Recipe for Success: How Tim Hortons and RBI are Running the Playbook for Growth

It's a great honor for me to be here at the Empire Club of Canada today, which is arguably the most famous and historically relevant speakers' podium to have ever existed in Canada. It has offered its podium to such international luminaries as Winston Churchill, Ronald Reagan, Audrey Hepburn, the Dalai Lama, Indira Gandhi, and closer to home, from Pierre Trudeau to Justin Trudeau, literally generations of our great nation's leaders, alongside those of the world's top international diplomats, heads of state, and business and thought leaders.

It is a real honor and a distinct privilege to be invited to speak to the Empire Club of Canada, which has been welcoming international diplomats, leaders in business, science, and politics. When they stand at that podium, they speak not only to the entire country but to the entire world. Good afternoon and welcome to the Empire Club of Canada. My name is Sal Raban, and it's an honor to stand before our community both in person and virtually as chair of the board of directors of the Empire Club. To formally begin this afternoon, I want to acknowledge that we're gathering today on the traditional and treaty lands of the Mississaugas of the Credit and the homelands of the Anishinaabe, the Haudenosaunee, and the Wendat peoples. We encourage everyone to learn more about the traditional territory on which you work and live.

This morning, as I was going about my day, I stopped for a cup of Tim Hortons, a staple of our mornings and so many great moments. We all have this soft spot for Tim Hortons, Tims, and for all things that this iconic brand symbolizes for Canadians and Canada: heritage, national identity, and a sense of community. Today we will have the privilege of hearing about all of these things, but most importantly, something that I believe we don't talk about enough: the incredible growth story behind Tim Hortons, Tims, and by extension its parent company, RBI, Restaurant Brands International. The choice to go for scale is something we don't often see in Canada. Tims' story could have easily been one in which they didn't create one of Canada's most important, beloved, and strongest growing companies. It could have been the story of a very successful Hamilton coffee house or of an Ontario or Atlantic Canada chain, for that matter. Yet complacency has never been part of this company's vocabulary, and ambition is well-ingrained into Tim Hortons' DNA. They've been proving it for more than half a century. Successive choices and smart strategic moves brought Tim Hortons to become a Canadian icon and a global champion that went way beyond the traditional U.S. expansion that put Canada on the map of the quick service restaurant space. We see the same determination for growth with Restaurant Brands International. I'm personally looking forward to seeing the growth strategy of three other brands that RBI operates: Burger King, Popeyes, and Firehouse Subs. There are so many lessons for the business community in these two business stories. Is there a recipe for growth? How does RBI manage and sustain growth across four brands in super aggressive and different international markets? What can we do in Canada to replicate and multiply Tims' growth recipe and create more global companies and champions? The answer is we need more Tims. Just think of how much potential we could unleash in Canada if we had more companies with the same ambitions and the same hunger for growth. Our hope is that today's conversation inspires others not to settle for good enough. Don't stop at Hamilton, Toronto, or Mississauga. Don't settle for Ontario or Canada. Do as Tims did: go big, and you could be the next Canadian success story.

A bit of housekeeping: we accept questions from the audience for our speakers. You can scan the QR code found on your program booklet or through the Q&A under the video player for those of you online. If you require technical assistance and you're online, please start a conversation with our team using the chat button on the right-hand side of your screen. The Empire Club of Canada is a not-for-profit organization, and we'd like to recognize our sponsors who generously support the club and make these events possible and complimentary for our online viewers to attend. Thank you to our supporting sponsors: Dairy Farmers of Canada, Ernst & Young, Aspire Bakeries, and McCarthy Tétrault. Thank you also to our season sponsors: Amazon Web Services, Bruce Power, and Hydro One. I'd now like to invite our esteemed speakers to the stage. We're thrilled to have with us Axel Schwan, President of Tim Hortons Canada and the U.S., and Duncan Fulton, Chief Corporate Officer at Restaurant Brands International, the parent company of Tim Hortons, Burger King, Popeyes, and Firehouse Subs. Our discussion will be expertly moderated by our friend John Erman, a senior bank anchor at BNN Bloomberg and correspondent anchor for CTV National News. We look forward to their insights and strategies for further growth in the quick service restaurant space. Please give a warm welcome to Axel Schwan, Duncan Fulton, and John Erman.

