How to Waste 100 Million Dollars

In the town where I live there are several places to buy coffee. The one closest to me, the Lucky Bean Cafe, which does happen to be by far my favourite, is a locally owned independent shop in a heritage building. The place is less than a year old, and the owner is working hard to succeed. It’s not easy in a smaller market where there are other coffee shops owned by either well established regional chains or large multinational corporations. Offering better coffee, better food, better decor, better atmosphere, and at reasonable prices, is an excellent start.

One small but significant promotional thing that the Lucky Bean offers is a loyalty card. Seven stamps and you get a free hot beverage of your choice. It’s not flashy, it’s simple and effective. McDonald’s, a fast food chain which you may have heard of, has been doing much the same thing for years.

While Mickey D’s is of course the largest restaurant company on the planet (in terms of revenue, at least, Subway actually has more locations worldwide), it’s certainly not the largest coffee seller in Canada. That title of course belongs to Tim Hortons, the Great White North’s 700 pound gorilla of coffee and donuts. There’s far more Tim Hortons locations in Canada compared to McDonald’s, somewhere in the ballpark of 4000 stores. That’s a lot of double doubles.

The Timmies location in my town is open 24/7, and it’s rare to go past at any time of day or night without seeing a car in the drive through lane. They sell a lot of coffee, and that’s without even really trying. It’s the default place to get a coffee in Canada, or really, anywhere lots of Canadians congregate. They opened a location in Khandahar when our military was conducting operations there, knowing that the Canadian forces would be a ready and immediate customer base. Opening a Tim Hortons franchise is essentially a licence to print money in this country.

You would think this would be hard to mess up, but lately it really feels like they’re trying to do exactly that. In case you’ve been living under a rock, Tim Hortons started offering a loyalty program last year. The formula was familiar — make seven purchases, remembering to scan your red card, and get a free coffee or a baked good on your eighth visit. That doesn’t seem complicated at all, and apparently 7.5 million customers took advantage of the program.

Sounds like a win to me. Only it isn’t. Turns out that giving away lots of free coffee and muffins isn’t great for the bottom line. Sales are down, possibly by as much as 150 million dollars, and much of that is due to the fact that people are coming in the same as always, only they aren’t spending more. They’re enjoying their occasional freebie, and why wouldn’t they? I have one of those cards, and while I’m not in to Timmies every day or anything, I’ve certainly used it for free items. Has it inspired me to spend more money or visit more often? Nope. And I don’t think that my experience is unique, my local Tim Hortons does not seem to be any busier than before the loyalty program began.

Tim Hortons has another promotional program, one that they have offered for years, which is their Roll-up-the-Rim contest. This has long been beloved by Canadians, and now they have changed it, first delaying the start of the program and shortening the offer period, and offering virtual roll-ups to reduce the amount of garbage produced. Of course, with the Corona virus situation no one would want to handle used paper cups, which are about as unsanitary as a half-eaten Timbit.

The contest had long driven business in the slower winters months, but now it remains to be seen if people will be as interested in coming in to get their double double when they can’t so readily win a free coffee, or donut, or maybe a bicycle or a car, in particular the older demographic which makes up a considerable portion of the Timmies’ customer base.

To further add to the confusion, the buy-seven loyalty program is also changing to a points based system that adds a level of complexity which clients may not appreciate. Sure, loyalty programs can be complicated, Air Miles and PC Optimum are hardly simple, but people care more about travel and groceries than they do about coffee and muffins. I have serious doubts that people will be willing to buy in to this new enhanced program.

Maybe that’s the idea. Perhaps top management has tired of giving away so many free things. Perhaps they have also overestimated the patience of customers and franchisees.

For the last number of years, Tim Hortons has made a valiant effort to expand their menu, and thereby their reach, into sandwiches, burgers, sugary drinks, more elaborate baked goods. In doing so, they have lost focus on doing their core business well. You can only be the most successful coffee seller in Canada for so long if you can make an excellent cup of coffee, and Timmies hasn’t manged that for years.

And it’s not just coffee. Robin’s Donuts, half a mile up the road from our local Timmies, has far better baked goods, McDonald’s has better coffee, and the Lucky Bean is better than both, plus it has a pleasant atmosphere. The only thing Tim Hortons has going for it is a fast and efficient drive through window, and the fact that they are the default.

They’ve lost over 100 million dollars on a loyalty program that hasn’t garnered any new business, and hasn’t gained any client goodwill. That’s three dollars for even man, woman, and child in this country. Frankly, that kind of squandered cash is normally only achievable by government, typically on the national level. Tim Hortons would have been better served to send everyone in the country a gift card in the hopes that some new customers would come in and spend some real money.

At this point, it’s time to cut the losses and get back to doing coffee and donuts and doing them well. Or maybe it’s time for all the franchisees to band together and buy out the chain from the corporate overlords. Because if something doesn’t happen, and happen soon, I can see the writing on the wall.

In any case I’m planning on supporting my locally owned independent coffee shop. They care about making a good cup of coffee, and they actually appreciate my business. Consider the alternatives the next time you feel the need to get a double double.