Tim Hortons’ global quarterly sales surpassed US$2 billion for the first time in its history, but the coffee chain’s parent company said its franchisees’ profits still aren’t good enough.

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Tim Hortons quarterly sales hit $2 billion for first time, but franchisee profits not where they need to be, exec says Back to video

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Play Video

Restaurant Brands International Inc. (RBI), the Toronto-based fast-food holding company that also owns Burger King, Popeyes and Firehouse Subs, has fully bounced back from its pandemic slump, reporting a roughly 3.8 per cent increase in profit during its latest earnings update on Aug. 8. Despite the gains this year, the company has faced public gripes from a Tim Hortons franchisee group over sagging profits at the store level.

“While we’re making very good progress on store-level profitability, I want to be clear that we aren’t where we need to be,” RBI executive chairman Patrick Doyle told analysts on a conference call.

RBI booked adjusted profits of US$387 million, or 85 cents U.S. per share, in the second quarter, beating forecasts of 77 cents U.S. and outdoing the previous year’s results by 3.8 per cent. The restaurant group reported sales of roughly US$10.95 billion, up 12 per cent compared to the same period last year.

At Tim Hortons, global system-wide sales reached US$2.02 billion in the second quarter, up from US$1.8 billion last year — the best-ever quarterly sales for the coffee chain, RBI spokesperson Jane Almeida confirmed. Same-store sales, a retail metric that excludes results from recently opened or closed stores to provide a clearer picture of year-over-year performance, grew by 11.4 per cent at Tim Hortons globally, and by 12.5 per cent in Canada.

While we’re making very good progress on store-level profitability, I want to be clear that we aren’t where we need to be

Patrick Doyle, chairman, RBI

RBC Capital Markets analyst Christopher Carril said the RBI results were a show of strength in the middle of “a mixed restaurants earnings season thus far.”

RBI executives attributed the sales gains at Tim Hortons in part to its success in cold beverages, which now make up 40 per cent of all beverage sales at the chain, up from 30 per cent in 2019.

Duncan Fulton, RBI’s chief corporate officer, said Tims has been focused on growing its cold beverages market share, as well as its food sales at lunch and dinner, because those items attract younger customers and tend to result in higher cheques.

“Tim Hortons franchisees are seeing improved sales, improved traffic, improved profitability across the board,” Fulton said.

The Alliance of Canadian Franchisees (ACF), a group which says its represents the owners of about 1,100 Tim Hortons restaurants, started speaking out publicly on the issue at the beginning of 2023 after inflation drove up the cost of ingredients RBI sells to franchisees, squeezing store margins and driving down profits to “a crisis point,” according to the association’s executive director Dave Lush in February.

RBI started reporting franchisee profit levels earlier this year, shortly after ACF started airing its complaints in media interviews. In its first round of reporting in February, RBI revealed the average Tim Hortons restaurant made $220,000 in annual earnings before interest, taxes, depreciation and amortization. That’s about $100,000 less than in 2018, which was the last time RBI reported the metric.

RBI did not provide an update on the metric during the Aug. 8 call, but Fulton said profitability is “improving.”

“I can tell you the sentiment of the system is very positive,” he said.

• Email: jedmiston@postmedia.com | Twitter: jakeedmiston