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On Thursday, Tim Hortons said it has been open with franchisees that the giveaways are part of an initial investment to attract customers to the program before gradually transforming it into “our most powerful marketing vehicle.”

“There’s two key phases to launching a successful loyalty program,” said Duncan Fulton, chief corporate officer at Tims’ parent company, Restaurant Brands International Inc. The first phase is convincing millions of people to start using it. “That’s usually the hardest part,” Fulton said. Instead, it took less than a year.

“Anyone in the industry would kill to have the kind of customer acquisition phase that we’ve had,” he said. “And obviously that involves a short-term investment.”

That investment involves “having guests that were paying for seven coffees now paying for six coffees,” Fulton said. “We’re now quickly shifting into the second phase.”

Discounting is slightly more than offsetting the traffic levels, which is causing a little bit of softness in sales Jose Cil, CEO, Restaurant Brands International

In its last quarterly update, in October, Restaurant Brands chief executive Jose Cil suggested the giveaways were starting to impact sales. “Discounting is slightly more than offsetting the traffic levels, which is causing a little bit of softness in sales,” he told investors.

In its second phase, Tim Hortons wants to start using the program to gradually ratchet up sales. That means shifting to a loyalty model that is able to send personalized offers to members.

“If you have never tried one of our breakfast wraps and I can encourage you to try a breakfast wrap, that’s going to be an incremental sale,” Fulton said. “When you love our breakfast wrap and start buying it more frequently, it becomes a more permanent incremental sale.”