Why Tim Hortons’ same-store sales grew
In the last part of this series, we learned that Tim Hortons’ (THI) same-store sales increased 6.8% in the US. Its same-store sales in Canada grew 3.5%. The same-store sales growth in Canada was a result of the company ‘s new product launches. During the year, THI had more than an 80% increase in product launches—compared to 2013.
According to management, it offered the premium Crispy Chicken Sandwich, premium beverages, Greek yogurt, and baked goods. This helped increase the average check. The average check is a result of price and product mix.
Product mix is the combination of items on the menu. It plays an important role in driving sales. For example, during the quarter, THI’s sides—like hash browns and kettle chips—helped increase customers’ orders. The sides can be part of a combo meal. THI experienced more combo meal orders during the breakfast daypart.
Competing product launches
In the US, THI’s same-store sales increased for the breakfast daypart. It launched the Hot Breakfast Sandwich and the Maple Flatbread Breakfast Panini on the breakfast menu.
In the 2Q14 earnings overview series, we discussed that THI launched its Frozen Hot Chocolate and Oreo Iced Capp. These additions, along with Dark Roast Coffee and Pumpkin Lattes, helped drive sales.
Starbucks (SBUX) is known for its famous Pumpkin Spice Latte. Dunkin’ Donuts (DNKN) also launched Dark Roast Coffee during the quarter. Some of these restaurants are part of the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY also includes McDonald’s (MCD).
During the quarter, THI also launched a spicy version of the Crispy Chicken Sandwich. It launched egg breakfast sandwiches and the Chipotle Angus Steak Melt Panini.
THI eliminated 50 low-volume menu items during the quarter. This will simplify the variety of orders in THI’s kitchen.
In the next part of this series, we’ll look at a few more of THI’s initiatives to grow same-store sales.