Even Burger King’s woodenheaded former mascot can see the benefits of pairing the chain with Tim Hortons to form a powerhouse with unfenced franchise opportunities on either side of the Canadian-U.S. border. Less obvious are the plusses for Hortons, since this would be its second marriage to a burger giant. And the first wasn’t exactly a sizzler of a romance.
Hortons was acquired by Wendy’s 18 years ago as part of a diversification drive that also included the burger chain’s purchase of the Baja Fresh and Pasta Pomodoro fast-casual concepts.
The Hortons-Wendy’s marriage wasn’t a strained marriage so much as it was a lifeless one. The hoped-for synergies never materialized to the degree they were hyped. Canada-based Hortons had wide-open development opportunities in the United States, but the concept never got the anticipated traction on this side of the border. Even today, Hortons executives speak of the need to “Americanize” what the chain sells outside its homeland.
Dual branding never worked as hoped, either. A later pairing with Cold Stone Creamery proved much more lucrative for Hortons’ U.S. stores.
Ditto for franchising crossovers. Each system had franchisees who might have wanted to open units of whatever brand they didn’t already operate, but the opportunity was never realized.
Meanwhile, Wendy’s core business tanked while Hortons’ flourished, prompting shareholders of the merged chains to demand a divorce. They realized that a share of Tim Hortons would be much more valuable than a share of Wendy’s, and holding a share in each would be best of all. Led by Nelson Peltz, they badgered Wendy’s to spin off Hortons to shareholders.
Peltz then changed direction and bought Wendy’s, whose market value had been thinned accordingly.
All those twists and turns occurred before the industry was forever changed by the Great Recession, so it’s not fair to assess a BK-Hortons merger as déjà vu all over again. And the benefits surmised to date are significant for BK.
It could drop its tax rate and realize millions of dollars in additional profit merely by relocating to Canada.
Franchising has become more sophisticated, with far more multi-concept operators in the field, constantly scouting for new concepts. Hortons could be an attractive possibility to anyone looking for a strong three-day-part brand. Today, the concept is clearly much closer in character today to Panera Bread Co. than it is to Dunkin’ Donuts, which wasn’t the case in 2006.
It’s also extended its dominance within Canada, where it functions as the closest thing that (or any other) country has to a national canteen. More than 4,500 units of Timmy’s, as Canadians call their beloved chain, are now in operation north of the border. And the frequency rates are likely in the range of Taco Bell’s.
Still, a big part of the distance that persisted between Wendy’s and Hortons was the result of cultural disconnection. Though they were brought together into a single headquarters city (Columbus, Ohio,) the management teams never really melded. Indeed, one of the reasons Wendy’s cited in spinning off Tim Hortons was its self-sufficiency in management and financing.
Then again, BK is being lauded right now for running lean and mean. Its scaled-down team’s absorption into Tim Hortons—the assumed course, given the ample indications that the Miami-based franchisor will relocate—could be much easier.
But, of course, time will tell. So stay tuned, eh?
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