* To remodel majority of restaurants by year-end
* Sees double-digit sales growth as a result of overhaul
* McDonald's, Tim Hortons compete more closely
(Adds background, comments from executive and analyst)
By S. John Tilak
TORONTO, Sept 7 McDonald's Corp (MCD.N) will
spend $1 billion renovating its stores in Canada, the
restaurant chain said on Wednesday, as competition with Tim
Hortons Inc THI.TO heats up.
The Canadian unit of the Oak Brook, Illinois-based company,
which has been operating for 44 years, plans to refurbish most
of its 1,400 restaurants by the end of 2012, with more than
half finished by the end of this year.
McDonald's has been outperforming its fast-food rivals
globally, reaping the benefits of broadening its low-cost food
menu, introducing premium items such as espresso-based coffee,
and sprucing up its restaurants.
The company plans new exterior and interior designs in
Canada, including fireplaces and flat-screen televisions in
some stores. It expects the changes to encourage customers to
linger and make more purchases.
"We're in the midst of a brand transformation. It's time to
make our restaurants more contemporary and comfortable," John
Betts, chief executive of McDonald's Canada, said in an
He said the renovations are also aimed at increasing the
chain's capacity to serve customers its expanded menu. He sees
close to double-digit sales growth at the restaurants when the
changes are complete.
The news comes as McDonald's has been promoting its coffee
aggressively, while Tim Hortons, Canada's No. 1
coffee-and-doughnuts chain, has been beefing up its food
McDonald's has doubled its coffee business in Canada in the
last two years, and its breakfast business has grown by 40
percent in the last three years, Betts said. It has given away
15 million cups of free coffee, drawing in more breakfast
customers, he said.
Tim Hortons continues to dominate breakfast sales, however,
while McDonald's has a slim lead in the lunch category.
The revamp will have a negligible impact on Tim Hortons,
though McDonald's could take share from other players, Edward
Jones analyst Brian Yarbrough said.
Tim Hortons does not want its customers to linger in its
restaurants and that strategy is working well for the company,
said Yarbrough, who added he sees little need for Tim Hortons
to respond to the McDonald's move.
Oakville, Ontario-based Tim Hortons is now targeting the
U.S. market, where it is investing heavily in marketing and
promotions. It reported strong quarterly U.S. sales last
Shares of Tim Hortons, which has almost 3,200 restaurants
in Canada, were up 1 percent at C$46.30 on the Toronto Stock
Exchange on Wednesday afternoon. McDonald's shares were up 0.3
percent at $89.05 on the New York Stock Exchange.
(Reporting by S. John Tilak in Toronto and Lisa Baertlein in
Los Angeles; editing by Peter Galloway)