Pizza Pizza Limited (“PPL”) is a privately held company that is the licensee of the Pizza Pizza and Pizza 73 trademarks owned and licensed by the Pizza Pizza Royalties Limited Partnership, a subsidiary of PPRC. PPL continues to be the franchisor of Pizza Pizza restaurants in Canada, providing management consulting services to Pizza Pizza franchisees and owns 50% of all Pizza 73 traditional restaurants.

PPL also holds securities exchangeable for shares of PPRC that if exchanged would give PPL a 23.5% interest in PPRC.

The number of shares that PPL is entitled to receive upon exchange of these securities should, in the absence of restaurant closures, increase as new locations are added to the Royalty Pool.

There are currently 24,618,392 publicly traded shares outstanding and 32, 177, 276 shares outstanding on a fully diluted basis.

At January 1, 2021 Pizza Pizza Limited owned 7,558,884 equivalent shares accounting for the difference in the publicly traded and fully diluted.

Pizza Pizza Royalty Corp.’s trading symbol is PZA.

The current dividend is 6.5 cents per share per month, or $0.78 per share per year. Dividends are paid on the 15th day of each month. These dividends are set by the Board of Directors and are reviewed monthly.

Beginning in 2013, PPRC dividends are 100% eligible taxable dividends (Canadian taxpayers) Foreign shareholders should consult their tax advisors.

The income reported on the T5´s provided to Shareholders of record on December 31, 2020 will not include the dividend for the period December 1 to 31, 2020, as dividends are recorded on the payable date, not the declaration date.

Since the initial public offering, a reasonable reserve has been maintained to smooth out distributions, to guard against abrupt economic downturns and/or unforeseen administrative expenses.

This term refers to a ratio used to judge an entity’s health and ability to meet its financial obligations, including its dividend payment.

A payout ratio is calculated by dividing the Company’s annual distribution per share by adjusted annual earnings per share.

Restaurant royalty companies, historically, have tended to have higher payout ratios than oil and gas companies since restaurant royalty companies are not exposed to operating and capital expenditure requirements.

For the twelve months ending December 31, 2019, the payout ratio was 103%. PPRC has accumulated a cash reserve to cover seasonality and any unforeseen administrative costs with the source of the reserve coming from the percentage of earnings not distributed.

Our payout ratio will always be relatively high, since we do not have capital expenditures or employees. Net profit generated after taxes, interest and administrative expenses is available for distribution.

Therefore, after establishing a reasonable cash reserve, the majority of net monthly cash generated is available for distribution to shareholders with the final decision resting with the Board.

Shares trade under the symbol is PZA on the Toronto and Alpha Stock Exchange. To purchase shares, please contact your brokerage firm.

Not at the moment. A dividend reinvestment program, or `DRIP”, is a mechanism that allows investors to elect to receive dividends (or distributions in the case of income trusts) in securities as opposed to cash. Pizza Pizza does not currently have a program like this; however, most brokerage firms offer a feature similar to a “DRIP” which allows investors to rollover monthly cash distributions for additional shares.

The Corp has a $47 million term loan with a syndicate of Chartered Canadian Banks. The $47 million term loan has an interest rate locked in at 1.875% plus a credit spread of 0.81% for a total of 2.685% using an interest SWAP until April 2025.

On January 1 of each year (the “Adjustment Date”), an adjustment is made to the Royalty Pool to “vend-in” new Pizza Pizza restaurants that have been opened, less any restaurants which have closed, by the December 31 and for new Pizza 73 restaurants that were open on or prior to September 1 of the previous year, less any restaurants which have closed, prior to that Adjustment Date.

At each adjustment date PPRC pays PPL, in securities exchangeable for shares, 92.5% of the amount reflecting the value of any increase in the royalty at that time. The adjustment for new restaurants added to the Royalty Pool is designed to be accretive to current shareholders due to the 7.5% discount in payment to PPL.

As of January 1, 2022 there are 727 restaurants in the PPRC´s Royalty Pool, comprised of 624 Pizza Pizza restaurants and 103 Pizza 73 restaurants.  This number will change with the next January 1 adjustment date.

The interests of Pizza Pizza Limited and shareholders are closely aligned, as PPL owns 23.5% of the fully diluted shares of PPRC.

As well, new restaurants are vended into the Royalty Pool annually for which PPL is compensated in equivalent shares based on the License and Royalty Agreement.

Details can be found in the Annual Information Return or on sedar.

The number of restaurants in the Royalty Pool is adjusted once a year on January 1 to include the royalties from restaurants, which opened in the prior year less closed restaurants.

Therefore at any given time there may be restaurants which have opened after January 1 and are not in the Royalty Pool until the following January 1.

For more information about PPRC, please contact:

Christine D’Sylva, Chief Financial Officer
cdsylva@pizzapizza.ca
500 Kipling Avenue
Toronto, Ontario
M8Z 5E5