Thank you, thank you, thank you. I wanted to be a senior banker, but my grades weren't good enough for that. Nice to see both of you. I feel peer pressure now to say that I get my morning coffee at Tim's, which I do sometimes. There's a Tims right outside our studio. I think to Sal's point, the growth story is an exciting one. I get an opportunity every day to talk about businesses in Canada and abroad, and certainly this is a business that has been doing exceptionally well. If you look at what's happening in the markets and within this Restaurant Brands organization... Duncan, we were on this stage here at Empire four years ago. It was early in your journey, and actually around that time you were entering into your role at Restaurant Brands through Tim Hortons. Maybe we'll start with you, Axel, on why you think things have been going well. Within the Restaurant Brands empire right now, Tims seems to be firing on all cylinders. What's going on?

And Duncan, I think since this is a global company in Restaurant Brands, and Tims is a big part of that growth story, I think if we're not there already, at some point soon we're going to see more international stores than Canadian stores. How did that communication experience, getting things right at home, set you up for what people are probably curious about today, which is the road ahead in that global story as well?

Look, I think if you look at the state of Burger King, Popeyes, and Firehouse Subs today, and you look at the plans that we've communicated for growth, they're all centered on the same principles that Axel just talked about. Tims was almost the first in the family of companies to say we need to get the basics really, really right. When you look at restaurants that have succeeded for decades, and there are a few good examples out there, restaurants that have created billions of dollars of value, the basics are: incredible quality, you have to have the best food in your category; you have to have consistently awesome service; and you have to always be super convenient to your guests. Certainly what Axel led at Tims were those basics, and looking now at the other brands, everyone is kind of following the same playbook for growth. If you look at how RBI grows around the world, it's actually a shockingly simple and awesome business model. We have these four brands that we believe have the best quality in their categories. We think Popeyes Chicken, hands down, best chicken in this category. The Whopper, every survey we ever do, says it's a better burger than our competitors. Firehouse Subs, lesser known in Canada, try it, best sub you've ever had. And of course, Tims. So then we go out and find in 100 countries around the world franchisees where we say, 'Look, if you're willing to invest your money to build these restaurants, we're going to give you a concept that has incredibly high quality food with brands that are loved, a playbook on how to execute it.' You've increasingly been hearing our executive chairman and our CEO talk about the importance of cash-on-cash returns for franchisees. So if we can give you a model where you're getting a three, four, or at most a five-year payback on your investment to open new doors, deliver this quality product, you're making a great return and it's inspiring you to grow more. We're making, call it plus or minus 4% in a royalty on everything you sell. So we're a generally capital-light business when you look at it, with huge growth potential. Today, we're opening a new restaurant somewhere in the world every seven hours or so, and we just announced earnings last week; we aspire to accelerate that going into next year, which would take us down to every four or five hours or so. So it's an exciting growth model that we have.

So you talked about the numbers for individual store locations, and there are franchisees here as well. That just made me think: there was a disclosure recently about how stores are performing. What was the transparency push there for a wider audience? Obviously you're having private discussions with different franchisees, but what was the benefit of putting that out there?

I just want to come back to the brand that is Tim Hortons, which is a brand that leans into brand Canada. I would say arguably for global companies with ties to Canada, we don't see that too often. I actually had a conversation with the CEO of Canada Goose, Danny Reiss, who also leans into brand Canada and doesn't understand why more brands don't do it. Maybe, Duncan, you can walk us through what happens when you lean into that, since you guys have been fairly aggressive and expanding around the world. Some of the feedback so far, and where you think that will go in carrying that brand around the world.

