This week’s Around The World looks at what happens when companies get big. In the case of Tim Horton’s (now owned by Restaurant Brands International), profit growth first slowed and then actually fell in the last quarter. This is typical of large companies where, as the saying goes, trees don’t grow to the sky. Click here for the G&M article on this.
I call it the goldfish phenomenon, where (within reason of course), the fish grows proportionate to the size of the tank it’s in. Similarly, there are physical limitations to the size companies can grow to, as the market place has finite limits in terms of locations, customers etc. In the case of Horton’s, from it’s founding in (May 17th 1954 for all you Timmy’s lovers out there), it has grown to almost 5000 stores globally of which about 3800 are here in good-old Canada. The early days where the number of stores were growing exponentially has come and gone, and growth now is incremental, relying on same-store sales to grow profits, as opposed to adding new locations.
The point in all of this is less about Tim’s as it is about how we manage our client’s hard earned savings. Specifically, it is because we recognize that profits and stock prices slow the larger companies become, that we partner with large institutional wealth management companies including Dimensional. They construct their fund portfolios to include small and mid-capitalization companies, where growth is higher and the opportunity for returns is as well. Over time, the inclusion of small and mid sized companies in a managed fund solution has delivered solid investment returns for clients.
With this in mind, maybe we need to order a double-double next time we’re grabbing a cup of coffee from Tim Horton’s. And by that, I mean 2 cups, not one -it’s a way to get the company growing again!