Business

Tim Hortons franchisees asked to invest $12K in new espresso machine

Tim Hortons says it is testing new premium latte and espresso coffees in Vancouver and London, Ont. The new coffees are expected to roll out across the country in the new year.

Premium lattes and espressos are being tested in Vancouver and London, Ont.

Tim Hortons is testing new premium lattes and espressos, while Starbucks goes even further upscale with its new Starbucks Reserve Roastery. (CBC)

A daily coffee at Tim Hortons could soon be tastier, but more expensive, too.

The chain says it is testing new premium latte and espresso coffees in Vancouver and London, Ont. The coffees are expected to roll out across the country in the new year.

Tim Hortons already offers an assortment of specialty coffees, but Tim Hortons Canada president Sami Siddiqui tells CBC News in an emailed statement that the new coffees are made to order with premium ingredients.

"The unique blend delivers a rich, creamy flavour featuring freshly ground Arabica espresso beans; and the lattes use freshly steamed 100 per cent Canadian milk," he said.

Pricey upgrades

Making the new coffees for customers will be costly for the chain's franchisees, however.

Published reports indicate that parent company Restaurant Brands International has told Tim Hortons franchisees to buy a $12,000 espresso machine to replace their existing machines. It's a cost that may be hard for some of them to swallow.

Jeff Dover, vice-president of fsStrategy in Toronto, says that the costs associated with launching new products are a challenge that many franchise owners have to face.

"They've got to convince their franchisees that the investment in the new machines and the new product is going to pay off in terms of sales and profitability," he said.

Tim Hortons has asked its franchisees to buy a $12,000 new espresso machine to produce the new coffees. (Peter Jones/Reuters)

With lattes and cappuccinos often costing several dollars more than regular coffees, it may be an easy sell if customers prove eager. And while food prices are expected to rise in the new year, Dover believes sales in the coffee market won't be affected.

"People will continue to treat themselves," he added. "It's not a huge expense. It's not like a fine dining meal."

Coffee wars

The news of Tim Hortons latte and espresso come as its competitors are also moving upscale.

McDonald's started rolling out stand-alone McCafés in downtown Toronto last year, which offer a much larger selection of specialty coffees than Tim Hortons at a cheaper cost than Starbucks. McDonald's uses two-step brewing machines, which are quicker than the process of pouring a customized Starbucks coffee.

More recently, McDonald's unveiled its efforts toward sourcing sustainable coffee and struck a deal with WestJet to become the only coffee available on its flights.

Starbucks, meanwhile, unveiled an ambitious five-year plan on Dec. 7 that includes opening high-end Starbucks Reserve Roastery & Tasting Rooms in China and Japan as well as Reserve bars in some existing stores.

The company says that since opening its first Starbucks Reserve Roastery in Seattle two years ago, it has "become recognized as the most dynamic and immersive coffee retail experience in the world."

Starbucks, McDonald's and Tim Hortons are all offering higher-priced specialty coffees. (John Vizcaino/Reuters)

Tim Hortons is also expanding abroad. It is expected to open its first full-service outlets in the U.K. in 2017 and will soon expand to the Philippines as well.

Dover doesn't think Tim Hortons premium coffees will be competing directly with Starbucks, but rather with McDonald's and its McCafés.

"[McDonald's] is competing really hard trying to capture a bigger share of the coffee market, and Tims is competing hard to keep theirs, and maybe grow it," he said. "It will be an interesting battle to watch in the coming years."  

With files from The Canadian Press

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