Transformation at Tims China with New CEO: Strategy Changes as Sales Decline

One of the recent examples showing that growth in the Chinese coffee market cannot be sustained solely by opening new stores comes from Tims China. The master franchise operator of Tim Hortons in China experienced a significant decline in revenue, customer traffic, and same-store sales in the second quarter of 2026.

According to the results announced by the company on August 18, total revenue fell by 21.7% year-on-year to 273.4 million RMB, while system sales decreased by 15.1% to 347.8 million RMB. Same-store sales across the system shrank by 17.8%. Tims China completed the quarter with 1,028 stores.

Kwok Wah Cheung, who took over as CEO in June, provided his first comprehensive assessment based on this data. Cheung stated that the company needs to make "meaningful changes" in its strategy to win back customers, focusing the transformation on core brand identity, product quality, and guest experience.

The Issue in the Second Quarter Was Not Just Store Closures

Tims China has been removing low-performing locations from its system for some time. Therefore, part of the revenue decline can be explained by the smaller company-operated store network. The number of company-operated stores, which was 566 in June 2025, dropped to 544 in June 2026.

However, the figures indicate that the issue is not solely due to store closures. Same-store sales in company-operated stores fell by 17.3%, while the number of orders decreased from 10.5 million to 8.3 million, representing a drop of 20.7%. The average basket size also shrank by 0.9%.

According to earnings call data, the comparable transaction count across the system decreased by 16.3%, and the average comparable basket size fell by 1.5%. Management cited the high comparison base created by strong subsidies from delivery platforms last year, insufficient marketing spending, and discount control as reasons for the sales pressure.

This distinction is important. While a chain can expect total sales to decline when closing weak stores, if traffic is also falling in existing stores, the issue goes beyond portfolio optimization.

Losses Continue

Tims China reported a net loss of 97.4 million RMB in the second quarter. A year ago, the loss for the same period was 75.9 million RMB. Adjusted corporate EBITDA turned from a positive 2.2 million RMB in the second quarter of 2025 to a loss of 21 million RMB.

In contrast, there have been improvements in some cost items at the store level. The ratio of food and packaging costs to company-operated store revenues decreased from 30.1% to 28.3%. The company attributes this to improved supply chain efficiency and declines in raw material, logistics, and storage costs.

This situation illustrates a familiar problem in café operations: cost optimization alone cannot solve demand issues. Even if food costs improve by a few points, if customer traffic is declining in double digits, it becomes challenging to rectify profitability at the company level.

What’s on the New CEO’s Agenda?

Kwok Wah Cheung began his role as CEO on June 15, 2026. Tims China management announced the appointment as part of an ongoing succession plan, emphasizing that Cheung has over 20 years of experience managing consumer companies in China. He previously served as CEO of home and kitchen products company Supor.

The second quarter announcement provides the first hints of the transformation. The company plans to focus on product innovation, increasing marketing investments, and developing a more balanced network between company-operated and franchise stores.

On the financing side, the support from the brand owner continues. The company announced that it closed the first tranche of a planned additional secured convertible bond financing from Tim Hortons Restaurants International, amounting to 15.8 million dollars in July. Management states that this capital will be used for product, marketing, and store network development.

Why Did 37 Million Loyalty Members Not Suffice?

One of the most striking contradictions in Tims China’s results is between the loyalty program and sales performance.

By the end of June, the number of registered loyalty members reached 37.1 million, an annual increase of 41.7%. During the same period, same-store sales fell by 17.8%.

This situation contains an important lesson for restaurant and café chains: the number of registered members is not the same as the number of active, revenue-generating customers.

When evaluating the commercial value of a loyalty program, metrics such as the active user rate, visit frequency, orders per member, repeat purchases, and organic visits outside of campaigns should be monitored instead of total registrations.

One of Tims China’s opportunities is to convert this database of over 37 million into real traffic growth.

The Chinese Coffee Market Is Not an Easy Transformation Area

The company’s own annual report lists major competitors in the Chinese coffee market, including Luckin Coffee, Starbucks, Cotti Coffee, and Manner. Competition is occurring simultaneously not only in product quality but also in price, store network, delivery, digital usage, marketing, and customer experience.

In 2026, major players are also reshaping their strategies in China. Starbucks completed the closing of its joint venture with Boyu Capital for its China operations in April; Boyu holds a 60% stake while Starbucks continues with a 40% stake as the brand/IP owner. The company positions this structure as a means to accelerate local growth and market alignment.

This environment moves Tims China’s transformation beyond just an internal cost-reduction project. The chain needs to reassess its pricing, product, location, and digital offerings simultaneously.

Lessons for Café Chains in Turkey

Although the scale of Tims China’s situation differs from Turkey, the fundamental operational problem is familiar.

A chain can quickly open branches, gather millions of loyalty members, and reduce raw material costs. However, if visitor numbers and repeat purchases at existing stores are weak, growth indicators alone are not sufficient.

Therefore, in rapidly growing café chains, alongside the number of stores, the following metrics should be monitored: same-store sales, transaction count, average basket size, store contribution margin, customer acquisition cost, and active orders per loyalty member.

Stafflink’s View

In the case of Tims China, the most striking point is not store closures but the loss of customer traffic.

In our view, the critical question in the new CEO’s strategic transformation should not be "how many more stores will be opened?" The priority should be to attract more customers back to the existing over 1,000 stores and strengthen unit economics.

The company has a strong loyalty base and brand awareness. However, converting registered users into active customers requires the collaboration of pricing, product innovation, delivery, store experience, and marketing.

Scale makes growth visible in café chains. The question that still determines healthy growth is: Are existing stores performing better than last year?