UPDATE AS OF AUGUST 26: DEAL IS WORTH $11 B US, BK HQ TO MOVE TO CANADA. It’s pretty much official – Ottawa just has to approve this.
Last night, I received an alert from both my Bloomberg and Wall Street Journal apps notifying me that Burger King was in talks to buy donut chain Tim Hortons. Should the purchase be successful, the new company’s headquarters will be located in Canada, not the United States, which would allow BK to pay lower taxes.
Parking lot at a Tim Hortons restaurant
This is NOT the first time Tim Hortons joined into the burger game, as for many years, the doughnut chain was owned by Wendy’s. It’s also a good way for Burger King to better-compete with McDonald’s, which has vastly improved its coffee and “bakery” offerings over the past few years by bringing in its (though a bit modified) McCafé model into North America. However, Tim Hortons/Burger King will have to greatly improve its espresso in order to compete directly (sorry, but Timmy’s so-called “lattés” are disgusting – I only get drip coffee there – when I buy coffee there. I usually go to smaller chains, indies or Starbucks).
A BK purchase can also be a good way for Tim Hortons to become more international. Currently, they only have locations in Canada and parts of the United States (there were also locations in Afghanistan when Canada had troops there). There are plenty of Canadians all over the world, in addition to people who have somehow been “touched” by Canada. I have, for example, many friends and relatives who are from Hong Kong. They came to Canada for an education and have since returned to work. During their time at school, they were exposed to so-called “Canadiana,” and yes, this can include an addiction to Tim Hortons. There are already a couple of New York Fries locations that side of the Pacific, offering locals and expats poutine, after all! And yes, I’ve spoken with many people there, and there are some things that they miss.
I wonder, though, if this is successful, Tim Hortons ads will lose its “patriotic” vibe. In Canada, at least, the commercials tend to fit the stereotype of snow, hockey and vibes of home (if it takes place abroad). The US-based ones are, on the other hand, rather boring, and indistinguishable from any other fast food ad. Not memorable at all.
So what do I think about this possibility? I’m actually not sure. It’s a good thing that they’re headquartering everything in Canada, but Tim Hortons has gone through the burger thing before with Wendy’s and it didn’t work out. And will the coffee improve to at least a McDonald’s level? What about unusual menu items such as a burger made with donut? And will Tim Hortons lose its “Canadian” identity at home? But at least (for the time being), my portfolio is happy. Tim Hortons stocks rose 18% in pre-market trading Monday morning. What are your thoughts? Do you own Tim Hortons and/or Burger King stock? Do you buy coffee at Tims?