Recipe for Success: How Tim Hortons and RBI are Running the Playbook for Growth

November 7, 2023

The Empire Club of Canada Presents

Recipe for Success: How Tim Hortons and RBI are Running the Playbook for Growth

Chairman: Sal Rabbani, President, Board of Directors, Empire Club of Canada

Moderator
Jon Erlichman, Senior Anchor, Bloomberg Markets & Correspondent/Anchor, CTV National News

Distinguished Guest Speakers
Duncan Fulton, Chief Corporate Officer, Restaurant Brands International
Axel Schwan, President, Tim Hortons Canada & U.S.

Head Table Guests
Racheal Awe, Chief of Staff & Vice President Canadian Tire Corporation
Amanda Bassin, Director, Empire Club of Canada Founder & President, Persuit Group Inc.
Stephen P. Doyle, Chairman Emeritus, Worldwide Properties Inc.
Iqbal Merchant, Retired Partner, KPMG, Tax Consultant, RBI
Gerard Power, Founder & CEO, Tre Amici Wines
Val Ramanand, Chief Executive Officer, TBM Service Group

Introduction
It is a great honour for me to be here at the Empire Club of Canada today, which is arguably the most famous and historically relevant speaker’s podium to have ever existed in Canada. It has offered its podium to such international luminaries as Winston Churchill, Ronald Reagan, Audrey Hepburn, the Dalai Lama, Indira Gandhi, and closer to home, from Pierre Trudeau to Justin Trudeau; literally generations of our great nation's leaders, alongside with those of the world's top international diplomats, heads of state, and business and thought leaders.

It is a real honour and distinct privilege to be invited to speak to the Empire Club of Canada, which has been welcoming international diplomats, leaders in business, and in science, and in politics. When they stand at that podium, they speak not only to the entire country, but they can speak to the entire world.

Welcome Address by Sal Rabbani, President, Board of Directors, Empire Club of Canada
Good afternoon, and welcome to the Empire Club of Canada. My name is Sal Rabbani, and it's an honour to stand before our community, both in person and virtually, as Chair of the Board of Directors of the Empire Club.

To formally begin this afternoon, I want to acknowledge that we're gathering on the Traditional and Treaty lands of the Mississaugas of the Credit, and the homelands of the Anishinaabeg, the Haudenosaunee, and the Wendat Peoples. We encourage everyone to learn more about the Traditional Territory on which you work and live.

This morning, as I was going about my day, as I've been doing for many years, I stopped for a cup of Tim Horton's. A staple of our mornings, and of so many great moments—we all have this soft spot for Tim Horton's, Tim's, and for all things that this iconic brand symbolizes for Canadians, and Canada, heritage, national identity, and a sense of community. Today, we will have the privilege of hearing about all of these things. But most importantly, mostly—it's something that I believe that we don't talk about enough: and that is, the incredible growth story behind Tim Horton's.

Tim's, and by extension, its parent company RBI, Restaurant Brands International's, choice to go for scale is something we don't often see in Canada. Tim's story could have easily been one in which they didn't create one of Canada's most important, beloved, and strongest-growing companies. It could have been the story of a very successful Hamilton Coffee House, or of an Ontario, or Atlantic Canada chain, for that matter. Yet complacency has never been part of this company's vocabulary, and ambition is well-ingrained into Tim Horton's DNA. They've been proving it for more than half a century. Successive choices and smart, strategic moves, brought Tim Horton's to become a Canadian icon, and a global champion that went way beyond the traditional US expansion, and that put Canada on the map of the quick-service restaurant space. We see the same determination for growth with Restaurant Brands International. I'm personally looking forward to seeing the growth strategy of the three other brands that Tim's operates—sorry, that RBI operates—Burger King, Popeye's, and Firehouse Subs.

There are so many lessons for the business community in these two business stories. Is there a recipe for growth? How does RBI manage and sustain growth across four brands, in super-aggressive, and different international markets? What can we do in Canada to replicate and multiply Tim's growth recipe, and create more global companies and champions? The answer is: we need more Tim's. Just think of how much potential we could unleash in Canada, if we had more companies with the same ambitions, and the same hunger for growth. Our hope is that today's conversation inspires others not to settle for good enough. Don't stop at Hamilton, Toronto, or Mississauga; don't settle for Ontario or Canada. Do as Tim's did. Go big, and you could be the next Canadian success story.

A bit of housekeeping. We accept questions from the audience for our speakers. You can undertake to scan that QR code found on your program booklet or through the Q&A under the video player, for those of you that are online. If you do require technical assistance and you're online, please start a conversation with our team using that chat button on the right-hand side of your screen.

The Empire Club of Canada is a not-for-profit organization, and we'd like to recognize our sponsors, who generously support the club, and make these events possible and complementary for our online viewers to attend. Thank you to our Supporting Sponsors, Dairy Farmers of Canada, Ernst & Young, Aspire Bakeries, and McCarthy Tétrault; thank you, also, to our Season Sponsors, Amazon Web Services, AWS, Bruce Power, and Hydro One.

