3/17/2010
GROUP
SEVEN
TIM HORTONS FRANCHISE BUSINESS PLAN
MBA 841 | Iman El Meniawi, Joey Tang, Sugantha Nathaniel & Trenna Brusky
Contents
1.0 Executive Summary ..............................................................................................................................................5
2.0 Introduction ...........................................................................................................................................................7
2.1. The Coffee Industry ..........................................................................................................................................7
2.2 Tim Hortons Organization .................................................................................................................................7
2.2.1 Mission Statement ..........................................................................................................................................7
2.2.2 Organizational Values ....................................................................................................................................8
2.2 Saskatoon: Community Overview .....................................................................................................................8
3.0 Marketing Plan ......................................................................................................................................................9
3.1 Market Analysis: ................................................................................................................................................9
3.1.1 Competitor Overview: .....................................................................................................................................9
3.1.2 Customer Analysis .......................................................................................................................................11
3.2 Product Offerings ............................................................................................................................................11
3.3 Price ................................................................................................................................................................12
3.4 Place ...............................................................................................................................................................13
3.4.1 Location Selection ........................................................................................................................................13
3.4.2 Store Layout .................................................................................................................................................14
3.5 Promotion ........................................................................................................................................................14
4.0 Operation’s Plan ..................................................................................................................................................15
4.1 Location...........................................................................................................................................................15
4.2 Store Operation ...............................................................................................................................................17
4.3 Business Hours ...............................................................................................................................................18
4.4 Business Activities ..........................................................................................................................................18
4.4.1 Daily Activities ..............................................................................................................................................18
4.4.2 Weekly activities ...........................................................................................................................................19
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4.4.3 Monthly Activities..........................................................................................................................................19
4.5 Suppliers and Quality Control ..........................................................................................................................19
5.0 Human Resources ..............................................................................................................................................19
5.1 Organization Structure ....................................................................................................................................19
5.2 Job Descriptions..............................................................................................................................................20
5.2.1 Store Manager..............................................................................................................................................20
5.2.2 Assistant Manager........................................................................................................................................21
5.2.3 Team Supervisor ..........................................................................................................................................21
5.2.4 Storefront Employee.....................................................................................................................................21
5.2.5 Production ....................................................................................................................................................21
5.3 Human Resources Strategy ............................................................................................................................22
5.3.1 Human Resource Needs: Five Year Forecast ..............................................................................................22
5.4 Employee Recruiting and Motivation ...............................................................................................................23
5.5 Human Resources Training.............................................................................................................................24
5.5.1 Initial Training Requirements ........................................................................................................................24
5.5.2 Ongoing Training Requirements...................................................................................................................24
5.6 Human Resources Costs ................................................................................................................................25
6.0 Financial Plan......................................................................................................................................................25
6.1 Marketing, Operational and Human Resource Considerations .......................................................................25
6.1.1 Estimated Revenues ....................................................................................................................................26
6.1.2 Cost of Goods Sold ......................................................................................................................................26
6.1.3 Operating Expenses .....................................................................................................................................27
6.1.4 Working Capital Estimates ...........................................................................................................................27
6.1.5 Capital Budget and Depreciation ..................................................................................................................28
6.2 Financing Budget ..........................................................................................................................................28
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6.3 Debt Amortization Schedules ........................................................................................................................29
6.4 Corporate Income Taxes ...............................................................................................................................29
6.5 Economic Forecast........................................................................................................................................30
6.6 Dividend Policy................................................................................................................................................30
6.7 Ratio Analysis .................................................................................................................................................30
6.9 Financial & Investment Analysis ......................................................................................................................32
6.9 Risk Analysis ...................................................................................................................................................32
7.0 Conclusion ..........................................................................................................................................................35
8.0 Appendix .............................................................................................................................................................36
Appendix One: Human Resource needs and scheduling during weekdays & weekends .....................................36
Appendix Two: Income Statement ........................................................................................................................38
Appendix Three: Balanced Sheet ..........................................................................................................................38
Appendix Four: Statement of Cash Flow ...............................................................................................................39
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1.0 Executive Summary
The city of Saskatoon has been experiencing an economic and residential growth for the past decade. This growth
has led to the expansion of many neighborhoods including the northeast end of Saskatoon, where this investment
group has identified an opportunity for establishing a Tim Hortons Franchise. The new franchise will be located on
Attridge Drive and will serve the following neighborhoods: Silverspring, Evergreen, University Heights, Willowgrove,
Erindale, Arbor Creek, and Forest Grove. This business plan demonstrates the market need for the new Tim
Hortons and highlights the goals and objectives of the franchise.
Tim Hortons is a quick service restaurant specializing in freshly brewed coffee, doughnuts, and home-style lunches.
Marketing analysis show that although Tim Hortons faces aggressive competition from various quick service
restaurants in Saskatoon, competition is relatively low in the Northeast end of the city, where it is limited to
Macdonald’s, Dairy Queen, and Reggie’s. The absence of specialty coffee shops in the area is a competitive
advantage for the franchise. The key success factor for the new Tim Hortons is its marketing mix; Tim Hortons
strong brand equity, specialty coffee blends, competitive prices, and location guarantee its success.
The Franchise will be managed by its experienced owners who have 65 years of combined food industry
experience and are the owners of two other non competing franchises. The management team will execute the Tim
Hortons principles and standards of operations on a daily basis and will be supported by formal training from the
TDL group. Tim Hortons is committed to offering top quality, always fresh and great service. Product and service
quality will be monitored through regular on site inspections by TDL’s district Manager. Tim Hortons corporate will
supply the franchise with all inventories and will guarantee their timely receiving.
Staffing plan for the new Tim Hortons has been developed to ensure that staffing levels are in line with demand and
that staff are capable of maintaining the required high levels of service and product quality. To ensure management
remains in contact with the needs of the consumer, the organizational structure of the Attridge franchise is kept flat
with three levels of management and supervisors who work directly with the part-time staff and the customers.
The new Tim Hortons is financially attractive with a return on investment of 14.6%. The total start up cost for the
restaurant is $535,000 of which 50% is owners’ equity and the rest is long term liability. The franchise is expected to
generate revenue of $1,369,251 in its first year of operation and is projected to maintain a steady revenue growth in
line with inflation rate.
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The marketing mix of the new Tim Hortons franchise along with its experienced management team guarantees its
success. According to this business plan the restaurant will generate a positive net income of $366,263 in its first
year and will sustain profitability for the projected five years period.
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2.0 Introduction
2.1. The Coffee Industry
Coffee is the first choice of beverage in Canada. 63% of Canadians consume coffee on a daily basis while 81%
consume it occasionally. Coffee is no more a morning beverage with the average Canadian drinking 2 to 3 cups of
coffee a day. Over the last 10 years there has been an increase in consumption of coffee in-transit and in work
places. Quick service restaurant chains intend on targeting this growing market of on-the-go coffee consumers. In
response to fierce competition in the industry, quick service restaurant chains have become creative in their pricing
strategy, location selection, and marketing schemes.
2.2 Tim Hortons Organization
Tim Hortons started as a coffee shop, selling donuts and coffee in Hamilton, Ontario. Over the years the company
expanded into a multi-million dollar franchise and today Tim Hortons stands as Canada's largest quick service
restaurant business. The company is known for consistency, high quality products, and excellent service. Tim
Hortons has also become an iconic brand in Canada due to innovative marketing campaigns that have increased
sales and created extreme customer loyalty.
The last ten-years have been a period of tremendous growth for Tim Hortons. The company has aggressively
expanded in both the Canadian and Unites States markets, and has increased its product line to include meals,
baked products, and blended drinks. Tim Hortons competitive low prices are known to build its customer base and
increase its presence in the market. Additionally, the company is known for its convenient locations in areas of
prominent visibility and growth. Tim Hortons humanitarian efforts across the nation have shown that it is a socially
responsible brand that gives back to the community. The company’s excellent marketing strategies along with its
customer base ensure its solid position in the market in the years to come.
2.2.1 Mission Statement
Tim Hortons mission is to be the industry leader through commitment to excellence in people, product quality,
value, cleanliness, customer service, and community leadership.
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2.2.2 Organizational Values
Tim Hortons and its franchises are committed to living the following core organizational values:

