Step aside, Ronald McDonald, Tim Hortons says it is poised to overtake Canada's fast-food king.
Canadians are choosing doughnuts and coffee over Big Macs and fries, and Tim Hortons says that will lead, by the end of the year, to higher sales than those of its key rival in this country, McDonald's Restaurants of Canada Ltd.
What's more, Wendy's International Inc. -- the U.S.-based parent of Tim Hortons -- said it plans to add between 170 and 180 new outlets a year for the next several years and expand its empire into Rochester, N.Y.
Tim Hortons was Wendy's first acquisition. It paid $400-million (Canadian) for the chain back in 1995, in an all-stock deal orchestrated by Wendy's founder Dave Thomas, who died in January.
At that point, Tim Hortons' sales were in the range of $600-million a year. Now, it sees 2002 revenue growing to $2.4-billion -- nearly three-quarters of which will come from coffee and "baked goods," which include doughnuts, muffins and bagels, a company spokeswoman said.
"By the end of this year, we will surpass McDonald's in terms of overall dollar sales," Paul House, president and chief operating officer of Tim Hortons, told analysts at a meeting in Burlington, Ont.
"Meeting you at Tim's has become a popular saying in Canada, we have virtually become a Canadian icon," Mr. House said.
A spokeswoman for McDonald's Canada said no one was available to comment on the forecasts of its rival.
Last year, Tim Hortons reported revenue of $2.1-billion, while McDonald's Canada had revenue of $2.24-billion.
Wendy's has set a goal for Tim Hortons of same-store-sales growth of between 5 and 6 per cent. Same-store sales, a key retail measure, track purchases at locations that have been open for at least a year.
In March, Wendy's said Tim Hortons' same-store sales climbed 7.7 per cent and that first-quarter sales and earnings for Wendy's were stronger than expected. As a result, it raised its 2002 earnings guidance to between $1.85 (U.S.) and $1.90 a share from between $1.83 and $1.88. Analysts had been expecting Wendy's 2002 earnings of $1.87, up from 2001 earnings of $1.65 a share, according to tracking firm Thomson Financial/First Call.
"They have to continue to focus on operations because even though you're big doesn't mean you're better," said Howard Penney, a research analyst with SunTrust Robinson Humphrey in Atlanta, who played down the sales projection, calling it merely a "symbolic" announcement.
"McDonald's is the biggest thing in the United States and they're having problems," he said. "Wendy's has to stick with their core philosophy of running great stores, growing them at a prudent rate and then hopefully taking Tim Hortons to the United States and growing them there."
Indeed, that's what it's doing, with an expansion plan south of the Canada-U.S. border.
It said yesterday that Rochester will become the fourth major U.S. market to receive Tim Hortons stores, with four locations opening this fall.
U.S. border cities Buffalo and Detroit already have dozens of Tim Hortons outlets. There are also a handful of restaurants in Ohio, Maine, Kentucky and West Virginia. Over all, it plans to open as many as 30 new restaurants in the United States by the end of this year.
In Canada, there are more than 2,000 Tim Hortons outlets, which include its restaurant-style stores, gas station counters and hospital locations. That number is seen rising to more than 3,000 by 2005, the company said.
It told analysts, however, that it could add more than 2,100 stores in Canada before it reached a level of "market saturation."
"The math says we should add more stores," said Thomas McNeely, executive vice-president of finance, noting that there is one restaurant-style Tim Hortons store for every 19,713 Canadians.
Now, plans are in the works to beef up its presence in Western Canada and Quebec, as well as Toronto, Vancouver and Montreal.
In March, Calgary-based Imperial Oil Ltd. and Tim Hortons unveiled plans to set up 300 food kiosks in Esso's "On the Run" service stations by 2005.
Rochester appears to be a natural fit for the company, which recently opened a new coffee-roasting plant in that city.
Shares of Wendy's International closed yesterday down 38 cents or 1 per cent to $37.02 on the New York Stock Exchange. They currently sit at the top end of their 52-week band of $24.04 and $38.50.