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    Can RBI's 'Winning Together' Plan Fix What Ails Tim Hortons?

  • Tim Hortons has faced a bevy of negative press in recent months. Can RBI rewrite the narrative and reinvigorate business?

    Tim Hortons
    Tim Hortons' same-store sales declined 0.3 percent in the first quarter.

    A “small group of dissident franchisees” have dragged Tim Hortons through the mud in recent months, and Restaurant Brands International is tired of it. Chief executive officer Daniel Schwartz said Tuesday afternoon in a conference call that these operators “have been the driving force behind negative media coverage [and do] not represent the voice of the whole franchise system or of the company.”

    However, he acknowledged RBI’s typically buttoned-up narrative shoulders some of the blame. But that’s about to change.

    RBI was far more candid than usual Tuesday with its plans to correct tepid results at the iconic 4,774-unit chain, starting with changes to the company’s communications strategy and a commitment to do a “better job of communicating our story based on observable facts.”

    READ MORE: Burger King, Popeyes testing delivery in hundreds of restaurants.

    “We keep our heads down and we focus on driving strong sustained growth. Because of that, we have not historically dedicated much time to media relations to tell our story,” he said. “Unfortunately, this has resulted in the publication of several articles, particularly related to Tim Hortons in Canada that mischaracterize our intentions [and] that often cite inaccurate information and that usually reflect a purposefully negative tone dictated by a group of dissident franchisees.”

    “Needless to say, we’re not pleased with the narrative in the media,” Schwartz added. “These misrepresentations undermine the good honest intentions of our franchise restaurant owners, their team members, and our employees, all of whom worked tirelessly every day to do their best for our guests and for our great Tim Hortons brand.”

    The story RBI plans to tell: Its “Winning Together” plan. At the heart of this initiative is the continued rollout of Tim Hortons’ “Welcome Image” redesign. In the next four years, chief financial officer Matt Dunnigan said the company would invest a combined total of roughly $700 million Canadian ($546 million in U.S. currency) over four years to revamp the coffee chain. The company didn’t disclose how it plans to split this cost between corporate and franchisees, but said it would remain consistent with its long-standing practice for Tim Hortons (for restaurants RBI owns or leases the real estate, it contributes 50 percent of the front-of-house renovation costs).

    As part of the new image, the restaurant exterior will be designed with natural looking, lighter, and more inviting materials. Inside, units will be decorated with artwork that reflects Tim Hortons values and history—including a commissioned portrait of Tim Horton, a mosaic of iconic brand images, and a photo wall that features Tim Hortons coffee-sourcing and proprietary blending process. There is also an upgraded, open concept-seating plan.

    New international restaurants and 10 Canada units are under the image already. Schwartz said about 95 percent of guests have responded by saying they completely agree the new interior design looks modern and up-to-date compared to less than 60 percent in the prior image. Also, 85 percent of guests said they perceive the new image as better than that of competitors in Canada, and about 75 percent said they were more likely to become repeat customers of the restaurant.

    Click the arrows in the images below to check out the new look.

    Tim Hortons

    The new Welcome Image provides Tim Hortons guests with a more contemporary restaurant experience.

    Tim Hortons

    Tim Hortons' heritage is celebrated with commissioned art found throughout the revitalized restaurant.

    Tim Hortons

    The new design provides Tim Hortons guests with a more modern, open concept.

    Tim Hortons

    With fresh architectural elements, soft lighting and modern upgrades, the new Welcome Image brings new warmth to the restaurant.

    Tim Hortons

    The design includes tables made with real Canadian Maple and communal seating.

    “What most excites us is that just in the first few weeks of announcing the new welcome image to our system, our franchisee partners in Canada have shown their support for the initiative and have already signed up hundreds of restaurants for renovation within the next two years. The current pace of signups puts us in line with our bold target to have most of the restaurants in Canada with a new image by 2021,” Schwartz said.

    The redesign is just one pillar in the plan to bolster Tim Hortons’ sales. The second is product excellence and innovation, Schwartz said. The chain wants to improve the quality of its launch products. Schwartz said this is currently underway with the new turkey bacon club, signature melts, and artisan grilled cheese. Tim Horton is working on improved packaging and other visual cues as well, he added.