We are 'Can Do’: Our success comes from continued grow and the complete satisfaction of our
customers. To do this are responsive, hands on, and pay attention to detail

We Seek Opportunities: Tim Hortons is guided by an entrepreneurial spirit focused on determination and
passion. This gives us both the power to succeed and allows us to continually learn and improve.

We Achieve Excellence: We believe in excellence in everything we do. We constantly strive to be the
best, proudly facing changes and challenges head on.

We are Fair and Ethical: We deal with stakeholders honestly and treat them with the utmost respect,
fairness, compassion and loyalty.

We are an Amazing Team: We are a strong team, relying on support and open communication from each
other. We are humble, hardworking, friendly, caring and passionate about our business.
2.2 Saskatoon: Community Overview
The investor group composed of Iman El Meniawi, Joey Tang, Sugantha Nathaniel and Trenna Brusky has been
selected to open a new Tim Hortons franchise in the University Heights neighborhood of Saskatoon. This selection
demonstrates the group has the necessary entrepreneurial drive, management skills, financial means and
dedication required for success in today's competitive market. The chosen location for the new franchise is a new
commercial development off Attridge Drive. Attridge Drive is the major roadway connecting the surrounding
northeast neighborhoods to the Circle Drive freeway, city centre, and industrial areas.
Market Research indicates Saskatoon’s northeast is an un-served market with significant growth potential. This is
due to numerous reasons:

The northeast is one of the fastest growing communities in Saskatoon with three newly developing
neighborhoods (University Heights, Willow Grove, and Evergreen)

