McDonald’s US Sales Getting Boost From Breakfast, Snacking

Paul Ziobro, of  DOW JONES NEWSWIRES reports that McDonald’s Corp.’s (MCD) domestic same-store sales are getting the biggest boost from breakfast and snacking items, helped by recent launches of a $1 breakfast menu and the Mac Snack Wrap, McDonald’s Chief Financial Officer Pete Bensen said Wednesday.

Otherwise, the fast-food giant isn’t seeing anything “dramatically different” in consumer behavior during the last several months in the U.S., where McDonald’s recently reported a slight increase in same-store sales in February, outperforming its competitors.

McDonald’s average sale has also been “relatively stable” this year, but has taken “a little bit of a hit” during breakfast due to the new bargain menu.

Bensen, speaking at a Bank of America/Merrill Lynch conference, also said McDonald’s expects price increases in 2010 to be below historical levels.

McDonald’s typically raises prices between 2% and 3% each year to help keep pace with inflation in food and other costs, but Bensen said that any increase this year “will probably be less than that.” The fast-food chain has spoken of diminished pricing power in recent months, though it comes at a time when commodity costs are expected to be benign.

“Right now as we sit, we don’t see a tremendous opportunity to take price,” Bensen said. “But the fact that our cost environment is so good, that’s not troubling to us.”

The Mac Snack Wrap, priced at $1.49, is also proving an attractive lure to get customers to trade up from the Dollar Menu. Bensen said 40% of Mac Snack Wraps sold are to customers who would have otherwise bought an item for $1.

McDonald’s focus for the upcoming year lies in menu innovation, with beverages like frappes and smoothies planned for launch in the coming months, and improving service with new cash-register systems and double drive-through lanes with screens that display orders.

It’s also renovating more than 2,000 restaurants this year. In the U.S., Bensen said McDonald’s contribution to store remodels will likely be similar to the amount it spent during the installation of McCafe, when McDonald’s paid for 40% of the costs needed to upgrade buildings.

Read More at: DOW JONES NEWSWIRES

Tim Hortons Plans 900 New Sites By 2013

Judy McKinnon, of  Dow Jones Newswires reports that Tim Hortons Inc. (THI) plans to open about 900 locations in North America by 2013, including about 600 in Canada, and is forecasting 2010 earnings of C$1.95-C$2.05 a share, well ahead of the C$1.64 a share it recently reported for 2009.

The big coffee and doughnut chain said new locations in Canada will focus on growth markets in Quebec, western Canada and major urban locations, as well as Ontario. The company had about 3,000 stores in Canada at the end of 2009 and sees potential for another 1,000 across the country.

U.S. expansion will focus on existing regional markets in New York, Ohio and Michigan. It plans to differentiate its brand through a new concept restaurant design to be piloted in at least 10 existing locations. The new concept features a “dramatic re-imaging” to define itself as a cafe and bake-shop destination.

At an investor conference, the company said a key part of its U.S. strategy is to become “famous” for its core coffee and baked goods, and so it will add the words “Cafe & Bake Shop” to its logo. “We have to call out what we are,” said David Clanachan, chief operations officer for U.S. and international at Tim Hortons.

He said the company’s new U.S. store concept will have the feel of a cafe inside and out, with goods baked before customers' eyes, equipment moved out of the way to create more opportunities for interaction with staff, and tables and chairs that aren’t fastened together or to the floor.

The company also plans to complement its standard restaurant-development activity in Canada and the U.S. with non-standard formats and locations, extending its reach in hospitals, universities and colleges, airports and other non-traditional sites.

As part of its overall development strategy, Tim Hortons will target smaller communities in Canada, mostly with standard restaurants, though it will also test a new, flexible restaurant design in these communities.

The chain will extend its co-branding initiative with Cold Stone Creamery and plans to convert up to 60 locations in Canada in 2010 to include the Cold Stone Creamery concept. In the U.S., it plans to co-brand 15 to 20 existing locations and open 10 to 15 new restaurants as co-branded locations in 2010.

It's also exploring the idea of co-branding with other companies.

For 2010, Tim Hortons is also projecting operating income growth of 8% to 10% and same-store sales growth of 3% to 5% in Canada and 2% to 4% in the U.S. Capital spending for 2010 is projected at C$180-C$200 million.

