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Case Study of Tim Hortons: Success Factors and Struggle to Stay Relevant to a New Generation

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The Status of Tim Hortons as a brand is unquestionable — it’s the king of coffee and quick service breakfast. It has inuated itself into everyday life for many canadians and even further to become a part of our Canadian Identity, culture and lifestyle. With over 3, 280 restaurants and 811 in the United States, it’s hard to go anywhere without seeing it. Ryan Murray once stated “Outside of Hockey night in Canada… there are few institutions or companies that have blended into the character of the nation as TIm Hortons”. Tim Hortons’ marketing strategy plays on the notion of being Canadian and how that’s defined by various people. With the founder being a former Maple Leafs player and a man who some described as “embodying canadian characteristics. ” The Prime Minister, Stephen Harper, once chose to attend a Tim Hortons headquarters rather an UN summit with Obama; he emphasized how “he was celebrating the repetition of Tim Hortons”. With a company so rooted into Canadian history and politics, there would seem to be no stopping it. However, it’s reign has come under question after it’s recent acquisition by RBI. Every business seeks to expand their market and increase sales but as Tim Hortons has tried expanding worldwide, they’re taking resources away from Canada and as such weakening their Canada’s business. With the acquisition of Tim Horton from RBI, they have lost touch with their core values as RBIs business practises directly rivals what Tim Hortons stands for.

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Tim Hortons built its brand on the idea of putting customers and communities first. One of their first successful ad campaigns was a commercial with an elderly customer that showed how she’d walk up a hill every morning just for some coffee; this was based on a real story gathered from group interviews done by the company. With such an emphasis on customer relations, the only way Tim Hortons can achieve more success is by building further relations with old and new customers and from customer feedback. Despite this, recent business actions show an increasing disdain from their values and with that their business is drastically being impacted. RBI is a company know for their cost cutting and tight budgeting to make the most profit, so when they first acquired Tim Hortons their first action was to focus their attention on technology. Technology allowed them to make the most profit with the lowest cost. They changed their coffee distributor to one that was more technologically advanced and cheaper. Tim Hortons was renowned for the coffee quality but with the change in distributor it faced backlash as their new coffee was lower in quality. This deterred customers to McDonald’s who acquired Tim Horton’s old distributor.

In addition, Tim Horton’s recent cost cutting practises have greatly impacted their reputation as it dismantles employee relationships and defining customer experiences. In marketing language, Tim Hortons markets itself as a ‘local brand’ despite being an international company. This places it highly in Canada’s media; one action made within the company is relayed everywhere. When the minimum wage spike was announced January 2018 many companies didn’t know how to react. With an increased employee wage, some companies increased the prices of their merchandise, while others reduced the size of their employees. However, for Tim Hortons they handled it in the worst way. The recent minimum wage increase, by 33%, resulted in Ontario franchises taking away employee benefits. This inevitably lead to a strike, one so impactful that politicians were backing it, even Kathlyn Wayne at the time. Perhaps the biggest tragedy in these events was the fact that the children of Tim Hortons himself were the first ones to take away benefits. Tim Hortons’ response stated this wasn’t part of their core values and didn’t reflect them as a whole. In contrast to Starbucks, who strives for employee happiness and productivity by the benefits they receive, they establishing a good employee relationship. This leads to better customer service. These customers are more likely to come back than those who aren’t. This lack of disconnect between customers and employee will greatly impact sales, their reputation and customer relations.

The company’s disconnection with its own beliefs has led to a strong disconnection with its customers. The new management charges higher prices for their supplies especially for coffee. In 2017, the company had charged $17, 650 or even more from each franchisee. This increase in supply prices directly impacted the menu prices; 2 cents increase per cup of coffee. Even though it doesn’t sound like it has a huge impact, consumers did notice and it certainly did impact on the connection they had with their favorite coffee outlet. Apart from that, it is also reported in many sources how Tim Hortons have reduced the amount of community services they used to be involved in. Tim Hortons used to raise between $60, 000 and $100, 000 per year for different community services such as hockey, children’s camps, local barbecues and swimming days. There are few generations who have been brought up/ lived with these programs. However, RBI shows no interest in carrying it on for new generations. The Great White North Group believes that these small things that made Tim Hortons different from other brands no longer exists, “I think it’s important to remember that franchise owners and their staff know which side their bagels are buttered on. They succeed when they serve their communities – not shareholders. RBI. . . seems completely disconnected from that reality” Tim Hortons is no longer Canadians’ favorite coffee. As of October 2017, Mc Café was voted as the best coffee chain, whilst Tim Hortons was placed 4th. With such nationwide coverage, Tim Hortons is effectively ruining their reputation.

