widowed mother Kathleen, now 85, has 28 grandchildren who are just starting to make a mark. Danny, who has six children but none yet in the business, recently took on an associate, Shawn's 31-year-old son Paul, a lawyer and accountant who is his chief financial officer. Having Paul as the "go-to guy" frees Danny for the deal making that he still loves. He hands a lapel pin to a visitor with the imprint of the numbers "20-30-40." It sums up his new dream, to own 40 hotels in the Atlantic region by 2030. He already has eight.
Hotels are a business like fast food – built on customer service, location and aligning with strong brands, with the added charm of a real estate play. And Danny knows the customer: These are the baby boomers who grew up with Tim Hortons, and they have made him rich. Now they are moving into retirement with money to spend and an appetite for travel. He is betting that some of them end up in his Atlantic hotels.
But Danny Murphy will never ignore the business that got him here. He despairs of franchise owners who just coast on the Tim Hortons brand name and don't keep their premises clean and their operations efficient. "We look after the golden goose and make sure it is profitable and shiny," he says.
THE MURPHY MACHINE
His company, D.P. Murphy Inc. of Charlottetown, owns:
– 20 Tim Hortons in Prince Edward Island.
– 10 Wendy's in PEI and Montreal.
– Eight hotels in Maritimes under various brands.
– Leon's furniture store in PEI.
– Stanhope Beach Resort, PEI.
– Dalvay by the Sea, PEI.
– Oak Acres Children's Camp, PEI.
Revenue: $70-million to $80-million.
Martie Murphy (wife)
– Two Tim Hortons in Fort McMurray, Alta.
– Six Wendy's outlets in Alberta.
Kevin Murphy (Danny's brother)
With his wife, Kathy, their Murphy Group of Restaurants includes:
– 13 restaurants in PEI. Among them: Fishbones Oyster Bar & Seafood Grill; Daniel Brenan Brickhouse; Gahan House Pub; ISE'S Bar; Sims Corner Steakhouse & Oyster Bar; Dooly's Kent Street; Dooly's Summerside; Merchantman Pub.
– Also, Great George Hotel and the Hotel on Pownal, Charlottetown.
Revenue: About $20-million a year
D'Arcy Murphy (brother)
– 14 Tim Hortons restaurants in Saint John.
Stephen Murphy (brother)
– 10 Tim Hortons outlets in Orleans (east-end Ottawa).
Joe Murphy (brother)
– Eight Tim Hortons, based in Kanata (west-end Ottawa).
Mary Jane Murphy (sister) and husband Mike Cassidy
– Charlottetown Transit, the city bus system.
– Recently launched Maritime Bus intercity transit.
– Operate Trius Tours charter service.