Yeah, look, it's pretty phenomenal when you look at the different brands we have. Clearly Tims in Canada is by far the leading quick service restaurant concept, most loved brand. Our other brands: Popeyes just overtook KFC in the United States and Canada for number two market share, and it's quickly becoming one of the most loved brands. Burger King in some markets around the world, and look, Canada, I think we have some work to do with the Burger King brand. We were just in France two weeks ago; there were no Burger Kings in France nine years ago. Now they've just finished building 500 Burger Kings. Every single restaurant is beautiful, digital-led. They're just about to hit $2 billion in sales, and they're chasing McDonald's in market share. You go over to Spain, Burger King has bigger market share than McDonald's. So when you take a global view of the brands, it's actually pretty amazing to see how you can grow national love for a brand starting in your home market, like where Burger King came from or Tims came from, but to be able to then translate that to be the number one burger brand in all of Spain, they've been there since 1974, it's pretty cool.

And you mentioned digital. I'll come back to you because I remember we were talking to Duncan on this stage four years ago, and he talked about the startup mentality at the company, just in terms of the organizational structure and attracting young talent. But you have increasingly worked technology into the business. You said long-term is the focus, and I think sometimes putting that technology spend behind that sort of speaks to that. Even when we spoke to the RBI CEO on Bloomberg last week, he talked about his vision for more digital. So this touches you guys in a lot of different ways, but it hits the consumer in a lot of ways, whether it's faster service, faster drive-thru, the opportunity to have more kiosks, or through loyalty. For those who are curious about how technology is playing a role in the Tims business, what is the goal there and where do you see that going?

I'm just going to pick up my phone because I'm going to be trying to monitor some of your questions that are coming in and try to work them into the conversation. We're fast approaching the 60th anniversary for Tims, which is pretty incredible. So we've talked a little bit about getting things right at home, we've talked about some of those recipes for success. Duncan, you talked a little bit about the global growth strategy, but is there a way to capitalize on that 60-year anniversary at a time when we're talking about more and more Tim stores making their way into foreign markets going forward?

Yeah, look, the Tims brand is so inextricably Canadian. And there's a lot of markets globally that are not necessarily coffee-first markets. I think what we've demonstrated in China is the brand still works. We very much compete head-to-head with the other big coffee player in China, and in many cases our product is positioned almost at parity with the competitor and bought as such. So there's a lot of opportunity there for sure. Just to finish the technology piece: it's pretty wild when you have the ability to look around the world at what all your different jurisdictions are doing. As you're testing with technology, we now have dozens of countries. If you can imagine this: walking into Tim Hortons or a Burger King or a Popeyes, that front counter you're used to going up and ordering at, you don't order there. The menu boards you're used to looking up at, there are no menu boards. You walk into the restaurant instead, and there are like a dozen kiosks. You simply walk up to the kiosk; it is a choose-your-own-adventure on the menu. It is your job then to make sure there's a very easy consumer flow, but you pick your food, you can edit your food however you want. It largely eliminates misunderstandings between 'hold the mayo, no pickles.' You literally do it yourself. If you're taking out, it gives you your order number, gives you a QR code, you scan it on your phone, and then the folks in the kitchen are simply expediting and giving you food. They're not taking payment, they're not taking orders. If you're eating in, and in many countries in Europe, also in Australia and elsewhere, there's a huge eat-in audience. You've got these plastic tent cards that sit by the kiosk. If you say 'I'm eating in,' you grab whatever the top 10 card is, whatever number is on it, say 97, and it says what table you are: 097. Then you just go sit down and you put your number on the table. There's a geolocator in it, so for the team members they know what quadrant of the restaurant you're in. Then you just sit and chat, and someone brings you your food. We're all trained in North America you got to order everything at once. In Paris now, they have what's called these King's Tables of Burger King. It's a QR code on the table, and when you're done eating your food, you scan the QR code and that's when you order your coffee and your ice cream. Because why would you let your coffee go cold and your ice cream melt while you're eating your food? We've trained you in North America to do that, but in Europe it gives you the opportunity to add on to it. On average, we have about 40% of people that are at those tables doing the second order at the table. On average, that's a ticket of about €4.40. So it is a very different digital experience in other countries. Even when you think of the drive-thru, to Axel's point, the future of being able to order ahead, pull through the drive-thru. When you're pulling up to order, should you be doing that at a big menu board still, talking into a box that was invented 60 years ago at In-N-Out? Or do you pull up with your phone, scan a QR code, and choose your own adventure for how you order? There are a lot of opportunities and questions about how we're succeeding internationally, when we look at the U.S. market and the Canadian market, some big opportunities to evolve and give efficiencies to the team members who are there as well.