The biggest contribution to Tim Hortons’ success is based on consumer relation, building trust and then relying on that to bring them back. However, by having bad press and a lack of employee connection, RBI seems to want to sever Tim Hortons past success. The company needs to get back to their roots otherwise, the company revered as part of the Canadian identity might lose its standing. In recent years Tim Hortons has been faced by stiff competition causing it to lose its title of market leader in the coffee industry in Canada. While the company has been successful in the past, due to competitors like McDonald’s and Starbucks the market has become competitive than ever. Tim Hortons has been forced to grow out of their traditional ways in order to incentivise customers to choose their coffee brand over others. However, with competitors offering better more concentrated products Tim Hortons find itself in a place where it attempts to satisfy everyone while pleasing no one. Marc Caira, chief executive officer of Tim Hortons wants emphasize the efficiency of drive thrus by cutting down menu items to make it easier and faster to order. Starbucks on the other hand is a company with a diverse selection of coffees, frappuccinos, etc and have already come up with a drive thru system that lures customers in without having to give up product diversity. They set up a two way video screen in order to tap into the consumers desire to have a more human interaction in a place they would not expect it. Tim Hortons attempts to reach the same level of success as Starbucks when it comes to drive-thrus but simply fall short. In this case Tim Hortons gives something up for something the consumer does not care about while Starbucks is able to surprise customers with something they did not realize they needed.

Another thing that Tim Hortons is lacking is the ability to appeal to specific demographics through the structural design of their locations. While Starbucks caters to specific nations by building their store’s with themes and aesthetics that match the geographical landscape that they are in, Tim Hortons simply copies and pastes its store design. Every Tim Hortons location is the same while most Starbucks location have their own identity. Tim Hortons lack of consumer awareness is one of the reason it has not been able to earn back the customers it has been losing. Another large scale issue that Tim Hortons has faced is the level of success of product outreach. The company has attempted to go toe to toe with McDonald’s and their vast selection of breakfast and lunch/dinner items. McDonald’s was able to breach the breakfast/coffee market by emphasizing a higher standard of quality in 1993 with McCafe while maintaining the status quo for their lunch/dinner items. On the other hand Tim Hortons has put out lackluster products that seem to impress no one while having a declining level of quality for the thing they are known for, their coffee. As previously stated in a survey conducted by Maclean’s Magazine’s Coffee Ranker the company went from first to fourth in Canada for 2017. Ironically enough the company was beat out by McDonald’s, Second Cup, and Starbucks respectively. Beating out other companies such as Van Houtte and A&W by only a few hundred votes putting the company in a tough position. If Tim Hortons loses consumer preference and is unable to perform in Canada it has little to no hope of sustaining itself in the years to come.

Though the company has attempted to expand into foreign markets such as the U. S it has done so with little success. Its 850+ stores in the U. S make up only 3% of the companies annual income with its largest markets New York and Ohio performing at net loss. Instead of learning from McDonald’s business model and concentrating on the improvement of the products that they do sell Tim Hortons has aggressively but unsuccessfully been producing sub-par lunch/dinner items that no one is interested in. While they struggle in learning from their mistakes McDonald’s has been making strides in increasing their control of the market. With one of the biggest decisions being their acquisition of Tim Hortons old coffee supplier Mother Baker. When Tim Hortons was acquired by RBI in 2014 they entered the brewing industry and dropped their original coffee supplier Mother Baker. It was then purchased by McDonald’s meaning that their new coffee was Tim Hortons old coffee and Tim Hortons new coffee was something nobody liked. This caused a huge shift in consumers as people had found that the taste they were looking for could now be found elsewhere.

Additionally, McDonald’s and Starbucks have also started to offer healthier alternatives to appeal to the millennial generation who are looking for a quick bite without sacrificing food quality. While Tim Hortons also offer healthier options they lack the same level of impact as McDonald’s due to poor quality control. Tim Hortons has been falling behind its competitors because they stick to the same business strategy of relying on the fact that they are a Canadian company. In today’s market however this is no longer enough to bring in consumers who have several options at their disposal. While competitors constantly find new ways to excite and entice customers to choose their brand over others Tim Hortons simply lacks the appeal it once had. Tim Hortons has maintained a leadership position but this Canadian giant is now in the process of remediation after an onslaught of negative press, strikes, a loss of identity, etc. Tim Hortons should focus on menu development, expand into new markets, and provide new products for potential, and current customers.

