Marketwired
Boston Pizza International Adds 12 New Restaurants Opened in 2015 to the Royalty Pool of Boston Pizza Royalties Income Fund
Marketwired

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Jan 4, 2016) - Boston Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) and Boston Pizza International Inc. ("BPI") announced today that effective January 1, 2016, the Fund's royalty pool (the "Royalty Pool") has been adjusted to include the 12 new full service restaurants opened across Canada between January 1, 2015 and December 31, 2015 (the "Period"), and to remove the six full service restaurants that were permanently closed during the Period. With the adjustment for these openings and closures during 2015, the Royalty Pool now includes 372 Boston Pizza restaurants. This is the fourteenth consecutive year of adding new Boston Pizza restaurants into the Royalty Pool.

"We are very pleased with the 12 new Boston Pizza restaurants opened in 2015, including nine in Western Canada and three in Ontario. These new locations further strengthen our position as Canada's number one casual dining brand." said Mark Pacinda, President and Chief Executive Officer of BPI. "Since the inception of the Fund, 218 net new Boston Pizza restaurants have been added to the Royalty Pool, growing from 154 in 2002 to 372 locations across the country today."

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 (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 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. The combined effect of the above is that 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. Annually, the Royalty Pool of Boston Pizza restaurants is adjusted to include the new Boston Pizza restaurants that opened, and to remove Boston Pizza restaurants that permanently closed, in the prior year.

On January 1 of each year (the "Adjustment Date"), an adjustment is made to add to the Royalty Pool new Boston Pizza restaurants that opened and to remove any Boston Pizza restaurants that permanently closed since the last Adjustment Date (the "Net New Restaurants"). In return for adding net additional Royalty and Distribution Income from Net New Restaurants, BPI receives the right to indirectly acquire additional units of the Fund (in respect of additional Royalty, the "Class B Additional Entitlements" and in respect of additional Distribution Income, the "Class 2 Additional Entitlements", and collectively, "Additional Entitlements"). The calculation of Additional Entitlements is designed to be accretive to unitholders of the Fund as the expected increase in net franchise revenues from the Net New Restaurants added to the Royalty Pool 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 received by the Fund in respect of the Net New Restaurants, multiplied by one minus the effective tax rate (expressed as a decimal) estimated to be paid by the Fund during that year, divided by the yield of the Fund, divided by the weighted average unit price over a specified time. BPI receives 80% of the Additional Entitlements initially, with the balance received when the actual full year performance of the Net New Restaurants and the actual effective tax rate paid by the Fund are known with certainty (such balance of units in respect of the additional Royalty, the "Class B Holdback", and in respect of the additional Distribution Income, the "Class 2 Holdback", and collectively, the "Holdback"). BPI receives 100% of distributions from the Additional Entitlements (including the Holdback) throughout the year. Once the Net New Restaurants have been part of the Royalty Pool for a full year, an audit of the franchise revenues 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.

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