Tim Hortons will pilot a new restaurant concept as part of a large expansion.

The Tim Hortons coffee chain plans to add 900 new outlets over the next three years across North America as part of an ambitious strategy the company announced Friday to grow profits and expand product offerings.

The Oakville, Ont.,-based company told an investors conference it hopes to add 600 outlets in Canada by 2013. It already has more than 3,000 outlets across Canada.

Its Canadian growth strategy will focus on Quebec, Western Canada and urban markets, as well as in Ontario.

In the U.S., it plans to add 300 new restaurants to its existing complement of 563 American locations.

Its U.S. growth will focus mainly in its existing markets in New York, Ohio and Michigan. But it said about 90 of its new U.S. store openings are being targeted for neighbouring states.

In the past, Tim Hortons has struggled amid the fierce competition in the U.S. fast-food market.

"Their average sales per store are about $900,000 in the States," Brian Yarbrough, an analyst at Edward Jones in St. Louis, Mo., told CBC News. "In Canada, they're a little over $2 million."

Yarbrough said it might succeed in making a niche for itself with its fresh bakery and cafe concept.

"In the U.S., they're taking a little bit of a different approach," he said.

Tim Hortons executives said they plan "to significantly differentiate the brand through a new concept design" that will be tested in at least 10 existing U.S. locations. The changes include making the outlets fancier and adding new items to the menu.

New menu offerings

The company said it plans new hot and cold beverage offerings as well as an expanded sandwich and soup menu.

The company also said it is thinking of expanding outside North America in the longer term.

"Our strategies will continue to transform Tim Hortons, not only adding significant scale but also introducing important additional growth layers to our business platform to extend our position as a leader in the North American restaurant industry," said chief executive Don Schroeder.

Tim Hortons said it would convert up to 60 Canadian locations this year to include Cold Stone Creamery offerings. Tim Hortons signed a development agreement with the U.S.-based ice cream company last year.

The expansion should allow Tim Hortons to report earnings per share (EPS) of $1.95 to $2.05 this year and is targeting EPS growth of 12 to 15 per cent annually through 2013.

Same-store sales should grow three to five per cent in Canada this year and two to four per cent in the U.S.

The company estimated it will spend up to $200 million rolling out its new strategy in 2010.

Tim Hortons shares gained 81 cents to close at $32.73 in Friday trading on the TSX.