I'd now like to invite our esteemed speakers to the stage. We're thrilled to have with us Axel Schwan, President of Tim Horton's in Canada and the US, and Duncan Fulton, Chief Corporate Officer at Restaurant Brands International, the parent company of Tim Horton's, Burger King, Popeye's, and Firehouse Subs. Our discussion will be expertly moderated by my friend Jon Erlichman, senior anchor at BNN, Bloomberg, and correspondent anchor for CTV National News. We look forward to their insights and strategies for further growth in the quick-service restaurants place. Please give a warm welcome to Axel Schwan, Duncan Fulton, and Jon Erlichman.

Jon Erlichman, Senior Anchor, Bloomberg Markets & Correspondent/Anchor, CTV National News
Thanks. Thank you to Sal. I wanted to be a senior banker, but my grades weren't good enough for that. Nice to see both of you. I feel peer pressure, now, to say that I get my morning coffee at Tim's—which I do sometimes, there is a Tim's literally right outside our studio. And I think, to Sal's point, the growth story is an exciting one. I get a, I get an opportunity every day to talk about businesses in Canada and abroad. And certainly, this is a business that has been doing exceptionally well, if you look at what's happening in the markets, and within this Restaurant Brands organization.

Duncan, we were on this stage here at Empire—by the way, it's wonderful to be back—four years ago, it was early in your journey. And Axel, it was around that time that you were entering into your role at Restaurant Brands, through Tim Horton's. Maybe we'll start, Axel, with you, on why it is that you think that things have been—I mean, it's a, it's a good thing for everything to be going well. But within the Restaurant Brands empire right now, Tim's seems to be firing on all cylinders. What's going on?

Axel Schwan, President, Tim Hortons Canada & U.S.
Jon, thank you. Thank you very much for this nice intro. And also, Sal, and the whole Empire Club. First of all, big thank you from all of us at RBI and Tim's to be here today with you, that you invited us to share a little bit of our stories. So, if I may say, thank you very much. [Applause] Okay, to your question, so, on Friday, we announced the earnings for RBI, and Tim's was able to report that we had 10 consecutive quarters of same-store sales growth. Which is—yeah, a nice result. But maybe, this might be interesting here for the group to, to learn a little bit about what actually got us to this point.

Jon Erlichman
Sure.

Axel Schwan
So, because exactly like you said, Jon, it started four, five years ago, roughly, when we listened very, very carefully—we do this every single day, actually—when we listened very carefully to our guests. And many of you here in the room will remember, four or five years ago, actually sales, traffic, things like restaurant profitability, and also our brand love scores, they were not going in the right direction. The media coverage in the country—well, the headlines that we were reading were not necessarily the ones that you would like to read about yourself, sometimes. And that was just facing the, the truth.

And so, first of all, we put together a really strong team—many of the teammates are here in the room, from TDL—so, we put a strong team together, and then got working on the feedback. So, I learned from my parents, feedback is a gift; you should always embrace feedback. And we got a lot of gifts four years ago—which was, which started with food quality. So, Canadians told us, "Look, your breakfast sandwiches, this, yeah, this frozen egg thing, that's good. It's not great; it's not a freshly cracked egg. The English muffin is good, but a little bit chewy, so, you need to work on that. The apple fritter, a bit more apple, would be actually a nice thing to have, in the apple fritter—[I can sense that you are in agreement with that, here]—and yeah, the Boston Cream, a little bit of Venetian cream, a little bit more of that inside, would also be a nice thing."

So, we then, straightforward, went ahead and built a plan, we call it the Back-to-Basics Plan, and fixed all these things. Because the good news was, back then—and I'm very, very happy to share this nice thing, and I think I think Sal, your introduction was spot on—Tim's is the most-loved restaurant brand here in Canada. It's actually the most Canadian brand of all brands in Canada. And so, we looked at our brand love scores, while they were not going in the right direction, marginally, it was still a very, very, very strong brand. And I remember the day when my team and I, when we looked at these scores, we said, "Well, we just learn it's purely on us. It's a hundred percent in our court"—I learned this expression from one of my teammates back then. Canadians are cheering for us. Canadians are cheering for Tim Horton's. They want this brand to succeed, and it's on us to deliver. So, we formed this plan, executed it, and that's really what it boils down to. Executing with excellence. Yeah.

Jon Erlichman
All right. The eggs, the apples; lots of work in between. And Duncan, I think, you know, since this is a global company in Restaurant Brands, and Tim's is a big part of that growth story. I think it's, if we're not there already, at some point soon, we're going to see more international stores than, than Canadian stores. How did that communication experience, getting things right at home, set you up for what people are probably curious about today, which is the road ahead, and that global story, as well.

