Published on 2 May 2022 Time 9 min read Last update by 21 Dec 2023

Tim Hortons Franchise Cost Detailed for 2023

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This article is based on the video featured above, originally recorded for Vetted Biz Youtube Channel.

Tim Hortons is a Canada-based company that sells coffee and other non-alcoholic beverages as well as baked goods, soups, and sandwiches. They were founded in 1984 in Ontario and have since grown, with 5,291 stores currently operating in the United States. Tim Hortons has recently pursued expansion into international markets, with 42 additional franchised locations in Latin America. With a large presence in North America, Tim Hortons is Canada’s largest quick-service restaurant chain.

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Is Tim Hortons Franchised?

Tim Hortons is a subsidiary of Restaurant Brands International (RBI), a Canadian Corporation. Notably, RBI also owns Burger King, Popeyes Louisiana Kitchen, and Firehouse of America.

Stepping into the beverage industry – and more specifically the quick service coffee industry – can be a daunting task, considering the significant start-up costs and the increasingly competitive nature of the industry. This article will break down the Financial Disclosure Document for Tim Hortons and provide all the information that prospective franchisees should know before making an investment decision.

Tim Hortons Restaurant Formats

Tim Hortons offers two types of franchises: the “Standard Shop” – a typical Tim Hortons shop  – and the “Non-Standard Shop”– generally a built-in kiosk or a full service cart. The Standard shop typically contains seating for customers, has a drive thru, and is between 1,000 and 2,300 square feet, although some Standard shops may be drive thru only and others may be located inside of malls and airports. The Non-Standard shop may either be a built-in kiosk, which varies by size, or a full service cart, which is generally smaller and has a limited menu.

How Is Tim Hortons Positioned in the Food and Beverage Industry?

The quick service coffee industry is well-established and highly competitive in America. Tim Hortons expects its franchises to compete with nationally established chain stores, such as Starbucks, Peet’s Coffee, and Dunkin Donuts, as well as local stores and independent restaurants.

How Much Does a Tim Hortons Franchise Cost?

The estimated cost of a Tim Hortons franchise depends on a variety of factors; namely, whether you choose to franchise a Standard shop or a Non-Standard shop and whether the Standard shop follows the new model or is a “within petro” location. To break it down,

  • A Standard shop under the new model costs $1,044,000 to $1,441,500.
  • A “within petro” Standard shop – a shop in partnership with a gas station –  costs $246,500 to $641,500.
  • A Non-Standard shop costs $94,000 to $270,000.

A breakdown of the costs is shown below. Note that an initial, nonrefundable franchise fee of $50,000 is due upon signing the Franchise Agreement for Standard Shops and a fee of $25,000 is due for Non-Standard shops.

Standard, New Model Shop

Type of Expenditures Estimated Range To Whom Payment Is to Be Made
Low High
Initial Franchise Fee $50,000 $50,000 Tim Hortons
Real Estate, Taxes, Personal Property Taxes, and CAM Charges $5,000 $70,000 Tim Hortons, or other lessor or sublessor
Equipment $337,000 $375,000 Tim Hortons and other supplies
Real Estate See Note 5 See Note 5 Lessor or sublessor or Propoerty Seller
Planning and Development and Desing Costs $20,000 $10,000 Government Agencies and approved service providers
Site Development Costs $100,000 $230,000 Contractors
Building Costs $476,000 $504,000 Contractors and Tim Hortons
Training $20,000 $27,000 Tim Hortons adn suppliers of transportation, food, and lodging
Start-up Supplies and Initial Inventory $7,000 $14,000 Suppliers
Professional and License Fees $1,500 $10,000 Attorneys, Accountants, Government Agencies
Insurance $2,500 $21,500 Tim Hortons, Insurers or Lessor/Sublessor
Security Deposits $0 $15,000 Utilities, Lessor
Additional Funds $25,000 $25,000 Various
Total $1,044,000 $1,441,500

Standard, Within Petro Shop

Type of Expenditures Estimated Range To Whom Payment Is to Be Made
Low High
Initial Franchise Fee $50,000 $50,000 Tim Hortons
Real Estate Taxes, Personal Property Taxes, and CAM Charges $1,000 $10,000 Tim Hortons, or other lessor o sublessor
Equipment $60,000 $216,000 Tim Hortons, and other suppliers
Real Estate See Note 5  See Note 5 Lessor or sublessor, or Property Seller
Planning and Development and Design Costs $15,000 $37,000 Approved service providers
Site Development Costs $0 $0 Contractors
Building Costs $75,000 $230,000 Contractos and Tim Horton
Training $20,000 $27,000 Tim Hortons and suppliers of transportation, food and lodging
Start-up Supplies and Initial Inventory $7,000 $14,000 Suppliers
Professional and License Fees $1,500 $10,000 Attorneys, Accountants, Government Agencies
Insurance $2,000 $7,500 Insurers or Lessor/Sublessor
Security Deposits $0 $15,000 Utilities, Lessor
Additional Funds $15,000 $25,000 Various
Total $246,500 $641,500

Note that a majority of the costs for each of the three types of shops come from the line items “Planning and Development Costs”, “Site Development Costs”, and “Building Costs”. The first two costs only apply to newly constructed Franchised Restaurants, so existing restaurants would not need these costs. Building Costs are estimates to construct a building’s structure and systems; for those that don’t need to be built from the ground up, these costs include refurbishment costs, such as the installation of a drive-thru.

Franchise Requirements

The Tim Hortons Franchise must be operated in compliance with the Franchise Agreement. Tim Hortons will provide a Confidential Operations Manual that will contain standards that must be followed. These standards include what proprietary items may be sold and restrictions on store build-out, computer software, and supplier and product approval.

