Tim Hortons, known as 'Canada's national coffee,' will intensify its franchise business in Korea starting this year. After entering the Korean market, it has operated primarily company-owned stores for two years, but this is interpreted as a move to accelerate store expansion through franchising. While it boasts a market share larger than Starbucks in North America, it currently has only about 20 stores in Korea. It remains to be seen whether its premium strategy, which differs from the local market in Canada, will resonate with consumers here.
According to industry sources on the 15th, Tim Hortons is a coffee and donut brand that originated in Hamilton, Ontario, Canada, in 1964. It currently operates over 6,000 stores in 19 countries worldwide. In Canada alone, it has over 4,000 locations, which is 2.5 times more than Starbucks. Along with its affordable and friendly image, coffee and donuts are signature items, making it a brand deeply integrated into the daily lives of Canadians as a place to quickly enjoy a meal.
Tim Hortons landed in Korea in December 2023, starting with its flagship store in Gangnam-gu, Seoul. In Korea, BKR is responsible for managing Tim Hortons along with Burger King. When it opened its first store, Tim Hortons stated, "We will actively expand and aim to open 150 stores within five years." Currently, the number of Tim Hortons stores in Korea stands at 23. It appears to be concentrating its locations in key commercial areas within Seoul, such as Gangnam Station, Seolleung Station, and POSCO Street, to maximize brand exposure.
This year, Tim Hortons will gradually begin expanding its franchises. Earlier, Tim Hortons registered its franchise business information disclosure statement with the Fair Trade Commission on April 1. Four months later, on the 22nd, it will hold a franchise business briefing for prospective franchisees at Somerset Palace in Jongno-gu, Seoul. The session will introduce the brand philosophy, opening procedures, and revenue structure, along with offering entrepreneurship consultations.
However, there are opinions suggesting that it's uncertain whether Tim Hortons will succeed in Korea. In fact, in June, it closed a company-owned store in Incheon Cheongna. The store, which opened in April last year, closed its doors just over a year later.
One reason why Tim Hortons has not achieved notable success in the Korean market is interpreted as its premium strategy, which contrasts with its approach back home. In Canada, a medium Americano is around 2,500 won (approximately 2.79 Canadian dollars), but the same menu item costs 4,000 won in Korea. The issue lies in the variety of options available in Korea, including low-cost franchises like Ediya Coffee, Mega MGC Coffee, and Compose Coffee, as well as unique independent cafes.
For instance, the price of an Ediya Americano is 3,200 won, while Mega MGC Coffee, Compose Coffee, and Baekdabang offer theirs at around 2,000 won. Indeed, the growth trend of low-cost coffee brands in Korea has been steep. As of late last year, the number of Mega MGC Coffee locations was reported at 3,400. The number of Compose Coffee stores also reached approximately 2,800. Tim Hortons' stance is that menu prices vary by country and are determined based on a comprehensive review of the economic level, market conditions, customer needs, and operating expenses.
One consumer noted, "The coffee doesn't taste exceptionally good, nor is it cheap. While they sell donuts in-store, it's ambiguous to consider it a donut specialty shop," adding, "Additionally, there are several famous specialty shops like Dunkin' Donuts and Cafe Noted, as well as Old Ferry Donuts and Randy's Donuts." Unlike in North America, Korean consumers have easy access to not just large franchises but also unique small cafes, dessert specialty shops, and roaster cafes, suggesting that for an international brand to succeed in Korea, it needs distinctive features.
Setting a condition to open large stores of at least 50 pyeong (165 square meters) could pose an obstacle to store expansion. An industry insider stated, "Tim Hortons' strategy is to provide a space where customers want to feel comfortable at any time, but rental costs will likely be significant," adding, "Since they prepare the donuts and sandwiches directly in the store, the labor costs are also relatively higher compared to other brands."
The growing liabilities of Tim Hortons and BKR, which operates Burger King, could also restrict the speed and scale of brand expansion. According to BKR's audit report, last year BKR's revenue reached 792.7 billion won, up 6.4% from the previous year. Operating profit rose 60.4% to 38.4 billion won. However, liabilities also increased during this period, from 360.1 billion won to 436.6 billion won, marking a 21.2% rise. Last year, it spent 20.1 billion won solely on interest expenses.
To recreate the image of a national coffee brand built up in Canada, simple store expansion may not be enough for Tim Hortons in Korea. An industry official noted, "To widen consumer touchpoints through limited-time menu items, collaboration menus, and price promotions, more active local customized menu development and marketing are necessary," stating further, "It seems a new strategy tailored to Korean consumer tastes and trends is needed."