As Tim Hortons’ sales continue to lag through the coronavirus pandemic, the coffee and doughnut chain is modernizing its drive-thru with new digital menu boards.
Tim Hortons saw comparable sales in the three month period ending September 30 fall 12.5 per cent overall, a deeper dive from a decline of 1.4 per cent during the same time last year. In Canada, the chain’s sales fell 13.7 per cent as the coronavirus pandemic continues to disrupt morning routines, a key aspect of the company’s business.
The comparable sales decline at Tim Hortons is the largest among the three brands operated by parent company Restaurant Brands International (QSR.TO) and has contributed to the company’s weaker net income. Burger King saw sales fall 7 per cent, while Popeyes sales jumped 17.4 per cent.
“While we made considerable progress during the third quarter, our performance also reflected certain more challenging impacts of the pandemic on consumer behaviour,” RBI chief executive Jose Cil said on a conference call with analysts on Tuesday, pointing to changing customer routines and restrictions that have forced the company to close dining rooms in some regions, including parts of Ontario and Quebec.
“The resulting impact to consumption patterns has caused some variability in the pace of recovery across regions and day-parts.”
The drop in sales at both Tim Hortons and Burger King, as well as a decrease in supply chain sales, has contributed to RBI’s overall profit decline. The company, which reports results in U.S. dollars, said adjusted net income in the quarter amounted to $320 million, or 68 cents per share, down from $337 million, or 72 per cents per share, last year.
COVID-19’s disruption of morning and commuter routines has been the most significant contributor to the sales decline at Tim Hortons, RBI’s chief corporate officer Duncan Fulton said in an interview on Tuesday. While the breakfast segment has struggled, Tim Hortons has seen substantial growth in third-party delivery and drive-thru service.
That drive-thru experience is about to get a makeover. RBI announced Tuesday that it plans to modernize more than 10,000 of its restaurant drive-thrus, 2,700 of which are at Tim Hortons locations.
Currently, about 1,900 Tim Hortons drive-thrus feature paper menu boards printed in Toronto that employees need to swap out frequently, depending on the time of day and changes to the menu. The paper boards are being replaced by digital screens that feature “predictive selling” algorithms that can tailor menu offerings based on previous popular items at that location, weather patterns and time of day. RBI is also testing menu boards that have integrated the Tim’s loyalty program at 30 locations. One location is currently testing a prototype board that will allow guests to order and pay through a contactless payment method at the same screen.
Josh Kobza, RBI’s chief operating officer, said on Tuesday’s conference call with analysts that growth in the drive-thru business has put pressure on the company to ensure the service is simple and efficient.
“You’ve seen us focus a lot on the simplicity on operations and the simplicity of our offering and less innovation,” Kobza said.
“We’ve been looking at ways to make our kitchens more efficient and allow us to drive faster drive-thru throughput.”
Still, while Tim Hortons’ drive-thru business is growing, the chain has shut down some indoor dining rooms in regions of Ontario and Quebec due to government-imposed restrictions, further dragging down sales. Fulton said the company is urging governments to be targeted when it comes to imposing restrictions.
“We’ve been encouraging governments, along with many others in our industry, to be really specific on using data to decide which locations should be closed or open,” he said, adding that Tim Hortons has had 49 cases of COVID-19 at its 2,000 Ontario locations since March. Approximately 56,000 people are employed at those restaurants.
“We think it’s important that governments get into the data to find out what types of locations are at greater risk of spreading COVID-19, and then be more surgical in applying those government orders.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.