King Tim

When I first heard that Tim Hortons and Burger King were in talks, it seemed odd. After all, Timmie's was previously merged with Wendy's, and that didn't work so well, resulting in them splitting up about ten years later. What benefit could there be to teaming up with another burger chain, this one being in a long-term decline?

An explanation I've seen in the media is that it would benefit Tim Hortons' underwhelming American expansion. The idea is that Burger King had plenty of expertise in dealing with the American market. But is not knowing the market really the problem Tim's has in the US? Because it seems to me that it's more to do with entrenched competition from Starbucks, Dunkin et al. Or to put it another way: by that logic there must be a lot of out-of-business mom-and-pop stores lamenting that if only they had better understanding of the American market, they could have survived against Walmart.

But growth is such a strong desire in business that it seems to override all other considerations. If I was a Timmies shareholder, I'd personally prefer they didn't pursue a long-shot expansion that will likely end in tears, even if the alternative is settling for the same returns in the future.  The odds just seem too long to be worth the huge costs.

Now that the deal is complete, we see that a big motivation is that Burger King wants to do an inversion. That's a tax-avoidance strategy where a big American company takes over a company in some other country, then reorganizes such that the big American company is a subsidiary of the foreign company, and thus pays its corporate taxes in the other country. In the past that's happened in countries that have gone out of their way to lure foreign investment, like Ireland. But Canada? Socialist, high-tax, bureaucratic, success-hating Canada?

So that's a positive we can take out of this. We may be losing our favourite food chain, and gaining technical ownership of a chain we don't really like, but at least we can take pride in out business-friendly-ing or neighbours. And from now on I'd better not hear any more Canadian conservatives trying to shame us into believing that we have unsustainably high taxes that will drive business away.