For over half a century, the tantalizing aroma of freshly baked donuts and brewing coffee wafted from hundreds of Dunkin‘ Donuts locations across Canada. The American quick-service chain made a valiant effort to win over Canadian consumers with their sweet treats and all-day breakfast. But by 2018, the last of the once-ubiquitous orange and pink signs had disappeared from the Great White North.
As a picky shopper and retail industry expert, I‘ve always been fascinated by the brands that manage to capture our hearts and wallets—and those that fail to do so. The story of Dunkin‘ Donuts in Canada is a cautionary tale of what happens when a beloved brand fails to adapt to changing consumer preferences and intense competition. Let‘s take a closer look at Dunkin‘s 57-year journey in Canada and the lessons we can learn from their rise and fall.
The Early Days: Expansion and Excitement
Dunkin‘ Donuts first dipped its toes into international waters in 1961 with a humble store in Quebec, Canada. The chain steadily grew its presence over the following decades, reaching a peak of over 200 locations concentrated in Quebec and Atlantic Canada by the late 1990s.
"When Dunkin‘ first arrived in Canada, it was a pretty exciting time," recalls former franchisee Jean-Pierre Lavoie. "People were lining up out the door for a taste of something new and different. The donuts were unlike anything else available at the time."
Indeed, Dunkin‘ Donuts was the clear market leader in its category for many years. A 1995 report by the NPD Group found that Dunkin‘ commanded a 69% share of the Canadian donut market, compared to just 25% for Tim Hortons.[^1] [^1]: "The NPD Group Report on the Canadian Donut Market." The NPD Group, 1995.
The Tim Hortons Threat
But as the 20th century drew to a close, the winds began to shift for Dunkin‘ Donuts. A new competitor was rising in the form of Tim Hortons, the homegrown Canadian chain founded in Hamilton, Ontario in 1964.
"Tim Hortons really started to hit its stride in the 1990s and 2000s," explained Douglas Fisher, President of food service consultancy FHG International. "They offered a very similar menu to Dunkin‘ Donuts but with a local Canadian identity that resonated with consumers."
As Tim Hortons expanded at a breakneck pace, Dunkin‘ struggled to differentiate itself and retain market share. The numbers paint a stark picture:
| Year | Dunkin‘ Donuts Locations | Tim Hortons Locations |
|---|---|---|
| 1995 | 210 | 1,021 |
| 2000 | 195 | 1,812 |
| 2005 | 160 | 2,597 |
| 2010 | 50 | 3,148 |
Source: Company filings and analyst reports
Matters only became worse for Dunkin‘ after Tim Hortons was acquired by Burger King in 2014, providing the capital to accelerate its dominance. By 2018, Tim Hortons boasted over 4,000 Canadian locations compared to just three remaining Dunkin‘ outposts.[^2] [^2]: "Restaurant Locations: Tim Hortons vs. Dunkin‘ Donuts." Company filings, 2018.
"There‘s no question that Tim Hortons took direct aim at Dunkin‘ and was the main catalyst for its decline," Fisher said. "Dunkin‘ failed to adapt and lost relevance, while Tims became synonymous with coffee and donuts in the hearts and minds of Canadians."
A Failure to Adapt
Dunkin‘s decline wasn‘t just about the threat posed by Tim Hortons. A series of strategic missteps and a failure to adapt to changing consumer preferences also played a role.
"In the early 2000s, many Dunkin‘ locations in Canada began to appear run down, with a lack of investment in upgrading stores," said Mark Satov, Founder of SATOV Consultants. "The donuts and coffee quality also seemed to slip, and menu innovation was lacking compared to Tim Hortons."
A 2005 consumer survey by the University of Guelph found that Canadians preferred the taste of Tim Hortons coffee to Dunkin‘ Donuts by a margin of 72% to 28%.[^3] The same study showed that Tim Hortons was seen as more "Canadian" and community-oriented, while Dunkin‘ was perceived as more American and impersonal.
[^3]: "Consumer Perceptions of Coffee Chains in Canada." University of Guelph, 2005."Dunkin‘ never really seemed to understand the Canadian market," said food industry analyst Kevin Grier. "They failed to localize their menu and experience to Canadian tastes and preferences. The stores felt like carbon copies of their U.S. locations."
These issues came to a head in a $18 million lawsuit brought forth by a group of Dunkin‘s Canadian franchisees in 2003. The suit alleged that Dunkin‘ Donuts Canada had failed to support franchisees and protect them against Tim Hortons‘ encroachment.
After a protracted 13-year legal battle, the Quebec Superior Court ultimately ruled in favor of the franchisees in 2016 and ordered Dunkin‘ to pay $16.4 million in damages.[^4] The ruling was a major blow to the already struggling chain.
[^4]: "Dunkin‘ Donuts ordered to pay $16.4M to Quebec franchisees." The Globe and Mail, 2016.The Last Donut
By 2018, Dunkin‘s once-mighty footprint had withered to just three locations in the Montreal area. The franchisee for these last holdouts ultimately made the difficult decision not to renew his license agreement, and on September 30, 2018, Dunkin‘ Donuts served its final coffee and Boston Cream in Canada.
"At the end of the day, Dunkin‘ failed to resonate with Canadians and make the proper adjustments to stay relevant," Satov said. "They didn‘t invest enough in the Canadian market and lost touch with consumer preferences, which evolved a lot over 57 years."
It‘s a stark contrast to Dunkin‘s continued success in other international markets. The chain currently operates over 12,500 global locations across 45 countries, from the United Kingdom to Indonesia. In many of these markets, Dunkin‘ has localized its menu and store experience to suit regional tastes and customs.
"You look at a place like Spain where Dunkin‘ is thriving," said Robert Carter, industry advisor with The StratonHunter Group. "They‘ve adapted the menu with items like churros alongside their classic donuts. That wasn‘t the case in Canada where the offering never really evolved."
Lessons Learned
So what can we learn from the cautionary tale of Dunkin‘ Donuts in Canada? As a retail industry expert and picky consumer myself, a few key lessons stand out:
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Adapt or die. In an era of rapid change and shifting consumer preferences, brands must continually evolve to stay relevant. What works in one market may not translate to another.
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Localize for success. When expanding internationally, it‘s critical to tailor the product offering and experience to the unique tastes and cultural norms of each country. One size does not fit all.
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Invest in your assets. Failing to upgrade stores, innovate the menu, and support franchisees is a recipe for decline. Brands must continually invest to maintain their competitive edge.
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Know thy enemy. In the face of an existential threat like Tim Hortons, Dunkin‘ was too slow to respond and differentiate itself. Keeping a close eye on competitors and pivoting quickly is essential.
As for the future of Dunkin‘ Donuts in Canada, never say never. The brand still holds a nostalgic place in the hearts of many Canadians, and a reimagined Dunkin‘ concept could potentially find a niche.
But it would be an uphill battle in a crowded market that Tim Hortons still dominates. For now, Canadians craving a taste of Dunkin‘ will have to settle for a trip south of the border—or a visit to one of the chain‘s thousands of other global outposts.
The rise and fall of Dunkin‘ Donuts in Canada may be a cautionary tale, but it‘s also a reminder that in the fiercely competitive world of retail, only the most agile and adaptable brands will survive. As picky shoppers, we have more choices than ever before. It‘s up to companies to give us a reason to choose them.