Duncan Fulton, Chief Corporate Officer, Restaurant Brands International
Look, I think if you look at the state of Burger King, and Popeye's, and Firehouse Subs today, and you look at the plans that we've communicated for growth, they're all centred on the same principles that Axel just talked about. I mean, Tim's was almost the first in the family of companies to say, "We need to get the basics really, really right." And when you look at restaurants that have succeeded for decades—and there's a few good examples out there, restaurants that have created billions of dollars of value—the basics are incredible quality, you have to have the best food in your category, you have to have consistently awesome service, and you have to always be super convenient to your guests. And certainly, what Axel kind of led at Tim's were those basics. And looking now at the other brands, everyone is kind of following the same playbook for growth.

If you look at how RBI grows around the world, it's actually, like, a shockingly simple and awesome business model. We have these four brands that we believe have the best quality in their categories. We think Popeye's Chicken, hands down, best chicken is category; the Whopper, every survey we ever do says it's a better burger than our competitors; Firehouse Subs, lesser known in Canada, try it, best sub you've ever had; and of course, Tim's. So then, we go out and we find, in 100 countries around the world, franchisees, where we say, "Look, if you're willing to invest your money to build these restaurants, we're going to give you a concept that has incredibly high-quality food, with brands that are loved, a playbook on how to execute it. You've increasingly been hearing our Executive Chairman and our CEO talk about the importance of cash-on-cash returns for franchisees. So, if we can give you a model where you're getting a three or four, or at most a five-year payback on your investment, to open new doors, deliver this quality product, you're making a great return, and it's inspiring you to grow more. We, we're making, call it a plus-or-minus four percent, in a royalty on everything you sell."

So, we're a generally capital aid business when you look at it, with huge growth potential. And today, opening a new restaurant somewhere in the world every seven hours or so. And we just announced in earnings last week, we aspire to accelerate that going into next year, which would take us down into every four or five hours or so. So, it's an exciting growth model that we have.

Jon Erlichman
So, you talked about the, the numbers for individual store locations—and there are franchisees here, as well, it just made me think—there was a disclosure recently about how stores are performing. What was the transparency push there for a wider audience? Obviously, you're having, you know, private discussions with different franchisees, but what was the, what was the benefit of putting that out there?

Axel Schwan
Yeah, it's a really, really good question, and it was a very, very important decision in our system, in our company, to publish restaurant-level profitability. Because at the end of the day, we will only be successful if our franchisees are successful, and vice versa. This is a strong team effort. It only goes together. And when you have a long-term perspective, which we have, we want to be here forever with this beautiful brand—these beautiful brands, but I'm a little bit biased—so, so when you have a forever mindset, then you need to talk about all the important KPI's. Which is, same store sales, which is important for the franchisee and franchisor because it drives the bottom line. You have to speak about traffic, meaning more guests in every restaurant. And then there are other line items, as well, that we can influence, that will drive the bottom line of the restaurant.

So, just to give you one aspect, here. So, Matt Moore is in the room, here, as well. He's our Chief Operating Officer for Tim Horton's. What he has done with his field team, working hand-in-hand with our franchisees—for example, Caroline Barham is here, so, she's 27 years with Tim Horton's, and then we have Marwan here, 10 years in the Tim Horton's system—so, our field team working hand-in-hand with our franchisees on every single line item. That's what we sign up for because we need a healthy system. And that doesn't end with the top line, it starts with the top line.

Jon Erlichman
So, I just want to come back to sort of the brand that is Tim Horton's, as well. Which is a brand that leans into Brand Canada. I would say arguably for global companies with ties to Canada, we don't see that too often. I actually had a conversation with the CEO of Canada Goose, Dani Reiss, who also leans into Brand Canada, doesn't understand why more brands don't do it. Maybe, Duncan, you can walk us through what happens when you lean into that, since you guys have been fairly aggressive in expanding around the world. Some of the feedback so far, and where you think that will go in carrying that brand around the world?

Duncan Fulton
Yeah. Look, it's pretty, it's pretty phenomenal. When , when you look at the different brands we have, I mean, clearly, Tim's in Canada is by far the leading quick-service restaurant concept, most-loved brand. Our other brands, I mean Popeye's, now, just overtook KFC in the United States, Canada for number-two market share, and it's quickly becoming one of the most-loved brands. Burger King in some markets around the world—and look, Canada, I think we have some work to do with the Burger King brand.

Jon Erlichman
M'hm (affirmative).

Duncan Fulton
We were just in France two weeks ago. You know, there were no Burger Kings in France nine years ago; now they've just finished building 500 Burger Kings. Every single restaurant is beautiful, digital lead, they're just about to hit two billion dollars in sales, and they have—they're chasing McDonald's in market share. You go over to Spain, Burger King has bigger market share than McDonald's. So, when you take a global view kind of, of the brands, it's actually pretty amazing to see how you can grow national love for a brand, starting in your home market like where Burger King came from, or Tim's came from. But to be able to then translate that to, like, be the number-one Burger brand in all of Spain—they've been there since 1974—it's pretty cool.

