How Much Does a Tim Hortons Franchise Cost and Profit?

With Tim Hortons being one of the most successful Canadian franchises, I’m willing to bet that you have wondered about the Tim Hortons business.  that is specifically how much revenue/profit a single location generates and how much it costs to start one up.

While it’s apparent that owning a Tim Hortons is like having a money printing machine, most do not realize the costs involved, and how much an owner really takes home.  When doing my research on the costs, I was surprised with how much the parent company takes off the top.  I always thought that franchises had to pay in about 8%-9% royalty which includes marketing.  But the numbers  that I’ve been coming up with is in the range of 17% – 19% on gross sales!  Then I realized that the Tim Hortons parent company actually builds the property and owns the land, so a large portion of the total royalty expenses is the rent charge.

How much does a Tim Hortons Franchise Cost?

As with any franchise, since the franchisee is getting a business that has track record of success, there is an added layer of cost.  Not only do they need to cover typical operating expenses, Tim Hortons franchises need to pay a weekly royalty, monthly marketing fee (similar to royalty), and monthly rent.  If that wasn’t enough, the start up costs are quite high.  As mentioned, Tim Hortons will build the location, but the franchisee is responsible for the startup equipment and the initial franchise fee.

Here is a tally of the ongoing costs from the Tim Hortons website:

  • a weekly Royalty fee of 4.5% of gross sales for the term of the License;
  • a monthly Rental fee (which is the greater of a fixed minimum rent or 8.5% of gross monthly sales);
  • a monthly Advertising levy of 4% of gross sales for the term of the License.

This works out to be a 17% of total gross sales per month – that is before any other expenses are paid!

Here are the startup costs:

The cost of a full Canadian franchise varies from $430,000 to $480,000* (CDN$) (plus all applicable taxes). At least $144,000 of the franchise cost must be unencumbered (cash or liquid assets), in addition to $50,000 in working capital (also unencumbered). The remaining amount may be financed through the chartered banks, upon approval of a franchise.

Included in the cost of a franchise is the following:

  • all equipment, furniture, display equipment and signage
  • 7-week training program in the Oakville, ON Tim Hortons University
  • a store opening crew to assist in the opening of a Tim Hortons restaurant (for a maximum period of two weeks)
  • the use of all Tim Hortons Manuals
  • right to use the Trademarks and Trade names
  • support from the head Office personnel

I’ve read on the U.S Tim Hortons site that they offer an incentive program for new franchisees.  It doesn’t appear to be available to Canadians, but the offer is basically a reduced royalty for 24 months (4.5% -> 2.5%).

How much does a Tim Hortons Franchise make?

Information on franchise profits was a little harder to come by as it’s not openly shared information.  From my digging around, I’ve read that average franchisees (in 2006) made around 16%-20% profit after all expenses but without real numbers for backup.  However, the big court case between franchisees and the parent company in 2011 made some of the numbers public.

In 2008, the average Tim Hortons franchisee profited $265k after all expenses.  We don’t know the actual average revenue numbers for 2008 to earn the $265k, but they disclose that between 2002 and 2008, the average franchise earned (before interest and taxes) $1.5M which fits franchisee profit range of 16%-20%.

If you know more about the Tim Hortons franchise, please share!

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FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Harvey McQuestion
1 year ago

More input please

Wachucha
3 years ago

The profitability of an average Tim Hortons store in Ontario is badly affected by the minimum wage hike. The stores operating at lower margins would probably go in losses if prices are not increased in near future. Consumers have disliked TH Franchisees cutting staff benefits to deal with this overwhelming increase in labor cost. Whether it damages the brand equity is to be seen in future.

Kris
3 years ago

Lol at people asking about how to be a franchise owner. Clearly you don’t have the tenacity to become a franchise owner if you can’t even look up the website on your own.

Xs
3 years ago

Hey there is a mistake in the royalty percentage math. The first one is 4.5% weekly which means around 18% monthly + 8.5% + 4% = 30.5% per month.

D
3 years ago
Reply to  Xs

No. 4.5% per week does not equate to 18% monthly. According to your math the 4.5% weekly would be 234% per year (52 x 4.5%).

If the fee is 4.5% per day, at the end of the week it would total 4.5% of the week’s earnings. Same for the month or year.

Mike
3 years ago

what are any owners general hours that you have waged out per week for your employees at one store? looking for some info on Mark Holly franchise owner in Minnesota area.

Passivecanadianincome
4 years ago

Great post, I have always wondered stuff like this. The lineups at drive trough’s are insane. Seems like a money press. I would hate the lack of power tho. More strawberry vanilla doughnuts! haha

terry
4 years ago

First yes Tim Horton’s does have to approve who you sell to there is a clause in the lease, usually means they will buy at a lower amount from you and then resell
here is a breakdown all are at the lowest amount
17 % rent royalties advertising (not including maintenance costs paid yearly)
30 % labour
32 % food and paper
7 % utilities
2% – 4% wastage not everything sells

does not include management payroll (supervisors, manager and yourself)
again does not include the cost renovate every 4-5 years paid by the owner
min $500,000

terry
4 years ago

does not include the cost renovate every 4-5 years paid by the owner
min $500,000

Paul H
4 years ago

I heard that as a franchisee you can not list your Tim Hortons business for sale when you’re ready to retire. Corporate has the first right of refusal to purchase it at depreciated value of assets. Even if you had a qualified franchisee or a huge investor to buy you out, Tim Hortons corporate will not match the same offer. They have a clause in their contract that prohibits that. Can somebody tell me if this is accurate or if there is a way around it?

Paramveer Singh
4 years ago

Hi I am interested in buying Tim Horton. So Please suggest me how i can apply for that application.

Thanks