Release Date: February 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Boston Pizza Royalties Income Fund (BPZZF, Financial) achieved its strongest performance of the year in the fourth quarter, with record franchise sales.
- The Fund posted a year-over-year increase in franchise sales of 2.9% for the fourth quarter and 0.6% for the year.
- Effective promotions, such as the $15 lunch menu and Hockey Night in Canada partnership, contributed to overcoming macroeconomic challenges.
- The Fund increased its monthly distribution rate and issued a special distribution, reflecting strong financial performance.
- Renovations are on an upward trend, with 27 restaurants renovated in 2024, indicating franchisee confidence and investment in the brand.
Negative Points
- Same-restaurant sales growth was primarily driven by menu price increases, indicating potential challenges in increasing guest traffic.
- The Fund's payout ratio increased significantly, reaching 99.9% for the year, which may indicate pressure on cash flow sustainability.
- Distributable cash per unit decreased slightly for both the fourth quarter and the year, reflecting financial pressures.
- The potential impact of tariffs and macroeconomic challenges could affect consumer spending and the overall business environment.
- The GST holiday, while beneficial, is a temporary measure and its end could impact traffic and sales.
Q & A Highlights
Q: Can you provide insights into the guest traffic trends for the quarter and the year, given that SRS was largely driven by menu price increases?
A: We don't publish guest traffic numbers publicly, but internally, we track transactions per restaurant as a proxy for guest visitation. We saw an increase in this metric in the fourth quarter. The reliance on menu price increases was due to hyperinflation post-COVID, but we expect to focus more on driving guest counts as inflation normalizes.
Q: Have you observed any impact on traffic due to the GST holiday?
A: Yes, the GST holiday, which started in mid-December and ends tomorrow, positively impacted traffic. While it's challenging to attribute traffic solely to this factor, we believe it contributed to increased visitation during this period.
Q: What are your renovation targets for 2025, given that 27 stores were renovated in 2024?
A: We aim to exceed the 27 renovations completed in 2024. Our franchise agreement requires renovations every seven years, and we expect to see more than 30 renovations in 2025, subject to material availability and project timelines.
Q: How might potential US tariffs impact your sourcing, and what percentage of your products are sourced from the US?
A: Boston Pizza sources most of its inputs from Canadian suppliers. Some items like fresh produce in winter and certain liquor SKUs are sourced from the US. While tariffs could affect these, the larger concern is the macroeconomic impact on consumer spending and confidence.
Q: What is the outlook for Boston Pizza as you enter 2025?
A: We are optimistic about 2025, starting with promotions like Pasta Tuesday and NFL Pepsi promotions. We continue to monitor the trade landscape and focus on enhancing guest experiences, supporting franchisees, and driving sustainable growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
