Author Topic: What you need to get a Tim Horton's  (Read 1122 times)

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Offline BC_cheque

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Re: What you need to get a Tim Horton's
« Reply #225 on: April 06, 2018, 03:51:13 pm »
The problem with Tim Hortons was it was bought by a conglomerate named Restaurant Brands which is run by a pair of investment firms, principally a Brazilian company called 3G Capital. They're pretty cutthroat, and they quickly realized the franchise agreements let them screw people over easily. So that's what they've been doing. Since they get a percentage of the gross, right off the top, it doesn't matter to them what profits the franchises get or don't get. So they ordered the franchises not to raise prices. They care about sales, you see, not profits, because their money comes from the gross, not the net.

Franchise fees on gross sales is pretty standard, otherwise think of all the creative ways franchisees can reduce their net income and not pay royalty fees.  Often it's a percentage, but sometimes a flat fee so I don't know what you mean that they 'caught on that they could screw people over'. 

Also, there is the cost/benefit to keep in mind.  A small price hike may lose a bit of customers but given the clientele, does it necessarily translate to less royalty given that as % of sales, the higher the gross sales, the higher their own royalties. 

They may be cut-throat but not for the reasons you listed.

Offline ?Impact

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Re: What you need to get a Tim Horton's
« Reply #226 on: April 06, 2018, 04:16:48 pm »
Franchise fees on gross sales is pretty standard

I wonder how fees work when the franchise is just a part of the business, for example a gas station with a Tim Horton's counter. Might be an interesting way to make more profit, Tim's to get the people in but only serve coffee/donuts and have my other snack counter to serve something more substantial (sandwiches, soup, etc.).

Offline BC_cheque

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Re: What you need to get a Tim Horton's
« Reply #227 on: April 06, 2018, 04:28:05 pm »
I wonder how fees work when the franchise is just a part of the business, for example a gas station with a Tim Horton's counter. Might be an interesting way to make more profit, Tim's to get the people in but only serve coffee/donuts and have my other snack counter to serve something more substantial (sandwiches, soup, etc.).

That's the idea behind all the post-offices in shoppers drug marts.  Apparently they don't make much money for it but the amount of people who go in to use the post office and end up impulse shopping makes up for it.

I'm not sure about Timmy's and gas stations (I think it's Esso only?), but I'm guessing it's similar.  Timmy's probably runs independently and is offered a discount rent (if any rent at all) and it's a win win for both. 

Timmy's keeps costs low, no bathrooms to wash; and the gas station has a product differentiation strategy.

ETA - in other words, for the gas station it's not about selling snacks, it's about getting customers to their gas station to buy gas instead of the one across the street.
« Last Edit: April 06, 2018, 04:30:54 pm by BC_cheque »

Offline ?Impact

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Re: What you need to get a Tim Horton's
« Reply #228 on: April 06, 2018, 04:41:29 pm »
ETA - in other words, for the gas station it's not about selling snacks, it's about getting customers to their gas station to buy gas instead of the one across the street.

I thought gas stations were all about the extra's these days as the margin on gas was fairly low (~5-6% average, low during price war and possibly negative for some credit card sales). We no longer have the days of the service station with a small office/retail that gave away maps and maybe sold you a pack of gum, with that dirty toilet on the back with an outside door that you would really have to be desperate to use. I have heard that while the gas sales account for over 70% of the revenue, they represent less than 30% of the profits. The margin on the bag of chips, loaf of bread, or quart of milk are very high.

Offline BC_cheque

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Re: What you need to get a Tim Horton's
« Reply #229 on: April 06, 2018, 04:52:50 pm »
I thought gas stations were all about the extra's these days as the margin on gas was fairly low (~5-6% average, low during price war and possibly negative for some credit card sales). We no longer have the days of the service station with a small office/retail that gave away maps and maybe sold you a pack of gum, with that dirty toilet on the back with an outside door that you would really have to be desperate to use. I have heard that while the gas sales account for over 70% of the revenue, they represent less than 30% of the profits. The margin on the bag of chips, loaf of bread, or quart of milk are very high.

That would be interesting to know more about, do you remember where you read it? 

I just googled to see what I found and not digging very deep I came across this:

Quote
Jason Parent, vice-president of consulting for Kent, says the average margin on gasoline has risen to eight or nine cents per litre in the past two years from the 20-year norm of four to six cents, leaving more profits at the pump for the owners.
http://www.metronews.ca/news/calgary/2017/05/16/national-gas-station-count-growing-again-thanks-to-stronger-profit-margins.html

I bet the margins on chips and pop is way higher but I'm guessing cigarettes and lotto tickets make up a bigger portion of that 70% (profit).  That's where Timmy's also helps.