Tim Hortons mass markets across all demographics, psychographics, and geographic locations across Canada. They do this because of the low prices and convenient products they offer. Studies have found that Generation Y and Generation X demographics tend to spend more money per meal at quick-serve restaurants. Therefore, Tim Hortons’ task is to attract potential customers by offering any developments in their brand, according to Canadian Coffee-market consumers’ wants and needs.

A very good solution for Tim Hortons to get back the recognition is to review research and experience with new customer groups like younger Millennials and immigrant groups in their taste and meal preferences. Invite key suppliers to submit their thoughts and development opportunities. Target key seasons and day-parts for introduction. Each restaurant contains a standardized menu, which includes a broad range of products for various times throughout the day in order to appeal to customers all day long. In order to remind customers of the variety, and freshness of their products, Tim Hortons has recently undergone a layout transformation in which their bagels, and donuts moved from the behind the cashier, to the front, beside, the cashier. All product packages contain the Tim Hortons logo, and slogan, which is “Always Fresh” to further remind customers of their quality products. In addition, the packaging they use for their products are easy and convenient, which supplements the position they want to hold in their customers mind, a high-quality, reasonably priced store, that offers convenience and fast, efficient, service. The QSR industry markets across all demographics thanks to the low prices they offer, and variety of foods matching all psychographic, and gender variables. Within the QSR industry, customers find value in the inexpensive overall price of items, and the convenience the restaurants provides in terms of efficiency and effectiveness. Customers also benefit from a high-quality product, and variety offered. The benefit of a value-priced menu is the opportunity to get what consumers want. Tim Hortons provides a variety of products for customers to choose from. Tim Hortons, like President’s Choice and Canadian Tire, stands for both good value from the familiar but also in helping their customers explore new meals.

The menu at Tims should offer both, comfort and familiarity, but also some excitement. But one of the biggest weaknesses Tim Hortons currently experiences is the perception that they do not serve a lunchtime menu, and the items on the menu are sugar and fat based. With the increasing trend towards a healthy lifestyle and the threat that competitors currently have in terms of the amount of variety offered, the implementation of a “diet” menu can have several benefits. On top of the benefits noted, many customers search for a healthy menu to benefit from. The benefits provided (quality, price, convenience, and variety) can all be viewed as possible segmenting dimensions. The coffee-and-doughnut chain recently faced an onslaught of negative publicity as some of its Ontario franchisees took back employee benefits and paid breaks, to help offset the province’s minimum wage hike, claiming their corporate parent did not provide assistance. The move sparked nationwide protests and prompted some consumers to boycott the chain. RBI and its franchisees need to find their own cause to rally around – something more compelling than a menu tweak. It should speak to the kind of people place that build the brand originally.

Tim Hortons is committed to provide employees with a workplace and customers with an experience free from discrimination based on race, color, gender, or any other status protected by law. This policy applies to all personnel actions and to participation in Company-administered activities. Differentiate in pay and promotions on the basis of merit; pay different amounts based on length of service to the Company, or in a particular position and pay different amounts for jobs that are different. It is important to be aware not only of what the law prohibits, but also of what it allows: differential treatment is allowed, but not on the basis of any of the prohibited factors mentioned above. In addition to subjecting the Company to potential liability, employees who engage in any type of improper discrimination or harassment. As a Company, they should continually monitor their products and services and work hard to improve them. It is important to encourage all employees to assist in this process by reporting anything which might compromise quality of a Restaurant. This commitment to product quality, by every employee and by everyone Tim Hortons does business with, is the key to keeping the quality promise. Food safety is a primary responsibility of the Company, and nothing, including cost, is allowed to interfere with this responsibility.

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For the first time in its history, Tim Hortons is facing stiff competition from rivals. However, it’s possible for the Canadian giant to move back up in the standings. Analyzing this situation, it is easy to say, Tim Hortons should focus more on Canada as opposed to international business and develop itself as a truly Canadian brand from the roots. Otherwise, all consumers will be gone. Tim Hortons overall mission and vision is to be a leader in everything they do. This includes providing superior quality products and services to all of their stakeholders, including consumers, communities, partners, and employees. Tim Hortons corporate goals moving in the near future include attacking the day-part segment and leveraging core business strengths.

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