Pizza Pizza Royalty TSE: PZA reported a difficult start to fiscal 2026 as management pointed to weak consumer confidence and pressured traffic across its system during the first quarter ended March 31, 2026. On the company’s May 1 earnings call, executives said macroeconomic uncertainty weighed on demand and contributed to negative same-store sales results for both Pizza Pizza and Pizza 73.
Traffic pressure drives same-store sales decline
President and CEO Paul Goddard said “overall macroeconomic conditions remained challenging” through the quarter, impacting “consumer confidence, spending, and demand,” with the most visible effect showing up in traffic. System-wide same-store sales declined 4.1% in the quarter, with Pizza Pizza restaurants down 4.3% and Pizza 73 down 2.7%.
Goddard also noted that results were affected by “last year’s non-recurring sales tax holiday,” which created a tougher comparison for both brands.
In the question-and-answer portion of the call, Goddard described a consumer that has become increasingly cautious since mid-February. He said the company is seeing “less frequency, less add-ons,” as customers buy “what they really need” rather than treating themselves. He added that customers have been “shying away from delivery,” while pickup showed some positive growth.
Value offers and innovation aimed at improving walk-in and engagement
Management highlighted a focus on strengthening its product offering while maintaining value across price points. Goddard said the company’s innovation pipeline is intended to attract new customers and encourage trade-up through premium offerings, while keeping the brand “top of mind through innovation.”
During the quarter, Pizza Pizza rolled out the Volcano Dipper pizzas after prior success at Pizza 73. However, Goddard said the product “didn’t quite get the pickup that we thought” at Pizza Pizza, acknowledging that “not everything we try does work.”
The company introduced a CAD 5 meal deal (a slice-and-drink combo) in late March to strengthen its walk-in channel. Goddard said the offer produced “immediate improvements in both sales and traffic within this channel.” He later told analysts the company is optimistic that this and other initiatives can have a “material impact,” though he cautioned that the overall environment remains “very tough.”
Discussing the competitive landscape, Goddard said the company is seeing “extreme discounting by other folks” that it does not believe is sustainable. He said Pizza Pizza is balancing the need to drive top-line sales while keeping franchisee profitability in mind, and emphasized monitoring the relationship between check size and traffic. “We saw check was up, generally speaking, traffic was down,” he said.
Chief Financial Officer Christine D’Sylva added that the company aims to offer value across multiple ordering channels, including walk-in, pickup, and delivery, noting that pickup deals can help customers avoid delivery fees and tipping costs.
Restaurant development starts strong; non-traditional locations face headwinds
On expansion, Goddard said the company began the year “stronger than we have in the last five years.” During the quarter, Pizza Pizza opened six traditional and three non-traditional locations, while Pizza 73 closed one traditional and one non-traditional restaurant.
Goddard said new traditional openings were spread across multiple provinces, including British Columbia, Manitoba, Ontario, Quebec, and two in Newfoundland. He reiterated that the traditional network makes up about 90% of royalty pool sales, with non-traditional and special event locations typically accounting for about 10%.
Management flagged pressure in parts of the non-traditional segment, especially college and university locations. Goddard said lower attendance tied to international student policies and reduced immigration has led to reduced operating hours and “overall sales.”
Looking ahead, Goddard said the company is taking a more disciplined approach to development, “carefully selecting locations and formats to ensure long-term profitability,” particularly as costs rise.
Royalty pool sales and royalty income decline; dividend maintained
D’Sylva said same-store sales—described as “the key driver yield for shareholders”—fell 4.1% during the quarter. While the royalty pool gained 20 net new restaurants on January 1, 2026, she said the benefit from added locations was offset by the same-store sales decline.
Royalty pool system sales decreased 3.5% to CAD 145.8 million, down from CAD 151.3 million in the prior-year quarter. Royalty income, calculated as a percentage of royalty pool sales, also decreased 3.5% to CAD 9.4 million.
D’Sylva also detailed partnership expenses, noting administrative expenses of CAD 132,000, down from CAD 152,000 a year earlier. Interest paid during the quarter was CAD 435,000 on a CAD 47 million credit facility. She said the all-in rate for the next three years will be 3.51%, compared with the prior rate of 2.685% that expired in April 2025.
The company declared shareholder dividends of CAD 5.7 million, or CAD 0.2325 per share, consistent with the prior year. D’Sylva said the payout ratio for the quarter was 134%, which reduced working capital by CAD 1.4 million to CAD 2.3 million. She said the working capital reserve is available to help stabilize dividends and fund expenditures amid variability in system sales and royalty income, and reiterated that the company has historically targeted a payout ratio near 100% on an annualized basis.
Early Q2 read: too soon, but delivery and promotional levers in focus
Asked about early second-quarter trends, Goddard said it was “still a little early” to provide meaningful commentary, though he pointed to ongoing menu innovation and the expected benefits of the CAD 5 slice-and-drink offer in walk-in occasions.
On delivery, Goddard said the company is working to push “organic delivery” and highlighted features such as order tracking maps and SMS updates, as well as the company’s focus on speed and service. D’Sylva noted promotions tied to sports partnerships, including “free game day deliveries,” and referenced the brand’s “on time or free” approach, with delivery “always less than 40 minutes” as a stated guarantee.
For store development, Goddard said the company remains “on offense growth-wise,” targeting 2% to 3% growth in traditional stores. He acknowledged cost pressures such as fuel surcharges from suppliers and said the company is challenging its construction team to reduce build costs to keep franchisee economics attractive.
Despite near-term headwinds, Goddard said the company expects challenging conditions to persist but plans to focus on “value and innovation” while leveraging what he described as a “solid and battle-tested” platform.
About Pizza Pizza Royalty TSE: PZA
Pizza Pizza Royalty Corp., through its subsidiary, Pizza Pizza Royalty Limited Partnership, owns and franchises quick-service restaurants under the Pizza Pizza and Pizza73 brands. It offers a flavorful, varied and high-quality menu to pizza-lovers of all ages and tastes and it is composed of more than 600 traditional and non-traditional restaurants coast to coast, employing over 3,000 Canadians. The business activity of the group primarily functions through Canada.
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