Unit growth and channel development
Besides product development and menu innovation, which we discussed in the last part of this series, a restaurant may also boost its sales by growing units and penetrating deeper into the markets through channel development and strategically offering combo meals to expand the average check.
For the U.S. market, Tim Hortons (THI) signed a development agreement for 25 locations in New Jersey and New York in the quarter. This, along with five previous development agreements, resulted in a new unit count of 135. This development effort, along with growth in same-store sales, has led to growth in system-wide sales for Tim Hortons.
Grocery channel development
Tim Hortons (THI) recently began piloting its dark roast coffee in Quebec. The company also started selling its single-serve coffee platforms through retail channels like grocery stores. Single-serve coffee platforms include K-Cups, similar to products sold by Starbucks (SBUX). K-Cups are single-serve coffee cups that consumers can load into a K-Cup machine so they can enjoy favorites like Tim Hortons coffee in their own homes.
An investor looking to get wider exposure to the restaurant industry may look into exchange-traded funds (or ETFs) like the Consumer Discretionary Select Sector SPDR Fund (XLY), which includes McDonald’s (MCD) and Yum! Brands (YUM) along with Starbucks.
Combos to increase average ticket size
Tim Hortons also introduced new Kettle Chips in Canada as a side dish to promote its combo options. A sandwich combo option at Tim Hortons, for example, would include a sandwich, a donut, and a small coffee.
By offering an option to order sides or beverages, Tim Hortons anticipates the average check to increase per customer. This outlook was evident in a statement by CEO Marc Caira, who said, “We want our guests, who currently purchase one item from us, to buy two. And those who buy two items, to buy three.”
Next, we’ll discuss Tim Hortons’ digital strategy and loyalty cards.
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