Beyond 2010, it’s targeting share earnings growth of 12% to 15% on a compound annual average growth rate basis from 2011 to 2013.

Executives said that, while Tim Hortons does most of its business in the morning and snack periods, it sees room for growth at all times of day, notably lunch and dinner through the launch of new products that appeal to its “on-the-go” customers.

In Toronto Friday, Tim Hortons is up 81 Canadian cents to C$32.73 on 723,000 shares.

Tim Hortons Plans Menu Expansion to Compete with Starbucks, Dunkin’ Donuts

The New York Daily News reports that Tim Hortons is brewing up a fresh strategy to take on Starbucks and Dunkin’ Donuts.

The big Canadian coffee chain said Friday it would open hundreds of new cafés, including in New York City, that break the mold of Tim’s iconic coffee shops north of the border.

Tim Hortons already has 11 shops in the city – nine in Manhattan and two in Brooklyn.

As part of a plan to open 900 stores in North America over the next three years, the company said it will build 300 more outlets in the U.S. That will increase its total of U.S. stores by more than 50%.

Rather than sticking with a format that has become a part of Canadian culture, Tim’s said it would open what it described as “redesigned upscale café/bake shops” that feature a menu that differs from the Canadian fare, including pastries baked on premises.

“The bottom line is that the Tim Hortons you know today will be dramatically different in four years from now,” CEO Don Schroeder said.

The company told industry analysts Friday it would locate the 300 new cafés in parts of the U.S. in which it already had a presence – mostly in New York, Ohio and Michigan.

“They are making the right move by targeting current markets. You just can’t continue to throw more stores out there. It’s like throwing bad money after bad money,” Edward Jones analyst Brian Yarbrough told Reuters.

Tim Hortons currently has 3,015 shops in Canada and 563 in the U.S. Those numbers pale compared with Starbucks, which has more than 11,000 outlets in the U.S. alone, and Dunkin’ Donuts, which has 6,400 in its home market.

Also for 2010, the company expects sales at stores open for at least a year to increase by 3% to 5% in Canada and by 2% to 4% in the U.S.

Read More:  New York Daily News

C-Stores Feeling the Heat

Linda Lisanti writes in Convenience Store News that there’s good news and bad news in the coffee category these days.

The bad news is a double whammy is impacting convenience retailers’ sales and margins in this all-important area of the store. With unemployment at record highs, once-core customers are out of work and no longer making their usual morning commutes — or their daily java stops. Coupled with that is the increasing coffee competition c-stores are facing from quick-service restaurants, doughnut shops and gourmet coffee houses.

The good news, though, is c-stores are holding their own. Coffee servings across all U.S. convenience stores were up 2 percent in 2009 vs. the prior year, and the channel is holding steady in its share of total restaurant coffee servings. In 2009, c-stores held an 8 percent share of brewed coffee servings, and a 9 percent share of specialty coffee servings, according to market research company The NPD Group. That’s compared to c-stores’ 2008 share of 9 percent brewed, and 8 percent specialty.

“We’ve got our challenges cut out for us,” said Bonnie Riggs, NPD’s restaurant industry analyst. “We’re going through the most prolonged downtrend ever seen in the restaurant industry. But c-stores are holding up better than others. C-stores have done some pretty aggressive promoting of their products — specifically foodservice and beverages — and they will have to continue to do so; the forecast [for 2010] is more of the same.”

In spite of all the negative projections, Brian Matlock, director of foodservice for Rockland, Mass.-based Tedeschi Food Shops, is optimistic. He said the chain had a great year in 2009, and he expects an even better performance this year. “Of course, we can’t let our guard down for a second,” he said. “This isn’t the time for complacency.”

That’s why for the last year, the 189-store convenience retailer has taken “a back-to-basics approach” in its coffee program execution, narrowing the offering and focusing on quality and consistency. Currently, 161 Tedeschi Food Shops have a Green Mountain-branded program, while the rest feature either Honey Dew Donuts or Dunkin’ Donuts.

“We gave managers flexibility in bringing in products, but some stores had 16 to 17 coffee varieties [going at one time],” Matlock explained. In April 2009, the chain narrowed the program to eight core varieties, with a focus on light, premium and dark roast blends.

