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Burger King, Tim Hortons Flex Muscles

Filed under Business, Competition

Restaurant Brands International (RBI) reported Q2 sales so strong that it invites the question of when its $17 billion Burger King and $6 billion Tim Hortons brands will begin to cannibalize each other.

Burger King A.1. Cheeseburger

Burger King’s A.1. Hearty Mozzarella Bacon Cheeseburger

“Strength” was a word repeatedly used by RBI CEO Daniel Schwartz, and with good reason. Burger King’s 6.7% increase in global same-store sales was its best showing in nearly 10 years. That included a 7.9% rise in the U.S./Canada and a 5.1% jump in Europe/Middle East. RBI did not disclose how much of its same-store-sales growth was from price/check and how much from traffic gains. Schwartz pointed to the success of the A.1. Hearty Mozzarella Bacon Cheeseburger—noting that the A.1. Sauce was the only new ingredient in that build—Extra Long Pulled Pork Sandwich and Chicken Fries in explaining the sales gain.

Tim Hortons’ quarter was almost as impressive, with a 5.5% systemwide increase in same-store sales. Its U.S. stores performed better (+7%) than its Canadian unit (+5.4%). A new Dark Roast coffee and dessert items such as the Creamy Chocolate Chill were strong performers. But Tim also improved its lunch menu with items such as a beefy Philly Steak Panini.Tim Hortons Steak Panini

And that’s where the potential for sibling conflict arises. The more Tim Horton expands in the U.S., the more it competes with Burger King for breakfast, lunch, dinner and snack dollars. RBI can happily concede the Canadian market to Tim Hortons, which has 3,819 stores there while Burger King has less than 300. But in the U.S., there are 892 Tim Hortons and RBI wants more. It recently opened its first store in St. Louis, so it’s no longer just hugging the U.S./Canadian border. The more it expands, the more customers will be asked to choose between a Whopper and a panini. For now, however, RBI and its shareholders are enjoying having two strong brands.

8 Responses to Burger King, Tim Hortons Flex Muscles

  1. burgerexaminer

    IMHO, Burger King has nearly killed the brand with second rate food, dingy stores, and no focus.
    I never even think about stopping in.
    They should just go ahead and re brand all the stores that are worth keeping as Tim Hortons and sell off the rest to independent operators.

  2. burgerexaminer

    IMHO, Burger King has nearly killed the brand with second rate food, dingy stores, and no focus.
    I never even think about stopping in.
    They should just go ahead and re brand all the stores that are worth keeping as Tim Hortons and sell off the rest to independent operators.

  3. Big Jim

    Couldn’t agree more with “burgerexaminer” except that BK’s order accuracy is so bad that it is beyond description. I patronize several different locations in the NY area and none of them get my order right. The counter girl enters the order correctly but the kitchen staff can not read the “POS” slip. It has taken me three and even four times to get the right order.

  4. Big Jim

    Couldn’t agree more with “burgerexaminer” except that BK’s order accuracy is so bad that it is beyond description. I patronize several different locations in the NY area and none of them get my order right. The counter girl enters the order correctly but the kitchen staff can not read the “POS” slip. It has taken me three and even four times to get the right order.

  5. ClevelandDave

    Yea, but look at their margins as well. They’ve been doing a lot of couponing/discounting in the wake of their recent purchases. Sales may be up, but my bet is that profits quarter over comps aren’t nearly as much so. In addition, anticipate a big write down as they take losses for closing underperforming stores. Just sayin’

  6. ClevelandDave

    Yea, but look at their margins as well. They’ve been doing a lot of couponing/discounting in the wake of their recent purchases. Sales may be up, but my bet is that profits quarter over comps aren’t nearly as much so. In addition, anticipate a big write down as they take losses for closing underperforming stores. Just sayin’

  7. Yes. CEO Daniel Schwartz wouldn’t break down margin growth but said this: “We don’t disclose the specific amounts, but you could imagine with the same store sales that our franchisees have had year to date, this has been the strongest franchise unit cash flow EBITDA growth that we’ve seen in, well certainly ever since we’ve owned the brand and many, many years prior to that as well. The franchisees are making stronger returns, better cash flow really than ever before. And we think it’s a function of the collaborative work that we are doing with our franchisees, launching good products, keeping things simple in the restaurants, growing our sales and you know how the cycle works. The more profitability that these restaurants are generating, the more they can reinvest, the more our franchisees can reimage and just continuing this positive momentum of delivering great guest experiences.”

  8. Yes. CEO Daniel Schwartz wouldn’t break down margin growth but said this: “We don’t disclose the specific amounts, but you could imagine with the same store sales that our franchisees have had year to date, this has been the strongest franchise unit cash flow EBITDA growth that we’ve seen in, well certainly ever since we’ve owned the brand and many, many years prior to that as well. The franchisees are making stronger returns, better cash flow really than ever before. And we think it’s a function of the collaborative work that we are doing with our franchisees, launching good products, keeping things simple in the restaurants, growing our sales and you know how the cycle works. The more profitability that these restaurants are generating, the more they can reinvest, the more our franchisees can reimage and just continuing this positive momentum of delivering great guest experiences.”