TIM HORTONS & STARBUCKSLooking in from the Outside, an Investor’s Perspective

Presented for Dena Jantzen, CEO/Instructor

Presented by

The Charter “Guys”

INTRODUCTION TIM HORTONS -- BACKGROUND

• Tim Horton (Tim), “Hockey Night in Canada Legend”

• 1964 Age 34 founded Tim Hortons• 1967 Partnered with Ron Joyce (Ron)• 1974 Tim’s unexpected death (MVA)• 1974 Ron continues Tim’s legacy

The Charter "Guys"

INTRODUCTIONSTARBUCKS -- BACKGROUND

• 1971 opened Pike Place Market, Seattle• Originally sold coffee beans (home brewing)• Howard Schultz, now CEO – visionary• 1980 opened second store• 2003, over 7,500 worldwide locations

The Charter "Guys"

TARGET MARKET

• THE “EVERYDAY HERO”

• Young, old, students – our Soldiers• Modest/fixed incomes• Densely populated areas (blanketing)

The Charter "Guys"

MARKETINGTIM HORTONS – THE FOUR “P’s”

• “Always Fresh” coffee (double/double) and baked goods/breakfast/luncheon sandwiches (basics)

• Competitive pricing• Highly dense underserviced markets• “Roll up the Rim to Win”, Jingles

The Charter "Guys"

TARGET MARKETSTARBUCKS

• Ages 18 – 49 • Some post-secondary education• Middle/upper classes (high price point)• The “third place”• Consumer looking to be “seen”

The Charter "Guys"

MARKETINGSTARBUCKS – THE FOUR “P’s”

• Freshly brewed coffee and extensive baked goods, breakfast/lunch

• High price point• 25,000 people, corner locations, median annual

household income $40,000+• “Word of mouth, new Via TV commercials, print

adds/billboards

The Charter "Guys"

• HISTORICAL• Until August 8, 1995 managed

by TDL• Wendy’s share interest owned

by TDL, not Tim Hortons• TDL largest Wendy shareholder

following merger

• Wendy’s made IPO selling off 18% shares

• Remaining shares spun off to THD Inc.

Organizational StructureTIM HORTONS

The Charter "Guys"

• Tall structure with Moderate Span of Control

• Int’l head office in Oakville, ON• 700+ employees• Departmentalization by

function/geographic location

Organizational StructureTIM HORTONS

The Charter "Guys"

Tim Hortons Organizational Structure

TIM HORTONS’ ORGANIZATIONAL STRUCTURE

The Charter "Guys"

• Flat top hierarchy.• President/CEO: Howard

Schultz (Schultz)• 11 managers reporting to

Schultz with different focus• Focus differentiated by

function/geographic location

• Matrix structure though not defined as such

• Teams assembly – individuals from different departments

• Employee/2 bosses (project manager/department head)

Organizational StructureSTARBUCKS

The Charter "Guys"

Tim Hortons Organizational Structure

STARBUCKS’ ORGANIZATIONAL STRUCTURE

The Charter "Guys"

• TIM HORTONS• Tall• Functional/Geographic• Matrix-Hybrid• Wide

• STARBUCKS• Flat• Functional/Geographic• Hierarchical Line-&-Staff • Moderate

Organizational StructureCONTRAST

The Charter "Guys"

SOCIAL RESPONSIBILITY

• TIM HORTONS• “Always Fresh” guaranteed• accountable reporting• creating new jobs/wealth • ethical work standards • Children’s Foundation/kids

hockey• “National Organization for

Marriage” • waste/energy/distribution

fleet emission reductions (by

• STARBUCKS• employee (partner)

community volunteers• environmental Responsibility

• Recycling, energy, water – company goals

• CAFÉ – Coffee and Farmer Equity

The Charter "Guys"

FINANCIAL

Tim Hortons (THI)TSX

Starbucks (SBUX)NASDAQ

Q1(2007)

Q2(2008)

Q3(2009)

Q1(2005)

Q2(2006)

Q3(2007)

Current Ratio (Liquidity)

$1.23 $1.27 $1.45 $0.79 $0.80 $1.29

Debt to Equity (Leverage)

.33% .32% .29% 1.34% 1.28% .83%

Earnings Per Share Ratio (Performance)

$931 $983 $59 $911 $450 $558

Return on Equity Ratio(Performance)

27% 25% 29% 29% 13% 13%

The Charter "Guys"

FINANCIAL $1,000 TO INVEST, WHICH ONE AND WHY?

TIM HORTONS• Corporate ethical position• Steady (assertive) growth plans• High liquidity• Record sales during tough times• Low debt ratio• High annual equity

The Charter "Guys"

STARBUCKS• Corporate ethical position• Slowed/cancelled expansion plans• Unadjusted prices … declining

sales/recession• Tackle decline -- Generic (Seattle’s

Best brand)• 2009 liquidity strength recovery • 2009 High debt to equity rating --

decreased borrowing

CONCLUSION$1,000 TO INVEST, WHICH ONE AND WHY?

• both organizations successful• Tim Hortons smaller but better organization to

invest in:• expected to continue to prosper… take

market from Starbucks • their success low prices, quality products…• recession not yet over• expected continued success

The Charter "Guys"

We learned, supported,got the job done by doing the right

things, the right way to be effective , efficient and successful!

The Charter "Guys"

QUESTIONS

The Charter "Guys"