The headlines from Restaurant Brands International Inc.’s (RBI) fourth-quarter earnings – at least in Canada – were striking: A 4.3-per-cent dip in same-store sales for Tim Hortons in stark contrast to impressive numbers from its fast-food cousins, Burger King and Popeyes Louisiana Kitchen.
RBI chief executive officer Jose Cil did not hide from the challenges the Tim’s brand faces. “It is clear that we have a large opportunity to refocus on our founding values and what has made us famous with our guests over the years,” he said in a release on Monday.
But where did the iconic Canadian brand go astray?
Alan Middleton, professor of marketing at the Schulich School of Business, says Tim Hortons management has made more than its share of missteps since RBI took control in 2014.
“They’re losing brand share,” Middleton told BNN Bloomberg in a phone interview on Monday. “They’re doing some things that aren’t connecting with consumers the way they did (in the past).”
Middleton used to give speeches to Tim Hortons franchisees prior to the RBI takeover, including one titled “Brands don’t die, they’re murdered: How do you avoid murdering your brand?” He was never formally employed by Tim Hortons.
Here’s a look at what Middleton sees as the key causes of Tims’ downturn.
“You’ve made some enemies in your franchisees by being over-oppressive and over dictatorial … You’ve cut money to your franchisees on very important things for Tim Hortons, like local sponsorships and promotions,” said Middleton.
While Middleton said that the franchisees have solidified their foothold by buddying up in the Great White North Franchisee Association, he said both management and the franchisees benefit from a good relationship.
“Tims’ proposition, which is so powerful, is the relationship between the customer and the staff: When they walk into the franchise and there’s a nice environment, and it’s a comfortable surrounding … and the people there know you. So when you walk in it’s, ‘Alan! How are you? Double-double?’”
“You get that kind of relationship. That comes from the franchisees, which comes from Tims’ management dealing with the franchisees, so they can pay regular staff to be there. They’re not constantly turning over their people and they have an orientation towards the customer, rather than just towards delivery.”
“They engaged in a series of advertisements, which began to look like a standard price and item from any fast-food outlet,” Middleton said.
The strength of the brands’ resonance with customers, Middleton said, is a blend of familiarity and deep-seeded Canadiana. He added that, even until recently, the company has not been able to stick to one track with its ads. For example, contrasting a recent campaign featuring Wayne Gretzky, with a new one focusing on a company coffee-taster.
“They started getting back some of that Canadian-ness with Canadian hockey stars and relaxed environment, but now they’ve gone and blown it again,” he said, in reference to the coffee-taster campaign.
“I know what they’re trying to do: They’re trying to be simple and say ‘We’re just about the coffee.’ All of which is right. But it’s the manufacturer that’s talking to the consumer, and Tim’s strength was in their old communications. It was the consumer in their ads, getting across the proposition. I think that’s a major error.”
Tim Hortons doesn’t have the loyalty of the under-40 set, Middleton says, which could lead to a tightrope act for the company.
“They’ve got challenges with millennials and with the next generation down, Gen Z, who has not grown up with Tim’s in the same way that the boomers did,” Middleton said.
“So, that strength of automatic loyalty is not there, so they’ve got to re-earn it with the group, without ditching who they were … There’s a lot more competition now.”
4.THE LOYALTY PROGRAM
“They put in a loyalty program that basically gave everything away in an attempt to get the interactions, but cost them money in terms of subsidizing coffee,” Middleton said.
Middleton believes that what attracts the majority of Canadians to the Tim Hortons brand is not necessarily their orders, or how much they cost, but how they get treated at their local branch.
“They’ve changed their loyalty program to go broader, and it’s right to do one,” Middleton said. “But I’ve got a concern that the signal that’s being sent out that they think loyalty is something they build from the products and the money incentive. Not from the treatment of the customer when they walk into a Tim’s.”
At the end, it comes down to the idea of community, Middleton said.
“What people forget, is Tim’s wasn’t built top-down. Tim’s was built bottom-up,” he said.
“So, it’s promotion and activity in the local community with the local kids, and pee-wee hockey, and things like that that built the power of Tim’s.”