Saskatoon is the largest city in the province and the population is booming1
“Saskatoon’s population booms,” CBC News, July 28, 2009, http://www.cbc.ca/canada/saskatchewan/story/2009/07/28/sask-saskatoon-populationgrowth.html
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
According to the Saskatoon Regional Economic Development Authority (SREDA) Saskatoon’s economy is
expected to rebound in 2010
It is expected that the Attridge location franchise will be successful and will not cannibalize the sales of other Tim
Hortons restaurants in Saskatoon.
3.0 Marketing Plan
Tim Hortons has an effective marketing strategy that portrays the brand as a national identity. It incorporates an
atmosphere of a rural small town Canadian restaurant that draws a customer inside its doors. Additionally, the
success stories of employees rising from unloading trucks to management creates a fond image in the minds of the
customers. The restaurant’s mission is to deliver superior quality products and services to its customers and
community. Its vision is to be a quality leader in its industry.
3.1 Market Analysis:
3.1.1 Competitor Overview:
Tim Hortons faces high levels of competition in the quick service restaurant business. Its competitors consist of a
wide spectrum of coffee chains featuring either lower prices or higher quality. In Saskatoon’s northeast, competition
is comparatively low when evaluated to other Tim Hortons locations. The following chart and Figure One provide an
overview of the direct competitors for this franchise location.
Quick Service Restaurant Chain
Features
McDonald's
They offer free coffee 24 hours but do not offer blended
coffee or the quality that Tim Hortons provides its
customers.
Robins Donuts
They do not offer the quality and the element of freshness
in their baked goods provided by Tim Hortons. They are
not a pressing competitive threat to Tim Hortons.
Reggie’s
They are known for their bagels, sandwiches and paninis.
They provide competition during breakfast and lunch
hours.
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Dairy Queen
They provide a broader selection for meals and treats on
their menu in comparison to Tim Hortons. The nutritional
value in Tim Hortons products is higher in comparison to
Dairy Queen.
Figure One: Aerial view of the site location for the new Attridge Drive Tim Hortons franchise
The Attridge Drive location will also face competition from coffee chains not located near this new location, but that
provide to the needs of the target customers in Saskatoon’s northeast. Starbucks provides higher quality coffee
along with specialty custom made coffee for its customers, but at increased prices and relatively slower service in
comparison to Tim Hortons. Local coffee houses such as the Broadway Roastery, Sola and Soulieo offer a more
relaxed environment for customers to enjoy their coffee. They serve a specific niche market in the community and
might not necessarily target the Tim Hortons loyalists.
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3.1.2 Customer Analysis
The Tim Hortons target market consists of two segments: the loyalists and the customers who are on-the-go.
Customers who are on-the-go, those on the way to work or on the way to school, predominates the drive through
market. Most of the time these customers are looking for the nearest coffee to their work place and can be quite
price sensitive. The possibility of these customers switching brands is high but they will seek Tim Hortons due to
convenience. The Tim Hortons loyalists have an element of patriotism to the Small Town Hockey Canadian Culture.
The possibility of them switching costs is low and they seek Tim Hortons because it’s a Canadian symbol. The
“RRRoLL up the Rim” campaign is a seasonal ritual that increases their intake of coffee and builds on their loyalty
to the brand. These customers have launched blogs online such as “Every cup tells a story” to share their Tim
Hortons story to other loyalists. When a Tim Hortons customer sends mail to the company inquiring on nutritional
facts, customer service is known to reply back immediately with the required answers offering better menu options
to their customers.
A Tim Hortons customer is always content with the good quality coffee, the excellent customer service, and the
reasonable price. The Attridge location selected for the launch of a Tim Hortons outlet will bring in customers from
neighborhoods surrounding the area. The community is filled with affluent families earning an above average
income of approximately $83,000. There is a high number of working individuals in the community who would
require a coffee on their way to work or on their way back home from work. Additionally, Saskatoon’s northeast
has three developing neighborhoods offering potential increases in patronage. The selected location is close to two
growing high schools, St. Joesph's and Centennial Collegiate that may attract students during their lunch hours and
after school hours. The Sasktel Sports center will bring in customers to Tim Hortons after athletic events are held.
The Alice Turner Public Library, Willowgrove Linear Park, and the Saskatoon Forestry Park & Zoo are walking
distance from the Tim Hortons thus increasing the number of its potential customers. These customers are aware
of the Tim Hortons brand along with its consistency hence would be more eager to flock into a familiar setting.
3.2 Product Offerings
Tim Hortons started in the 60s with just 2 products, coffees and donuts. Today it has evolved into a quick service
restaurant chain that offers sandwiches, bagels, muffins, juice, wraps, rolls and blended coffee. It intends on
providing a fresh home-style breakfast or lunch to its customers. Tim Hortons started the sales of coffee cans to
bring its brand to its customers’ home. Other merchandise products include coffee mugs, shirts, caps etc.
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3.3 Price
Tim Hortons provides good quality products at a competitive price. The food and beverage prices are lower than
competitors and Tim Hortons is known by consumers to produce consistent quality. Nothing on its menu is over $9,
reflecting to its customers that it can deliver fresh products at a good value. All menu prices are set by the TDL
Group or Tim Hortons corporate and franchises are expected to follow this pricing model.
The working customers from Saskatoon’s northeast neighborhoods will be less price sensitive while the students in
this area will be seen to be more price sensitive. Tim Hortons’ pricing strategy is effective in catering to the needs of
both these types of customers. Tables One and Two are projections of the number of unit sales and total revenue
expected throughout the week and on weekends. The total estimated revenue generated annually is $2,201,121,
indicating that the brands pricing strategy has been effective for them.
We determine the average sale per transaction by calculating the price of an average customer purchase
combination. During peak- breakfast hours and non-peak hours, let say 75% of customers get a larger coffee, and
the other 25% of customer order a combination of a large coffee and a choice of snacks, (which includes donuts,
muffins, bagels and choice of breakfast sandwich). According to the menu provided from Cumberland and 8th street
stores in Saskatoon, a large coffee costs $1.46 and the average of a choice of food products is $1.60. The
combination will cost $3.06 in sum. We estimate the average sale of transaction is $1.86 in peak breakfast hours
and non-peak hours for our revenue calculation. For peak-lunch hours, we assume 50% of customers loyal to
coffee only and the other 50% will order a lunch combo. The price of lunch combos ranges from $4.35 to $7.15. We
take the average of each lunch combos, which is $5.83. If half people order a large coffee and half people order
lunch combo during lunch hours, we estimate $3.65 will be our average sales of transaction during peak lunch hour.
Table One: The number of units sold, sales and revenue on weekdays:
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year 1
Weekdays
# Trans/hr Hours/day Avg price/trans Total Sales per day
Peak-Breakfast
150
3.5 $
Peak-Lunch
150
2.5 $
75
11 $
Non-Peak
Total per Day
1725
1.86 $
3.65 $
1.86 $
1,368.75
$
3,879.75
$
1,008,735.00
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Total Revenue
976.50
1,534.50
Table Two: The number of units sold, sales and revenue on weekends
year 1
Weekends
# Trans/hr Hours/day Avg price/trans Total Sales per day
Peak-Breakfast
150
3 $
Peak-Lunch
150
2 $
75
11 $
Non-Peak
Total per Day
1575
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1.86 $
3.65 $
1.86 $
$
837.00
1,095.00
1,534.50
3,466.50
$
360,516.00
Total Revenue
3.4 Place
3.4.1 Location Selection
Tim Hortons are located in a place of prominent visibility and caters to the “on-the-go” customer. It has regular
stand alone stores along with outlets in shopping malls, highway outlets, universities and hospitals. The drive-thru
