Tim Hortons is looking to switch to Canadian suppliers to buy items it currently sources from the United States, as the threat of tariffs forces businesses to rethink their supply chains.

“The vast majority of goods that we use here in our restaurants in Canada are from Canada, really the vast majority,” Axel Schwan, president of Tim Hortons Canada & U.S., said in an interview. But he added that the company is evaluating how to reduce the impact on franchisees of potentially higher costs for U.S. imports should the U.S. proceed with punishing 25-per-cent tariffs, leading to retaliatory measures by the Canadian government.

While Mr. Schwan declined to specify which goods Tim Hortons plans to source from Canadian suppliers, the company imports some of its packaging from the U.S. “We are ready for this, to minimize the cost impact all around,” Mr. Schwan said

Keeping costs in line has been just one element of a push to improve franchisees’ profitability – something Tim Hortons’ parent company, Restaurant Brands International Inc. QSR-T -2.04%decrease, has made a priority since acknowledging significant declines two years ago. The Canadian coffee-and-doughnuts chain has also worked to boost the bottom line by drawing in more customers with new menu items, improved food quality and faster service.

On Wednesday, Toronto-based Restaurant Brands reported that in 2024, the average Tim Hortons restaurant in Canada made $305,000 in earnings before interest, taxes, depreciation and amortization (EBITDA), a nearly 9-per-cent increase from the prior year.

While Tim Hortons restaurant owners still have not returned to theprofitability levels seen in 2018, when the average Canadian location made $320,000 in EBITDA, the 2024 number is a considerable improvement after average EBITDA declined to $220,000 in 2022.

“Supporting our franchisees’ profitability remains foundational to our success,” Restaurant Brands chief executive officer Josh Kobza said on a conference call Wednesday to discuss the quarterly results.

Some of those franchisees are now looking to expand, and the company plans to open more Tim Hortons locations in Canada in the year ahead. The chain already has nearly 4,000 restaurants across the country, but sees opportunity for growth in rural areas and in Western Canada, Mr. Kobza said.

As it has worked to improve the economics of its restaurants, the company has also shuffled ownership of some locations across the fast-food banners it owners – including Tim Hortons – by shifting underperforming franchises to “stronger, more engaged operators,” Mr. Kobza said.

Restaurant Brands beat analysts’ estimates for quarterly revenue, led by continued growth at Tim Hortons as well as customer demand for value meals at its Burger King chain.

The company reported its 15th quarter in a row of growth in traffic at Tim Hortons. For 2024 in total, traffic grew by 3 per cent. The chain’s comparable sales – an important metric that tracks sales growth not tied to new store openings – rose by 2.2 per cent in total in the fourth quarter ended Dec. 31, 2024, and was up 2.5 per cent in Canada.

For the full year, Tim Hortons comparable sales were up 3.9 per cent compared with 2023, led by 4.3-per-cent growth in Canada.

The chain saw strength both in breakfast sales, helped by a $3 hot breakfast sandwich offer, and growth later in the day, aided by last spring’s launch of flatbread pizzas. It has also made progress on speeding up drive-through times on weekday mornings, with the average car spending just 28 seconds at the window, Mr. Kobza said. He added that every second shaved off that time generates roughly $30,000 in additional annual sales for each restaurant.

Restaurant Brands also reported growth at Burger King, which is in the midst of a multiyear turnaround plan to improve sales and profitability. Burger King’s comparable sales grew by 1.1 per cent in total in the fourth quarter, and by 1.5 per cent in the U.S.

Comparable sales were roughly flat in the fourth quarter at both its Popeyes Louisiana Kitchen and Firehouse Subs chains.

In addition to improvements at Tims, franchisee profitability also grew at Popeyes last year, to US$255,000 average EBITDA per U.S. location, compared to US$245,000 in 2023. Average EBITDA was flat for Burger King in the U.S., at US$205,000, and declined slightly at U.S. locations of Firehouse Subs, to US$90,000 compared to US$110,000 the year before.

Mr. Kobza noted that at Burger King, the top franchisee operators recorded profits that were 35 per cent higher than the average across the chain, and added that the company is working on “transitioning disengaged franchisees out of the system,” and attracting top performers.

“Over all, we’re very pleased with the improvements we delivered at Tims and Popeyes and we’re working to return to growth at Burger King and Firehouse in 2025,” Mr. Kobza said.

Restaurant Brands’s total revenue grew to US$2.3-billion in the fourth quarter, a 26-per-cent jump compared with the same period in the prior year. That exceeded analysts’ average estimate of US$2.29-billion, according to the data compiled by S&P Capital IQ.

The company’s fourth-quarter net income fell to US$361-million or 79 US cents in diluted earnings per share, compared with US$726-million or US$1.60 the year before. However, the 2024 decline was partly affected by a large income tax benefit in the fourth quarter of 2023. Accounting for that change and other adjustments, the company reported that adjusted net income grew to US$369-million or 81 cents per share in the quarter, compared to US$340-million or 75 cents per share in same period the prior year.

Last modified: February 20, 2025