The operator of Tim Hortons in China closed 34 locations in the second quarter to improve the group’s profitability – a move that led to the brand’s first positive adjusted EBITDA.

Tims China’s revenue increased 6% quarter-on-quarter to RMB 366.8 million ($50.5 million) | Image credit: Tims China

Tims China achieved its first positive adjusted EBITDA after the second consecutive quarter of cost-cutting measures and store closures.

The Shanghai-based operator reported adjusted EBITDA of RMB4.1 million ($0.6 million) for the three months ended June 30, 2024, compared to a loss of RMB40.8 million ($5.7 million) in the second quarter of 2023. Tims China also narrowed its net loss to RMB46.4 million ($6.4 million) during the period, from RMB142.8 million ($19.8 million) in the first quarter.

“We reach this important milestone after achieving eight consecutive quarters of adjusted store EBITDA profitability, achieving our highest ever adjusted store EBITDA margin of 10.3%,” said Yongchen Lu, CEO of Tims China.

Tims China’s revenue increased 6% quarter-on-quarter to RMB 366.8 million (US$50.5 million), but remained well below the year-ago quarter’s record revenue of RMB 411.7 million (US$56.8 million).

After closing 15 low-revenue company-owned stores in the first quarter, Tims China reduced another 34 locations and opened a net one new store in the second quarter, bringing the company’s total to 907 stores in 71 cities.
The move is in stark contrast to the 149 net new store openings in the fourth quarter of 2023 and was key to increasing store profitability, according to Chief Financial Officer Dong Li. Year-over-year savings in food and packaging, rental costs, labor and staff costs also contributed to the improved profitability.

Delivery was the only cost item to increase during the quarter, up 10% year-on-year to RMB32.2 million ($4.4 million).

Digital orders, which include both delivery and mobile orders for pickup, now account for 86.5% of all transactions – up from 80% twelve months ago.

Founded in 2018 by Canadian restaurant group Restaurant Brands International (RBI) and New York-based private equity firm Cartesian Capital, Tims China opened its first Tim Hortons store in Shanghai in 2019.

The second-quarter results come nearly two months after RBI and Cartesian Capital agreed to invest up to $50 million in the joint venture. In announcing the investment, Tims Chia CEO Lu said “strengthening” the company’s balance sheet will help ensure its long-term success in China’s “highly competitive” branded coffeehouse market.