TORONTO - Canadians may not associate espresso, arm chairs and soft lighting with Tim Hortons, but the upscale fixtures are part of the brand's latest makeover.
Along with the December launch of drinks like lattes and mochas, the chain is also giving some of its stores a facelift that invites customers to linger a little longer.
The redesign includes wireless Internet connections, bench seating, softer lighting, a new floor layout and a more open kitchen that gives customers the "ambience" of watching their food being prepared for them.
"While specialty coffee represents a relatively small part of the overall coffee market, it is a growing segment," executive chairman, president and CEO Paul House said on a conference call with analysts Thursday.
"We believe our entry with such a meaningful and relevant offering will reinforce our continued coffee leadership in Canada."
The move is expected to encourage customers to come inside, sit and perhaps spend a little more money, rather than zooming through the drive-thru.
"A baked product is really, in some cases, an impulse buy so if you're looking and you like what you see you're more likely to buy it," House said.
The new interior is also designed to provide a more comfortable restaurant environment as Tims ramps up its food offerings.
Earlier this month, it launched a hot lasagna casserole in several restaurants and House said it plans to offer more "comfort foods." In the U.S. it is testing panini-style grilled sandwiches.
The makeover comes as the chain reports soaring profits and revenues based on the traditional offerings Canadians know and love Tims for — doughnuts, coffee, soups and bagels.
The company earned $103.6 million or 65 cents per diluted share in the third quarter, up from $73.8 million or 42 cents in the same 2010 period.
Revenue totalled $726.9 million, up from $670.5 million.
The average analyst estimate had been for a profit of 64 cents per share, according to data compiled by Thomson Reuters.
Same-store sales, a key metric measuring results from stores open at least a year, were up 4.7 per cent in Canada and 6.3 per cent in the United States.
Still, the company remains focused on how to succeed in an intensely competitive Canadian coffee market as it watches competitor McDonalds also remake its image.
Just days after Tims announced it would introduce espresso-based drinks, McDonalds said it would do the same.
Specialty drinks had been a territory traditionally left to the baristas at Starbucks or Second Cup, but Tims new machines allows it to brew up similar beverages, while maintaining the low cost and fast service it's known for.
Its espresso based beverages start at $2, about 40 per cent cheaper than Starbucks.
But House said he isn't afraid of alienating the chain's core customers, those who come for a "double-double" and a doughnut.
The chain is simply reacting to the evolving tastes of Canadian coffee drinkers, he said, adding that Tims has made some decisions considered risky in the past — such as becoming the first Canadian chain to ban smoking in the 1990s.
"Every time we've done it, there's always that concern you're going to turn off your core customers, but so far we've been successful and not done that."
Tims also caters to local market tastes when it considers how to design or renovate stores, he said.
"Some of these new style restaurants will not be the right features for rural markets and so forth, I don't know if they're going to want leather chairs," he said.
"But in the city markets, especially in the downtown areas of Toronto and so forth, that's really what that market expects."
During the quarter, the company opened 41 locations in Canada and 23 in the U.S.
Based in Oakville, Ont., Tim Hortons is Canada's biggest restaurant chain and the fourth-largest in North America with more than 3,700 restaurants on the continent.
Since opening its first U.S. store in Buffalo, N.Y., in 1985, Tim Hortons has expanded to over 600 stores in a dozen states — including Michigan, Ohio, Kentucky and West Virginia — and plans to open another 300 locations over the next three years.
The company has also signed a licence agreement with Dubai-based Apparel Group to open up to 120 restaurants in the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman over the next five years.
Shares in the company were up one per cent or 55 cents to $50.09 Thursday on the Toronto Stock Exchange.