Absolutely. We got a lot of great questions already, so I'm just going to start launching them into this conversation too. Since we're talking about the tech too, there was a question about the return on investment for Tims Rewards. I wonder if there's anything you can share on how internally you see it, how you're measuring the success.

There's another question, Duncan, for you perhaps about how you pick locations for, let's say, Tims in the U.S. I think we've been sort of from Canada watching the Tims strategy stateside for many years, and it was more just about what represents perhaps a prime location versus some of the other players out there. Any insight you can provide on that?

So Axel's directly accountable for that. I'm going to let Axel go first.

I think you covered it well.

There's actually a question as well about the growth for grocery retail. Maybe, Axel, do you want to start on that one? I guess in terms of where we see the Tims brand, the opportunity there.

Haven't had a chance yet to just talk about the state of the economy, but I think a lot of people are wondering about that too. Even anytime the company reports results, and Restaurant Brands was no exception, there were a lot of questions around the health of the consumer. Even with a steady business for Tims here at home, whether it's people deciding whether they want to buy your products in a grocery store or if they're going to drive to one of your locations, any thoughts on how the economic outlook impacts the business, how the inflationary realities have impacted the business?

It's a good segue to one area that has been of great importance to you: having people come for lunch or later in the day. That seems to be something Wall Street is very curious about, that strategy and the rollout of that strategy. So for frequency of visits or getting the word out on making Tims a place that people might go afternoon and into the evening, how's that going?

The reason I asked the first question just about the economy was because we did have an audience question, Duncan, maybe more for you, which I think is sort of how RBI itself is thinking about the outlook. The inflationary environment, does it influence things like acquisitions? I mean, you talked about your main four brands, and you're constantly fielding questions around other acquisitions. But how does the overall economic backdrop impact how you think strategically globally right now?

It's a great question. We generally have very recession-resilient businesses, being in the QSR sector, being in the space we're in. Our menus and our price points around the world are designed so that we do offer full-price premium items, and we have everyday value items, and like everyone we have discount items. As wallets get tighter for our consumer, very often someone will decide instead of taking their family to a higher-end sit-down experience, they can get a great quality meal through our drive-thru or sitting in one of our restaurants. So we're always super relevant from an everyday value perspective, which Axel talked about as extremely important. In that respect, I think we're always open to what is the next big category that we could grow in. With that said, we've been extremely choosy over the years. It was an acquisition of Burger King in 2010, Tims in 2014, Popeyes in 2017, Firehouse Subs in 2021. There's usually a number of years in between these things. Right now, we're super focused on getting all those basics right in the four businesses that we talked about, which are in some cases in expansion mode, rapid expansion mode. Back to new restaurant every seven hours currently, and a commitment to go even faster than that. So we think we have a lot of room to grow significantly what we have. I would say not actively looking for the moment.

Okay. This is just a chairman who has a pizza background, people always ask about that, but that hasn't come up. There was a question just about franchisees. When we started the conversation, you talked about communication. For the broader media or some of the headlines that we've seen over the last 5 to 10 years, from time to time you would see stories around tensions with franchisees. It seems like there's been a lot of work done, you already talked about that, but we still do sometimes see headlines around that issue. I would imagine that's just the reality sometimes of working with a lot of franchisees within the larger company, but also within Tims. So maybe a more direct question, Axel: how would you characterize the relationships overall with franchisees right now?

