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    Tim Horton's Big Move

    The Canadian coffee chain may be a big name in Canada, but will it survive the U.S. market?

    OTTAWA, Canada --Tim Hortons may be a fast-food institution in Canada, but the brains behind the brand have realized the company's history north of the border has no impact on its ability to expand to the south, reported BusinessWeek Online.

    Named after its founder, Tim Horton, a legendary hockey player for the Toronto Maple Leafs, there is little question that, with more than 2,500 coffee shops across Canada, Tim Hortons has become part of the country's retail and social fabric during its 41 years of operation. The vast majority of its growth has taken place after Horton himself was killed in a car accident in 1974.

    Cathy Whelan Molloy, vice president of marketing and merchandising at the TDL Group Corp., which operates Tim Hortons for its parent company, Ohio-based Wendy's International Inc., told BusinessWeek Online that while expansion in Canada is largely a factor of setting up stores in relatively underserviced markets, growth in the United States isn't nearly as easy and takes considerably longer.

    So, Tim Hortons set out to differentiate itself in the United States from its competitors, which include chains such as Dunkin' Donuts and McDonald's, and convenience stores. It placed an emphasis on a commitment to providing the freshest products, reported BusinessWeek Online. The chain has three main menu offerings -- beverages, baked goods and lunch -- with coffee, which is always less than 20 minutes old, as its core item.

    "You have to be true to your brand. Who Tim Hortons innately is and what it stands for is its 'always fresh' proposition. Everything else stems from there," TDL Group's Whelan Molloy told BusinessWeek Online, noting the company's signs were changed from Tim Hortons Donuts to Tim Hortons Always Fresh in 1990.

    In order to make an impact in the United States, she said that the company had to launch an introductory advertising campaign about the brand and what it stood for.

    "In Canada, there's an established out-of-home coffee market. So not only do we have an awareness challenge, we have a category that wasn't developed," she said in the BusinessWeek Online report, noting that as awareness of Tim Hortons grows, more and more people are making out-of-home coffee a part of their daily lives.

    She notes there are also economies of scale in branding. For example, Tim Hortons does not want to enter any U.S. markets with a single store, but rather blanket the area.

    "We know we have to enter the market in a big way, we can't just open up one store. If we wait for one store to build, we can't support it with advertising. We need a strong enough store base to support it with marketing," she said in BusinessWeek Online.

    Thus far, she says the strategy appears to be working. Today, 265 of its locations are in 10 U.S. states -- Connecticut, New York, Ohio, Maine, Pennsylvania, Massachusetts, Rhode Island, Michigan, Kentucky and West Virginia -- and it's currently focusing on building its brand out along the Great Lakes states, an area encompassing about 90 million people, or almost three times the population of Canada. The plan is to have 500 Tim Hortons locations in the United States by sometime in 2007.

    "People are very accepting of us. They love the concept, they say they don't have anything like it in their market. They see us as a step above fast-food because we're fresh and not fried. We're seen as good food served fast but we're not classified along with hamburger places. They see Tim's as more of a gathering place," Whelan Molloy told BusinessWeek Online.

    "It's an unpretentious brand. It's very similar to how you would think of a Canadian: friendly, caring, dependable. That's our brand character," she said.

    Whelan Molloy notes Tim Hortons has handled this kind of expansion challenge before. She says its approach in the United States isn't dissimilar from its 1990s strategy in building beyond its traditional Canadian strongholds in Ontario and Atlantic Canada.

    "Our stores in Western Canada had a tough go at first. We didn't have a lot of money for regional advertising. Now we can't build stores quick enough for our west coast friends," she said. "The advantage we have in Canada is they've heard of us, but we still had to build the category there and in [predominantly French-speaking] Quebec."

    All that said, Rob Warren, director of the Asper Centre for Entrepreneurship at the University of Manitoba in Winnipeg, doesn't have high hopes for Tim Hortons' expansion plans south of the border.

    "What American has ever heard of Tim Hortons? What's the tie to the local area? I just don't see it," he told BusinessWeek Online.

    He says the brand is essentially irrelevant if it's pedaling products that Americans don't want to buy, or at least not as much as Canadians do. For example, he said Tim Hortons' coffee is on the strong side, while most Americans drink their coffee black.

    "The double double is Tim Hortons' mainstay, but I'm not sure if Americans will go for it," he said.

    He says doughnut consumption is also significantly lower in the United States, as demonstrated by the fact that Tim Hortons has franchise penetration in Canada per thousand people that is ten times that of Dunkin' Donuts' in the United States.

    "Look at the last doughnut franchise that tried to expand across the United States. Krispy Kreme had to file for Chapter 11 bankruptcy," said Warren.

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