Jon Erlichman
And you mentioned digital, so actually, maybe I'll come back to you—because I remember when we were talking to Duncan on this stage four years ago, when he talked about the startup mentality at the company, just in terms of the organizational structure and attracting young talent. But you have increasingly worked technology into the business. You said long-term is the focus, and I think sometimes sort of putting that technology spend behind that sort of speaks to that. And even when we spoke to the RBI CEO on Bloomberg last week, I mean he talked about his vision for more digital. So, this touches you guys in a lot of different ways. But it hits the consumer in a lot of ways, just whether it's, you know, faster service, faster drive-thru, whether it's, you know, the, the, the opportunity to have more kiosks, whether it's through loyalty. For those who are curious about how technology is playing a role in the Tim's business, what is sort of the goal, there, and where do you see that going?

Axel Schwan
I love that question. We love technology. I think everybody in the room, in some shape and form, probably loves technology. Why do we love it so much? Because when you use technology in the right way, it will improve the guest experience, and also the team member experience—and ideally, both at the same time. So, I give you, let's say good—let's call it a bad example from our journey. Let me give you a good example from our journey. Actually, all of them are good, because you also learn from your mistakes. So, in—what was it—2017-ish, we launched our app. So, our app, our first-Tim's app, really. And so, the feature, the key feature, was mobile order and pay. So, 70 percent of our business happens in the drive-thru. So, now you place your order on the phone, you go into the drive-thru. What's your benefit, first of all. It's not directly a big benefit, because you still stand in the same line—you already placed your order, you don't have to do it at the speaker box, but you're still in the same line. So, that's the first thing. Then you pull up to the, to the speaker box, the conversation changes. "Yes, hi. Here. I'm, I'm Axel. I'm order number X." "What?" So, because this is not yet necessarily a vocabulary that our teammates are used to in the drive-thru. So, I'm just trying to make you feel this, the benefit, that was not the speed of service benefit—blah, blah, blah, you get the point. So, we learned from that.

And then fast-forward, what do we have now? We have offers. First of all, we have really attractive offers that are tailored to the needs of our guests. So, you have offers that give you even more attractive price points for the products you love. That's one thing. And then there is one feature—and maybe some of you have tried it already—scan-and-pay. Scan-and-pay. It's magic. What's magic about it? So, when you have our app—so, 30 percent of our sales are done with, are digital sales—so, when you toggle on the scan-and-pay feature, what it does is two things at the same time. Number one is, you scan for loyalty points, for your points, and then you also pay at the same time. So, that means when you connect your Tim's card or when you connect your credit card, then you pay right away. What does this mean? It's faster in the drive-thru.

And our industry is called QSR. The Q has a meaning, it's quick. And that's what you, as our guests, expect from us. We have to be fast. And a feature like this, it sounds so simple—it's of course more difficult to develop it—but it is relevant for our guests, it's relevant for our team members, because it also reduces the time they have to work on the POS. And that's the type of things you can expect more often that we will have fun with, in the future, to use technology in a relevant way. Because you can also get carried away in technology, and just do technology for the sake of technology, which is not really getting you anywhere. So, really, starting with what are the pain points today for our guests and our team members, and then that's our job, solving these problems.

Jon Erlichman
I'm going to pick up my phone, because I'm going to be trying to monitor some of your questions that are coming in, and trying to work them into the conversation. It's, it, we're, we're fast approaching the 60th anniversary for Tim's, which is pretty incredible, as well. So, we've talked a little bit about getting things right at home. We've talked about some of those recipes for success. Duncan, you talked a little bit about the global growth strategy. But is there, is there a way to capitalize on that 60-year anniversary, at a time when we're talking about more and more of the Tim's stores making their way into foreign markets going forward?

Duncan Fulton
Yeah. Look, I mean, the Tim's, the Tim's brand is so inextricably Canadian. And there's a lot of markets globally that are not necessarily coffee-first markets. I think what we've demonstrated in China is the brand still works, and we very much compete head-to-head with the other big coffee player in China. And in many cases, our product is positioned almost at parity with the competitor and is bought as such. So, there's—and you often see, you know, globally, you know, Canada's Favorite Coffee, it's Canada's Favourite Shop. So, I think there's a lot of, there's a lot of opportunity there for sure.

Just to finish, maybe, the technology piece. It's, it's pretty wild when you have the ability to, like, look around the world and what all your different jurisdictions are doing and as you're testing with technology. We now have dozens of countries—if you can imagine this, walking into a Tim Horton's or a Burger King or Popeye's, that front counter you're used to going up and ordering at? You don't order there. And the menu boards you're used to looking up at? There's no menu boards. So, you walk into the restaurant; instead, there's like a dozen kiosks. And you simply walk up to the kiosk, it is a choose-your-own-adventure on the menu. It is your job, then, to make sure there's a very easy consumer flow. That you pick your food, you can edit your food however you want. It largely eliminates misunderstandings between, "hold the mayo, no pickles." You literally do it yourself.

