Tim Hortons
Date of Incorporation: 1964
Franchising Since: 1964
U.S. Headquarters: Dublin, Ohio
Country of Origin: Canada
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 on offer is for one of the 3 following retail stores:
Standard Store: A standard store is the typical “Tim Hortons” store. It produces merchandises and sells a variety of baked goods, such as donuts, cookies, muffins, tarts, cakes and pies, as well as coffee and other beverages. Most standard stores also offer a variety of soups, chilli and sandwiches. The standard store generally ranges in size from 1,750 to 3,080 sq ft., and contains a seating area for customers. The standard store also typically includes a drive-thru faculty.
Kiosk: the versatility of Kiosks allows them to be installed in almost any type of location area. There are generally 2 types of Kiosks, namely, (i) a built-in Kiosk; and (ii) a full service cart and/or self 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 chilli. The dimensions of a built-in Kiosk vary depending on the proposed location. 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/chilli 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.
Drive-Thrus: Drive-thrus are generally a free-standing building containing approximately 350-740 sq feet. They may be of either brick or modular construction, and typically serve customers in their vehicles from the drive-thru’s windows, although drive-thrus can be built to allow customers to enter the building to purchase products.
Financial Assistance: The franchisor developed a "Franchise Incentive Program". The program allows short term financing on the cost of the equipment, trade fixtures, furniture and interior signs for a 24 month period from the takeover/opening date. An initial payment towards the equipment package (i.e. equipment, furniture, trade fixtures and sign) of $20,000 would be payable when the franchisee signs the Franchise Agreement. The franchisee’s promissory note covers the balance.
During that 24 month period:
- royalty payments are reduced from 4.5 % to 2.5% of gross sales
- rent is reduced from 8.5% to 8% of gross sales
- advertising contributions remain at 4% of gross sales
At the end of the 24 month period, the franchisee pays off the promissory note.
The franchisee must also have the choice of paying the $35,000 franchise fee either:
- when they sign the franchise agreement
- in 104 weekly payments, with interest
Training and Assistance: New franchisees undergo an intensive eight week training program at the Tim Hortons Training Centre, located next to the Oakville, ON, head office. The facility includes classrooms and a fully operational store, providing trainees with intensive hands-on experience in the preparation of all Tim Hortons products. Strong emphasis is placed on food handling and hygiene procedures, employee relations, equipment maintenance and in-store security systems.
In addition, there will be a store opening crew to assist in the opening of a Tim Hortons restaurant (for a maximum period of two weeks)
Territory: The franchisor does not grant area/regional development rights. They believe in building the system store owner by store owner and restaurant by restaurant. The franchisor grants additional restaurants to only those franchisees whose performance demonstrates success in managing and operating their existing restaurants.
The franchisee does not receive an exclusive territory and the franchisor may allow another franchise into the franchisees area. The franchisor attempts to ensure that the placement of a restaurant in a market does not significantly affect the sales and profits of any other Tim Hortons restaurant in the market.
Term of Agreement and Renewal: The term of the License Agreement is usually 10 years and usually with options to renew for up to a further period of 10 years.
Obligations and Restrictions: The franchisor must ensure that the franchisor’s standards of product quality, value, cleanliness and customer service are consistently met in all areas of the franchised business.
Total Number of Units: Over 500 units in the U.S. 3,750 units worldwide.
Investment Tables:
Estimated Initial Investment
Standard Store:
| Name of fee | Low | High |
|---|---|---|
| Initial franchise fee | $35,000 | |
| Real property | $2,400 | $28,000 |
| Equipment | $337,000 | $439,000 |
| Training | $4,800 | $6,400 |
| Start-up supplies and Initial Inventory | $15,000 | $18,000 |
| Professional and license fees | $1,500 | $18,000 |
| Insurance | $1,200 | $10,000 |
| Initial Advertising and Promotion | $2,500 | |
| Security Deposits | $0 | $10,000 |
| Special Shop Development Expense | $0 | $100,000 |
| Additional Funds | $10,000 | |
| Total estimated initial investment | $409,200 | $665,700 |
Kiosk:
| Name of fee | Low | HIgh |
|---|---|---|
| Initial franchise fee | $10,000 | $35,000 |
| Real property | $800 | $11,000 |
| Equipment | $36,000 | $333,300 |
| Training | $0 | $6,400 |
| Start-up supplies and Initial | $1,000 | $18,000 |
| Inventory | $1,500 | $6,000 |
| Professional and license fees | $1,500 | $6,000 |
| Insurance | $200 | $1,000 |
| Initial Advertising and Promotion | $500 | $1,000 |
| Security Deposits | $0 | $10,000 |
| Special Shop Development Expense | $0 | $100,000 |
| Additional Funds | $10,000 | |
| Total estimated initial investment | $60,000 | $535,200 |
Drive-thru
| Name of fee | Low | High |
|---|---|---|
| Initial franchise fee | $35,000 | |
| Real property | $2,300 | $4,500 |
| Equipment | $259,000 | $319,600 |
| Training | $0 | $6,400 |
| Start-up supplies and Initial Inventory | $8,000 | $18,000 |
| Professional and license fees | $1,500 | $6,000 |
| Insurance | $1,200 | $4,500 |
| Initial Advertising and Promotion | $1,000 | $2,500 |
| Security Deposits | $0 | $10,000 |
| Special Shop Development Expense | $0 | $100,000 |
| Additional Funds | $10,000 | |
| Total estimated initial investment | $318,000 | $516,500 |
Ongoing Fees:
| Name of Fee | Amount |
|---|---|
| Royalty | 4.5% of Gross Sales |
| Advertising Contridutions | 4% of Gross Sales |
| Audit by Tim Hortons | Cost of audit plus interest |
| Additional Training | Cost to attend additional training such as transportation, food, and lodging, as well as a materials fee. |
| Transfer Fee | 5% of the full purchase price |
|
Indemnification |
Will vary with circumstances |
| Securities offering by you | $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 |
| Installmwnt payments on initial franchise fee by FIP participants | A fixed minimum payment amount based in amortizing the initial franchise fee during the initial franchise payment period with interest accruing at the rate of the prime rate of the Harris Bank N.A. |
| Approving new suppliers requested by the franchisee | The franchisors reasonable expenses incurred in evaluating the suitability of any supplier which the franchisee asks the franchisor to approve. |
| Reorganization of the franchisees business | Reasonable legal and administrative expenses incurred in procession changes resulting from the reorganization of the franchisees business structure |
| Real estate taxes | Varies |
| Insurance | Varies |
| Utilities | Varies |
| CAM | Varies |
| Smart Store changes | Varies |
| Approving suppliers | Varies |
Date of FDD: 2009
The above information has been taken from the UFOC/FDD and online sources of Tim Hortons.
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