February 25, 2014 / 2:23 PM / 5 years ago

Tim Hortons to open 800 restaurants under new strategy

TORONTO (Reuters) - Tim Hortons Inc THI.TO, the Canadian coffee and doughnut chain, said on Tuesday it will open at least 800 restaurants over the next five years under a new strategic plan to extend its dominance in Canada and boost returns in the United States.

A row of Tim Hortons coffee cups are lined up for customers at Penn Station in New York, July 13, 2009. REUTERS/Brendan McDermid

Pressured by activist investors last year to deliver better returns, the company said its new strategy is expected to reduce capital intensity while improving returns to shareholders and on assets.

Tim Hortons, which boasts that it sells nearly eight of every 10 cups of coffee sold in Canada, said the move reflected changing consumer preferences for healthier food, a shift in demographics and new technology for marketing.

Facing mounting competition from rivals such as Starbucks Corp (SBUX.O) and McDonald’s Corp (MCD.N), Tim Hortons said it will open 500 new restaurants in Canada by 2018, including new formats in office, sporting venue and healthcare settings.

It also aims to improve service, attract customers beyond breakfast and snack times, and boost the average bill at its restaurants.

Tim Hortons, which last week issued its 2014 forecast, said that from 2015 to 2018 it is targeting earnings per share at a compounded annual growth rate of 11 percent to 13 percent. It will also target cumulative free cash of about C$2 billion ($1.81 billion).

The company, which has found it difficult to translate its Canadian success in the United States, said it will open about 300 restaurants in priority U.S. markets by the end of 2018.

That expansion will use a “capital light” model, in which franchisees deploy capital and local market knowledge, Tim Hortons said. The company has signed its first such development agreements, for close to 100 restaurants over the next five years in Missouri, Ohio, Indiana and North Dakota.

Tim Hortons said it would further expand in the Middle East, but did not say how many restaurants it would open there. It will also develop plans that will allow it to enter new international markets in 2015.

As of December 29, 2013, the company had 4,485 locations, with 3,588 in Canada, 859 in the United States and 38 in the Middle East.

Reporting by Susan Taylor; Editing by Jeffrey Benkoe and Paul Simao

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