Could a Burger King-Tim Hortons merger be a good thing? Photo: Marie-France Coallier/ THE GAZETTE Shouldn’t we be celebrating the proposed Tim Hortons-Burger King merger?
The global burger giant snapping up the Canadian icon for $12.5 billion, reportedly because Burger King wants to be headquartered in Canada.
But the self-effacing stereotypical response was quick and quixotic: We can’t sell the national bathroom to an American company.
The hand-wringing began in tweets and spread to political circles, where New Democrat MP Peggy Nash called “on the federal government for greater transparency and to ensure there is a net benefit to Canadians.”
She worried small towns might lose their only Timmies, or some of the 100,000 employed by the coffee company may lose their jobs.
All this misses a crucial point: this story isn’t about Tim Hortons being purchased (it was already owned by Wendy’s from 1995 to 2006 and now is publicly traded with shareholders around the world), it’s about a massive, multi-billion-dollar American company moving north.
Instead of stories about losing Tim Hortons, Niraj Dawar, a marketing professor with the Ivey School of Business said the narrative “could also be spun in terms of Canada acquiring a large global brand.”
“Canada’s tax rates must be really good,” he added. “We’re getting a very large company.”
Burger King wants to buy Tim Hortons because of what’s known as “tax inversion” in business circles. Essentially, a larger company like Burger King buys a small company — usually one smaller than the $8-billion Tim Hortons is worth — and then uses that anchor to move its operations to a cheaper tax jurisdiction. Time was, Canada lost headquarters to the U.S.; now a multinational giant wants to move here and we’re wringing our hands.
Dawar called Burger King’s interest “quite an endorsement” of Canada’s business climate, tax rates and economic confidence.
Prime Minister Stephen Harper takes a Tim Hortons order from a young boy.
Prime Minister Stephen Harper campaigned on the fact he helped bring Tim Hortons head office back to Oakville, Ont., in 2009 (his level of influence is debatable but the photo op still stands). With an election about a year out, the NDP shouldn’t be too quick to knock a follow-up deal that could prove a second boon to Ontario’s still struggling economy.
And some analysts say the deal isn’t even about the Canadian operations of Tim Hortons. Remember, this is a profitable company whose sales are increasing year-over-year.
Yes, it’s about Burger King’s taxes, in part. And yes, it might help Burger King crack into the breakfast market in Canada, where it’s never been able to fight McDonald’s and Tim Hortons. With familiar coffee, it might be able to lure a few more pickups and minivans full of bleary-eyed hockey players through its drive-ins. But mostly it’s about Tim Hortons teaming up with a like-minded brand to take America, and then the world.
“Tim’s has played well on the Canadian [psyche]… I think the Americans look at it and go, ‘what is this’?” said Doug Fisher, president of FHG International Inc, a food services and franchise consultation. He said Tim Hortons has “saturated” Canada with more than 3,500 stores but “they have to figure out how to penetrate the U.S.” where they could reach 35,000 stores with the same level of penetration but only have about 600 right now.
“With Burger King, they’ll figure out the Americanization of what they need to do,” Fisher said, adding the chain is a better fit than Wendy’s, because “it was a better brand than Tim’s in terms of quality and market positioning.”
He added, “Tim Hortons and Burger King focus and cater to very similar markets and they’ll be able to expand the brand in the U.S. around the world.”
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