A double-double in Dubai

Behind a walnut wooden counter, a handful of workers dressed in Tim Hortons cream-coloured uniforms mill about. They slice bagels, place doughnuts into boxes and, of course, pour coffee.

Passersby in dark suits and traditional Arabian dress stop and peer into the coffee shop’s glass display case, filled with Timbits and maple-pecan Danishes laid in wire baskets.

Photo: Charles Crowell
A woman asks for a cappuccino, but her order is met with: “Do you want to have a double-double instead?”

Puzzled, she pauses before responding. “Um, what’s that?”

The iconic Canadian coffee brand wants to give people around the world a chance to find out.

Tim Hortons recently set up this miniature version of its coffee shop at a Dubai retail conference as part of a push to explore new ground, and possibly bring its trademark brew to customers outside its core market of Canada and the United States.

The UAE and the Gulf region is one of two or three markets it is seriously studying for potential expansion, said David Clanachan, Tim Hortons chief operations officer for the United States and International.

“The desire for Western brands throughout the globe right now is about as high as it’s ever been,” he said. “There’s certainly a tremendous opportunity for well-run franchise brands to expand and develop. And if you look at the growth and where it is in the world today, the North American market isn’t it.”

Mr. Clanachan said the publicly listed company started researching and testing the global waters at the beginning of this year to see where their coffee would work best. And if these potential plans come to fruition, coffee enthusiasts could be sipping double-doubles in the UAE and elsewhere by the first quarter of next year.

The international expansion marks a turnaround from Tim Hortons’ traditionally cautious approach. Except for a lone outlet on the Canadian Armed Forces base in Afghanistan, and some self-serve kiosks inside supermarkets in Ireland, the brand has stayed close to home.

But interest from potential franchisees outside has piqued the company’s curiosity, Mr. Clanachan said.

“Right now we’re going through a process of looking at what regions we want to go to,” he said. “We don’t want to do what other North American or Western brands have done. Which is go and plant flags all over the globe and then go back later and take them out because it didn’t work. We are being very strategic about how we look at it.”

The Middle East is far from uncharted territory for Canadian retailers.

Stroll through any of Dubai’s sprawling shopping centres, and there are many familiar names – from Aldo shoes to Le Chateau to other home-grown coffee chains such as Coffee Time and Second Cup.

Demand in the Emirates for new retail concepts has been spurred by its rapid development in the last five years. As consumer spending and the number of tourists to the UAE grew, more shopping centres were built in the city-state, each one bigger than the next. At the foot of the Burj Khalifa, the world’s largest tower, sits Dubai Mall, one of the largest in the world with more than 1,000 stores. These shopping centres needed tenants and locally-based franchisees – a mandatory requirement to trade in the UAE – sought out the most popular brands from around the world to cash in on the boom.

That is what brought Second Cup to the UAE in 2003, said Jim Ragas, its vice president for international business development and operations. It signed a franchise deal with the Dubai-based Bin Hendi group after its then-chief executive came across the brand.

“It started off with Dubai because, very simply, [Mohidin] Bin Hendi was travelling in Canada and came across several cafes in Montreal and Toronto. He liked the concept and approached us.”

These dynamics have helped shape Dubai into the second-most popular destination for international retailers, behind London and ahead of Paris and New York, according to a recent report by real estate consultancy CB Richard Ellis. It is why for many Canadian retailers, Dubai was the first franchise stop outside North America.

Now, Second Cup has 12 outlets in the UAE, with three more to open this year, Mr. Ragas said. Dubai opened the door to nearby markets as well, such as Oman, Saudi Arabia, Qatar, Bahrain and Kuwait. Second Cup has 53 outlets outside Canada, and hopes to add another 21 before the year is out, he added.

While the UAE’s coffee culture and large expatriate population helped its brand to grow its footprint, being Canadian also helped, Mr. Ragas said.

“While everybody likes the American brands, they’re not necessarily enamoured with America itself,” he said. “Canada is pretty close to America in terms of culture and look and feel, but we’re actually the good guys.”

If Tim Hortons dives into the region, it will emphasize budget-friendly prices as it seeks a competitive edge. It’s one of the many factors the company will be scrutinizing before opening a full-fledged coffee shop abroad. Mr. Clanachan’s team of eight people, and a consulting firm, will assess GDP, spending power, food preferences and ease of doing business in the UAE and other potential markets, he said. Afterward, the team will present its findings to the board of directors for approval.

Being behind other Canadian brands to step into the region means playing catch-up, but it also helps to avoid where Tim Hortons’ predecessors tripped, said Mr. Clanachan.

“Yes, you are later in, but that’s okay,” he said. “Sometimes its better to be late and successful than early and have a lot of hiccups.”

Sidebar:

MBCo, which stands for Montreal Bread Company, opened its first outlet in Dubai nearly two years ago. The upscale café now has three locations in the Emirates, including one overlooking the Olympic-size ice skating rink in Dubai Mall. Through its joint venture with a local company, Hospitality Concepts and Solutions, the Montreal-based company plans to bring its cafés – one of the few places you can buy poutine in the Emirates – to nine countries throughout the region, said Raymond Croubalian, president of MBCo International.

“Canada is a much smaller country,” he notes. “Our population is that of California. … You will find that Canada and other smaller countries or smaller markets need to expand … into other countries.”

Longer term, MBCo plans to have 60 to 100 cafés across the Middle East within the next eight years.

While retail sales in the Emirates slowed last year significantly from the double-digit growth it saw during the boom, malls continue to serve an important role as a social gathering place, Mr. Croubalian said. Many North American shoppers will “grab and go,” but a Mideastern consumers approach shopping as an excursion, instead of a chore.

“That may have a lot to do with the extraordinary heat and the weather conditions,” Mr. Croubalian said. “But it is not unusual to see larger square-footages in the region, because a customer will visit your store for a longer time.”

Longer term, MBCo plans to have 60 to 100 cafés across the Middle East within the next eight years.

While the much-publicized debt troubles Dubai is facing may be a reflection of difficult economic times in the Emirate, it may also give new retailers an advantage when signing leases for retail space.

“The best time to roll out a multiple-unit concept is during recessionary times, when landlords negotiate more favourably,” Mr. Croubalian said.