OAKVILLE Ontario Tim Hortons Inc., the Canadian coffee-and-doughnuts chain, said it might shutter underperforming locations in southern New England if traffic and sales there do not improve.
In a recent filing with the U.S. Securities and Exchange Commission, the 3,000-unit chain, which operates some 340 units in the United States, said it faces "intense competition from one highly penetrated competitor in the Southern New England market." Dunkin' Donuts, a subsidiary of Dunkin' Brands, is headquartered in Canton, Mass.
Three years ago, Hortons secured a presence in the area by outbidding Dunkin' for Bess Eaton Donut Flour Co., operator of 42 Bess Eaton doughnut shops in Rhode Island, Connecticut and Massachusetts. The $41.6-million purchase increased Hortons' U.S. store base by 23 percent at the time, to 228 restaurants.
In the securities filing, Hortons said the stores were not performing at "a level expected by the company based on the length of time." It cautioned investors that if it is not able to improve customer traffic and the average sales of the units, "the company will review the long-term viability of restaurants located in certain of these markets."
Tim Hortons has said it wants to expand its presence in the United States, which currently generates about 9 percent of its $1.66 billion in annual revenues. The chain said it plans to have 500 U.S. stores by the end of 2008. Dublin, Ohio-based Wendy's International spun off Tim Hortons as a public company in early 2006.
The chain, which is about 97 percent franchised, reported an operating loss in the first quarter ended April 1 of $4.12 million, compared with a profit of $393,000 for the year-ago period.