service provides quick and efficient service to the drive through market.
A city needs to think carefully before locating a Tim Hortons as it can affect the flow of traffic. At the moment there
are 17 other Tim Hortons outlets in Saskatoon. University Height, off Attridge Drive, is a good location for a coffee
chain in Saskatoon as the competition in this area is limited and there is a good-sized market in need of the product.
The new franchise location is surrounded by 6 established neighborhoods (Erindale, Arbor Creek, Sutherland,
Forest Grove, Silverspring and Willowgrove) and a new neighborhood Evergreen scheduled to start development
this year. With the increase in residential and commercial development in these areas there is definite potential for
increased customers and growth in sales for the launch of a Tim Hortons in this area. The St. Josephs High
School, Centennial College, Sasktel Sports Center, Willowgrove Linear park, Alice Turner Public Library and
Saskatoon Forestry Park & Zoo around this locality will flock in more customers. The location is such that it will not
cannibalize sales from other brand outlets but will capture sales from an un-served market. University Heights is
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perfect for visibility and convenience to attract potential customers. As the place looks extremely promising there is
a high possibility that the brand would reach its maximum capacity to serve its customers fairly quickly.
3.4.2 Store Layout
Ninety five percent of Tim Hortons’ stores are franchised owned, and there are over 28000 and 5000 stores in
Canada and the United States respectively. The layout is styled in similar pattern to provide customers with a
familiar and consistent experience regardless of the province or country of operation. The chairs are designed to
make the customer feel comfortable, but only for a short time, to ensure availability for the next customer. Each
Tim Hortons location prominently features large colorful signs for new products that catch the eye of customer as
they stand in line for their purchase. The menu boards are well lit with appropriate use of colors to make it easy for
the customer to scan through before his purchase. Merchandise products such as coffee cans, mugs, shirts, caps
etc. are placed near the customer line up for effective visibility and to facilitate purchase. Large screens displaying
images of the Children's Foundation makes the customer aware of the different social activities Tim Hortons is
involved with to support the community.
3.5 Promotion
Tim Hortons is known for its excellent promotion campaigns that increase sales and build customer loyalty. The
brand is based on a traditional Canadian hockey success story of a small town man that signed by the Toronto
Maple Leafs. This automatically aligns the Tim Hortons brand to Canadian hockey culture and elicits nationalistic
feelings in loyal consumers. The company is involved in community enhancement programs such as sponsorships,
sports programs, and clean up events portraying it as a socially responsible brand. It is specifically known for its
Children's Program that organizes yearly camping events for children. Tim Hortons customers sense that with each
coffee they purchasing they are giving an adventurous experience for these children. On January 18th 2010, Tim
Hortons started to collect funds in coin boxes in outlets across Canada to help the people in Haiti after the
earthquake; By February 1st the nickels and quarters accumulated to $700,000.
The “RRRoLL up the Rim” campaign every season creates a buzz and is considered a ritual among the Tim
Hortons loyalists. Exciting prizes ranging from cars to cash is offered to customers hence increasing sales and
increases its target market. Its “20 minute Commitment” on coffee pots with each pot stating the time of preparation
written on it, ensures that the coffee is fresh and no coffee is served after 20 minutes. This campaign established
Tim Hortons as a freshly baked goods restaurant chain with quick service. The advertising is taken care of by Tim
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Hortons and not the franchisee thus giving the brand control to implement what it feels appropriate for this specific
Attridge Drive location. To support corporate Tim Hortons advertising, the franchisee pays a monthly advertising
levy of 4% of gross sales. Table Three highlights the estimated advertising costs that will accompany the projected
increases in revenues for the next five years.
Table Three: Estimated advertising costs per year
Year 1
Year 2
Year 3
Year 4
Year 5
$54,770
$55,865
$80,228
$81,832
$83,469
4.0 Operation’s Plan
4.1 Location
Tim Hortons is a quick service restaurant chain specializing in freshly brewed coffee, doughnuts, and home-style
lunches. The new Tim Hortons franchise will be located on Attridge Drive in the growing northeast end of
Saskatoon. This location will serve the following neighborhoods: Silverspring, Evergreen, University Heights,
Willowgrove, Erindale, Arbor Creek, and Forest Grove. As indicated by Figure Two, the combined size of these
neighborhoods is significant and provides a large market of potential consumers.
Figure Two: Northeast Saskatoon neighborhoods and scope of franchise coverage.
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Currently, this area does not have any coffee shops, and the closest one, Robins Donuts, is located on Central
Avenue. Northeast residents have above average income and are expected to be regular customers for the new
Tim Hortons. Also, Centennial Collegiate, Saint Joseph’s high school, and the soccer centre are a two minutes
walking distance from the suggested location, so students and soccer centre patrons are seen as potential
customers. The area will capture numbers of industrial areas of Sutherland and University areas.
The new franchise will be located in the developing University Heights neighborhood, and will be included in Phase
One of a new business development off Attridge Drive (refer to Figure Three). This location will capture
neighborhood commuter traffic and also customers that from other areas that utilize the numerous facilities outlined
above.
Figure Three: Proposed business development in University Heights and future Tim Hortons franchise location
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4.2 Store Operation
The four owners of the store will execute the Tim Hortons’ principles and standards of operations on a daily basis
and will be supported by formal training from the TDL group. The store will operate as a quick service restaurant,
where customers will make orders at the cashier and then pick them up from another station within three minutes.
Tim Hortons is committed to offering top quality, always fresh and great service. Product and service quality will be
monitored through regular on site inspections by TDL’s district Manager. Continuous on the job coaching will be
offered to all employees on a regular basis and the store will be functioning under food government regulations.
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4.3 Business Hours
Tim Hortons will open from 6:00 am to 11:00 pm on weekdays and 6:00 am to 10:00 pm on weekends. These
business hours will put the store in a competitive position with other stores in the neighborhood. Dairy Queen opens
daily till 11 pm and MacDonald’s is open 24 hours. The franchise will cater to the needs of a wide range of
customers; Early bird customers grabbing a coffee or breakfast on their way to work; soccer centre and school
patrons; and neighborhood’s residents going out for a quick lunch, snack or coffee all throughout the day.
4.4 Business Activities
4.4.1 Daily Activities
The following activities and structure reflects a typical operational day at the Attridge Drive franchise:
Opening:
Time: half hour before opening
Crew: 1 manager/owner and two employees
Responsibility: Opening the store, brewing coffee, baking morning items, and receiving deliveries
Day Shift:
Time: Throughout the day
Crew: The manager, assistant manager, shift supervisor, and shift employees
Responsibility: Two employees will be responsible for taking orders and processing payments, two will be responsible for
preparing beverages, two for food preparation, and cleaning responsibility will be rotated among all store front employees.
Closing shift:
Time: 11 pm and will take about half hour.
Crew: a shift supervisor, and one employee.
Responsibility: Preparing cash for bank deposits, cleaning machines and tools, restocking inventory for the next morning, and
filling in inventory ordering forms, cleaning and talking out garbage.
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4.4.2 Weekly activities
Managers will order napkins, culinary, and restock on coffee and other merchandise and prepare a sales revenue
report to monitor store sales.
4.4.3 Monthly Activities
Managers will perform the following duties:

