Business

How Tim Hortons Became the Donut King of Detroit

March 07, 2013, 2:50 PM

Before Whole Foods dominated the local headlines as the chain betting on Detroit, a different food goliath was quietly doubling down on the city.

Tim Hortons didn't make quite the same splash, but the quick growth of  "Tims" chains around the city has made the Canadian-based company the undisputed donut king of Detroit. 

It started in December 2008, when native Detroiter Walter Bender, a former linebacker with the Canadian Football League, became an entrepreneur, partnering with ex-NBA star Derrick Coleman to open the first Tim Hortons donut shop in the city. Bender now owns three Detroit franchises.

In all, in the past four years, Tim Hortons has opened up 10 outlets in the city of Detroit and an 11th is on the way.

The question some might ask is: Why Detroit, particularly when the giants like Dunkin‘ Donuts have essentially taken a pass? Dunkin’ Donuts has one store in the city. Krispy Kreme has none, with the closest outlet being in Allen Park.

“We certainly have a development strategy,” says Mike Meilleur, Executive Vice President of Tim Hortons, U.S. “Detroit is one of Tim Hortons Café & Bake Shop’s strongest and most successful markets, so continued growth in Detroit and Michigan is most definitely in our future.” The company currently boasts over a hundred locations in the Metro area.

Derek Dley, an analyst in Vancouver for the Canadian investment bank Canaccord Genuity,  who follows Tim Hortons, says the move into Detroit is part of a bigger plan by the Canadian donut king to focus on expansion in U.S. cities in Northeast that border Canada, Tim Hortons’ power base. 

“So Detroit would make sense,” Dley said.  “I expect to see a lot more in Detroit.”

How it all came about

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Walter Bender

Bender, a graduate of Northwestern High School in Detroit, attended  Kent State University and then went off to the Canadian Football League, where he played from 1984 to 1989. His first team was the Toronto Argonauts.

“When I was in my rookie year in 1984, I was surrounded by Tim Hortons all the time,” he recalled. “The rookies always had to bring donuts for the veterans. I became very well versed in apple fritters, apple creme, honey dip, you name it.”

“Just being in Canada and seeing the impact that Tim Hortons had, it’s just something I fell in love with. From the time I was a rookie I always knew I wanted to own and operate a number of Tim Hortons restaurants.”

After his football career ended, he managed Foot Locker and Finish Line sporting goods stores in the Detroit area for some 17 years. Then he decided it was finally time to take up an offer for help from some former teammates who owned Tim Hortons in Canada. He called one in the Toronto area, who helped him get connected.

At that point, Bender was anxious to buy a franchise almost anywhere and was willing to go along with whatever locations the company offered. One of those stores happened to be in Detroit. 

“It didn’t matter to me,” Bender said.  “My approach was I get in where I fit in. When the opportunity came I wasn’t going to turn it down. I always felt Detroit would be a good market for the brand. And I always felt once it was introduced to the city of Detroit it would take off.”

So in December 2008, Bender and retired basketball star Derrick Coleman (who attended Northern High School in Detroit) opened a Tim Hortons in the Millender Center in a space previously occupied by a Starbucks. The company made a big deal out of the grand opening since the store was the 500th outlet in the U.S., and the 125th in Michigan. Some top honchos at Tim Hortons attended the opening, which was not to be Bender’s last.

Today, Bender, 51, has two suburban stores and the three in the city: The Millender Center, Compuware building and E. Jefferson Avenue at E. Grand Blvd. He’s also bought out Derrick Coleman’s interest in the Millender Center. Coleman ran into financial problems and filed for bankruptcy in 2010.

Why Tims?

Co-founded by the late Toronto Maple Leafs defenseman Tim Horton, the company dominates the donut world in Canada, with 3,436 outlets. In the U.S., it has more than 800 franchise stores. That compares to Dunkin’ Donuts 7,000-plus stores in the U.S. and another 3,000-plus worldwide. Krispy Kreme has 700-plus outlets in the U.S. and abroad.

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Dunkin’ Donuts declined to comment on the Detroit market, and Krispy  Kreme did not return calls.

So it’s unclear exactly why the two popular U.S. donut chains have passed on opportunities in the city.

Hugh Cannon, a Wayne State University Business Administration professor says “it’s very very competitive. It’s possible their model is telling them that this is not a good place to be.”

Hortons’ exec Meilleur said “the entrance into Detroit was a result of an opportunity to purchase existing restaurant real estate within the market, which allowed us to experience immediate market penetration.”

In a city rife with serious problems, from crime to unemployment to blighted neighborhoods, you might think it would be a challenge for the company to generate interest in franchises. But that hasn’t been the case.

“We haven’t had an issue finding restaurant owners,” says Meilleur. “Most of the Detroit franchise owners grew up in Detroit or the metro area.”

“I think there’s a sense of pride there that they are able to open something in the community they grew up in.”

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A Tim Hortons advertisement wrapping the People Mover.

Generally, the company proposes locations to interested franchise owners, who then have the option to accept or reject the offer.

Nila and Ronald Sarmiento, who wanted in on a franchise, say they accepted an offer to open an outlet at 8 Mile and Redfern in Northwest Detroit because there was no competition.

“When they offered this to us, we looked around. We like the traffic, there are lots of cars, and a good community,” says Ronald.

But there can be challenges to operating in Detroit.

Tammy Barksdale, a manager at the Wayne State University Tim Hortons on Cass Avenue, says the owners of the location also own a Tim Hortons on Woodward near 9 Mile in Ferndale.

The owner, Wanda Johnson, was ready for her move to Detroit, Barksdale recalls, but some of their Ferndale employees had safety concerns about moving south.

“I’m not from here, so to me, a lot of places seem like anywhere else,” she adds.

Safety not an issue

So they hired locally instead, and although they’ve had a few “belligerent” customers, Barksdale says she has no real security concerns operating in the city, mainly because the Wayne State police patrol the area.

Locations farther from Wayne State rely on Detroit police officers and Tim Hortons electronic security systems.

“You worry about that,” says Meilleur. “We have different levels of security packages, where the number of cameras are different and things like that. I don’t want to get into the things we do for theft prevention at all locations, but we’re pretty diligent in all locations. That risk is there in all locations.”

Meilleur says Detroit has “gone through its trials and tribulations. It’s been knocked down a little bit, but it’s coming back to life.  It’s certainly about opportunity.”

As for Bender, he’s not done expanding his portfolio.

“I would like to continue to expand and grow as the opportunity presents itself.”



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