Cold weather and an outdated roll-up-the-rim-to-win promotion slowed sales at Canadian Tim Hortons locations in its most recent quarter, said the CEO of the coffee chain's parent company, prompting Restaurant Brands International Inc. to revamp the contest for next year.
Comparable store sales at Tim Hortons fell 0.6 per cent worldwide, and 0.4 per cent in Canada. The company only breaks out each chain's home market for comparable sales figures.
"I hate using weather as an excuse," said CEO Jose Cil, who has just served his first full quarter in the top post, during a conference call with investors Monday morning.
The company estimates severe winter weather during the quarter, which ended March 31, resulted in a drag of about one per cent on comparable sales.
The weather woes started in the back half of January and lasted until the end of February, said Alex Macedo, Tim Hortons president, in an interview following the conference call, and impacted performance across Canada.
A weak roll-up-the-rim campaign also contributed to the negative figure.
RBI started to see a decline in the program's effectiveness last year, said Cil, and decided to expand the number of giveaways for 2019's contest. However, the added investment did not drive the engagement the company expected and dragged down comparable sales about 0.5 per cent over the quarter.
"It's become clear to us that it needs a modern and fresh approach to engage our guests in a stronger way going forward," he said. A team is working to reboot the program for next year and that will include a seamless digital integration.
Comparable sales at the company's two other chains were positive. Burger King comparable sales increased 2.2 per cent. Popeyes comparable sales increased 0.6 per cent.
Cil stressed the company does not believe that the negative comparable sales figure for Tim Hortons accurately reflects the underlying strength of the Canadian business and said the company expects its April comparable sales to come in at about 1.5 per cent.
He lauded the benefits of the company's Winning Together plan for providing the building blocks for long-term growth. RBI launched the strategy in April 2018 amid negative attention as the parent company battled a group of dissident franchisees who vocally criticized management, including filing multiple lawsuits against the parent company.
Those legal battles wrapped Monday as an Ontario Superior Court of Justice judge approved a proposed settlement in two class-action lawsuits by Canadian Tim Hortons franchisees against RBI.
"... The settlement agreement is fair, reasonable, and in the best interests of the class," wrote the judge, according to court documents.
None of the roughly 1,500 Canadian Tim Hortons franchisees opted out of the proposed settlement, he noted -- though one franchisee, Eric Sanderson, objected outside of the formal opting out process by sending a letter to the court.
In the "thoughtful and well-articulated letter," Sanderson worries that the Great White North Franchisee Association, which formed to give concerned franchisees a voice, has not been officially recognized and the GWNFA's current board members, of which he is one, may never be replaced because no other franchisees will want to play an adversarial role, according to court documents.
While the judge found his objections raised legitimate concerns, they "are not of a type that undermine" the agreement.
Restaurant Brands International, which keeps its books in U.S. dollars, said its first-quarter profit fell compared with a year ago. It reported a profit attributable to common shareholders of US$135 million or 53 cents per diluted share compared with a profit of $148 million or 59 cents per diluted share a year ago.
On an adjusted basis, it earned $255 million or 55 cents per diluted share for the quarter, down from an adjusted profit of $314 million or 66 cents per share in the same quarter last year.
Analysts on average had expected a profit of 58 cents per share for the quarter, according to Thomson Reuters Eikon.
Revenue in the three-month period ended March 31 totalled nearly $1.27 billion, up from $1.25 billion a year ago.