Pay monthly bills and royalty fees

Prepare a monthly income statement.

Compare actual budget to planned one and monitor variances.
4.5 Suppliers and Quality Control
TDL group will supply the franchise with all inventories including coffee, cups, lids, napkins, dry goods, frozen
dough, and Tim Hortons’ merchandise. Quality and timely receiving of inventories is ensured through the franchise
agreement with Tim Hortons; all Tim Hortons production facilities supplying frozen dough are approved HACCP
facilities.
5.0 Human Resources
5.1 Organization Structure
Iman El Meniawi, Joey Tang, Sugantha Nathaniel and Trenna Brusky are the owners and primary equity investors
in the Attridge Tim Hortons franchise operation. This ownership group brings considerable knowledge and
experience as they have over 65 years of combined food industry experience, and are the owners of two other noncompeting food franchises in smaller Saskatchewan centers. As owners they will be responsible for establishing
the stores vision and operational goals, will supervise the store and monitor its performance and productivity. The
day-to-day operational will be the responsibilities of the Store and Assistant Manager, positions that will be held by
members the ownership group. This group recognizes that this franchise will require dedication, direct supervision,
long hour and hands-on labor.
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In addition to the ownership team, the franchise will receive corporate support from TDL Group Corp. TDL is a
group of professionals that works in partnership with storeowners to ensure operations are efficient and experience
optimal growth levels. This group is knowledgeable in all facets of the Tim Hortons system and is available on an
ongoing basis for operational support and guidance. The direct connection to TDL is through the regional District
Manager that will provide knowledge, conduct regular site visits and monitor the operation to ensure the corporate
standards of product quality, value, cleanliness and customer service are met.
The organizational structure of the Attridge franchise is flat (refer to Figure 4). There are three levels of
management and supervisors that work directly with the part-time staff and the customers. Tim Hortons believes
this is critical for the maintenance of high quality service and products, and ensures management remains in
contact with the needs of the consumer.
Figure Four: Attridge Drive Tim Hortons organizational chart
TDL
Store Manager
Assistant
Manager
Production
(bakery)
Shift Supervisor
Storefront
Employee
5.2 Job Descriptions
The staff at the Attridge Tim Hortons will consist of the following:
5.2.1 Store Manager

Experienced in managing a food service operation

Knowledgeable and focused on accomplishing the long-term vision of the store owners

Involved in employee recruitment, training and team coaching to achieve and maintain high standards of
operations (i.e. superior product, clean store environment, development of loyal clientele)
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
Skilled at managing employees and promoting a team based work environment

Plans and executes methods to increase sales and achieved targeted goals
5.2.2 Assistant Manager

Knowledgeable in the food service industry

Supports the Store Manager and Owners in the day-to-day operations of the store

Great trainer and motivator focused on building a successful work team relationship
5.2.3 Team Supervisor

Focused on being a mentor and team captain

Communicates effectively with the management team

Heavily involved in promoting the team focus, and acts as the team leader for their shift

Displays outstanding customer service

Completes scheduling of storefront employees and develops the duty roster
5.2.4 Storefront Employee

Directly involved with customer service and the production of food and beverages

Deals directly with the customer

Performs all tasks to ensure services and quality standards are maintained

Fulfills orders and prepares food and beverages

Performs regular cleaning activities as listed by the duty roster schedule (i.e. clearing tables, washing
dishes, restroom and store cleaning and supply maintenance)

Follows proper food handling and hygienic procedures
5.2.5 Production

Production and preparation of baked goods

Communicates with Management and Storefront staff to ensure availability of baked goods

Refills store-front displays with fresh products

Follows proper food handling and hygienic procedures
Tim Hortons is company of team players that believes its greatest strength is the diversity of its employees. Each
employee has a variety of backgrounds, experiences and personalities and these differences make Tim Hortons
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team a positive and inclusive environment. This focus delves deeper into our belief in creating a supportive team
based work environment. We believe this approach provides employees with the support required for job
satisfaction, quality products and the excellent customer service Tim Hortons is known for.
5.3 Human Resources Strategy
5.3.1 Human Resource Needs: Five Year Forecast
Due to the popularity of the Tim Hortons franchise, the Attridge store is expected to have high levels of traffic right
from its opening. In the development of the Human Resources Strategy the expected number of sales and the
peak hours of operation were estimated for this location (Refer to Appendix One). Management will assess the
accuracy of these estimates against the actual customer visits and traffic levels to ensure staffing levels are inline
with demand and able to maintain the required high levels of service and product quality.
General estimates for employee scheduling is as follows:
Table Four: Staff during peak and non-peak hours
Peak Hours
Non-Peak Hours
 Drive Thru: 2 employees (till and beverage
 Drive Thru: 2 employees (till and beverage
preparation)
preparation)
 Food: 1-2 employees
 Food: 1 employee
 Till One: 2 employees (till and beverage preparation)
 Till One: 2 employees (till and beverage preparation)
 Till Two: 2 employees (till and beverage preparation)
 1-2 production employees in the kitchen (baking is
 1-2 production employees in the kitchen area
completed at 6:00 pm daily)
**Note that unless specified the ‘employees’ are storefront employees, supervisors or managers
Over the next five years, the Attridge Tim Hortons is projected to have growth in traffic and sales volumes. This is
due to increases in both commercial and residential developments in the surrounding neighborhoods causing an
expanded customer base. The potential increase in demand will be matched with growth in the number of part-time
22
Storefront employees as the location moves towards capacity levels. Estimates calculated based on store visits to
fully operational Tim Hortons in Saskatoon indicate that at as customers increase approximately 19 new storefront
and 7 new production shifts (4hrs) will need to be added and filled each week. This increase in employees will
support the new customer levels expected in 2012.
Table Five: Tim Hortons Human Resource needs
Year
2010
2011
2012
2013
2014
Number Full-Time
Store Manager
1
1
1
1
1
Employees
Assistant Manager
1
1
1
1
1
3
3
3
3
3
Production
28
28
35
35
35
Storefront
145
145
164
164
164
Shift Supervisors
(full and part-time)
Number of PartTime
Shifts / Week
(4Hrs)
5.4 Employee Recruiting and Motivation
According the Provincial Government, Saskatchewan has had the lowest unemployment rate in Canada for the last
nine months.2 Due to the opportunities available for workers in the province, the Attridge franchise will implement
numerous strategies to increase motivation and attract new employees. These strategies are as follows:

Competitive salaries

Health and dental benefits for qualifying employee

Opportunities for advancement through training programs

An incentive and recognition program focused on acknowledging employees with outstanding customer
service, operational standards and teamwork. This system is based on the ‘Tim-Points’ and other service
awards.
“Saskatchewan’s unemployment rate remains lowest in Canada,” Government of Saskatchewan, March 12, 2010,
http://www.gov.sk.ca/news?newsId=41f401f4-1a77-4502-a079-71492c985fbf
2
23