Additionally, Tim Hortons expects new franchisees to participate in the Tim Hortons Training Program before opening their shop. This training program, based in Columbus, Ohio, provides the skills necessary to properly operate a Tim Hortons shop, and takes approximately 20 business days over a 1 to 6 week period. A full breakdown of the training program, broken down by hours of training, is shown below.

 

Classroom Training On the job Training (Full Program)
Subject Hours Subject Hours Location
Welcome to Tim Hortons (Orientation) 1.0 Welcome to Tim Hortons

(Orientation) Beverage Service

1.0

30.0

Columbus, Ohio
Hospitality and Brand Standards 3.5 Drive Thru (Ifapplicable) 36.0 Columbus, Ohio
Food Safety 2.5 Equipment Maintenance 4.0 Columbus, Ohio
Coffee Leadership and Other Beverages 4.5 Food Safety 8.0 Columbus, Ohio
Restaurant Management Routines 2.0 Food Preparation and Food Service 32.0 Columbus, Ohio
Restaurant Management Routines P.L.A.N 2.0 Digital and Loyalty 1.0 Columbus, Ohio
Restaurant Management Operations 43.0 Columbus, Ohio
REV 8.0 Columbus, Ohio
Clearview Overview and Introduction 8.0 Columbus, Ohio
Training at Tim’s Modules 8.0 Columbus, Ohio
TOTAL CLASSROOM TRAINING 15.5 TOTAL ON THE JOB TRAINING 179.0

Ongoing Fees

The main fees associated with owning a Tim Hortons franchise are as follows:

  • A 4.5 to 6% royalty fee on all gross sales, due weekly, and
  • A 4% advertising fee on all gross sales, due monthly.

While the royalty fee is in line with the food and beverage industry average of 5.3%, Tim Hortons 4% marketing fee is significantly higher than the industry average of 2.3%.

Additional minor fees, such as audit costs, refurbishment costs, and Smart Store charges, vary depending on location and circumstances.

Company Trends

Prospective franchisees should also consider how Tim Hortons as a company has fared in recent years. Although past performance is no indicator of future success, recent trends in company performance can be an indicator for the underlying strength and viability of Tim Hortons as a brand. As such, we will examine trends in gross sales and total number of stores for Tim Hortons over the past three years.

Gross Sales

Tim Hortons reported an average of a 9.4% same store growth between 2020 and 2021, which is a sign that the company is experiencing healthy, robust growth in existing markets. This growth, however, should be qualified, considering that consumer demand for restaurant dining – quick service restaurants included – was severely dampened in 2020 due to the coronavirus pandemic. As such, growth should be expected from restaurants now when compared to their performance during the pandemic-stricken year.

Total Standard Shops, Including New Model Shops
Period Shop SSS Growth (DAily Average) Total # of Shops #% of Shops Exceeding Average SSS Median Shop SSS Growth
2020/2021 9.4% 558 303/54% 10.9%


Listing

Total Number of Stores

Tim Hortons had a net growth of 4 stores across all its outlets in 2021, rising from 633 to 637 total stores. This bucked a recent trend seen in previous years where they experienced a net decline in the number of open stores. Whether this growth will persist or is simply a fluke is yet to be determined.

Outlet type Year Outlets at the Start of the Year Outlets at the End of the Year Net Change
Franchised 2019 727 656 -71
2020 656 633 -23
2021 633 637 +4
Company-Owned 2019 0 0 0
2020 0 0 0
2021 0 0 0
Total Outlets 2019 727 656 -71
2020 656 633 -23
2021 633 637 +4

How Much Do Tim Hortons Franchises Make?

The Gross Sales of Tim Hortons Standard shops for the year ending December 31, 2021 are shown below. The average Tim Hortons reported $87,858 in monthly Gross Sales; the median Tim Hortons, $90,431. Therefore, one can expect an average Tim Hortons to generate $1,054,296 in annual Gross Sales.

Average Median
Gross Sales $87,858 $90,431
COGS $23,530 $24,229
COGS % of Sales 27% 27%
Labor $22,916 $24,211
Labor % of Sales 26% 27%

How Much Do Tim Hortons Franchise Owners Make?

As shown above, the average Tim Hortons has $1,054,296 in Gross Sales in 2021.

We will take the midpoint investment of a Standard shop, which amounts to $1,242,750. Based on this midpoint investment,

  • A 10% profit margin would yield estimated annual profits of $105,430. This means it would take nearly 14 years to recoup your investment.
  • A 15% profit margin would yield estimated annual profits of $158,144. This means it would take nearly 11 years to recoup your investment.
  • A 20% profit margin would yield estimated annual profits of $210,860. This means it would take nearly 8 years to recoup your investment.

Note that these calculations account for the 2 years it takes, on average, for a franchise in the food and beverage industry to scale up to full production. Please also note that these calculations do not consider inflation or compounded interest rates over the timeframe.

However, many Tim Hortons and quick service restaurants franchises make their return on investment back much faster through a triple net lease (NNN). In this type of lease agreement, the franchisee leases the restaurant building from the property owner. The franchisee then pays the building’s property taxes, insurance, and maintenance costs in exchange for a lower rent. As seen below, Tim Hortons franchises may engage in NNN leases with property owners. The flexibility of NNN leases allows the tenant to have more freedom with their operating structure.

Source: Tim Hortons NNN 
Source: Collier International

Many factors affect the sales, costs, and expenses of your Franchise. However, there is no guarantee that these numbers will be reflective of the time it takes for your Franchise to recoup your initial investment.

Is the Tim Hortons Franchise Profit Worth the Cost?

While Tim Hortons is a growing company and has seen increasing gross sales, the 8-14 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait. Unless you are also developing and owning the real estate, you might want to also consider other food franchises available on Vetted Biz.

 

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