If you're taking out, it then gives you your order number, gives you a QR code, you scan it on your phone. And then the folks that are in the kitchen are simply expediting and giving you food. They're not taking payment; they're not taking orders. If you're eating in—and in many countries in Europe, also in Australia, and elsewhere, there's a huge eat in audience—you've got these plastic tent cards that sit by the kiosk. And you say, I'm eating in, you grab whatever the top tent card is, whatever numbers on it is 097. And it says what table are you? 097. Then you just go sit down, and you put your number on the table. There's a geolocator in it, so for the team members, they know kind of what quadrant of the restaurant you're in. And then you just sit and chat, and someone brings you your food.

And then, we're all trained in North America, you've got to order everything at once. In Paris, now, that they have what's called these King's tables of Burger King, it's a QR code on the table. And when you're done eating your food, you scan the QR code, and that's when you order your coffee and your ice cream. Because why would you let your coffee go cold and your ice cream melt while you're eating your food? We've trained you in North America to do that. But in Europe, it gives you the opportunity to add on to it. And on average, we have about 40 percent of people that are at those tables doing the second order at the table. On average, that's a ticket of about 4.40 Euros. So, it is a very different digital experience in other countries.

And even when you think of the drive-thru, to Axel's point, you know, the future of being able to, now, as it's more adopted, order ahead, pull through the drive-thru. When you're pulling up to order, should you be doing that at a big menu board, still talking into a box that was invented 60 years ago at In-and-Out? Or do you pull up with your phone, scan a QR code, and choose-your-own-adventure for how you order? So, there's a lot of, there's a lot of opportunities and questions about how we're succeeding internationally, when we look at the US market and the Canadian market, some big opportunities to evolve.

Jon Erlichman
And giving efficiencies to the team members who are there, as well. So....

Duncan Fulton
Absolutely.

[QUESTION & ANSWER]

Jon Erlichman
We've got a lot of great questions already, so I'm just going to start launching them into this conversation, too. And since we're talking about the tech, too, there was a question about the return on investment for Tim's Rewards. So, I wonder if there's, you know, for the launch of the program, anything you can share on how, internally, you see it, you know, how you're measuring the success?

Axel Schwan
Absolutely. So, the beauty about Tim's Rewards is that it drives frequency for our restaurants, so guests coming more often, it brings in new guests, once you attracted them to download the, the app. And then the next thing is, usually people spend more when they use these offers and use the app. So, all of this put together delivers a nice return for our owners, for us. And there's also, you know, the element of, there's competitive, I call it competitive activity out there. There's other brands also trying to steal a share of our coffee market share. And it's important to compete with that in the right way, so that it's still economically very attractive.

Jon Erlichman
Okay. There's another question, Duncan, for you perhaps, about how you pick locations for, let's say, Tim's in the US. I think we've been sort of, from Canada, watching the Tim's strategy stateside for many years. And it was more just about what represents, perhaps, a prime location, versus some of the other players out there. Any insight you can provide on that?

Duncan Fulton
So, Axel's directly accountable for the US, so I'm going to let Axel...

Jon Erlichman
Oh. Okay. Okay...

Duncan Fulton
...so, I'm going to let Axel...

Jon Erlichman
...sorry about that, Axel.

Duncan Fulton
...answer that.

Axel Schwan
No, no, no, please. You go ahead, and then you go first, and then I go.

Duncan Fulton
It's interesting. It depends on your business model around the world.

Jon Erlichman
Okay.

Duncan Fulton
So, in some cases—I'll just speak generally—in some cases, if we own the property, then we have teams that are constantly looking ahead several years, seeing where developments are going to be, seeing where, you know, what's a cornfield now becomes a suburban development in four years from now, and doing deals with developers to make sure you've got great locations. In other countries around the world, you know, we have a master franchisee who runs 500 restaurants. And in that case, they have their own, they have their own development team. You have franchisees that bring forward, because they know their community extremely well, and they know that there's a great site that's going to be there. So, we actually have the full range of real estate development capabilities, all the way from saying yes to a good idea from a franchisee to being heavily involved in the site selection, to just simply letting, you know, master franchisees design, you know, design their own real estate development.

Axel Schwan
I think you covered it well.

Jon Erlichman
Okay. There's actually a question, as well, about the growth for grocery retail. Maybe Axel, do you want to start on that one, I guess, in terms of where we see the Tim's brand?

Axel Schwan
Yeah.

Jon Erlichman
The opportunity there?

Axel Schwan
Who in the room has Tim's coffee at home? Maybe? Awesome. We still have room to go, I guess. No, very good. So, actually, it's it's, it's a really good question. And it started around 10 years ago that we started selling coffee in supermarkets. Up to that point, our restaurant owners exclusively would sell coffee in the restaurants. And then we made a decision to also start selling bagged coffee, canned coffee, in supermarkets.