“Sometimes, less is more,” he noted. “When we looked at the demographics for our markets, it was apparent that six out of 10 people coming in for coffee were looking for a core blend. The rest was being divided between decaf and flavored.”

In addition to SKU adjustments, Tedeschi Food Shops concentrated on improving quality and consistency by re-energizing its foodservice training programs and reworking the company’s standards manual and store-level checklists for the coffee section. The changes made are showing some success so far, according to Matlock.

“We have been able to maintain our market share in coffee, and that was key for us. A lot of our competitors were deep discounting last year. There was a time when some were selling their coffee below 99 cents, others were at 79 cents and some were even giving it away. We were able to hold our market share in cup sales despite this, so I look at it as a win for us,” he said. “If your offering is compelling enough — if you have what the customer wants — you don’t have to deep discount to drive volume.”

Like Tedeschi Food Shops, 31-store NOCO Energy Corp., based in Tonawanda, N.Y., is feeling the heat from competitors, specifically Dunkin’ Donuts and Tim Horton’s.

Terry Messmer, director of merchandising for the chain’s NOCO Express convenience stores, said a new coffee shop seems to be popping up on every corner. “We’re in a highly competitive market, and that’s our biggest struggle,” he explained. “It seems every day a new Tim Horton’s is opening up here.”

Read more at: Convenience Store News

Tim Hortons Profit Rises, Boosts Payout

The Canadian Press reports that Tim Hortons Inc. THI-T brewed up a bigger profit in its latest quarter and is preparing to serve up higher dividends for its shareholders.

The Ontario-based restaurant company says it has boosted the dividend range and will raise its quarterly payout by 30 per cent, to 13 cents per common share.

The coffee, doughnut and sandwich chain also says it will use some of its cash to buy back shares from the open market.

Tim Hortons had profit of $91-million, or 51 cents per diluted share in the fourth quarter – a 32-per-cent gain from the year-earlier profit.

Revenue increased by 9.2 per cent, to $615.3-million in the three-months ended Dec. 31 from $563.7-million a year earlier.

Tims says sales at its stores accelerated each month of the quarter and the momentum continued into the current year.

Same-store sales, which compare locations open for at least a year, were up 3.4 per cent in Canada during the quarter.

Same-store sales growth was somewhat slower for Tim Hortons in the United States – rising by 2.1 per cent.

Tim Hortons Bets on Michigan Expansion

Jennifer Youssef  of The Detroit News reports that as Starbucks Corp. shutters stores in Michigan — seven closed last year and 11 more are on the chopping block — Canada’s Tim Hortons Inc. is moving in to serve coffee-drinkers left in the lurch.

Tim Hortons has 125 stores in Michigan, including 93 in Metro Detroit, and plans to open more here, though officials wouldn’t disclose details of the expansion plan. The company also has stores in Flint, Saginaw and Lansing. It employs about 2,000 workers in the state.

Two weeks ago, the Canadian company signed an agreement with the Red Wings for the exclusive “pouring rights” at Joe Louis Arena, meaning only Tim Hortons can serve coffee there, said David Morelli, director of public affairs for the company based in Oakville, Ontario, a suburb of Toronto. Last year, it signed a similar deal with The Palace of Auburn Hills.

The company has existed since 1964 and has been growing steadily, Morelli said. Store sales in 2008, the latest annual figures available, topped $4 billion.

It’s uncommon for national restaurant chains to be expanding in Michigan now, said Andy Deloney, vice president of public affairs for the Michigan Restaurant Association. But Tim Hortons’ emphasis on value is a quality Michigan customers are demanding.

“There’s something they see in Michigan that says ‘This is right for us,’ ” Deloney said. “Success is a gamble, but companies will do their research and do whatever they can to compete.”

“They’re placing a bet on Michigan and I hope their bet pays off,” he said.

Company officials are confident the coffee and baked goods chain will do well in the Michigan market. David Clanachan, Tim Hortons chief operations officer for the United States and internationally, said he was aware that Starbucks closed three stores in Detroit last year and also announced in 2009 that it would close 18 stores in the state, but he is confident Tim Hortons won’t face the same fate.

