Boston Pizza Royalties Income Fund Announces Recommencement of Monthly Distributions of $0.065 Per Unit Beginning with September 2020 Distribution

Toronto Stock Exchange: BPF.UN

VANCOUVER, BC, Oct. 1, 2020 /CNW/ - Boston Pizza Royalties Income Fund (the "Fund") (TSX: BPF.UN) announced today that it is resuming monthly distributions to its unitholders ("Unitholders").  Monthly distributions will commence in the amount of $0.065 per unit of the Fund ("Units"), compared to the monthly distributions of $0.102 per Unit that existed prior to the Fund temporarily suspending distributions on March 23, 2020 due to the effects of COVID-19 on the business of Boston Pizza restaurants across Canada, and the corresponding decline in Royalty¹ and Distribution Income¹ payable to the Fund.  Accordingly, the Fund has declared a cash distribution to Unitholders of $0.065 per Unit for September 2020.  The distribution will be paid on October 30, 2020 to Unitholders of record at the close of business on October 21, 2020.

On June 22, 2020, the Fund and Boston Pizza International Inc. ("BPI") announced that they reached agreements to address the financial challenges caused by the COVID-19 pandemic including having entered into a pandemic recovery plan among BPI, the Fund and certain of their subsidiaries (the "Pandemic Recovery Plan").  As a condition to agreeing to the Pandemic Recovery Plan, the Fund's bank required that the Fund not pay distributions to Unitholders before October 1, 2020.  The decision to temporarily suspend distributions was a condition of the Pandemic Recovery Plan and also a prudent step to help preserve the Fund's cash until the economic consequences of COVID-19 could be better understood.

Throughout the past several months, the business of the Boston Pizza restaurants in the Fund's royalty pool has improved. Franchise Sales², and the resulting Royalty and Distribution Income, for May, June, July and August 2020 were approximately 45%, 67%, 81% and 84% of the level they were in May, June, July and August 2019, respectively.  Same Restaurant Sales³ for May, June, July and August 2020 were negative 58%, negative 34%, negative 18% and negative 16%, respectively, when compared to the same periods in 2019.  While the Trustees of the Fund are pleased with the improvement of the business over the past several months, they continue to expect that Franchise Sales and Same Restaurant Sales at Boston Pizza restaurants, and resulting Royalty, Distribution Income and cash available for distribution to Unitholders, will be adversely affected for as long as the COVID-19 pandemic persists.

"We are encouraged by the continued improvement of Boston Pizza restaurants in the royalty pool.  While Boston Pizza's underlying restaurant business continues to be negatively impacted by COVID-19, the financial operations of BPI and the Fund are becoming less volatile relative to earlier in the pandemic" said Marc Guay, Chair of the Board of Trustees.  "Based upon the recent improvement in performance and positive sales trend, the Trustees have decided to reinstate monthly distributions at $0.065 per Unit."

In deciding to reinstate monthly distributions on Units at $0.065 per Unit, the Trustees of the Fund considered, among other factors, the recent financial performance of the Fund, BPI and Boston Pizza restaurants in the Fund's royalty pool, and internal financial projections for the Fund, BPI and Boston Pizza restaurants in the Fund's royalty pool for the remainder of 2020 and 2021, with the view to ensuring the payment of regular monthly distributions at a sustainable level.  

The Trustees will continue to closely monitor the Fund's available cash balances for the remainder of 2020 and beyond.  To the extent that the Trustees determine that, after paying monthly distributions, the Fund has any additional cash available for distribution for the year 2020, the Trustees will consider declaring a special distribution in December 2020, taking into account any potential increase in effective tax rate paid by the Fund if the Fund does not distribute sufficient cash each year. While the consideration of declaring a special distribution would be a departure from the Fund's historical distribution practices and is not envisioned to be a long-term strategy, the Trustees believe this is a prudent approach during the COVID-19 pandemic given the continued volatility and economic uncertainty.

1)	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 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 ("BP Canada LP", a limited partnership controlled and operated by BPI) that entitles the Fund to receive distribution income from BP Canada LP ("Distribution Income") equal to 1.5% of franchise revenues of Boston Pizza restaurants in the Fund's royalty pool less the pro rata portion payable to BPI in respect of its retained interest in the Fund.
2)	"Franchise Sales" is the basis upon which Royalty and Distribution Income are payable, and means the gross revenue: (i) of the corporate Boston Pizza restaurants in Canada owned by BPI that are in the Fund's royalty pool; and (ii) reported to BP Canada LP by franchised Boston Pizza restaurants in Canada that are in the Fund's royalty pool, without audit or other form of independent assurance, and in the case of both (i) and (ii), after deducting revenue from the sale of liquor, beer, wine and revenue from BP Canada LP approved national promotions and discounts and excluding applicable sales and similar taxes. Nevertheless, BP Canada LP periodically conducts audits of the Franchise Sales reported to it by its franchisees, and the Franchise Sales reported herein include results from sales audits of earlier periods.
3)	"Same Restaurant Sales" or "SRS" is the change in gross revenue of Boston Pizza restaurants as compared to the gross revenue for the same period in the previous year for Boston Pizza restaurants that have been open for a minimum 24 months.  SRS is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers.  Management believes SRS provides investors useful information regarding the change in gross sales of Boston Pizza restaurants.

Forward Looking Information

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, BP Canada LP, 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 its Trustees expect or anticipate will or may occur in the future, including such things as: the financial operations and outlook for BPI and the Fund are becoming less uncertain; the Trustees of the Fund continuing to closely monitor BPI's business as the COVID-19 situation develops; the Trustees of the Fund expecting that Franchise Sales and Same Restaurant Sales at Boston Pizza restaurants, and resulting Royalty, Distribution Income and cash available for distribution to Unitholders will continue to be adversely affected by the impact of the COVID-19 pandemic; the potential of, and timing for, a special distribution of cash in December, 2020; and such matters are forward-looking information.  When used in this press release, forward-looking information may include words such as "anticipate", "estimate", "may", "will", "expect", "believe", "plan", "should", "continue" and other similar terminology.  The material factors and assumptions used to develop the forward-looking information contained in this press release include the following: the COVID-19 pandemic will continue to negatively impact the restaurant industry, Franchise Sales, Same Restaurant sales and distributable cash.  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) competition, demographic trends, consumer preferences and discretionary spending patterns, business and economic conditions (including the impact of the COVID-19 pandemic), legislation and regulation, reliance on operating revenues, accounting policies and practices, the results of operations and financial condition of BPI, BP Canada LP and the Fund, as well as those factors discussed under the heading "Risks and Uncertainties" in the most recent Annual Information Form of the Fund. In particular, the continued payment of monthly distributions will be dependent on the financial performance of the Fund, BPI and Boston Pizza and the Fund cautions that monthly distributions could be negatively impacted by the reintroduction of shutdowns on Boston Pizza's restaurants due to the COVID-19 pandemic. 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, neither the Fund nor BPI assumes any obligation to update previously disclosed forward-looking information.  For a complete list of the risks associated with forward-looking information and the Fund's business, please refer to the "Risks and Uncertainties" and "Note Regarding Forward-Looking Information" sections included in the most recent Annual Information Form and Management's Discussion and Analysis of the Fund available at www.sedar.com and www.bpincomefund.com.

The Trustees of the Fund have approved the contents of this news 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.

SOURCE Boston Pizza Royalties Income Fund

Michael Harbinson, Chief Financial Officer, Tel: [phone], E-mail: [email protected], www.bpincomefund.com

Related Links

www.bpincomefund.com