Scholarship opportunities

Opportunities for community involvement through various programs including Camp Day, Smile Cookies to
fund local charities, and other events that give back to the community

Free uniforms
5.5 Human Resources Training
5.5.1 Initial Training Requirements
Tim Hortons has developed a comprehensive training program for new franchise owners. This program was
designed to provide initial and ongoing operational and marketing support, and is focused on maintaining Tim
Hortons' leadership as Canada’s foremost coffee and baked goods chain.
The ownership team will undergo a 7-8 week corporate training program to understand the operational facets of the
Tim Hortons restaurant. This program is held at the National Training Centre in Oakville, Ontario that includes
classrooms and a fully operational store. This course provides trainees with hands-on experience preparing the
Tim Hortons product line, and emphasizes proper food handling and hygienic procedures, employee relations,
equipment maintenance and in-store security systems.
The corporate operations’ staff will also assist with the opening of the Attridge franchise. This staff will remain on
location for up to 17 days to help hire an train staff, clean and prepare the restaurant for opening, and provide
general assistance and guidance with operations.
Tim Hortons also loans franchisees Operation Manuals that contain recipes, formulations, operating procedure,
equipment maintenance guidelines, record keeping systems and general reference materials for guidance in the
proper manner of operating a Tim Hortons restaurant.
5.5.2 Ongoing Training Requirements
Tim Hortons Head Office offers a wide range of operation-focused courses and an annual symposium for
management staff. These programs will provide the Attridge management team with the opportunity to develop the
skills required to make continual improvements at the restaurant.
24
The Team Supervisor and Assistant Manager will complete ongoing and new employee training at the Attridge
location. Employee training will be conducted on the job and focus on safe food handling, proper personal hygiene,
customer service, and food/beverage preparation. The Store Manager will monitor training to ensure employee
training is complete and up-to-date.
5.6 Human Resources Costs
The costs of implementing the Human Resource Strategy are illustrated in Table Six. Human Resource needs are
anticipated to increase in year three, which is when the Attridge Drive Tim Hortons is expected to reach capacity
operation levels.
Table Six: Projected Human Resource costs
Labor Costs
2010
2011
2012
2013
2014
Management/Supervisors
$178,100.00
$180,336.00
$183,942.72
$187,621.57
$191,374.01
Benefits for Salary Employees
$30,526.34
$30,909.59
$31,527.78
$32,158.34
$32,801.50
Total Salaries
$208,626.34
$211,245.59
$215,470.50
$219,779.91
$224,175.51
Part-Time Salaries
$332,852.00
$339,509.04
$398,344.19
$406,311.07
$414,437.30
Benefits for Salary Employees
$37,845.27
$38,602.18
$45,291.73
$46,197.57
$47,121.52
Total Wages
$370,697.27
$378,111.22
$443,635.92
$452,508.64
$461,558.82
6.0 Financial Plan
6.1 Marketing, Operational and Human Resource Considerations
Based on the nature of the business, the coffee industry is protected from seasonal fluctuations since the demand
for coffee is considered to be stable year round, and the decrease in sales of cold beverages during the winter will
be mitigated with an increase in sales of other hot beverages (such as hot chocolate and cider), and vice versa in
25
the summer. Please refer to Appendix Two, Three & Four to see the five year projected income statement, balance
sheet and statement of cash flow.
6.1.1 Estimated Revenues
The annual estimated revenues are the following (examined in detail by quantity and average selling price in
Schedule 1).
Table Seven: Sales Revenue projected to 5 years
Sales Revenue
1
2
3
4
5
$1,369,251
$1,396,636
$2,005,692
$2,045,806
$2,086,722
We have examined the sales revenue based on average selling price, quantity of transactions in weekdays and
weekends as well as in breakfast peak hours, lunch peak hours and non-peak hours. We assumed the growth rate
of selling price is consistent with inflation rate which is 2%. After the new residential area, Evergreen have been
developed in 2013, we expect store run to full capacity (i.e. drive-thru transaction rise up to 30 per hours, non-peak
hours increase to double at year 3).
6.1.2 Cost of Goods Sold
The detail for Cost of Goods Sold is as follow (see Schedule 2 as details), assuming growth margin is 60%.
Table Eight: Cost of Goods sold from year 2 to 5
2011
COGS
$
547,700
2012
$
558,654
2013
$ 802,277
2014
$ 818,323
2015
$
834,689
Note: In year 3 we hit full capacity based on drive thru and assuming peak all thru out the day. rational: organic growth
plus new neighborhood development ( Evergreen)
26
6.1.3 Operating Expenses
Table Nine: Operating Expense for 5 years
Schedule 4: Expenses
Year
Utilities
Royalty fees
Full time wages
Benefits
rental fees
Advertising
Interest
Part time wages
Other Fixed costs
Total Expenses
4.5%
$
8.5%
4%
1
15,000
61,616
178,100
37,845
69,832
54,770
24,075
332,852
774,090
2
15,300
62,849
180,336
38,602
71,228
55,865
22,490
339,509
786,180
3
15,606
90,256
183,943
45,292
102,290
80,228
20,763
398,344
936,722
4
5
15,918
16,236
92,061
93,903
187,622
191,374
46,198 $ 47,121.52
104,336
106,423
81,832
83,469
18,880
16,828
406,311
414,437
953,158
969,792
The expense items are as follow:

Utilities: Close estimate based on building size and operating hours.

Royalty Fees, rental fees and monthly advertising fees were given at website.