    The third pillar is brand communications and launching impactful marketing campaigns, “which highlight the great values that define us as the Tim Hortons brand.” The chain recently introduces a neighbor’s campaign encouraging guests to come out and meet their neighbors over a cup of coffee.

    The question now becomes, can these moves reroute the conversation? Tim Hortons’ comparable same-store sales declined 0.3 percent in the first quarter after declining 0.1 percent in fiscal 2017. The negative media Schwartz referenced includes several ugly battles on the public front—mostly one-sided attacks coming from, as he mentioned, dissident franchisees. In June, franchisees in Canada launched a $500 million class action lawsuit alleging mismanagement of an advertising fund and rising costs. A second came in October to the tune of $850 million, saying RBI “is trying to intimidate its restaurant owners and force the franchisees who formed the group out of their restaurants,” according to the Financial Post. It was filed in Ontario Superior Court on behalf of two store owners, both board members of The Great White North Franchisee Association. In January, a report surfaced that some franchisees in Ontario cut employee benefits and paid breaks in response to the province’s minimum wage hikes. This led to a “No Timmies Tuesday” social media movement that encouraged consumers to boycott. Organized labor protests outside several Tim Hortons restaurants took place as well.

    Schwartz acknowledged that Tim Hortons’ issues “can’t be addressed with a series of short easy fixes.”

    “Like our restaurant owners we are focused on the long term and on executing with excellence on our three-pillar winning together plan,” he said.  “Simply put, we are as passionate about this iconic brand as our franchisees and our guests and we know we are accountable for its success. That’s why you have my commitment it will continue moving with speed and determination to improve its performance.”

    As for RBI’s other brands, Burger King turned in another strong quarter of performance with same-store sales gains of 3.8 percent in Q1. Systemwide sales were up 11 percent thanks to net restaurant growth of nearly 7 percent in addition to the comps lift. In the U.S., Burger King’s same-store sales hiked an impressive 4.2 percent.

    “In the U.S., our sales growth was a result of impactful marketing, product innovation, and our consistent strategy of maintaining a menu that is balanced across price points. Innovation included the launch of our Double Quarter Pound King and the launch of our Spicy Crispy Chicken Sandwich, an evolution of our improved quality crispy chicken platform that we launched last year. Both products contributed positively to our sales growth this quarter,” he said.

    In RBI’s first year at the controls of Burger King, it added about 170 net stores in 2010. It brought nearly 1,100 in the last 12 months to market. There were 16,859 Burger Kings at the quarter's end.

    “Our accelerated store growth also highlights the power of our master franchise development model, which we have also been deploying at Tim's and more recently at Popeyes,” he said.

    Schwartz also shed some light on RBI’s technology plans. He said Burger King began testing delivery in the U.S. across “several hundred restaurants and numerous markets” this past quarter.

    “Though it is still early, delivery has been successful for us in many of our international markets, including places like China and Spain and we intend to further expand our test in the U.S. over the coming months,” he said.

    Popeyes, which RBI agreed to purchase for $1.8 billion last March, posted systemwide sales growth in Q1 of 11 percent. Net growth was nearly 7 percent and comparable same-store sales were 3.2 percent versus the prior-year period. This was thanks to a 2.3 percent lift in the U.S. “Our results in the U.S. reflect a better balance between value and premium offers than we had during prior quarters,” Schwartz said. Popeyes comps slid to a 1.3 percent decline in the previous quarter and reported negative 1.5 percent for the year.

    Like Burger King, Schwartz said delivery is also underway at 2,926-unit Popeyes.

    “Consistent with our priority to use technology to enhance guest experience we’re also testing delivery at Popeyes in the U.S. and currently have several hundred restaurants in various markets across the country that are participating in the test. Our results thus far have shown that consumers have particularly enjoyed using the delivery channel to purchase Popeyes products for the dinner and for the late-night day parts, which are day parts that typically involve larger check sizes. As with BK it is still early, but the results have been encouraging so far and we intend to meaningfully broaden our test in the coming months,” he said.