VANCOUVER, BC, Jan. 4, 2022 /CNW/ - Boston Pizza Royalties
Income Fund (the "Fund") (TSX: BPF.UN) and Boston Pizza
International Inc. ("BPI1") announced today that
effective January 1, 2022, the Fund's royalty pool (the
"Royalty Pool") has been adjusted to remove four Boston
Pizza restaurants that were permanently closed between
January 1, 2021 and December 31, 2021 (the
"Period"). No new Boston Pizza restaurants were opened
during the Period. With the adjustment for these closures
during 2021, the Royalty Pool now includes 383 Boston Pizza
restaurants.
The Fund effectively receives 5.5% of franchise revenues of
Boston Pizza restaurants in the Royalty Pool less the pro rata
portion payable to BPI in respect of its retained interest in the
Fund.2 On January 1 of each year (each, an
"Adjustment Date"), an adjustment is made to add to the
Royalty Pool new Boston Pizza restaurants that opened ("New
Restaurants") and to remove any Boston Pizza restaurants that
permanently closed since the last Adjustment Date (the "Closed
Restaurants"). In return for adding new Royalty and
Distribution Income from the New Restaurants after subtracting the
Royalty and Distribution Income that is lost from the Closed
Restaurants3 (such difference, "Net Royalty and
Distribution Income"), BPI receives the right to indirectly
acquire additional units of the Fund (the "Additional
Entitlements"). The calculation of Additional
Entitlements is designed to be accretive to unitholders of the Fund
as the expected increase in Franchise Sales from the New
Restaurants added to the Royalty Pool less the decrease in
Franchise Sales from the Closed Restaurants is valued at a 7.5%
discount. The Additional Entitlements are calculated at 92.5%
of the estimated Royalty and Distribution Income expected to be
generated by the New Restaurants less the actual Royalty and
Distribution Income lost from the Closed Restaurants, multiplied by
one minus the effective tax rate estimated to be paid by the Fund,
divided by the yield of the Fund, divided by the weighted average
unit price over a specified period. BPI indirectly receives
80% of the Additional Entitlements initially, with the balance
received when the actual full year performance of the New
Restaurants and the actual effective tax rate paid by the Fund are
known with certainty (the "Holdback"). BPI receives
100% of the distributions on the Additional Entitlements throughout
the year. After the New Restaurants have been part of the
Royalty Pool for a full year, an audit of the Franchise Sales of
these restaurants is performed, and the actual effective tax rate
paid by the Fund is determined. At such time, an adjustment
is made to reconcile distributions paid to BPI and the Additional
Entitlements received by BPI.
The actual Franchise Sales received from the four Boston
Pizza restaurants that permanently closed in 2021 during the first
12-month period immediately following their addition to the Royalty
Pool is $6.2 million. As
there were no New Restaurants in 2021, the Net Royalty and
Distribution Income in respect of the Adjustment Date of
January 1, 2022 is negative $0.3 million (the "Deficiency", being
5.5% of negative $6.2 million
Franchise Sales). On the January 1, 2021 Adjustment
Date, there was a Deficiency of $0.8 million as a result of the estimated
annual net Franchise Sales of the two Boston Pizza restaurants in
2020 ($3.3 million) being less
than the actual Franchise Sales received from the 11 Boston Pizza
restaurants that permanently closed in 2020 during the first
12-month period immediately following their addition to the Royalty
Pool ($18.5 million).
Accordingly, there is currently a cumulative Deficiency of
$1.2 million. A summary of
the above is as follows:
Adjustment
Date
|
Estimated
Franchise
Sales New
Restaurants for
Adjustment Date
(in millions)
|
Actual
Franchise
Sales of Closed
Restaurants for
Adjustment Date
(in millions)
|
Net Franchise
Sales for
Adjustment Date
(in millions)
|
Deficiency, being
5.5% of Net
Franchise Sales
(in millions)
|
January 1,
2021
|
$3.3
|
$18.5
|
($15.2)
|
($0.8)
|
January 1,
2022
|
--
|
$6.2
|
($6.2)
|
($0.3)
|
Cumulative
|
$3.3
|
$24.7
|
($21.4)
|
($1.2)
|
Since there is a Deficiency, BPI did not receive any
Additional Entitlements on January 1, 2022. However, BPI
did not lose any of the Additional Entitlements it received in
respect of previous years. Instead, BPI will be required to
make-up the cumulative Deficiency of $1.2 million in future years by first adding
Net Royalty and Distribution Income in an amount equal to the
cumulative Deficiency before receiving any further Additional
Entitlements. BPI continues to hold a 13.2% interest in the
Fund.
