Tim Horton’s Strategy Components:
“we fit anywhere”
Growth goal structure
As demonstrated by its recent activities, Tim Horton’s is following a goal structure of growth. The growth model is characterized by a focus on market, plant and personnel investments, sometimes at the expense of current profitability.
Tim Hortons has been eyeing the US quick service restaurants (QSR) market for the past decade, but only recently has Tim Hortons started pushing more aggressively into the US. Just last year (2009), Riese Organization, a restaurant franchisee and real-estate company, approached Tim Hortons with a contract to open 12 new locations in and around the New York area.
However, it is not without significant risk to profitability that Tim Hortons moves into the US market. In 2004, after acquiring 42 new outlets in southern New England, Tim Hortons had to compete directly with Dunkin’ Donuts (another coffee shop chain that had a strong foothold in the area). Ultimately, Tim Hortons had to close 11 money-losing stores in 2008, incurring $21.3 million in asset impairment and closure costs in the process.
With respect to growth, below are its operational and financial goals for 2010.
2010 Operational Objectives
* Same store sales growth of 3% - 5% in Canada; 2% - 4% in the US * To open a total of 130 – 150 restaurants in Canada; 40 – 60 in the US * Convert 15 – 30 existing Tim Horton’s restaurants to include Cold Stone Creamery; 15 – 30 new restaurants in US will be co-branded with Cold Stone Creamery
2010 Financial Objectives
* EPS of $1.95 to $2.05
* Operating income growth of 8% to 10%
* Tax rate of approximately 32%
* Capital expenditures of $180 million to $200 million
Long-term Objectives (2010 – 2013)
* 12% to 15% earnings per share (EPS) compound annual growth * New restaurant development of approximately 600 in Canada; 300 in the US
* Sales (67% of total...
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