Unlike Starbucks, which has limited food choices, he said, Tim Hortons has “the right menu mix” of breakfast foods, soups and other lunch items, as well as coffee, all for an affordable price. Plus, the company already has many loyal customers in Michigan and retail space that was previously occupied by other businesses is available for Tim Hortons stores to move in, he said.

“We’re very positive about our position in the Michigan market and our progression there,” he said. “We think we fit the bill.”

Walter Bender, owner of four Tim Hortons stores in Metro Detroit, fell in love with the eatery as a high school student in Detroit and used to cross the border into Canada to go there. He opened his first store in 2008 in Warren and has two in Detroit — both of which have moved into space vacated by Starbucks — and one in Harper Woods.

“It’s been going great,” said Bender, who employs about 70 people. “Business is growing, it’s picking up every day.”

He said he has a “very loyal” customer base and new customers stop into his stores all the time, he said. Customers are always commenting on how good the food and coffee taste and what a good value they got, he said.

“I’m living a dream,” he said.

 From The Detroit News: http://www.detnews.com/article/20100223/BIZ/2230330/Tim-Hortons-bets-on-Michigan-expansion#ixzz0gMKxLmeC

Honey Dew Donuts Partners with the Dartmouth Company

A release on BusinessWire today announces that Honey Dew Donuts has partnered with The Dartmouth Company to assist them with their expansion efforts. The Dartmouth Company is a full service commercial real estate firm specializing in the leasing and sale of retail properties throughout New England. The key to The Dartmouth Company’s success has been the quality of their team members and their in-depth understanding of the markets in which they operate.

“By adding the services of The Dartmouth Group, I am anticipating great success toward the expansion efforts of Honey Dew in the New England region.”
.“I am so excited and optimistic about the response that I have received from potential franchisees,” stated Larry Flaherty, Director of Franchise of Development, Honey Dew Donuts. “By adding the services of The Dartmouth Group, I am anticipating great success toward the expansion efforts of Honey Dew in the New England region.”

Scott Black, of the Dartmouth Company, noted “By choosing to aggressively pursue expansion, Honey Dew is positioning themselves and their operating partners to capitalize on depressed real estate prices. This shrewd strategy will allow franchisees the opportunity to capture great locations at affordable rates and building long-term value for the Honey Dew brand.”

Honey Dew is looking to expand into markets in the New England area, focusing in Central and Northern Massachusetts, Rhode Island, Connecticut, New Hampshire, Vermont and Maine.

BusinessWire

Breakfast Wars: Burger King turns to Starbucks’ Seattle’s Best coffee

Ashley M. Heher of the  Associated Press reports at USA Today that Burger King(BKC) plans to launch a massive new coffee line as it tries to overhaul its breakfast menu and boost its slumping business. The nation’s No. 2 burger chain will add Starbucks’ Seattle’s Best Coffee to all its U.S. restaurants in a phased roll-out that begins this summer, executives told The Associated Press on Tuesday.

The move takes a page from rival McDonald’s success with its McCafe line of coffee drinks, which have been credited with boosting its performance. The deal also adds a new wrinkle to the coffee wars, because McDonald’s coffee campaign has been seen as taking aim at Starbucks.

“We’ll be delivering a better cup of coffee,” said John Schaufelberger, senior vice president of Burger King’s global product marketing and innovation, who said improving the company’s breakfast business is among the chain’s “top strategic priorities.”

Under the effort, more than 7,000 Burger King restaurants will begin to sell the coffee along with iced varieties that also come with a choice of plain, vanilla or mocha flavors and whipped toppings. While prices will be set by franchise owners — who operate 90% of the chain’s locations — the brew’s suggested prices range from $1 to $2.79. Drinks will be sold all day.

Terms of the agreement weren’t disclosed. But the deal marks the latest expansion for Seattle’s Best and comes as Starbucks focuses on building the lesser-known brand it acquired in 2003. In the fall, Starbucks signed a deal with Subway locations to sell the roasted coffee in 9,000 locations — more than doubling the number of U.S. sites where the brand is sold.

Most fast-food restaurants, which spent recent years expand their early morning business, have seen a decline in breakfast diners as unemployment climbs and fewer workers stop in on their way to work. In 2009, total visits to fast-food locations across the country slipped 3%, while traffic during breakfast hours slipped 2%, according to research from The NPD Group.

