Tim Horton’s is a popular Canadian franchise, serving up coffee and donuts since 1964 in Hamilton, Ontario. Founded by Canadian Hockey legend Tim Horton and Jim Charade, the two came up with the concept after a failed venture in hamburger restaurants.
Just three years later, Ron Joyce became the first franchisee while also becoming a partner with Tim Horton.
Today, the Tim Horton’s Franchise is famous for its coffee and donuts in Canada and has also made its way into the United States. The company has over 700 locations today and is owned by Restaurant Brands International along with Popeyes and Burger King.
Do you love coffee and donuts and maybe looking to purchase a franchise but also wondering what it would cost? We reviewed the Tim Horton’s Franchise Disclosure Document and found the estimated cost to start operating a Tim Horton’s restaurant ranges from $299,550 to $1,363,800 for a Non-Standard Shop and $1,009,900 to $2,046,300 for a standard shop. This includes the initial franchise fee of $50,000 for a standard shop, $25,000 for a non-standard shop, and $15,000 for a kiosk.
The ongoing royalty fee paid to the franchisor is between 4.5% and 6% of gross sales. The ongoing advertising contribution is 4% of gross sales.
How Much Money Can you Expect to Make from a Tim Horton’s Franchise
So you decided to drop $1,500,000 on a Tim Horton’s, but the real question is how much money will you make on that investment? According to our review of the Tim Horton’s Franchise Disclosure Document, the average store brings in around $1,000,000 in sales and reports indicate around 18% EBITDA margins (before G&A, taxes or interest paid). Therefore, the average franchisee likely makes around $180,000 in EBITDA.
If you take the $150,000 of EBITDA and divide by an average cost of $1,500,000 the return on investment comes out to 12% (before paying any administrative costs, interest or taxes)
To determine whether this is a good investment, you must look at your other investment opportunities. If you don’t have the opportunity to invest elsewhere at greater than 12% then Tim Horton’s may be a good investment opportunity for you.
Tim Horton’s Estimated Initial Investment Cost
The total estimated cost to start operating a Tim Horton’s restaurant ranges from $299,550 to $1,363,800 for a Non-Standard Shop and $1,009,900 to $2,046,300 for a standard shop. Like most franchise concepts, the majority of costs are associated with building costs and equipment costs. Here is how the initial investment costs break down:
- Initial Franchise Fee: $50,000
- Real estate taxes, personal property taxes and CAM: $5,000 to $22,000
- Equipment: $325,000 to $415,000
- Planning and Development and Design Costs: $20,000 to $100,000
- Site Development Costs: $200,000 to $500,000
- Building Costs: $350,000 to $800,000
- Training: $7,900 to $11,800
- Start-up Supplies and Initial Inventory: $15,000 to $30,000
- Professional and License Fees: $1,500 to $10,000
- Development Assistance Fee: $5,000 to $25,000
- Insurance: $2,500 to $21,500
- Initial Advertising and Promotion: $3,000 to $6,000
- Security Deposits: $0 to $15,000
- Additional Funds: $25,000 to $40,000
- Total Initial Costs: $1,009,900 to $2,046,300
How much money does a Tim Horton’s Franchisee Make?
According to our review of the Tim Horton’s Franchise Disclosure Document (FDD), the average store brings in around $1,000,000 in sales and reports indicate around 18% EBITDA margins (before G&A, taxes or interest paid). Therefore, the average franchisee likely makes around $180,000 in EBITDA.
Tim Horton’s Net Worth Requirement
Maybe you can find the money to build a new Tim Horton’s, but along with that Tim Horton’s is also going to check out your net worth. The current net worth requirement to become a Tim Horton’s franchisee is $1,500,000 along with $500,000 in liquid assets in order to qualify as a franchisee.
Tim Horton’s Royalty, Advertising and Other Ongoing Costs
The ongoing royalty fee paid to the franchisor is between 4.5% and 6% of gross sales. This amount is due on Thursday of each week based on the prior week’s gross sales. Franchisees may pay reduced royalties based on various factors. Here is how all these costs break down:
- Royalties: 4.5% to 6% of Gross Sales
- Advertising Contributions: 4% of Gross Sales
- Transfer fee: 5% of the full purchase price
- Smart Store Charges: $450 to $1,050 per month
Tim Horton’s Number of Locations
At the end of 2018, there were 727 locations. This included 727 franchised units and no company-owned locations. Here is how the trends have looked for franchised units: