Life after Timmies

When Canada’s largest coffee chain came to Iqaluit, local cafes were forced to fight for their very survival. Chris Windeyer provides check-ups on all the businesses that made it out alive – and serves up a post-mortem for the one that didn’t.

It happens in small towns across North America. Chain stores and big box outlets come to a small town, undercut mom-and-pop shops, force them under and gut a city’s downtown as they sprawl into the suburbs.

But Iqaluit is not like most small towns in Canada. When Tim Hortons, the ubiquitous national coffee chain, arrived in Nunavut’s capital late in 2010, many feared it would stranglehold the town’s handful of sandwich and coffee shops and force them all to close. It did the opposite. Along with its reliably-caffeinated, if unremarkable, brew and its “always fresh” donuts, Timmies also whipped up a healthy spirit of competition. For those in the city’s coffee business, the arrival of those trademark brown paper cups offered an object lesson in rudimentary capitalism. It was time to adapt or perish.

The result? The weak died out and the surviving businesses got stronger. Iqaluit’s food service industry has never been better: more options, better quality, lower pri… actually, never mind the prices. But if you’re hungry in Iqaluit, and you don’t want to cook for yourself, your options have never looked so good.

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When the mighty Hortons opened three kiosk-style locations around town – the result of a deal with the North West Company, whose Northmart and Kwik Stop stores serve as the franchise’s storefronts – it was inevitable that some businesses would perish. The chain dominated the Iqaluit coffee scene instantly, which proved fatal for one long-standing coffee stalwart. Fantasy Palace, a coffee shop near the city’s airport, disappeared shortly after the national franchise set up shop.

I hate to say it, but Fantasy Palace had it coming. Long-time Iqaluit residents will tell you about a time when it sold savoury, homemade soups and delicious fair-trade coffee. But those glory days were long gone. In the days before they closed, the coffee tasted like dishwater, the sandwiches were mushy, the hot chocolate was mediocre.

And the service sucked: I once ordered lunch there and was told, upon requesting a napkin, that there were none. Could I have a piece of paper towel? I asked. Sorry, I was told, the shipment hasn’t come in yet. But I needn’t worry about getting mustard on my shirt, for I was invited to help myself to toilet paper from the men’s room.

But after capitalism killed Fantasy Palace, it granted the opportunity for another entrepreneur to fill a glaring market demand: Iqaluit now has its first shawarma joint.

After four years working up north as a jack of all trades – driving a cab, working security, and so on – Khldoun El-Shamaa and his father-in-law, Hassan Abdulghani, opened Yummy Shawarma this past April, in the old Fantasy Palace location, after buying out the coffee shop’s owners. “They were not doing too good because of Tim Hortons, coffee shops, gas stations – everywhere there’s coffee,” he says.

For Yummy Shawarma, Fantasy Palace’s struggles helped remove what’s probably the single biggest obstacle facing any new retail business in Iqaluit: the lack of storefront space. It’s virtually impossible to find, and given the astronomical cost of construction in Iqaluit, building from scratch is not an option for a small entrepreneur. “We were looking for a place for a while, but there was nothing available,” El-Shamaa says.

Then came the standard pains of starting up. The place had to be renovated. Equipment – including three of the iconic spits used to turn chicken, beef and donair meat – had to be bought (they can cost up to $2,000 each), shipped up and installed. Then there are the cost pressures that every business must face but which are especially severe in Iqaluit. Power rates went up about 18 per cent this year. Supplies have to be flown up, further inflating food prices that are on the rise globally. The cost of living in Iqaluit means employees need relatively high hourly wages to make it worth their while. Keeping staff has been tough, El-Shamaa admits.

Then there’s the added challenge of introducing a type of food Iqaluit has never seen before. El-Shamaa says the most popular menu item is a Lebanese salad served with sliced roast chicken over top. The place is busy at lunchtime, feeding throngs of downtown worker bees, who form a growing base of loyal customers. The retail prices are obviously higher than one would expect down south, but the portions are huge. El-Shamaa is optimistic that Yummy Shawarma is here to stay. “Everybody likes it, that’s the main thing,” he says. “We don’t want to be millionaires, we just want to live off it.”

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So what about the rest of the competition? The coffee shops that had a better product than Fantasy Palace did – did they get shoved out, too?

No. Iqaluit did not repeat the experience of so many small towns faced with strong-arm franchise brands. The difference: the competition survived.

For locally owned businesses, there was no question of competing with Tim Horton’s prices. Everything is more expensive in Iqaluit; consumers expect that. And besides, people generally don’t choose one coffee shop over another to save a quarter per cup. They opt for convenience, quality or brand recognition.

So instead, the local stores adapted, opting for change instead of the ignominious end that Fantasy Palace met with.

Brian Twerdin and his wife, former Iqaluit mayor Elisapee Sheutiapik, have owned the Grind and Brew café since 1999. But with rumours circulating that Tim Hortons was on its way, Twerdin foresaw a major drop in traffic to his coffee shop, and so began plotting an updated menu. “We knew what was coming,” he says. “We figured if they came to town we’d certainly lose a lot of business, so we had to do something different.”

The stakes were high. The Grind and Brew – nestled in a tiny bungalow on the city’s waterfront, across the street from a string of fishing shacks – is an Iqaluit landmark. Its main items are adequate coffee and the legendary “Eye Opener,” a greasy, bacon-and-processed-cheese breakfast sandwich that’s fuelled many a workday and soothed many a hangover. Many of the Grind and Brew’s regulars are your classic small-town coffee shop old farts: businessmen, pastors and former cabinet ministers sit around, chewing the fat and talking hockey.

While the Grind and Brew loyalists held steady after Tim Hortons opened for business, Twerdin says the number of casual customers dropped off significantly. But then business rebounded. “Maybe some tried Hortons and came back here. But I can remember the first month or so. It was very quiet. I remember I got a call from a newspaper down south when Tim Hortons first opened, asking how it impacted this place,” Twerdin recalls. “When he called here, there was only one customer in the place and it was nine o’clock in the morning. I let (the reporter) speak to the customer. That’s how dead it was.”

Twerdin and Sheutiapik further developed the catering half of their business, and they expanded their menu, adding pasta, Asian food and, most importantly, pizza. The latter was a glaring hole in the Iqaluit food sector since The Snack, Iqaluit’s round-the-clock supplier of grease, dropped pizza from their menu some years back. Grind and Brew shipped up a pizza oven, which can easily run you $10,000 or more, and started selling slices at the store, and offering delivery too.

I recommend the pork barbecue pizza, although Twerdin says the Grind and Brew special, loaded with pepperoni, bacon, green peppers, mushrooms and onions, is the top seller, followed closely by that old reliable, pepperoni. Regardless, where Iqalummiut once had to settle for frozen grocery store pies or Pizza Hut Express offerings – really just pizza-like food objects seemingly conjured out of petroleum, high-fructose corn syrup and radioactive waste – they now enjoy the genuine article. And the old standard, the Eye Opener breakfast sandwich, with either toast or English muffin, is still available.

Through it all, Twerdin seems to have scarcely broken a business sweat. “I learned a long time ago that you always have to be ready to diversify,” he says. “You’ve got to make a change or come up with a plan.”

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Rainer Launhardt swears Tim Hortons’ impending Iqaluit touchdown had nothing to do with Caribrew Café’s decision to renovate, but it seemed a timely choice for the busiest coffee shop in town to make. As a result, they’re still the busiest café in Iqaluit – even with Timmies around.

Launhardt is the vice president of hotels for Calgary-based Nunastar, which owns Astro Hill, a sprawling complex that includes a movie theatre, bar, hotel, conference centre, office buildings, the café and the tallest apartment building in town, locally known as the eight-storey – all of it perched on a hill in the middle of the city. With hundreds of workers and residents constantly milling around, Astro Hill may well be the business nexus of Iqaluit.

With all that traffic, Launhardt says it was time for the Caribrew Café to expand its lineup of coffee, muffins, soup and sandwiches, noting the changes were complete by the time Tim Horton’s set up shop. The menu has grown to include pizza, curry, salads, mozza sticks and hummus. “We saw the trend at the Caribrew,” he says. “Food business was definitely increasing and customers were looking for different items, more selection. In order to grow, we made a decision to expand Caribrew and offer a lot more food.”

Coffee sales are down, which is not a surprise, Launhardt says. But the new menu items have more than made up for the downturn in business. “We made the right decision to expand,” he says. And he adds that the Caribrew has more than a few coffee diehards, proving that while Tim Hortons’ predictable, high-caffeine blend is popular, it’s not universally appreciated.

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The cost of establishing a business in Iqaluit, not to mention the scarcity of available real estate, serves to protect independent incumbents from the predation of well-funded national restaurant chains. Generally, the buildings that contain fast-food outlets have to be built to spec, an impossibility here. A franchise must meet very specific criteria, follow company protocol, and often buy everything it needs directly from the mother corporation. In the south, uniformity is often the path to profitability. But Iqaluit’s harsh market conditions have killed chain stores in the past. A Subway franchise died out because its reliance on fresh vegetables (shipped by air) pushed the cost of a foot-long sub close to $25. The place was as quiet as a tomb at lunchtime.

On the other hand, a mom-and-pop operation can wing it. Any old place with a grill and a vent will do. There’s no need to test new menu items with focus groups. Have people asked for it? Do we know how to cook it? If yes, then let’s sell it.

Tim Hortons’ ubiquity, more than the quality of its products, may be the real draw for Iqalummuit because so many residents are non-Inuit southerners or Inuit who have lived in the south for school or other reasons. It’s a taste of the south; no longer must the city rely on airline passengers returning north, box of donuts in tow, as was the ritual for many years.

And this is the real draw: Tim Hortons is Canada’s security blanket. There’s simply one everywhere you look. Driving the Trans-Canada and need a pit stop? It’s perfect. Remember that cloying commercial in which a Yukon Timmies installed a hitching post for customers arriving on horseback? Such a good neighbour! The company even created a bilingual logo specifically for Iqaluit in which “Always fresh” translates in Inuktitut into something like: “It seems like the coffee was just made.”

Although these efforts are endearing, they’re also kind of sad. Canada is a country so lacking in self-confidence and identity that there was room for a multi-national corporation to steal a place in Canada’s psyche. But this exalted position is false because really, it’s only coffee.

Still, you have to hand it to them. Growing from a single location in Hamilton, Ontario in 1964 to 3,600 stores in Canada and the U.S. today, Tim Hortons relies on relentless expansion for its continued profitability. And that’s why you open a restaurant – any restaurant – in the first place. As the first successful franchise to operate in Iqaluit, perhaps they are truer to their slick marketing scheme as Canada’s patriotic choice than we would like to believe.

And so the Tim Hortons empire now stretches to every corner of the homeland. As Canada’s official motto goes: A mari usque ad mare. From sea to shining sea.

Up Here Business magazine, January, 2012.

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