Tim Hortons to open hundreds of new cafes

Tim Hortons Inc unveiled a fresh strategy on Friday to take on Starbucks and Dunkin Donuts in the U.S. market, saying it would open hundreds of new American cafes that break the mold of Tim's iconic Canadian coffee shops.

As part of a plan to open 900 stores in North America over the next three years, the company said it will build 300 more outlets south of the border, increasing its total there by more than 50 percent. Its shares rose 2.7 percent on the news.

Rather than sticking with a format that has become a part of Canadian culture, Tim's said it would open what it described as "redesigned upscale cafe/bake shops" that feature a menu that differs from the Canadian fare, including pastries baked on premises.

The Oakville, Ontario-based company also plans to open 600 more outlets in Canada, bringing its total to nearly 4,000. It already dominates its home market, and analysts say it is quickly running out of room to expand there.

At the same time, critics say Tim's growth strategy has been haphazard, especially in the United States, calling on the company to spell out the number of outlets it wants to open.

In a presentation to analysts on Friday, the company said it would locate the 300 new cafes in parts of the United States in which it already had a presence, mostly in New York, Ohio and Michigan, states on the border with Canada.

Brian Yarbrough, an analyst at Edward Jones in St. Louis, Missouri, said the U.S. strategy will work only if the company targets the right areas.

"If you just start throwing up 100 stores in the U.S., that's the wrong way to do it," Yarborough, who has a "hold" rating on the stock, said. "They are making the right move by targeting current markets. You just can't continue to throw more stores out there. It's like throwing bad money after bad money."

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by Scott Anderson on March 8, 2010