Vehicles line up at the Tim Horton drive thru shop on Dorval Rd. in Oakville, Ont. on Feb 15, 2022.Fred Lum/The Globe and Mail
The price of your double-double, doughnut or breakfast sandwich could soon be going up.
As supply chain pressures and rising commodity costs have pushed up food prices, the chief executive officer of Tim Hortons parent Restaurant Brands International Inc. said on Tuesday that those pressures have had an effect on menu prices at the company’s fast-food chains.
“We took price [increases] in 2021 at each of our brands, and given the level of commodity costs and labour inflation we’re seeing, we expect additional price increases in 2022,” CEO Jose Cil said on a conference call Tuesday to discuss the company’s financial results.
At Tim Hortons in Canada, menu price increases have tracked slightly below the increase in the consumer price index. And in the United States, RBI-owned Burger King has taken its popular Whopper burger off its discount menus.
“We look at all the different commodity increases – we look at the cost of lettuce, the cost of chicken, the cost of pork or beef or eggs or milk. And it all goes into that equation on pricing,” RBI chief corporate officer Duncan Fulton said in an interview Tuesday.
The rising cost of labour has also affected those decisions, as franchisees have had to pay more to attract workers. Menu prices differ in Canada – where the parent company sets them region by region – and in the U.S., where RBI provides guidance and can set caps on value items, but franchisees decide on prices.
“We do consumer research so that we don’t get too far out over our skis with the consumer. There’s a threshold of what customers will bear,” Mr. Fulton said.
The Toronto-based company reported on Tuesday that its profit nearly doubled in the fourth quarter, as its fast-food chains benefited from fewer restrictions related to COVID-19.
Restaurant Brands reported net income attributable to common shareholders grew to US$179-million, or 57 cents a share, from $91-million, or 30 cents, a year earlier.
RBI pointed to growth at Tim Hortons in Canada and Burger King in the U.S., as sales were affected more severely in previous waves of COVID-19 than they were in late 2021.
Comparable sales grew by 10.3 per cent for Tim Hortons in the three months ended Dec. 31, 2021, compared with an 11-per-cent decline during the same period the prior year. While sales at the coffee-shop chain are still down 2 per cent from the same period in 2019, that decline compared with prepandemic levels was not as steep as in previous quarters.
Tim Hortons has been affected by work-from-home measures during the pandemic, as fewer people picked up coffee and breakfast items on their way to the office. But traffic has been improving and has recovered from Omicron-related restrictions more quickly than in previous waves. Increasing sales of breakfast and lunch foods are offsetting the dip in morning coffee runs, Mr. Fulton said.
For example, the introduction of a steak-and-egg breakfast sandwich helped to push sales in the morning at Tim Hortons to a level higher than 2019 for the first time since the pandemic began. And a recent collaboration with pop star Justin Bieber to create a line of Timbits “was one of the more successful traffic-driving initiatives in recent memory,” Mr. Cil said on the call.
Burger King’s comparable sales were up 11.3 per cent, compared with a 7.9-per-cent decrease a year earlier. The company’s Popeyes Louisiana Kitchen chain reported comparable sales fell by 0.4 per cent, compared with a drop of 5.8 per cent in the fourth quarter of 2020.
RBI’s fast-food chains have benefited from the easing of pandemic-related restrictions in many jurisdictions but saw performance dip in locations where governments reintroduced lockdown measures – including as the Omicron variant began spreading late last year.
Quick-service restaurants were able to cope with restrictions more quickly than others in the industry, since such chains were already accustomed to serving customers for takeout, and many locations were equipped with drive-through lanes. RBI has been experimenting with changes to its drive-throughs to speed up orders and make it easier to pick up digital orders, Mr. Fulton said.
Traffic has recovered more quickly at rural and suburban locations as many people continue to work from home, he said, while locations closer to downtown are still performing at below prepandemic levels. “We view that as all upside, because that’s coming back inevitably, in the coming months,” Mr. Fulton said.
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RBI has also been affected by labour shortages, leading some restaurants to cut back on their opening hours or the services they provide.
Still, the growth in new restaurant openings accelerated in 2021, particularly for Tim Hortons and Popeyes. In total, the company opened more than 1,200 net new restaurants last year.
Total revenue grew by 13.8 per cent to $1.55-billion in the three months ended Dec. 31, compared with $1.36-billion in the same period the prior year.
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