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The October 2010 issue of Report on Business magazine.
The October 2010 issue of Report on Business magazine.

How Tim Hortons will take over the world Add to ...

If the sign outside this coffee shop in Troy, Ohio, didn't say Tim Hortons-or, more specifically, Tim Hortons Cafe and Bake Shop, as they call them around here-you wouldn't recognize the place.

There's no trace of the red-and-brown colour scheme so familiar to Canadians. This store is fitted with ultramodern stainless-steel fixtures and elegant wood veneer. There is a gas fireplace on one bricked wall, surrounded by four chic but comfy orange leather chairs, where patrons can curl up and take advantage of the free Wi-Fi. Above the fireplace hangs a flat-panel TV typically tuned to ESPN, so regulars can sit at the bar and watch the game while they eat. The menu is different, too: There is mac and cheese, grilled paninis with chicken and pesto or ham and cheese, mini-burgers, berry smoothies, hearty oatmeal, and shiny Delicious apples in a basket on the counter.

The Troy location, which dates back to 2004, is one of two Tim Hortons concept stores (the other is in nearby Bellefontaine) unveiled earlier this year. Together they're a kind of market lab where Tim Hortons can experiment with a panoply of new initiatives designed specifically for the U.S. market.

In 2008, Tim Hortons undertook what David Clanachan, Tim Hortons' jovial head of U.S. and international operations, calls "a deep dive," surveying tens of thousands of people about what would get them through the door of a Tim Hortons. The company built a full-sized model store in a warehouse in Oakville, spending months testing and refining the concept before rolling it up, so to speak, to the gates of Troy.

The result is a cross between the likes of Starbucks and the Tim's Canadians know. "Not that I'm gonna hang around, write poetry and sing songs," says Clanachan, "but I am gonna feel comfortable."

The buzzword here is "experiential." It's not about just the TV and cozy chairs. The counters are lower, and the coffee pots have been moved to create better sight lines, so servers can chat to customers while they pour. At the sandwich counter, ingredients are prominently displayed in a glass case, so customers can choose their own toppings, rather than being stuck with the standard two slices of tomato and a slab of iceberg lettuce. "It's about customization," says Clanachan, "especially with the younger generation. Everybody wants to be in control, part of the process."

That even extends to the doughnuts. Every so often, a burly "baker" in chef's whites (he's really just nuking stuff back there) emerges from the kitchen carrying a tray of naked doughnuts, bound for the topping station. Customers can watch as he smothers the treats in fondant and sprinkles out of clear, teardrop-shaped dispensers. You want maple topping on your chocolate doughnut? Can do. Sprinkles on your fritter? You're the boss.

Really, though, the fancy design is just a way of getting people to try Tim Hortons in the first place. Clanachan believes that Tim Hortons' formula of quality food + good coffee + cheap prices will ultimately win over the U.S., as it did in Canada. But the company faces obstacles here that it didn't back home-first among them that it has virtually no brand recognition. With the exception of a few hockey towns like Buffalo (the place where Horton finished his career is home to 100 stores), the name "Tim Horton" means zilch down here. And competition is fierce. At home, Tim Hortons has only one serious rival: McDonald's. In the States, it is battling entrenched, all-American brands that have many more locations per capita there than they do in Canada, including McDonald's, 7-Eleven, Starbucks and, most notably, the 6,400-strong Dunkin' Donuts chain.

To compound the problem, "the company has had to be creative with the ad spend down here," Clanachan says. Translation: Head office is being stingy with the cash, which means no TV advertising. Instead, Tim's in the U.S. is all about grassroots marketing. Franchisees participate in community events and sponsor Little Leaguers (a key strategy early on in Canada). On the corporate level, the company courts media attention with stunts like parachuting "Roll Up the Rim" cups from the rafters during Buffalo Sabres games, or landing a store cameo on the hit sitcom How I Met Your Mother.

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