But selling a good-tasting cup of coffee, which often comes with a fat profit margin, is generally considered a key part of any successful breakfast effort — in good times and bad.

Five years ago, Burger King launched its BK Joe coffee brand, which will be retired as Seattle’s Best takes over.

Tuesday’s announcement marks the beginning of the first sizable change to Burger King’s breakfast lineup, which was last revamped in 2007 when the restaurant chain, based in Miami, launched its breakfast value menu.

“You should expect to see new and improved products from Burger King at breakfast,” Schaufelberger said.

Morningstar analyst R.J. Hottovy said the move allows Burger King to sell a highly profitable product and try to bring back customers.

“To me it’s just a way to offset the weakness in the breakfast business,” Hottovy said. “It’s something most (fast food) restaurants recognize could be a sales driver, and helps the bottom line.”

Burger King is also rolling out a change to its value menu that will remove a slice of cheese from its double cheeseburger and rename it the BK Dollar Double. The existing double cheeseburger, which has two slices of cheese and which the chain has been selling for $1, will now cost $1.19.

The move mirrors what McDonald’s did with its McDouble, which also has one slice of cheese and replaced the double cheeseburger on its value menu.

Burger King franchisees have complained that they’re losing money on the dollar double cheeseburger. They sued the company after it rolled out the promotion after they twice voted it down.

Burger King’s shares rose 6 cents to $18.28 Tuesday.

Read more at: USA Today

Starbucks Replaces McDonald’s at Fashion Week

Crain’s New York Business reports that after two seasons serving McCafe beverages at Mercedes Benz Fashion Week, McDonald’s has bowed out and Starbucks has stepped in.

The burger chain’s initial appearance at Fashion Week a year ago surprised fashionistas who are used to more opulent fare, Crain’s reports, but by the time the fall season rolled around, it was accepted and understood that lower price points are in vogue.

McDonald’s served more than 13,000 cups of espresso and coffee by midway through last February’s Fashion Week, “exceeding expectations,” Crain’s said in a phrase that made me wonder if I was reliving a Starbucks earnings call.

The chains don’t disclose how much they pay to participate in Fashion Week, which officially began today. Starbucks is serving Frappuccino Lite, “a limited-calorie option created especially for Fashion Week,” Crain’s wrote.

McDonald’s to Introduce Smoothies

Mark Brandau reports in Nation’s Restaurant News reports that wWhile the 2010 Winter Olympic Games begin tomorrow, official restaurant sponsor McDonald’s had an opening ceremony of its own, announcing the debut of its latest beverage: Real Fruit Smoothies.

McDonald’s Real Fruit Smoothies will come in two flavors, Strawberry Banana and Wild Berry. The products will first be served in the three Olympic restaurants McDonald’s is operating in Vancouver and Whistler, British Columbia, during the next two weeks, with plans to have the smoothies in U.S. locations by summer as part of the McCafe lineup, which currently includes hot and iced coffee drinks.

The smoothie announcement Thursday was part of McDonald’s official launch of global activities to sponsor the 2010 Olympics. At the McDonald’s restaurant in the Olympic Main Media Center in Vancouver, company officials joined gold medalists Cassie Campbell, Shawn Johnson, Picabo Street and Katarina Witt to unveil the new smoothie.

The company’s official launch included an “ultimate smoothie challenge,” which joined Canadian hockey player Campbell, American gymnast Johnson and American skier Street with a pair of winners from McDonald’s Champion Kids program. Begun for the Summer Olympics in 2008 in Beijing, McDonald’s Champion Kids provides children between the ages of 6 and 14 with a chance to experience the Olympics firsthand. For the competition, each pair of kids teamed up with an Olympian to create their own smoothie flavors, to be judged by a panel that included German ice skater Witt.

McDonald’s location in the Main Media Center is expected to feed nearly 3,000 media members during the Olympics, and its two restaurants in the Olympic Villages in Vancouver and Whistler are expected to serve more than 10,000 athletes, coaches and officials. The restaurants are open 24 hours a day and will offer McCafe beverages, snacks and McDonald’s signature menu items.

Oak Brook, Ill.-based McDonald’s, which operates or franchises more than 32,000 restaurants in more than 100 countries, has been an official sponsor of the Olympics since 1976.

 Nation’s Restaurant News

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