Pizza Pizza Royalty Q2 Earnings Call Highlights

Key Points

• Second-quarter sales weakened: Same-store sales fell 5.0%, while partnership royalty income declined 3.6% to C$10 million as consumer spending, restaurant traffic and comparisons with last year’s hockey-driven demand pressured both brands.
• Dividend cut to preserve financial flexibility: Pizza Pizza Royalty reduced its monthly dividend by approximately 12.9% to C$0.0675 per share, citing lower sales volumes and the need to maintain sustainable payout levels and working capital.
• Management is emphasizing value and selective growth: Promotions such as “Buck an Inch,” larger slices and menu innovation supported traffic, while the company plans to focus on efficiency and expand its traditional store base by roughly 2% annually despite continued pressure on franchisee profitability.

Pizza Pizza Royalty TSE: PZA reported lower same-store sales and royalty income in the second quarter of 2026 as consumer spending pressures, reduced traffic and difficult comparisons with last year’s hockey-driven demand weighed on its restaurant network.

Same-store sales declined 5.0% in the quarter ended June 30. Pizza Pizza locations posted a 4.9% decrease, while Pizza 73 restaurants recorded a 5.3% decline. President and Chief Executive Officer of Pizza Pizza Limited Paul Goddard said persistent pressure on consumer confidence, discretionary spending and quick-service restaurant demand affected sales and guest traffic at both brands.

“Consumers are hurting,” Goddard said, adding that customers appeared to be reducing purchase frequency, shopping more actively for deals and shifting toward pickup to avoid delivery fees. He also said customers were purchasing fewer add-on items in some cases, including drinks, desserts and dipping sauces.

Dividend Reduction and Financial Results

The company’s partnership royalty income declined 3.6% to C$10 million during the quarter. The addition of 20 restaurants to the 2026 royalty pool was offset by the decline in same-store sales, Chief Financial Officer Christine D’Sylva said.

The 2026 royalty pool includes 814 restaurants, comprising 712 Pizza Pizza locations and 102 Pizza 73 locations, compared with 794 restaurants in the pool in 2025. The pool increased by 20 locations on Jan. 1 after adding 39 new restaurants and removing 19 that permanently closed.

In May, the company reduced its monthly dividend by approximately 12.9% to C$0.0675 per share from C$0.0775 per share. Goddard said the decision was intended to preserve working capital and keep the distribution payout ratio sustainable amid lower network sales volumes.

For the second quarter, Pizza Pizza Royalty declared C$5.2 million in dividends, or C$0.2125 per share, compared with C$5.7 million, or C$0.2325 per share, in the prior-year period. The payout ratio declined to 102% from 108% a year earlier. The company ended the quarter with C$2.2 million of working capital after using C$100,000 during the period.

Administrative expenses decreased to C$181,000 from C$283,000 in the prior-year quarter, reflecting lower professional and director fees. Interest expense on the partnership’s C$47 million credit facility was C$439,000. The facility matures in April 2028.

Sales Pressures Included Sports Comparisons and Student Enrollment

Goddard said the company faced unusually challenging comparisons with the second quarter of 2025, when extended NHL playoff runs involving Canadian teams supported home-viewing occasions, late-night consumption and sales at non-traditional locations. The prior-year period also benefited from the Four Nations hockey tournament, he said.

Non-traditional locations at colleges and universities also faced pressure from lower international student enrollment. Goddard said international students have historically represented a high-frequency, late-night customer base, and reduced attendance affected transaction counts, sales and operating hours at campus locations and nearby restaurant hubs.

During the quarter, the company opened four traditional and two non-traditional Pizza Pizza locations. It closed one traditional and six non-traditional Pizza Pizza locations, along with one non-traditional Pizza 73 location. Despite the closures in the non-traditional segment, the company’s traditional restaurant base expanded by a net three locations across British Columbia, Ontario and Quebec.

Traditional restaurants account for roughly 90% of royalty pool sales, while non-traditional and special-event locations contribute the remaining approximately 10%, according to Goddard.

Value Offers and Menu Innovation

Management highlighted several efforts intended to support traffic and consumer value. In mid-May, Pizza Pizza introduced its “Buck an Inch” promotion, offering two-topping pizzas for C$1 per inch, ranging from a C$10 small pizza to a C$18 XXL pizza. Goddard said the offer quickly became the company’s top-selling menu promotion and enabled the chain to eliminate certain legacy offers, simplifying restaurant operations.

The company also increased the size of pizza slices nationally by 25%, with what Goddard described as a nominal price increase. Its C$5 slice-and-drink meal continued to support walk-in traffic and sales, he said.

Other second-quarter initiatives included FIFA World Cup-related promotions, including “Dip Cup Nations,” “Pitch Party Pizza” boxes with tabletop soccer games and “Pie-dration Break” discount codes. Goddard said the company’s media analysis showed Pizza Pizza was the most-searched pizza brand in Canada during the activation.

At Pizza 73, the company launched Golden Crispy Chicken Tenders and brought back its “4/20 pre-rolls” promotion with a two-for-C$5 offer. Goddard said pre-roll sales doubled during the 4/20 week and remained strong through the month-long limited-time promotion. Pizza Pizza also introduced three loaded poutine recipes, driving a 36% year-over-year increase in poutine-category sales.

Outlook and Franchisee Conditions

Goddard said the company expects the macroeconomic environment to remain difficult in the near term, but intends to focus on value, menu innovation, operational efficiency and disciplined network expansion. He said Pizza Pizza is targeting roughly 2% annual growth in its traditional store base, or about two dozen locations.

Management said it has recently gained market share in Ontario and nationally, while cautioning that market-share data can vary in reliability. Goddard also said the company has seen intensified promotional activity from some competitors, including what he characterized as deep discounting, but does not plan to broadly match unsustainable promotional levels.

On costs, Chief Operating Officer Philip Goudreau cited increases in onions, produce and certain proteins, though he said the company has worked with suppliers to mitigate those pressures. D’Sylva said the company’s purchasing scale and longstanding vendor relationships help support negotiations and franchisee economics.

Goddard said franchisee profitability remains under pressure from rent and labor inflation, but management continues to monitor key operating metrics and provide support. He added that interest from prospective franchisees remains strong, although the company is taking a selective approach to new locations and formats.

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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