Tim Hortons Franchise Drama and How Much Owners Actually Make

The most Iconic Canadian brand is in trouble? How much does a Tim Hortons franchise earn? How much does it cost to open a Tim Hortons? Is Tim Hortons Canadian owned? We look at the hidden dark side of Canada's coffee giant today on Franchise City.

If you are Canadian you know Tim Hortons . If you aren't Canadian Tim Hortons is kind of an equivalent to Dunkin in the USA. There are 3,569 Tim Hortons locations in Canada, 1800 locations of those in Ontario. Americans may think that isn't many locations but remember the population of all of Canada is under 40 million people, not much more than reside in the state of California.
Most Canadians think Tim Hortons owners must be making an absolute fortune because no matter the time of day there are huge lineups of customers usually blocking the streets. That reason to buy a Tim Hortons, or any franchise is included in our Top 10 stupid reasons to buy a franchise list because guess what, you don't get paid on lineups. You get paid on profit margins and if the margins are bad you wont make money. More on that in a moment.
We did a video on Tim Hortons way back in 2018, we had only 2,000 subscribers at the time, and I pointed out reasons why Tim Hortons may not be as great an investment as many people think. Since that time average EBITDA ( earnings before interest, taxes, depreciation and amortization) has dropped by over $100,000 a year average for franchise owners.
In 2018 average EBITDA across the system was around $320,000 a year. Not bad. But that number as of last year dropped to $220,000, then minus your interest, taxes, etc. $200k is not bad money, but keep in mind how much work is involved hiring, training, attrition, customer satisfaction in one of the highest volume environments in food. Employee doesn't show up? Guess who has to cover for them. Keep in mind a traditional store can cost up to 2 million dollars to open, not even including real estate. To buy a Tim Hortons you need a net worth of 1.5 million and $500k liquid to even be considered
So number one on our list of red flags is declining profits and low margins. Remember $220,000 is the average, around half the stores earn even less than that. Is that a good return on an investment of 1-2 million?
Next is location. As someone new to the Tim Hortons system you get whatever locations are left over. The first 4,000 owners obviously picked the best locations. Also remember, Tim Hortons offers existing owners new locations first, whatever nobody wants goes to new buyers. This is why getting in to an emerging franchise brand can be a good strategy, similar to people who bought in to Tim Hortons decades ago. They made a lot of money.
Number 3 is territory. From the 2023 Tim Hortons franchise disclosure your "territory" is basically your store. Tim Hortons can open a competing store wherever it wants, even right next door to you. Now its unlikely they would ever do that, but Tim Hortons corporate has been quite heavy handed against franchisees, more on that in a minute.
Number 4 Tim Hortons is no longer a Canadian owned chain. Burger King purchased Tim Hortons for $11.4 billion dollars in 2014 and they became a subsidiary of the Oakville based Restaurant Brands International. And RBI is majority owned by a company from Brazil called 3G Capital. Side note, the Subway Franchise chain may be sold in the near future, they are looking at offers in the 10 billion range, less than RBI paid for Time Hortons. Subscribe for updates to that potential sale.
Back when RBI took over many analysts suggested this company takeover is "likely to have overwhelmingly negative consequences for Canadians." Quote from a Canadian Policy Alternatives study. The study analyzed 3G Capital's past history of takeovers of Burger King, Heinz, and Anheuser-Busch and stated "it has a 30-year history of aggressive cost cutting, which could hurt Tim Hortons employees, small-businesspeople, Canadian taxpayers, and consumers. Almost a decade later some might suggest this was remarkably prescient.
Number 5 Tim Hortons donuts are no longer baked in store. More than a decade ago Tim Hortons switched from baking fresh in store, to having their goods partly cooked offsite, frozen, then delivered to stores. This helps corporate, as they make the margins on baked goods, franchisees not so much.
There was a class action lawsuit over this switch to par baking for "breach of contract, breach of duty of fair dealing, negligent misrepresentation, and unjust enrichment" and the lawsuit cited that franchisee's costs to produce a doughnut literally tripled from 6 cents to 18 cents per donut, required new equipment and other expensive investments. That case was eventually dismissed however needless to say franchisees were not happy now making 3 times less on donuts than they had prior to prebaking and having to buy the goods from corporate.

SORRY OUT OF TEXT SPACE! See Video for end.

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