Read the article: Tim Hortons closes 36 U.S. stores

Source: http://www.cbc.ca/money/story/2010/11/11/tim-hortons-store-closures.html

The Canadian Press

Tim Hortons says it plans to close the doors at 36 of its coffee and doughnut shops in the northeastern United States.

The iconic Canadian restaurant operator has been making inroads into the U.S. market but announced that it will make a strategic retreat from Providence, R.I., and Hartford, Conn.

Tim Hortons, with stores across Canada, including this one in Calgary, and 600 stores in the United States, boosted profits by 20 per cent last quarter. (Kelsey Hipkin/CBC)

All but two of the store closures will come in those two cities, and the company will record a $20.9 million US accounting charge to reflect the impaired value of those assets.

That will be followed by an additional charge of up to $30 million US that will be recorded in the fourth quarter.

The closures, which represent a small fraction of the 600-plus stores Tims has in the United States, were largely responsible for the company's third-quarter profit falling short of analysts' expectations.

Tim Hortons earned $73.8 million in the third quarter, or 42 cents per share — up more than 20 per cent from last year, but falling short of analysts expectations of 53 cents per share.

1. Describe the type of market in which Tim Hortons competes.

How does Tim Hortons determine the price of a cup of coffee? explain.

2. Is the news article discussing a short-term decision or a long-term decision? explain.

3. What triggers the decision for the Tim Hortons stores to close? Why?

4. Discuss the situation facing a Tim Hortons store that leads to the decision to leave the market.

5. Describe the market before the closing of the Tim Hortons stores and after the closing of the Tim Hortons stores. What happens to the price of a cup of coffee in the coffee shops that remain open? Why? What happen to the demand and quantity demanded for coffee in the coffee shops that remain open?