Monday, February 7, 2011

Coffee in the Desert: Tim Horton's Expanding to Middle East.

Canada's very own Tim Horton's (TSE: THI) will be commencing some rather large expansion plans into the Middle East beginning this year.

There will be as many as 120 multi-format Tim Horton's restaurants opening up in association with Dubai-based Apparel Group. Five of the restaurants will be started in 2011. The 120 possible locations will be opening in the United Arab Emirates, Qatar, Bahrain, Kuwait, and Oman.

For shareholders of Tim Horton's this should be a good thing because the company will not actually be using its own capital or cash for the expansion. Apparel Group of Dubai will be financing the expansion and Tim Horton's will be receiving a royalty, or percentage of sales, in return for their branding and products. Essentially, it is a low risk, potentially high-reward scenario for Tim Horton's.

Of course, Tim's has plenty of room for expansion in the United States, where they have already been experiencing some troubles as stiff competition from Dunkin Doughnuts and McDonald's gives them a run for their money. But nonetheless, as a low-risk way to expand into a diverse market, it is a good strategy. The company will, however, have to make some definite adjustments if they hope to succeed in a very different culture. Apparel Group thinks that they can provide Tim Horton's with this needed expertise.

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