Tim Hortons is a Canada based brand with international presence in the restaurant industry. The menu offered by the company includes coffee and items related to the fast food range. The PESTLE analysis of Tim Hortons covers the external environment’s dynamics that have helped the company to establish global presence and shaped its business decisions.
About Tim Hortins
| Industry | Restaurants and coffee shops |
| Founded | 1964 |
| Headquarters | Toronto, Ontario, Canada |
| Founders | Tim Horton and Ron Joyce |
| CEO | Axel Schwan |
| Parent company | Restaurant Brands International |
| Number of locations (2021) | Over 4,900 |
| Revenue (2020) | $3.4 billion CAD |
| Net income (2020) | $529.1 million CAD |
| Website | https://www.timhortons.com/ |
Political Factors
The political factors play a major role in the global expansion decisions of restaurant companies such as Tim Hortons. Unstable political environment that threatens the stability of economic activity of a country is seen as an unfavorable factor. The management scans the external environment and opts for regions that are likely to provide positive growth opportunities.
The management has established its franchises in regions that provide political stability to lower the risk of political turmoil. Current plans of expansion include opening up of the franchises in Singapore, Malaysia and Indonesia, which are deemed as having politically favorable climate for businesses (Tsuge, 2023).
The trading environment is also a factor that is effected by the political dynamics prevailing in a country. Trading barriers and unfavorable trading policies make it difficult for the company to procure raw material from the regions that are impacted by the restrictions. The supply chain decisions need to be made considering the trading environment and regulations.
The domain of tax is also related to the external environment of Tim Hortons as the management has to follow government directions pertaining to the taxation. According to the government regulations, the harmonized sales tax is applicable on the company products, effecting the prices offered to the consumers.
Economic Factors
The strong economic position of Canada has placed it among the top 10 economies in the world, due to the high GDP. At present, the GDP is $1.894 trillion, which indicates the growth prospects for the company. The pandemic has changed the economic dynamics of the country as businesses struggled to maintain profitability during the lockdown and social distancing rules.
Tim Hortons has faced significant financial loss due to the pandemic as there was a more than 13% decrease in the restaurant sales in Canada. The stores located in Ontario were major contributor to low sales as 50% of the brand’s outlets are located in the region (Lucas, 2021). The lockdown has resulted in limited number of people visiting the stores.
The post pandemic economic condition is also effecting the level of profitability of the company. Inflation, and price changes of raw materials have affected the operational cost. There has also been an increase in the wages of the workers, therefore, the management at Tim Hortons have to deal with the financial pressure from this aspect as well.
Social Factors
One of the social factors for Tim Hortons include the population growth which would support the organization in expansion of its market. The decision to enter into the specific US locations was supported by the high population in those areas, which is likely to promote high sales.
The main segment of the population that is the focal point of the company is people who are employed and consume coffee, donuts and other menu items while going to their workplace. Urban development is also a factor that contributes to the growth of the company as a larger number of people shift to urban locations, increasing the consumers.
The brand image in the market and consumer loyalty is another social factor which is relevant for its operations in Canada. The company is considered to be the most trustworthy brand in the region, indicating a higher degree of favorable attitude of the customers towards the restaurant as compared to its competitors (Siekierska, 2022).
Technological Factors
Tim Hortons has introduced the scan to pay option in its restaurants to make the process more convenient for the consumers. The app supports the integration of this option and allows the employees to improve service speed, specifically in locations that have a high number of visitors. A Tim card is provided to the users to manage their online payments.
The organization has also utilized social media to increase brand awareness and making better connection with the consumers. For instance, the trend of #ChillwithTims is aiming to support the restaurant in marketing its products through the customers who are encouraged to share their pictures with their menu items (Tim Hortons, 2013).
Legal Factors
Tim Hortons needs to follow the regulations related to franchise licensing and develop contracts according to the legal requirements. Along with that, the employment laws being practiced in the country where the restaurants are operating are applicable on the organization. For instance, in Canada, fair labor legislation guides the business practices towards employee salary.
The government has revised the wages of the employees, rising the amount which has affected the cost of labor for the company. Another way that legal factors contribute in shaping business practices is through the laws related to disabilities and discrimination. The restaurants have to ensure accessibility for the people with disability and avoid discriminatory work practices (Restaurant Brands International Inc., 2022).
The food safety and quality laws are also important part of the legal environment for Tim Hortons. The food that is being served to the consumer needs to be in line with the quality standards and quality inspection constitutes an integral part of business operations. For instance, Egg Quality Assurance certificate illustrates the management’s commitment to quality.
Environmental Factors
The company has made efforts to reduce plastic waste originating from its sandwich packaging by shifting to a more eco-friendly material. Moreover, the use of plastic straws by the company would be gradually emitted and the consumers will be offered paper straws as a replacement (Tim Hortons, 2021).
Another initiative in terms of food packaging was the use of coffee cup comprising 30% of the recycled material, lowering the impact of wastage on the environment.
Along with that the introduction of recyclable napkins and cup liners has been done. The management has also taken initiatives related to reduction of emissions and decreasing the water usage.
Conclusion
The external environment of Tim Hortons is offering it a favorable business environment as the company has stable political and economic dynamics. Despite the challenges of inflation and higher price the company has achieved high sales in the post-pandemic period. The use of technology has further helped the restaurant in marketing and brand building.
References
- Lucas, A. (2021). Canadian Covid outbreaks challenge Tim Hortons’ turnaround and may hide its progress. CNBC. Retrieved from: https://www.cnbc.com/2021/04/30/canadian-covid-outbreaks-challenge-tim-hortons-turnaround.html
- Restaurant Brands International Inc. (2022). Form 10-K. Retrieved from: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001618756/40203844-f907-40e0-bc0a-c1699999916b.pdf
- Siekierska, A. (2022). Tim Hortons is the most trusted brand in Canada: survey. Yahoo Finance. Retrieved from: https://ca.finance.yahoo.com/news/tim-hortons-is-the-most-trusted-brand-in-canada-survey-125819188.html
- Tim Hortons (2013). Tim Hortons Kicks Off “Chill To Win”, A Cool New Iced Capp Contest That Celebrates Summer Chillin’. Retrieved from: https://prod.timhortons.com/ca/en/corporate/news-release.php?id=8152#!
- Tim Hortons (2021). 1 billion single-use plastics to be eliminated. $275 million raised. Your favourite foods without artificial colours, flavours or preservatives. Tim Hortons Newsroom. Retrieved from: http://news.timhortons.ca/1-billion-single-use-plastics-to-be-eliminated-275-million-raised-your-favourite-foods-without-artificial-colours-flavours-or-preservatives/#:~:text=The%20transition%20to%20paper%20straws,by%20the%20end%20of%20May.
- Tsuge, M. (2023). Tim Hortons coffee chain expands to Singapore, Malaysia in Marubeni pact. Asia Nikkei. Retrieved from: https://asia.nikkei.com/Business/Food-Beverage/Tim-Hortons-coffee-chain-expands-to-Singapore-Malaysia-in-Marubeni-pact