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OT Tim Hortons


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Does anyone have an opinion they will share on Tims.

Okay, i'll give you mine, anyway.


Great canadian operations, franchising, products and marketing

Good return on investment and decent moat

Overpriced at $30, worth buying at $25 considering slower growth

Wasting  shareholder money in the us expansion

Co-branding with Stone Cold Creamery a mistake





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I struggle with THI....I would really like to be a shareholder, but I can never seem to convince myself that it is a good idea.  A couple of thoughts:


1) Domestic Growth: there is still a little room for domestic growth in Quebec and Western Canada.  They can maybe increase their Canadian presence by another 25%.  That's nothing compared to their historical growth.


2) US Expansion: This is the real wild-card.  Will the Americans embrace Timmy's the way we have?  If so, there is an absolutely enormous market available.  However, history has been unkind to a great many companies who thought that they could take their success in Canada and simply apply the same formula in the US.  I worry that Timmy's may get their head handed to them.


3) Product expansion: IMO, they have made a mistake by offering breakfast sandwiches.  This broadening of their product line seriously juiced their sales numbers for the past two years, but it has caused their drive-through service to slow down to a crawl.  Ultimately, this may end up cannibalizing their coffee and doughnut sales, as who the hell wants to wait in line for 15 minutes just to get a damned coffee and doughnut?  If this occurs, they will be gaining relatively labour-intensive low margin sales, but may lose a chunk of the quick high margin coffee and doughnut sales.  Don't these guys ever look to McDonalds past mistakes before making decisions?


4) Value: This thing is priced for perfection....or maybe it's priced for the potential US growth.  But it sure isn't priced appropriately for their current volume of business.  I'd love to buy it, but I just cannot pay such a large premium (20X EPS) based on the very uncertain prospect of US growth.




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3) good point, i hadn't thought of the negative side of the sandwiches. At the one i frequent there are alot of foot lineups now which you would think is great, but there are some walkaways.  Often they can't get in the door. It does seem more labour intensive than MCD or SBUX or the likes. 


Visited Cold Stone Creamery in San Fran and was not impressed. Gimmicky concept, average quality, sickly sweet, not busy in a very busy area,  franchisees complaining. Maybe tim horton house brand ice cream works, but not this joint venture, imho.


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I too have thought long about Tim Hortons.


In reference to Stubble's numbers:

1) Domestic:  TH has some absurd precentage of the total fast food sales in Canada.  43% of quick serve, and 75% of coffee and baked goods (from their website).  Where do you go from all.  The funny thing is I frequently see new ones open up in newly constructed regions north of Toronto and they are full instantly.


2)  US expansion - This is going to take time.  They are spreading like an invasive species down the interstates at the rest stops.  I think the northern states and the "Canadian" states such as Florida may embrace these expansions over a few years.  Also, you cant get past the ability of this company to market.  They have an outlet in Khandahar, Afgan.  There was a drive to send all the Canadian troops a $10 TH gift card for Christmas this year.  People donated online and every single Canadian serviceperson has received a card.  Now there are thousands of Americans and foreign troops in Afgan who will also frequent this outlet, and may get a coffee bought for them by their Canadian counterpart.


Not to mention the effect of having an outlet in Fort Knox in the US. 


3) You can gaurantee that if the breakfast sandwiches slow down the service they will take them away.  Or they will find a faster way to deliver.  They will be looking at the numbers.


I am not an owner of THI.  I have a target somewhere in the mid-high twenties.  The only time it got there was when everything else was 70% off so I was buying elsewhere. 





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