OAKVILLE, Ont. -- Tim Hortons Inc. has reported a 13.1 per cent increase in second-quarter earnings, crediting higher system-wide sales, royalties and franchise fees among other things.

The coffee and fast food restaurant franchisor said Thursday that net profit in the three months ended July 1 was $108.1 million or 69 cents per share, up from $95.5 million or 58 cents per share in the same year-earlier period.

Revenue rose 11.8 per cent to $785.6 million from $702.8 million.

"We experienced strong earnings growth in the second quarter although same-store sales growth in Canada reflected a challenging macro-economic environment and minimal pricing in the system,'' president and CEO Paul House said in a statement.

"We are confident about the strategic initiatives designed to grow our business and support our long-term objectives.''

The increased revenue included a six per cent increase in system-wide sales on a constant currency basis as a result of new restaurant development in Canada and the United states and from continued same-store sales growth of 1.8 per cent in Canada and 4.9 per cent in the U.S.

Rents and royalties increased 7.3 per cent year over year supported by system-wide sales growth.

However, the company said its total revenues outpaced system-wide sales growth for the quarter, ``driven primarily by higher distribution sales and an increase in the number of restaurants consolidated as variable interest entities.''

Franchise fees grew 18.2 per cent in the quarter, mainly due to the combination of higher international restaurant openings and equipment sales, an increased number of U.S. sales and a higher number of renovations during the quarter.

"These factors were partially offset by the recognition in 2011 of up-front fees associated with the master licence agreement related to our international expansion,'' it said.

Meanwhile, Tim Hortons announced it has reached a North American-wide agreement with Kraft Foods to enter the single-serve, on-demand coffee market, leveraging Tim Hortons coffee and Kraft's TASSIMO system.

Under the terms of the agreement, the company's premium-blend coffee, decaf coffee and lattes, in a single-serve format, will be sold in Tim Hortons restaurants in Canada and the U.S., and online, using the TASSIMO T DISC on-demand beverage platform.

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