See the Fund's annual information form dated February 9,
2021 for a detailed description of the annual adjustment that is
made to the Royalty Pool.
Certain information in this press release constitutes
"forward-looking information" that involves known and unknown
risks, uncertainties, future expectations and other factors which
may cause the actual results, performance or achievements of the
Fund, Boston Pizza Holdings Trust, Boston Pizza Royalties Limited
Partnership, Boston Pizza Holdings Limited Partnership, Boston
Pizza Holdings GP Inc., Boston Pizza GP Inc., BPI, Boston Pizza
Canada Limited Partnership, Boston Pizza Canada Holdings Inc.,
Boston Pizza Canada Holdings Partnership, Boston Pizza restaurants,
or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking information. All statements, other than
statements of historical facts, included in this press release that
address activities, events or developments that the Fund or
management of BPI expects or anticipates will or may occur in the
future, including adjustments to the Royalty Pool on the Adjustment
Date, calculation and timing of payment of Additional Entitlements
and Holdback, an audit of franchise revenues being performed and an
adjustment to reconcile distributions indirectly paid to BPI and
the Additional Entitlements indirectly received by BPI being made,
the estimated effective tax rate that will be paid by the Fund for
2022, and other such matters are forward-looking information.
When used in this press release, forward-looking information may
include words such as "estimate", "will", "expect" and other
similar terminology. The material factors and assumptions
used to develop the forward-looking information contained in this
press release include the following: future results being similar
to historical results, as adjusted for the expected impact of the
continuing COVID-19 pandemic, expectations related to future
general economic conditions, business plans, receipt of franchise
fees and other amounts, franchisees access to financing, pace of
commercial real estate development, protection of intellectual
property rights of Boston Pizza Royalties Limited Partnership,
absence of changes of laws, absence of amendments to contracts and
the Toronto Stock Exchange granting final approval for the issuance
of the Additional Entitlements. Risks, uncertainties and
other factors that may cause actual results, performance or
achievements to be materially different from any future results,
performance or achievement expressed or implied by the
forward-looking information contained herein, relate to (among
others) the ongoing COVID-19 pandemic, competition, demographic
trends, consumer preferences and discretionary spending patterns,
business and economic conditions, legislation and regulation,
distributable cash and reliance on operating revenues, accounting
policies and practices, the results of operations and financial
condition of BPI and the Fund, as well as those factors discussed
under the heading "Risks and Uncertainties" in the Fund's
Management Discussions and Analysis for the third quarter of
2021. This information reflects current expectations
regarding future events and operating performance and speaks only
as of the date of this press release. Except as required by
law, the Fund and BPI assume no obligation to update previously
disclosed forward-looking information. For a complete list of
the risks associated with forward-looking information and our
business, please refer to the "Risks and Uncertainties" and "Note
Regarding Forward-Looking Information" sections included in the
Fund's Management's Discussion and Analysis for the third quarter
of 2021 available at www.sedar.com and
http://bpincomefund.com/.
The trustees of the Fund approved the contents of this press
release.
® Boston Pizza Royalties Limited Partnership. All Boston
Pizza registered Canadian trade-marks and unregistered Canadian
trade-marks containing the words "Boston", "BP", and/or "Pizza" are
trade-marks owned by the Boston Pizza Royalties Limited Partnership
and licensed by the Boston Pizza Royalties Limited Partnership to
Boston Pizza International Inc.
____________________________________________________________
1
|
In this press
release, BPI includes its subsidiares where applicable.
|
2
|
The Fund indirectly
owns the Boston Pizza trademarks and trade names used by Boston
Pizza restaurants in Canada. In 2002, the Fund licensed these
trademarks to BPI for 99 years and in return BPI pays the Fund a
top line royalty of 4% of franchise revenues ("Franchise
Sales") of Boston Pizza restaurants in the Royalty Pool
("Royalty"). On May 6, 2015, the Fund completed
an indirect investment in Boston Pizza Canada Limited Partnership
(a limited partnership controlled and operated by BPI) that
entitles the Fund to receive distribution income from Boston Pizza
Canada Limited Partnership ("Distribution Income") equal to
1.5% of Franchise Sales of Boston Pizza restaurants in the Royalty
Pool less the pro rata portion payable to BPI in respect of its
retained interest in the Fund.
|
3
|
The Royalty and
Distribution Income that is lost from the Closed Restaurants is
calculated based upon the actual Franchise Sales received from the
Closed Restaurants during the first 12-month period immediately
following their addition to the Royalty Pool.
|
SOURCE Boston Pizza Royalties Income Fund