Full time & part time wages, benefits refer to human resources budget

Interest: based on 10 years loan with interest rate 9%, see schedule 6 & 7 for details
6.1.4 Working Capital Estimates
6.1.4.1 Inventories
Inventories will primarily be composed of the direct materials that generate specialty coffee drinks, plus Tim Hortons
merchandizing products. Direct materials take over 90% of an average 4 inventory days. For merchandizing
products, inventory days can be up to 24 days, occupy the 10% of input supply. We will have an average of 6 days
of inventory and have regular orders placed every four days.
6.1.4.2 Accounts Receivable
27
Since the nature of the business is primarily cash or cash equivalent since all transactions generating sales of
small value (usually less than $20.00) we have no accounts receivable balance.
6.1.4.3 Accounts Payable
We are assuming that our only supplier, the TDL group will allow purchases on credit about 1 to 2 weeks. In a
conservative approach, we take 12 days as an average account payable period.
6.1.4.4 Operating Line of Credit
Through the franchise, the bank will provide $267,500 (50%) of money loaned for start-up costs of the business,
and as well, we will be required to provide $267,500 in equity. This will be sufficient to cover start up costs of
$535,000, which includes $480,000 franchise cost and $55,000 working capital.
6.1.5 Capital Budget and Depreciation
Since Tim Hortons own the building, furniture and equipment, it is not required to consider the amortization of usage.
At the end of each five-year period of the License term, at the sole discretion of The TDL Group Corp. has the
obligation to refurbish the restaurant to meet current Tim Hortons’ standards.
6.2 Financing Budget
Franchiser is responsible for $55,000 as working capital in at least franchise cost of $144,000. We would contribute
50% of the budget can be financed through liability, $267,500. The term of the license agreement is usually 10
years. There will be an option to renew for up to a further period of 10 years.
Table Ten: Financing Budget
Schedule 6: Financing Budget
Year
Debt
50%
Equity
Total
535,000
1
267,500
267,500
535,000
28
6.3 Debt Amortization Schedules
For the coming five projected period, term of debt is ten years. Principal you need is $267,500, with an interest rate
9%, payment amount is $41,682 every year. Interest amount is $24,075 and the principal reduction is $17,607 as
the first year. Therefore, end balance of debt decrease through time.
Table Eleven: Debt amortization projected to 5 years
Schedule 7: Debt Ammortization Schedule
Year
Term
Beg Bal
10
Addition
Payment
Interest
Princ Red
End Bal
1
267,500
41,682
24,075
17,607
249,893
2
249,893
41,682
22,490
19,191
230,702
3
230,702
41,682
20,763
20,919
209,783
4
209,783
41,682
18,880
22,801
186,981
5
186,981
41,682
16,828
24,854
162,128
6.4 Corporate Income Taxes
Corporation tax rate in Saskatchewan is 12.0% and federal corporate rate is 18% if the business over $500,000
limit. The calculation of the annual tax payment is increasing from $67,184 in the first year, up to $170,497 in year
five.
Table Twelve: Corporate Income Tax projection in first five years
Income Taxes
Federal Corporate Rate
1
18.0%
2
16.5%
3
15.0%
4
15.0%
5
15.0%
1
47,460
-
2
51,802
-
3
266,694
-
4
274,325
-
5
282,242
-
Taxable Income
47,460
51,802
266,694
274,325
282,242
Federal Tax
Small Bus Tax Credit
Provincial Tax
12,814
(7,594)
2,136
13,986
(8,288)
2,331
72,007
(42,671)
12,001
74,068
(43,892)
12,345
76,205
(45,159)
12,701
7,356
8,029
41,337
42,520
43,747
Income Before Taxes
Accumulated Loss Carryforward
Loss Carryforward Used
Total Taxes
29
6.5 Economic Forecast
The estimate expected inflation rate is 2.0%, based on the 2009 to 2010 inflation rate. Nominal interest rate is 9.0%
in order to take a conservative approach.
6.6 Dividend Policy
We as a group will take the total of 25% from net income as dividend every year end. The proportion of amount will
be distributed according to the amount of time that put in every year for each investor.
6.7 Ratio Analysis
The figures we generated from ratio analysis are attractive. Current and quick ratios are more than 100% and
increase at least double growth rate. It shows the strong cash flow strength will be foreseen. For investment
utilization, inventory turnover rate is high, which means the business can run very efficiently with direct materials
and merchandized products. The account payable is also effective since all the supply is from the TDL team;
therefore the account payable period is not a main concern. Asset turnover will increase from 7% to 40% from year
1 to year 3, which show the full capacity will promise the return in three years.
Table Thirteen: Ratio Analysis (Liquidity and Investment Utilization)
1
2
3
4
5
Current Ratio
13%
20%
85%
162%
260%
Quick Ratio
10%
16%
80%
156%
253%
Inventory T/O
60.83
60.83
60.83
60.83
60.83
Inventory Day
6
6
6
6
6
A/P Turnover
54.92
54.79
50.10
50.04
49.97
30
A/P T/O Days
6.65
6.66
7.29
7.29
7.30
7%
7%
30%
26%
23%
Total asset
Turnover
No fixed asset turnover
More ratio analysis has been performed. Debt ratio has shown this franchise will be in a healthy condition financially.
It will become better while the debt continue to be paid off. Cash flow to debt and interest coverage indicates the
company has no problem in debt financing. Net profit margin, return on assets and return on equity and investment
provides a positive profitability for this business.
Table Fourteen: Ratio Analysis (Solvency & Profitability)
1
2
3
4
5
Debt Ratio
47.93%
43.58%
32.87%
24.83%
18.87%
Debt/Equity Ratio
92.06%
77.25%
48.95%
33.03%
23.26%
17%
20%
109%
123%
142%
Interest Coverage
197%
230%
1284%
1453%
1677%
Net Profit Margin
2.93%
3.13%
11.24%
11.33%
11.43%
Return on Assets
7.02%
7.47%
30.29%
25.88%
22.71%
Return on Equity
13.48%
13.25%
45.12%
34.43%
27.99%
14.64%
17.15%
92.17%
104.24%
120.31%
CF to Total Debt
Return on
Investment
31
6.9 Financial & Investment Analysis
Table Fifteen: Net Present Value and Internal Rate of Return Analysis
Schedule 10: Investment Analysis
Investment Analysis
Required Return on Equity Investment
Cash Flows:
Operating Cash Flow
Dividends
Salvage Value
Total Cash Flows
(535,000)
1
2