And John, if I just hijack this point for a second, because the underlying mentality to everything Axel just described is core to the DNA of both Tim Hortons and RBI, which is ownership. When you think of this pretty cool company, this global multinational operating in 100 countries around the world, with one of your biggest businesses here in Canada, headquartered here in Canada just a few blocks away from here, you look at who we hire in the company. Now it's an interesting mix of people that we get straight out of university and then grow up in the company, and then bring in industry veterans. We now have that really good mix. The one thing that is required to succeed in the company is a true mindset of ownership. You are not an employee fixing a problem; you're an owner in the company. Core to that, from what I've seen in my entire career, is one of the most unique compensation philosophies. At the director level in our company, when you're invited to start participating in a stock ownership plan, it's the kind of plan where you know when you're making in the mid-hundreds as an employee, in many companies you would not be invited to participate in ownership in the company until you're at SVP or higher. Here, starting at director level, you're invited to invest half of your take-home bonus into buying company shares. In return, the company grants you three to four times your investment in additional company shares. If you're then part of the group that doubles the share price over five years, for a relatively small investment you've got huge ownership in the company. You do that year after year after year, and at a very young age you develop a pretty substantive personal wealth and ownership in the company. So when it comes back to the things that Axel is talking about, it's not 'This is a pain in the ass, this is an issue, it's 5:00, I'm off the clock.' You truly believe you have ownership in this company and you have ownership over the solutions, and you're going to be here for the long term, so you want to make the right long-term decision and not take any shortcuts.

I mean, we're rapidly running out of time, but just as a quick follow-up: we've got record population in the country right now, obviously. There are many new Canadians arriving here each day. There are still some of these issues around affordability that are a stress to a lot of people. They come here and they see that firsthand. And then there's this bigger issue around productivity: how can we be a more productive nation too? Do you think that your company can be at the center of that story, giving people an opportunity to come here and have that kind of success?

I would say yes on two levels. The restaurant retail marketplace for employees is extremely competitive. Folks come and they have the opportunity to work at a Tim Hortons, they can work at another restaurant brand, they can work at Canadian Tire, they can work at an Amazon warehouse. If you look at the restaurant industry and the million-plus people that work in it, you look at the retail industry and everyone that works in it, there's such competition for labor right now that a high tide is raising all boats. Most owners, most retailers, most restaurants are paying well above minimum wage. For highly skilled workers, immigrants coming to the country, there's so much that we're doing in technology and in other areas of the economy that there's just a huge opportunity to participate in this great Canadian growth story.

I think we're almost out of time, but I just have to throw in one with Canada because there was a really good question that came in. We ask a lot of people in construction what's going on with higher interest rates right now, and something that I've heard frequently is that we kind of hit the brakes because the math is not working to get some of those new developments going right now. So at a time when there is a concern about supply, it sounds like one question was specifically about construction-related costs and the challenges of this current environment and what that perhaps means as well. Can you field a real estate question as we wrap things up here, and what people should be thinking about and what your message is?

Okay, a lot of great stuff. That 40 minutes flew by. I want to thank everybody for all the great questions. I've never been able to have so many questions from the audience within a Q&A. I think that's because everyone's very engaged and very interested. Thank you both, Duncan and Axel, and thank you everyone for your time today. Really appreciate it.

Thank you very much, John Erman, for leading this discussion. Axel Schwan and Duncan Fulton, for sharing your insights with us today. As a club of record, all Empire Club of Canada events are available to watch and listen to on demand on our website. The recording of this event will be available shortly, and everyone registered will receive an email with the link on Wednesday, November 8th. Join us virtually in honoring Indigenous Veterans as we pay tribute to their contributions in Canada's military history. This event will feature two distinguished speakers who will shed light on the remarkable journeys of Indigenous veterans on Thursday, November 23rd. Join us in person to celebrate the Empire Club's 120th anniversary. The event is a tribute to the club's history, which began in 1903. The club's commitment to recording and sharing speeches has been an invaluable contribution to public education. You'll hear some of the magical moments and the thousands of speeches delivered at the club over the past 12 decades, and the iconic stories behind these moments. On Thursday, November 30th, join us in person to hear from the federal Labour Minister, the Honourable Seamus O'Regan Jr., for an economic update on the state of labour relations in Canada and how business, labour, and government can work together to address structural changes in the labour market and grow the economy amidst inflation, energy transition, automation, and other challenges. Thank you for joining us today. We invite you to stay and connect with one another for continued networking. Have a great afternoon. This meeting is now adjourned.