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Tim Hortons Franchise Cost & Fees

Date of Incorporation: 1964

Franchising Since: 1964

U.S. Headquarters: Oakville, Ontario

Country of Origin: Canada

 

Business Description: Tim Hortons is a Canadian fast-food restaurant known for coffee and doughnuts. Tim Hortons Inc. engages in the development and franchising of quick-service restaurants. It primarily offers premium coffee, flavored cappuccinos, specialty teas, home-style soups, sandwiches, baked goods, and donuts.

 

Franchise Offer: The Franchise Agreement grants franchisees the right to open one of the following three types of retail stores:

  1. Standard Shop: A Standard Shop is the typical Tim Hortons store. It produces, merchandises, and sells a variety of baked goods, such as donuts, cookies, muffins, tarts, as well as coffee and other beverages. Most Standard Shops also offer a variety of soups, chili, and sandwiches. The Standard Shop also typically includes a drive-thru facility.
  2. Kiosk: The versatility of kiosks allows them to be installed in almost any type of location or area. There are generally three types of kiosks, namely, (i) a built-in kiosk; (ii) a self-serve kiosk; and (iii) a full service cart. Kiosks are generally located within another facility or institution such as retail stores, universities, gas stations, hospitals or airports. The built-in kiosk is designed to accommodate any product format but is best suited for a full menu line, including coffee, baked goods, soups, sandwiches, and chili. The self-serve kiosk is typically located within grocery stores and gas stations, offers coffee and a limited selection of baked goods, and occupies approximately six feet of counter space. The full service cart is modular and can be modified to suit the size, location and consumer demand of its location. It can accommodate one or more coffee stations, a full baked goods line, and/or a soup/sandwich/chili station. In certain limited circumstances, kiosk owners may be required to supply kiosks with all necessary products or make arrangements to obtain their goods from a local franchisee.

 

Financial Assistance: Except for Kiosks located at institutional sites the franchisee typically will lease/sublease your Shop premises location from the franchisor or an affiliate. The franchisor does on occasion and in its discretion allow franchisees who have its prior approval to arrange for their own lease or ownership of property where the Shop premises will be located. The franchisor also has made arrangements with PNC Equipment Finance, LLC (PNC) to offer a Shop financing program to qualified borrowers. Franchisees of the Tim Hortons system are eligible for expedited and streamlined SBA loan application processing through the SBA's Franchise Registry Program.

 

Training and Assistance: Unless franchisees will own or lease from a third party the property the franchisor approves for the Restaurant, franchisees will lease/sublease the Restaurant premises location from the franchisor or an affiliate. The terms of any specific lease or sublease will be site-specific. If the franchisor constructs the leasehold improvements and install all necessary fixtures, furnishings, signs, and equipment, the rent may reflect the cost of leasehold improvements. The franchisor has arranged with an unaffiliated lender, Western Equipment Finance, Inc., to offer a Restaurant financing program to qualified borrowers. Franchisees of the Tim Hortons system are eligible for expedited and streamlined SBA loan application processing through the SBA's Franchise Registry Program.

 

Territory: The franchisee will not receive an exclusive territory. The franchisee may face competition from other franchisees, from outlets owned by Tim Hortons, or from other channels of distribution or competitive brands controlled by Tim Hortons.

 

Term of Agreement and Renewal: The term of the franchise agreement is typically 10 years, less one day, after the Restaurant opens for business, except for Kiosks, whose terms are usually five years less one day. All Shops except Kiosks may be renewed for two renewal terms of five years each, subject to contractual pre-requisites. Renewals for Kiosks vary depending upon location.

 

Obligations and Restrictions: The franchisee must (i) faithfully, honestly, and diligently perform your duties in connection with, and devote his or her entire working time, labor, skill, and best efforts to, operating the Restaurant; and (ii) reside in the United States at a location no farther than 30 miles from the Restaurant. The franchisee cannot delegate this responsibility except in very special circumstances and subject to the franchisor’s prior approval, such as if the franchisee is a large corporation or if the franchisee executes an Area Development Agreement. If the franchisee is an Institutional Kiosk franchisee, the manager must be fully trained by Tim Hortons and act in the same manner as described. Franchisees must use the Restaurant premises solely for the operation of the Restaurant. Franchisees must operate the Restaurant in strict conformity with the franchisor’s standards and must not operate in any manner which reflects adversely on the Proprietary Marks or the Tim Hortons System. Franchisees must sell only those products and services that have been approved by the franchisor and which have been prepared using the recipes and ingredients it specifies.

 

Estimated Number of Units: 4,600

 

Investment Tables:

Initial Investment

Standard Restaurant

Name of Fee Low High
Initial Franchise Fee $35,000 $35,000
Real Estate Taxes, Personal Property Taxes and Common Area Maintenance Charges $1,000 $16,000
Equipment $319,000 $613,400
Building Costs $25,000 $450,000
Site Development Costs $100,000 $250,000
Real Estate Varies
Planning and Development and Design Costs $20,000 $80,000
Training $4,800 $6,400
Start-up Supplies and Initial Inventory $15,000 $22,000
Professional and License Fees $1,500 $10,000
Development Assistance Fees $0 $50,000
Insurance $2,500 $21,500
Initial Advertising and Promotion $3,000 $6,000
Security Deposits $0 $10,000
Special Shop Development Expense $0 $100,000
Additional Funds $20,000 $20,000
ESTIMATED TOTAL $546,800 $1,690,300

 

Kiosk

Name of Fee Low High
Initial Franchise Fee $5,000 $35,000
Real Estate Taxes, Personal Property Taxes and Common Area Maintenance Charges $800 $15,000
Equipment $9,300 $431,800
Building Costs $10,000 $200,000
Site Development Costs $0 $50,000
Real Estate Varies
Planning and Development and Design Costs $0 $50,000
Training $0 $6,400
Start-up Supplies and Initial Inventory $1,000 $22,000
Professional and License Fees $1,500 $10,000
Development Assistance Fees $0 $50,000
Insurance $150 $15,000
Initial Advertising and Promotion $500 $3,000
Security Deposits $0 $10,000
Special Shop Development Expense $0 $100,000
Additional Funds $20,000 $20,000
ESTIMATED TOTAL $48,550 $1,018,200

 

Other Fees

Type of Fee Amount
Royalty 4.5% - 6% of Gross Sales or more under limited circumstances.
Advertising Contributions 4% of Gross Sales.
Audit by Tim Hortons Costs of audit plus interest.
Additional Training Cost to attend additional training such as transportation, food, and lodging, as well as a materials fee. The materials fee will not exceed $500
Transfer Fee 5% of the full purchase price.
Indemnification Will vary with circumstances.
Securities offering by franchisee $25,000
Maintaining Shop premises in good repair Varies.
Refurbishing Shop Varies.
Lease for Shop premises Varies, but typically between 8% and 8.5% of Gross Sales.
Reorganization of your business The franchisor’s reasonable legal and administrative expenses incurred in processing changes resulting from the reorganization of the franchisee’s business structure.
Nestle Milano Espresso Machine Equipment and Maintenance Fee $165
Real estate and personal property taxes Varies.
Insurance Varies.
Utilities Varies.
Common Area Maintenance Varies.
Smart Store charges Varies.
Approving Suppliers Requested by Franchisee Varies.

The above information has been taken from the FDD of Tim Hortons. Year of FDD: 2014

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