Tim Hortons Set to Open in Big Apple

Janet Whitman of the Financial Post writes that after a 25-year battle to make inroads in the biggest fast-food market in the world, Tim Hortons Inc. is set to open up a new U. S. front in August when it takes its double-doubles into the heart of New York City’s coffee wars.

The iconic Canadian coffee-and-doughnut chain plans to have three stores up and running in the Big Apple, including a location in Times Square — its first foray into Manhattan — the Financial Post has learned.

More New York City store openings are likely to follow in the coming months if the three test locations are deemed a success against already entrenched rivals including Starbucks, Dunkin’ Donuts and McDonald’s, with its heavily hyped McCafe espresso drinks.

The initial three stores will be cobranded with U. S. ice-cream parlour chain Cold Stone Creamery, part of a plan by the two companies to open more than 100 locations together throughout the United States and Canada.

“New York City offers a tremendous opportunity and we recognize that,” David Clanachan, chief operations officer for U. S. and international operations at Tim Hortons, said in an interview. “It’s the biggest stage of all. If you’re a retailer, you want to be in New York City. How well we do there with the three stores is going to play into our overall development plans for our U. S. business.”

Tim Hortons opened its first U. S. store in 1984 in Tonawanda, N. Y. Since then, the company has expanded into 10 other states — Michigan, Ohio, Kentucky, Indiana, West Virginia, Pennsylvania, Maine, Rhode Island, Connecticut and Massachusetts –and now has a total of 527 U. S. locations. It plans to add as many as 40 U. S. stores this year, mainly in its more established markets along the U. S.-Canadian border.

Compared to Canada– where regular trips to Tim Hortons are practically a national pastime– the United States hasn’t always been an easy sell.

The company has faced a particularly hard grind in southern New England — prime Dunkin’ Donuts territory — and ended up closing 11 underperforming locations there at the end of last year.

It’s unclear how well Tim Hortons will go down with New Yorkers.

The city’s streets already are brimming with highly popular coffee brands. It’s hard to walk a block without passing a Dunkin’ Donuts, Starbucks or McDonald’s.

“Coffee is shaping up to be like the burger wars of prior decades,” said Dennis Lombardi, executive vice-president of food-service strategies for WD Partners, a restaurant and retail design and development consultancy. “One of the challenges Tim Hortons has to face is its brand recognition in the United States, especially in new markets. One of the things Starbucks did very well is that it went into a market with a lot of stores.”

Tim Hortons will need to open enough stores for consumers to hear about its brand, he said. “If there isn’t awareness, there’s never going to be a trial, and if there’s no trial, there’s no way you’re going to get them to become customers.”

Despite the tough market, Mr. Clanachan said he’s “very bullish” about New York City and the rest of the company’s U. S. business.

“American consumers are very savvy,” he said. “They understand good value and good quality and they’re prepared to try new things…. Whether you’re talking about Detroit or Columbus, Ohio, the reality is there is a lot of competition. The key thing is to deliver on quality and service.”

Rather than a pricey TV advertising blitz, Tim Hortons will look to hook New Yorkers with local marketing efforts, such as coupons for free coffee, a strategy that has worked well for the company in other U. S. markets.

“I’m a big believer that if you try our coffee three times, we’ve got you for life,” Mr. Clanachan said.

Opening up shop with Cold Stone Creamery — a company with great U. S. brand recognition — should also give Tim Hortons a boost.

The two companies’ co-branding effort debuted over the winter in Rhode Island, and they now have more than 40 locations together, including about a half-dozen in Canada.

New York City, home to Cold Stone Creamery’s flagship store in Times Square, seemed “the next logical place” to expand the partnership, said Kevin Blackwell, chief executive of Cold Stone’s parent company, Kahala Corp., in Scottsdale, Ariz. “The results of the stores that we’ve already opened have been very encouraging. The customers seem very happy and the franchisees are very happy.”

Besides exposing each brand to new customers, the companies also are saving a bundle on real-estate and other costs because of their complementary traffic patterns.

Tim Hortons typically has its heaviest traffic in the mornings and early afternoons, while Cold Stone Creamery is busiest in the late afternoon and evenings.

“We think it’s a good fit,” Mr. Blackwell said. “If the New York stores give us the same results we’ve had in other markets, if they play out favourably, then we’ll look to open more stores together there.”

Financial Post

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