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3 Reasons Why Burger King Should Buy Tim Hortons

Stocks in this article: BKW THI MCD PNRA CMG WEN YUM

1. Breakfast is hot, hot, hot

A merger of Burger King and Tim Hortons is likely to produce innovative additions to both menus. We could see an offering of chicken-and-doughnuts at Tim Hortons, or a Canadian Maple doughnut-inspired shake at Burger King. It's been done before at other co-owned brands.

The move to merge appears to be borne of the need to boost the overall quality of the restaurants' offerings to better compete with fast-casual outlets like Chipotle (CMG) , Panera Bread (PNRA) and Smashburger, among others. McDonald's and Wendy's (WEN)  are under pressure to do the same.

Burger King's focus here is on breakfast. In its long rivalry with McDonald's, which has had a solid offering in the breakfast space for years, Burger King is anxious to carve out more morning customers.
Yum! Brands (YUM) Taco Bell launched its line of breakfast in March, which included the Waffle Taco, A.M. Crunchwrap and Breakfast Burrito.

And while Burger King has also had a breakfast offering, it needs to do more, says Sam Oches, managing editor of QSR Magazine, a trade publication based in Chapel Hill, N.C.

"These brands have been in the breakfast space forever but have not had anything innovative," Oches said in a phone interview. "In the last five to 10 years as you see lunch and dinner menus [move to] more premium fast casual [ideas] breakfast lagged behind." 

Brands have realized the importance in winning customers earlier in the day, getting them accustomed to returning to the same outlet, Oches says.

Breakfast is "a huge opportunity for growth" and Burger King is "struggling right now to create brand excitement," he adds. "A lot of Burger King menu moves sort of come in the shadow of McDonald's. By adding Tim Hortons to the fold Burger King has a lot of potential to get into breakfast in a big way."

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