Merger Conditions Could Boost Burger King’s Image in Canada

UPDATE 11 a.m. CST: Tim Hortons shareholders have approved the chain’s takeover by Burger King, The Globe and Mail reports.

The Tim Hortons-Burger King merger is one step closer to completion after the Canadian government signed off on the deal last week.

Conditions attached to the deal’s approval could ease any hard feelings harbored by Canadians of the takeover of their iconic coffee shop. Approval is still required by Tim Hortons’ shareholders, with a vote scheduled for December 9, and according to a joint statement, the two companies anticipate finalizing the deal on December 12.

In August, Burger King announced plans to acquire Tim Hortons and relocate its headquarters to Canada in a more than $10.5 billion deal. In the U.S. the story has focused on Burger King’s lowered tax obligations, while a Canadian study suggested debt financing required for the deal could force layoffs of more than 700 Tim Hortons employees.

Following the approval of the deal last week, Industry Minister James Moore issued a statement listing conditions of the approval and aimed at assuaging some of Canadians’ fears. According to CBC News, conditions include:

  • Maintain 100% of Tim Hortons franchises across Canada and preserve the chain’s charitable work
  • Expand in the U.S. and globally faster than initially planned
  • Maintain current levels of Canadian franchisee rent and royalty structure for five years
  • Manage Tim Hortons as a distinct brand with no co-branding of any locations in the U.S. or Canada
  • Ensure Canadians represent at least half of the membership of Tim Hortons’ brand board of directors

We’ve previously discussed the benefits of the deal, and many of the conditions are in line with positives such as gaining a competitive edge, global growth and improving customer loyalty.

McDonald’s is a top competitor for both Tim Hortons and Burger King in  Canada and in the U.S. The marriage of Burger King and Tim Hortons could help Burger King compete at breakfast with the attraction of Tim Hortons’ premium-blend coffee and help Tim Hortons capture visits beyond breakfast. In Canada, coffee drives fast-food visits, but consumers visit quick-service restaurants most often at lunch, according to Technomic’s 2014 Canadian Future of LSR: Fast-Food and Fast-Casual Restaurant Consumer Trend Report.

Keeping the love alive between Tim Hortons and its customers through maintaining staffing and charity work can improve Burger King’s image in Canada as well. Technomic finds these emotional connections and demand for corporate social responsibility are especially important to Millennials.

Even with the conditions outlined by the Canadian government, the merger of Tim Hortons and Burger King remains a solid venture. Looking forward, the merger’s success will hinge on how quickly the two can begin working together to put the company in the best position for continued growth in North America and beyond.

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Patrick Noone

With more than 15 years of experience in the research/consulting industry, Patrick Noone, Executive Vice President, Business Development, is integrally involved in the sales, development and marketing of Technomic's online resources, reports and custom studies—tools that provide clients with actionable industry data that supports their strategic and tactical business planning processes. He also manages Technomic's Business Development and Client Service teams.

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