3
4
5
10%
47,585
10,026
35,825
10,943
266,933
56,339
267,385
57,951
57,611
46,768
323,272
325,336
273,703
59,624
333,327
1,086,315
Calculate NPV and IRR
NPV
IRR
228,083
21.47%
When we look at the net present value (NPV=228,083) and internal rate of return (IRR=21.47%), the analysis show
reasonable valuation for this business. With the condition that the TDL Team will invest the land, building and most
of the equipments, this allows more cash flows for reinvesting the own business such as paying back debt, royalty
fees, rents and advertising fees etc. There are dividends paid to investors as well, which is the decision is being
made in a corporate function.
The required return of equity is 10% by a conservative approach. The valuation of IRR has exceeds approximately
ten times than what it is required. The projected rate of return is very positive, with no salvage value necessarily
considered since the TDL Team will own the building. Therefore, the risk of amortization and fluctuation of fixed
cost are mitigated. Investment on equity projected a high return on the cash flow the business held.
6.9 Risk Analysis
We have performed a scenario analysis by varying the variable of number of transaction a day. The best case
scenario is the store will operate to full capacity in year one, which means totally 150 transactions an hour (i.e. 2.5
transactions every minutes, while two tills and a drive-thru operate at the same time). The worst case scenario is
32
pretending the store will not reach full capacity until the fifth year. It is assuming the number of transaction during a
non-peak hour is 75 (i.e. 2.5 transactions every two minutes). From this analysis, we see if the store can reach full
capacity in 3 years, the NPV and IRR are in positive and healthy condition. But the worst case saying if the full
capacity is not reached, business will start losing money, since the direct labour cost is increasing every years.
Therefore, the number of transactions is one of the critical factor to indicate if the business in this location will be
popular or not. Therefore, if the area becomes fully developed and generates high traffic, the investment of this
business looks very promising.
Table Sixteen: Scenario Analysis
Scenario Analysis
1
2
3
4
5
Base Case
$
1,369,251 $
1,396,636 $
2,005,692 $
2,045,806 $
2,086,722
Best Case
$
1,927,809 $
1,966,365 $
2,005,692 $
2,045,806 $
2,086,722
Worst Case
$
1,369,251 $
1,396,636 $
1,424,569 $
1,453,060 $
2,086,722
Figure Five: Scenario Analysis of Revenue Projection in Five Years
$2,500,000
$2,000,000
$1,500,000
Base Case
Best Case
$1,000,000
Worst Case
$500,000
$1
2
3
4
5
33
Table Seventeen: NPV and IRR of Base case, Best case and Worst case
NPV
IRR
Base Case, full capacity in year 3
$ 228,083.23
21.47%
Best Case, full capacity in year 1
$ 804,501.20
62.61%
Worst Case, no full capacity
$ (267,640.56)
-6.71%
Figure Six: Scenario Analysis of NPV
NPV
$1,000,000.00
$800,000.00
$600,000.00
NPV
$400,000.00
$200,000.00
$$(200,000.00)
Base Case, full
capacity in year 3
Best Case, full
capacity in year 1
Worst Case, no full
capacity
$(400,000.00)
Figure Seven: Scenario Analysis of IRR
IRR
Worst Case, no full capacity
Best Case, full capacity in year 1
IRR
Base Case, full capacity in year 3
-10%
0%
10%
20%
30%
40%
50%
60%
70%
34
7.0 Conclusion
Tim Hortons holds 46 years of experience in this industry and has an excellent reputation for its consistent quality
and service. Attridge Drive proves to be the perfect location to start a Tim Hortons franchise as it will attract a large
number of customers from the community. With the recent growth of the community, the launch of the franchise will
quench an unmet demand for quick coffee service in the area. The business plan has estimated a high return on
cash flows with a return on equity of 10% and a positive net present value of over two million dollars for the first five
years. The operations, marketing, human resource, and financial plans will justify that investing in a Tim Hortons
franchise for the Saskatoon’s northeast communities is a great opportunity for investors.
35
8.0 Appendix
Appendix One: Human Resource needs and scheduling during weekdays & weekends
36
Appendix Two: Income Statement
Income Statement
For the year ended
Revenues
COGS
Gross Profit
1
1,369,251
547,700
821,551
2
1,396,636
558,654
837,982
3
2,005,692
802,277
1,203,415
4
2,045,806
818,323
1,227,484
5
2,086,722
834,689
1,252,033
Expenses
Utilities
Royalty Fees
Wages
Benefits
Rental Fees
mothly advertising
Interest
Other
Total Expenses
15,000
61,616
510,952
37,845
69,832
54,770
24,075
774,090
15,300
62,849
519,845
38,602
71,228
55,865
22,490
786,180
15,606
90,256
582,287
45,292
102,290
80,228
20,763
936,722
15,918
92,061
593,933
46,198
104,336
81,832
18,880
953,158
16,236
93,903
605,811
47,122
106,423
83,469
16,828
969,792
Net Income b4 tax
Income Taxes
Net Income
47,460
7,356
40,104
51,802
8,029
43,772
266,694
41,337
225,356
274,325
42,520
231,805
282,242
43,747
238,494
Retained Earnings
Beg RE
Net Income
Dividends
End RE
40,104
10,026
30,078
30,078
43,772
10,943
62,907
62,907
225,356
56,339
231,924
231,924
231,805
57,951
405,778
405,778
238,494
59,624
584,648
Balance Sheet
Year
Cash
Inventories
Franchise cost
Building
Equipment
Acc CCA
Total Assets
1
27,533
9,003
535,000
571,537
2
41,472
9,183
535,000
585,656
3
195,728
13,188
535,000
743,916
4
347,210
13,452
535,000
895,662
5
501,666
13,721
535,000
1,050,387
Acc Pay
LTD
Common Equity
RE
Total Liab & Equity
24,066
249,893
267,500
30,078
571,537
24,547
230,702
267,500
62,907
585,656
34,709
209,783
267,500
231,924
743,916
35,403
186,981
267,500
405,778
895,662
36,111
162,128
267,500
584,648
1,050,387
25%
Appendix Three: Balanced Sheet
38
Appendix Four: Statement of Cash Flow
Cash Flow
For the year ended
Net Income
CCA
Dividends
Inventories
Total Franchise Cost
Building
Equipment
Acc Pay
LTD
Common Equity
Net Cash Flow
Beg Cash
End Cash
1
40,104
10,026
(9,003)
(535,000)
24,066
249,893
267,500
47,585
2
43,772
10,943
(180)
481
(19,191)
35,825
3
225,356
56,339
(4,005)
10,162
(20,919)
266,933
4
231,805
57,951
(264)
694
(22,801)
267,385
5
238,494
59,624
(269)
708
(24,854)
273,703
47,585
47,585
83,410
83,410
350,344
350,344
617,729
617,729
891,432
39