food service

Tim Hortons to close restaurants in Rhode Island and Connecticut

BLOOMBERG NEWS FILE PHOTO / DAVE OLECKO
A TIM HORTONS EMPLOYEE fills a customer's order. The fourth largest publicly-traded restaurant chain in North America said Wednesday it will close all of its Providence and Hartford restaurants.
Posted 11/11/10

(Updated, 10 a.m.)

OAKVILLE, Ontario – Tim Hortons announced Wednesday it will close all of its Providence and Hartford restaurants as well as two in Portland, Maine, the company said in its third-quarter earnings release.

Tim Hortons’ U.S. segment had an operating loss of $17.5 million in the third quarter due to a $20.9 million asset impairment charge - an unexpected or sudden decline in the service utility of a capital asset that can be written off – related to the three New England markets.

The company said it will close 36 stores and 18 self-serve kiosks and expects to see an additional cash charge of no more than $30 million in its fourth quarter related to lease and location closing costs. It explained that it intends focus on “core growth markets in the Northeast and Midwest.”

“The restaurants we are closing in the New England region have detracted from that performance and our overall development in the U.S. We believe this step removes a significant impediment to our long-term growth and development,” said Don Schroeder, president and CEO.

“These restaurants represent a small portion of our overall system in the U.S, but had a disproportionately large negative impact on earnings, average unit volumes and same-store sales growth in the segment,” he said.

The restaurants scheduled to be closed had a negative impact of about $4.4 million on the operating income year-to-date, the company said.

In Rhode Island, many Tim Hortons stores were former Bess Eaton shops. When Bess Eaton went bankrupt in 2004, Wendy’s International Inc. purchased them and converted them to its Tim Hortons brand. Wendy’s spun off the doughnut shop chain as its own company in 2006.

Tim Hortons spokesperson David Morelli said the company has six stores in Providence.

The Providence metropolitan area has more doughnut shops per capita than any other region in the Untied States, according to a January study by the market-research firm NPD Group Inc.

As of Oct. 3, Tim Hortons had 621 restaurants in the U.S. and 3,082 in Canada.

For Tim Hortons’ third-quarter earnings release, click here.

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wesdym@yahoo.com

Tim Hortons failed in Rhode Island (and likely Connecticut, too), for good old fashioned reasons of poor business management. I speak here as a fan, not a detractor, but I have mostly only criticism and express mostly disappointment. A lot of their problems here seemed to stem from a combination of naive ignorance about the market and stubborn arrogance about how to deal with it.

In Canada, Tim's has little credible competition in most of their market area. There are not 55 Dunkin Donuts in Toronto, as there are in Providence, nor the Honey Dews, Cafes la France, Au Bon Pain, Starbucks, and all the rest -- including McDonald's, selling Newman's Organic coffees. (we must Bess Eaton didn't fail because they were notably inferior to Tim Hortons: I was a Bess Eaton customer and liked them just fine. It's just as likely that Bess Eaton discovered the upper limit to how many coffee and donut chains can make it in one crowded market.

The same could be argued for Tim Hortons, except that it's clear to anyone who patronised them how they fell short. First, their product selection and pricing was not competitive, both with the ample coffee and pastry market here and with chains like Panera and Atlanta Bread Company selling similar food products. They introduced exacly one new product to the Southeastern New England market: maple-frosted donuts. (They continue to make a big deal out of their cider donuts, as if better ones weren't already sold at every orchard and farmstand in the Northeast.) Much is evident in loyal customer's use of the term "steeped tea," apparently a novelty in areas outside New England.

Second, service was spotty. On my visits to several Tim's in Rhode Island, I often saw staff goofing around like they were on permanent break, sometimes with their friends hanging out in the stores, so that customers became intruders in their private good times. It seemed no one was in charge. I saw this too often at too many stores for it to be one manager's fault.

Third and perhaps most notably, Tim Hortons did not carry an extremely popular New England product, iced coffee. I was aware that this was the reality in Canada, where I was once admonished, "We don't DO that!" -- literally, within sight of a Dunkin Donuts right across the border. The stores did not even have ice, making it impossible for them to even fake a poor imitation. I was repeatedly advised to try some syrupy concoction similar to Dunkin Donuts' Coolatta (which I find revolting) as a fair alternative, which it is not. They did finaly get it, but it took them twice as long as it took competitors to duplicate their special donuts. By then, most of us had already given up on them and weren't coming back. It wasn't very good, by the way. They don't seem know New England coffee tastes very well, and there's almost certainly not enough Canadians here to support them.

I wish Tim Hortons well, and have no hard feelings for them, but I can only shake my head at the series of blunders they made here. And I won't miss them.

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