Fast-forward, we are now in all kinds of different coffee categories. So, you can have whole beans, you can have ground coffee, you can have all kinds of formats, Keurig cups, et cetera. So, we really cover all bases of coffee in supermarkets. Because what we see is the moment of consumption at home is very different to the moment of consumption on the road. So, you don't really decide, am I going to have my Tim's coffee now on the road or at home? You actually decide, am I going to drink coffee at home or on the road? And then you decide where you actually go. So, that means either we compete with all the assortments in the supermarket, and yeah, try to gain the largest market share here, as well, or we don't. It's, it's less about cannibalizing the restaurant business. And so, it's very incremental, that business, it grew, it grew substantially. And yeah. You also now have chili at home, you can purchase chili. So, we have Markus Sturm here, as well; he is leading that part of our business very successfully. So, it's a beautiful business that started small 10 years ago, which became an adult, if I may say. And yeah, we want to make it an even stronger adult in the decades to come.

Jon Erlichman
Haven't had a chance yet to just talk about the state of the economy, but I think a lot of people are wondering about that too. And even, you know, anytime the company reports results—and Restaurant Brands was no exception—there were a lot of questions around the health of the consumer. Even with a steady business for Tim's, let's say, here at home, whether it's people deciding whether they want to buy your products in a grocery store, or if they're going to drive to one of your locations or what have you right now, any thoughts on how the economic outlook impacts the business, how the inflationary realities have impacted the business?

Axel Schwan
It's a key question, Jon. It's really something that we take extremely seriously. And I don't want to go too much into the time tunnel, but you all know that one of the foundational success criteria for Tim's is really good value for money. Since 1964, Tim's always delivered a very good value for money equation, and that's what we embrace wholeheartedly. And so, in the, for us generally, if the economy is booming or if the economy is softening a little bit, as long as we do our work right, delivering good quality products for a very attractive price point, we tend to not be impacted by, let's say, these macro trends too much. It's really in our hands to offer great quality product at a fantastic price, and that's how we approach every day, really. It sounds very basic, but that's what we do. And we do a lot of testing. So, Hope Bagozzi, our CMO, she is also in the room, and Brett, he leads our pricing team. And they do a ton of research all the time to see how, yeah, what is the best price point. We don't, we don't want to take too much—and we really don't—because we want to keep traffic and frequency going, and offer great value for money.

Jon Erlichman
It's, it's a good segue to one area that has been of great importance to you, which is having people come for lunch or later in the day. That seems to be—Wall Street seems to be very curious about that strategy, and the rollout of that strategy. So, I guess for frequency of visits, or getting the word out on making Tim's a place that people might go afternoon and into the evening, how's that going?

Axel Schwan
Yeah, that's thanks for that question, as well. So, we have 70-plus percent market share in brewed coffee in Canada, and we have single digit market share in dinner, and a fairly, a way too small market share in lunch. And when we maybe get together here again in 10 years or so, those numbers should have changed big time, let me put it this way. So, this is really one of our big priorities, to be more relevant for Canadians during lunch and dinner. We just launched our loaded wraps and loaded bowls in, yeah, just in the last 24 months. They're off to a really good start. And there might be something else coming next year, as well.

Jon Erlichman
Does that one involve apples, or?

Axel Schwan
Yeah. You're give me ideas, here.

Jon Erlichman
Here everybody was very interested in apples. I'm just saying.

Axel Schwan
Yeah. I like that.

Jon Erlichman
Sorry.

Axel Schwan
No, Hope is here—can we take a note on apples, there? So, no, jokes aside. So, PM food, the whole PM day part, and cold beverages, and espresso-based beverages, they will play a key role in driving the business forward.

Jon Erlichman
Okay. The reason I asked the first question just about the economy was because we did have an audience question—Duncan, maybe more for you—which I think is sort of how RBI itself is thinking about the outlook, the inflationary environment, does it influence things like acquisitions. I mean you talked about your main four brands, and you're constantly fielding questions around other acquisitions, but how does the overall economic backdrop impact how you think sort of strategically globally, right now?

Duncan Fulton
Great question. So, we generally have—as I touch wood, as I say this—very recession-resilient businesses, being in the QSR sector, being in, being in the space we're in. Our menus and our price points around the world are designed so that we do offer full price premium items, and we have everyday value items, and then, like everyone, we have discount items. And as wallets get tighter for our consumer, you know, that very often someone will decide instead of taking their family to a higher-end sit-down experience that they can get a great quality meal through our drive-thru, or sitting in one of our restaurants. So, we're always super relevant from—and the everyday value Axel talked about, extremely important. So, in that respect, you know, I think we're always open to what is the next big category that we could grow in?

With that said, we've been extremely choosy over the years. I mean, there was an acquisition of Burger King in 2010, Tim's in 2014, Popeye's in 2017, Firehouse Subs in 2021. There's usually a number of years in between these things. And right now, we're super focused on getting all those basics right in the four businesses that we talked about. And....

