Boston Pizza Royalties Income Fund TSE: BPF.UN reported record third-quarter franchise sales and its eighth consecutive quarter of positive same-restaurant sales, while net income fell sharply because of increased fair value losses.
Franchise sales at the 372 restaurants in the fund’s royalty pool rose 3.4% to CAD 257.5 million in the quarter. Same-restaurant sales increased 3.9%, supported by takeout and delivery, promotions and restaurant traffic associated with the FIFA World Cup, Boston Pizza International President Jordan Holm said on the November 9 earnings call.
For the first nine months of 2026, franchise sales rose 2.8% to CAD 752.4 million, while same-restaurant sales increased 3.1%. Holm said both quarterly and year-to-date franchise sales reached record highs.
Fair value losses weigh on income
Net and comprehensive income fell to CAD 0.7 million in the third quarter from CAD 10.4 million a year earlier. Chief Financial Officer Michael Harbinson said the decline primarily reflected a CAD 13 million increase in fair value loss and a CAD 0.2 million increase in net interest expense. Lower income tax expense and higher royalty and distribution income partly offset those factors.
For the first nine months, net and comprehensive income declined to CAD 18.8 million from CAD 31.1 million. Harbinson said the fair value losses for both periods primarily reflected a decline in the trading price of the fund’s units, consistent with broader declines in interest rate-sensitive securities.
Quarterly royalty income rose to CAD 10.3 million from CAD 10 million, while distribution income increased to CAD 3.4 million from CAD 3.3 million. Cash generated from operating activities edged up to CAD 10.7 million from CAD 10.6 million.
Distributable cash, a non-IFRS measure the fund uses to assess its ability to pay unitholders, slipped to CAD 8.4 million from CAD 8.5 million in the quarter. Harbinson attributed the decrease primarily to higher interest paid on debt. Year-to-date distributable cash rose to CAD 24.2 million from CAD 23.8 million.
Distribution rises as payout ratio increases
The fund’s quarterly payout ratio rose to 93.8% from 88.8% a year earlier as distributions paid increased and distributable cash declined. The year-to-date payout ratio was 97.1%, up from 93.5%.
On a trailing 12-month basis, the payout ratio was 104.5% as of September 30. Harbinson said the figure included a CAD 0.11-per-unit special distribution paid in December 2025 and funded by cash generated throughout that year. Excluding the special distribution, the ratio would have been 97.2%.
On November 6, the fund’s trustees increased the monthly distribution to CAD 0.126 per unit from CAD 0.124, beginning with the October distribution. The increase brings the annualized rate to CAD 1.512 per unit. The October payment is scheduled for November 30 to unitholders of record on November 21.
Harbinson said the trustees aim to set a sustainable monthly distribution and will continue to monitor available cash balances amid the fluctuating economic outlook.
Restaurant openings and promotions
One Boston Pizza restaurant opened during the quarter, none permanently closed and 13 were renovated, Holm said. Through the first nine months, one restaurant opened, four permanently closed and 34 completed full renovations.
Third-quarter promotions included the return of Kids Cards, which offered five free kids meals in exchange for a CAD 5 donation to the Boston Pizza Foundation. Holm said the promotion raised more than CAD 900,000 for local charities. A separate Kids Eat Free offer ran throughout September with qualifying purchases.
For the fourth quarter, Holm cited a refreshed main menu, a holiday feature menu and a gift-card promotion in most regions. He said the company’s priorities include supporting franchisee profitability, driving traffic and strengthening its brand presence.
No questions were asked during the call. Holm said the fourth-quarter investor call is scheduled for February 2027.
About Boston Pizza Royalties Income Fund (TSE:BPF.UN)
The Fund is a limited purpose open ended trust with an excellent track record for investors since its IPO in 2002. Including the December 2025 distribution which is payable on January 30, 2026, the Fund will have paid out 276 monthly distributions and four special distributions totaling $485.7 million or $28.97 per unit. The Fund earns revenue based on the franchise system sales of the 372 Boston Pizza restaurants in the Fund's royalty pool. Boston Pizza is the premier casual dining brand in Canada.
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