One of the biggest Canadian business stories of the past week – if not the past year – has to be the announcement last week that Burger King and private equity firm 3G Capital are purchasing Canada’s favourite coffee chain, Tim Hortons. The price: a whopper-sized $12.5 billion. According to the National Post, the combined annual sales of Burger King and Tim Hortons is over $23 billion (US$) with over 18,000 locations worldwide.
Tim’s fans, used to lining up for their double-double every day, may be wondering how this change will affect their coffee tradition? Will, for instance, they be able to purchase their favourite Tim’s coffee at Burger King locations? And, what will happen to those Wendy’s outlets conveniently co-located with a Tim’s franchise? Will The Burger King soon appear side-by-side with Tim Hortons, displacing the smiling, red-haired Wendy?
Meanwhile, the Financial Post reports that Burger King’s worldwide influence is good news for the Tim Hortons brand. The Post reports that Miles Nadal, from the major advertising firm MDC Partners Inc, believes that the combination of 3G Capital’s strong marketing orientation and Burger King’s large international presence, will help advance Tim Hortons as a worldwide brand. Of course, with branding, some Tim Hortons patrons may be fearing a change to the coffee chain they love. A Canadian Press story last week featured CusotmerLAB CEO, Jim Dahany, noting his concerns that this new business combination may raise concerns around the old rule of ‘if it ain’t broke, don’t fix it’.
1) What do you think were the main reasons why Burger King and 3G Capital decided to purchase Tim Hortons?
2) As an accounting student, what do you think will be some of the major accounting issues that will emerge from this business combination?
3) What concerns would you have around the rule ‘if it ain’t broke, don’t fix it’? In other words, what is it about Tim Hortons that you would say “Leave it alone. I don’t want to see it change”?