Jon Erlichman
Which are which are in, in some cases, in expansion mode, as is.

Duncan Fulton
Rapid expansion mode.

Jon Erlichman
Yeah.

Duncan Fulton
I mean, back to new restaurant every seven hours, currently, and commitment to go even faster than that. So, we think we have a lot of room to grow significantly what we have. So, I would say not actively looking, for the moment.

Jon Erlichman
Okay. This is a chairman who has a pizza background, and people always ask about that.

Duncan Fulton
That has come up from time to time.

Jon Erlichman
Time there was a question just about franchisees. You guys, when we started the conversation, you talked about communication. And I think for the—whether it's the broader media, or some of the headlines that we've seen over, well, over the last five to 10 years, from time-to-time you would see stories around tensions with franchisees. And it seems like there's been a lot of work done; you already talked about that. But we still do sometimes see headlines around that issue. And I would imagine that's just the reality sometimes of working with a lot of franchisees within the larger company, but also within Tim's. So, maybe a more direct question, Axel. How would you characterize the relationships overall with franchisees, right now?

Axel Schwan
Very good—and we have two here, so, I'm not trying to be nice—but I think, genuinely, I can say that the relationship is very good. And it took a couple of years. Because like in any relationship, we really started this journey four or five years ago with a, with a new team. And just when you, when you look at the world through the eyes of a franchisee four or five years ago—just, let's all put on these glasses for a moment—results going not in the right direction. The team? I don't really know this team. And so, it's difficult to trust, right? It's by definition. You don't know the people, really, and the plan is not driving the results that you would like to see. And then fast-forward, we went ahead, we rolled up the sleeves, worked extremely hard together with our owners, and listened very carefully. And something else I learned—and many of you probably, too—we have two ears and one mouth. We listened a lot to our owners, to our guests. We put plans in place that ultimately drove results. And now, building trust takes time. Delivering consistent results builds trust. And that's what we were able to do.

And something maybe to give you a little bit of texture. What we also started doing—because of course we have conventions with our owners where we get together once a year; big convention, thousands of people in the room. We do that, we do regional meetings where you have, where we travel around the country and have hundreds of people in the room. These are all important touch points. But what really is an important touch point is spending time with our owners in the restaurants, and having dinners. So, and that's a new format, that Matt Moore, Duncan, and the team, that we introduced—what is it now, 18 months ago, roughly? So, we have we have 1500 franchisees. And so, we have dinner, now; groups of eight. And we met 50 percent of our system, so far.

So, these dinners take four hours. Of course you have a meal, but you talk about the business. And the beauty about eight people, plus two or three from the TDL side, is you have one conversation. You have one conversation. It's not two people here, two people there. And then usually, the first 20 minutes, "Can I really say what I want?" So, yes, please, share everything that's on your mind, and, from let's say very overarching topics, the macro topics, to my Panini press is not working so well, the service is not great. And we take so much input on board, and then fix stuff. And that drives the business forward.

The principles in our industry are very simple. If we were all in a room and my team and I would walk you one day through the general principles of our industry, you would all get it. And it's pretty straightforward. You need to have good quality product, good value for money, you need to execute well every single day with a smile, hot and fresh food. So, the principles are very simple. To do this every single day with excellence, that's where the rubber hits the road. And we had to improve our processes, we had to improve our tools, we had to improve our routines with franchisees, and that's really what we worked on now for years. And I'm actually, yeah, proud of what we were able to accomplish all together as a Tim's family, because that's really what we are. And yeah, the results are coming in.

Jon Erlichman
Duncan, go ahead.

Duncan Fulton
And Jon, if I just hijack this point for a second, because it's, the underlying mentality to everything Axel just described is core to the DNA of both Tim Horton's and RBI, which is ownership. And when you think of this pretty cool company, this global multinational, operating in 100 countries around the world, with one of your biggest businesses here in Canada, headquartered here in Canada, just a few blocks away from here. You look at who we hire in the company, and now it's like an interesting mix of people that we get straight out of university, and then grow up in the company, and then bring in industry veterans. And we now have that really good mix.

The one thing that is, like, required to succeed in the company is a true mindset of ownership. Like, you are not an employee fixing a problem; you're an owner in the company. And the core to that is, from what I've seen in my entire career, one of the most unique compensation philosophies, is at the director level in our company, is when you're invited to start participating in a stock ownership plan. And it's the kind of plan where, you know, when you're making in the mid-one hundreds as an employee, in many companies, you would not be invited to participate in ownership in the company until you're at SVP or higher. Here, starting at director level, you're invited to invest half of your take-home bonus into buying company shares. In return, the company grants you three-to-four times your investment in additional company shares, that, if you're then part of the group, doubles the share price over five years. For a relatively small investment, you've got huge ownership in the company. And you do that year after year after year after year, and at a very young age, you develop a pretty substantive personal wealth and ownership in the company.

So, when it comes back to the things that Axel's talking about, it's not "This is a pain in the ass; this is an issue, it's five o'clock, I'm off the clock." You truly believe you've ownership in this company, and you have ownership over the solutions, and you're going to be here for the long term. So, you want to make the right long-term decision, and not do any shortcuts.

Jon Erlichman
I mean, we're rapidly running out of time, but I, just as a quick follow, we've got record population in the country right now. Obviously, there are many new Canadians arriving here each day. There are still some of these issues around affordability that are, you know, a stress to a lot of people, they come here and they, and they see that firsthand. And then there's this bigger issue around productivity. How can we be a more productive nation, too—do you think that your company can be at the centre of that story, giving people an opportunity to come here and have that kind of success?

Duncan Fulton
I would say yes, on two levels. The restaurant retail marketplace for employees is extremely competitive. Folks come and they have the opportunity to work at a Tim Horton's, they can work at another restaurant brand, they can work at Canadian Tire, they can work in an Amazon warehouse. There's—if you look at the restaurant industry, and the million-plus people that work in it, and you look at the retail industry and everyone that works in it, there's such competition for labour right now that a high tide is raising all boats. And most owners, most retailers, most restaurants, are paying well above minimum wage. And for highly skilled workers, immigrants coming to the country, there's so much that we're doing in technology, in other areas of the economy, that there's just a huge opportunity to participate in this great Canadian growth story.

Jon Erlichman
I think we're almost out of time, but it just, and just with Canada—because there was a really good question that came in. And we ask a lot of people in construction what's going on with higher interest rates right now. And something that I've heard frequently is, well, it's, we kind of hit the brakes, because the math is not working to get some of those new developments going right now. So, at a time when there is a concern about supply, it sounds like one question was specifically about construction-related costs, and the challenges of this current environment, and what that perhaps means, as well. Can you, can you field a real estate question as we wrap things up, here, and what people should be thinking about, what your message is?

Axel Schwan
Yeah, of course. So, same here. So, what is the biggest investment that our franchisees do, what we do as a, as a company? It's building restaurants and renovating restaurants. So, this is really where the majority of the investment goes. And so, this is why this is extremely critical to be mindful where do the dollars go, so, where do we invest.

And I learned something from Brian Noviski, our head of design—he's also here in the room—it's all about choices. It's all about choices. So, and I give you just a practical example, we pretty much still spend the same amount of money for renovating a restaurant that we spent prior to the pandemic. But we spend it very differently today. While we put most of our dollars in the front-of-the-house back in the days, now it goes in the front-of-the-house, it goes in the back of the house, it goes in the service area, and it goes into the drive-thru. What is the attractiveness here? So, a) the absolute amount of money that we spend is fairly similar, and b) it drives higher returns, because you actually drive efficiencies in the restaurant, so that our teammates in the restaurants don't, for example—just practically speaking, you might have seen this—don't bump into each other in the back-of-the-house, because we reorganized the equipment, the flow is much smoother. And so, two things happened over the last couple of years. The absolute amount of money is fairly the same, and there is a bigger return, which makes it quite attractive.

Jon Erlichman
Okay. A lot of great stuff. That 40 minutes flew by. I want to thank everybody for all the great questions—I've never been able to have so many questions from the audience within a Q&A. I think that's cause everyone's very engaged, and very interested. And thank you both, Duncan and Axel, and thank you everyone for your time today. Really appreciate it. Thank you very much. That's right. That's right. Right. Thank you very much.

Note of Appreciation and Concluding Remarks by Sal Rabbani
Thank you. Thank you very much, Jon Erlichman, for leading this discussion, Axel Schwan, and Duncan Fulton for sharing your insights with us today. As a club of record, all Empire Club of Canada events are available to watch and listen to on demand on our website. The recording of this event will be available shortly, and everyone registered will receive an e-mail with the link.

On Wednesday, November 8th, join us virtually in honouring Indigenous veterans, as we pay tribute to their contributions in Canada's military history. This event will feature two distinguished speakers, who will shed light on the remarkable journeys of Indigenous veterans.

On Thursday, November 23rd, join us in person to celebrate the Empire Club's 120th anniversary. The event is a tribute to the club's history, which began in 1903. The club's commitment to recording and sharing speeches has been an invaluable contribution to public education. You'll hear some of the magical moments in the thousands of speeches delivered at the club over the past 12 decades, and iconic stories behind these moments.

On Thursday, November 30th, join us in person to hear from the Federal Labour Minister, the Honourable Seamus O'Regan Jr. for an economic update on the state of labour relations in Canada, and how business, labour, and government can work together to address structural changes in the labour market, and grow the economy amidst inflation, energy transition, automation, and other challenges.

Thank you for joining us today. We invite you to stay and connect with one another for continued networking. Have a great afternoon. This meeting is now adjourned.