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Tim Hortons develops a taste for Buffalo Niagara region Area is top market in U.S. for firm

Tim Hortons may be Canada-based, but the chain has an affinity for the Buffalo market.

"It's our best market in the U.S., by far, and it is equal really to virtually any market we have in the Tim Hortons system as far as success," said Chris Laganos, senior vice president of Tim Hortons' U.S. operations, during a visit on Wednesday.

The chain has about 70 locations in the Buffalo area, with another four under construction. Laganos said he expects the growth to continue.

Tim Hortons opened its first Buffalo area store in the mid-1980s, but its local growth didn't really accelerate until the mid-1990s, when it expanded to about a dozen stores.

Even though Buffalo is adjacent to the border, and the company's founder played for the Sabres, Laganos said Tim Hortons still had to take the same approach it uses in any new market in order to gain a foothold.

"It takes time. It takes trial. It takes locations. We need to open more restaurants in order to be convenient," he said. "We are not an overnight success anywhere we are, and Buffalo is just a great example of build the stores, stay true to the brand, (have) good solid locations, and you will succeed."

If it seems as though Tim Hortons already has a lot of locations here, consider this: In vibrant markets, it likes a ratio of one store for every 12,000 people, and it views Buffalo as a 1.1 million-person market. By that measure, the area could support 92 stores, nearly two dozen more than it has now.

Laganos said he isn't concerned about oversaturation.

"I just haven't seen it," he said. "Every time we open a store in the right location, we do great."

Tim Hortons in the first quarter reported a 7 percent drop in profits to $59.3 million, which the company said was partly due to a higher tax rate. Same-store revenues increased 4 percent from a year earlier.

Tim Hortons in its annual report identifies some of its biggest competitors as McDonald's, Wendy's, Starbucks, Subway and Dunkin' Donuts, since its offerings range from doughnuts to coffee to sandwiches.

Dunkin' Donuts has 27 locations in the Buffalo-Niagara Falls area, and plans to increase that number to 35 by year's end. One particular franchisee, Kainos Partners, is in the midst of an aggressive expansion program.

Tim Hortons is expanding using different formats, from restaurants, to walk-up counters like those in two downtown office buildings, to kiosks at service stations.

Some customers visit Tim Hortons three or four times a day, so having multiple locations close to each other is actually a benefit rather than a detriment, Laganos said. Convenience store locations, for instance, help handle overflow from lines that form at its restaurants' drive-through windows.

"The more stores you put in, the more sales each store does, because you're more convenient to the customer," he said.

Coffee is the main draw for the stores, he said, and the drive-through window is critical, since it accounts for 65 percent of its business.

Tim Hortons likes introducing new products at its U.S. stores to see how they're received and work out any hitches before taking them into the far bigger Canadian market. Its breakfast sandwiches debuted in U.S. locations, and its iced coffee is going through a similar rollout. The chain on July 19 is offering free 16 oz. iced coffees at its U.S. stores.

All of its Buffalo area stores are run by franchisees. Laganos said a typical franchisee owns about three stores, which he describes as a good number for the owner to stay involved in the locations. Often they are run by a husband and wife team.

"We're looking for hands-on people who are doing nothing else but running their Tim Hortons. That's their only business interest," he said.

As for potential new franchisees in Buffalo, Laganos said: "If someone were to come in today in Buffalo to apply for a franchise, there would be a bit of a wait. There's a lot of interest."

The company prefers to give the first shot at new area stores to existing franchisees, who have helped the chain grow here, he said. Aspiring franchisees from here might instead be offered opportunities in markets where Tim Hortons is still emerging, such as Rochester, he said.

According to the chain, the cost for a new franchisee to get into the business can range from $323,000 to $386,000, depending on a variety of expenses.

Sahil Ahuja, a Buffalo-area franchisee since 2001, first trained with his uncle, who owns Tim Hortons stores in Toronto. Ahuja said customer loyalty to the brand drew him to the business. "You open in any location, the customers are there," said Ahuja, who owns four stores, including the one Laganos visited, at Delaware and Hertel.

Ahuja's brother-in-law, Rajan Kalra, who works in the business, said he enjoys seeing familiarity between employees and regular customers. The employees end up knowing what those customers want the moment they arrive, he said.

"That makes it pleasurable for the store owner to see that," Kalra said.


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