Tim Hortons Inc. (USA) (THI), Biglari Holdings Inc (BH): The Lesser-Known Restaurateurs

In the world of publicly-traded restaurant companies, a tiny few command most of the attention of the U.S. mainstream financial media. If your company is not a big name like Starbucks Corporation (NASDAQ:SBUX) or Chipotle Mexican Grill, Inc. (NYSE:CMG), good luck getting even a brief mention on CNBC. Despite the lack of attention, there are other, lesser-known restaurant companies out there that are quietly improving sales, expanding their businesses and making their shareholders money.

Canada’s Most Well-Known Lesser-Known

‘Lesser-known’ is a relative term. What is more anonymous in one country could very well be one of the most iconic brands in another. That is certainly the case with this restaurant operator. Although unknown in much of the United States, Tim Hortons Inc. (NYSE:THI) absolutely epitomizes fast food retail north of the U.S. border. Tim Hortons is the largest restaurant operator in Canada. The company has more restaurants in Canada than McDonald’s Corporation (NYSE:MCD) and serves more cups of coffee in Canada than Starbucks Corporation (NASDAQ:SBUX) (more cups of coffee than all other fast food restaurants in Canada combined, actually). About 42% of all fast food restaurant traffic in Canada goes through Tim Hortons Inc. (NYSE:THI)’ nearly 3,500 Canadian restaurants (a large number for a country of only 34.5 million people).

Tim Hortons Inc. (NYSE:THI) management team openly admits that they had not accomplished all of their goals in 2012. While last year marked the company’s 21^st consecutive year of positive same-store sales growth for its Canadian and U.S. markets, Canadian same-store sales growth came in at 2.8% (below estimates) and U.S. growth came in at 4.8% (in the middle of the estimate range). For a point of comparison, over the past 10-years, same-store sales growth had averaged 5.1% in Canada, with its U.S. same-store sales eking out a slightly better 5.3%. And as one might imagine, full year earnings also came in below estimates. Although the growth was not as expected, 2012 was the first time in the 49-year history of the company that revenue passed $3 billion CAD. And continuing with the positives, Tim Hortons Inc. (NYSE:THI) managed to increase its dividend 23.8% percent in 2012 and increase its share buyback program from $200 million CAD to $250 million. A below-expectations year for Tim Hortons, but not a terrible year by any means.

While management believes that they can increase their Canadian store count to 4,000 total before the market becomes over-saturated (currently there are approximately 3,436 Canadian Tim Hortons), the real growth for the company is outside of Canada and into its neighbor to the south. Tim Hortons Inc. (NYSE:THI) has a growing presence in certain regions in the United States (mostly in the Northeast and Midwest, the Canadian border states). In the 11 states Tim Hortons currently operates its nearly 800 U.S. locations, the combined population is about 70 million people. That is more than double the entire population of Canada and a great growth opportunity for the company.

Growth away from North America is also beginning to take shape. In late 2011, Tim Hortons opened its first restaurants in the Middle East. At the end of 2012, there were 24 restaurants in Oman and the United Arab Emirates. There are plans to open another 20 this year, as well as a recent agreement to open 100 restaurants over the next five years in Saudi Arabia.