Pizza Pizza Royalty Stock

Ladies and gentlemen, thank you for standing by, and welcome to the Pizza Pizza Royalty Corp.'s Earnings Call for the Second Quarter of 2026.

[Operator Instructions]

As a reminder, the conference is being recorded on August 5, 2026. I will now turn the call over to Christine D'Sylva, CFO.

Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp.'s Earnings Call for the second quarter ended June 30, 2026. Joining me on the call today is Pizza Pizza Limited's President and Chief Executive Officer, Paul Goddard, and Chief Operating Officer, Philip Goudreau.

Just a quick note, our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. And all forward-looking statements should be considered in conjunction with the cautionary language in our earnings release and the risk factors included in our annual information form. Please refer to our earnings release and the MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to non-IFRS measures mentioned on this call.

As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call. With that, I'd like to turn the call over to Paul to provide a brief business update.

Thank you, and good afternoon, everyone. Thanks for joining the call. This afternoon, we released our results for the second quarter of 2026, which you can find posted on our website. The overall macroeconomic environment remained challenging throughout the second quarter. Persistent pressures on consumer confidence, discretionary spending and overall QSR demand continued to weigh on our retail sales and guest traffic across both brands.

So in the second quarter, our overall same-store sales decreased by 5.0%. Pizza Pizza restaurants were down 4.9%, while Pizza 73 restaurants were down 5.3%. Before addressing our operational highlights, I want to comment on the dividend adjustment we announced in May. In the ongoing macroeconomic headwinds and lower overall sales volume across the network, our Board took the prudent step to reduce our monthly dividend by about 12.9%. It was $0.01 per share from $0.0775 to $0.0675. And this decision was made to ensure our distribution payout ratio remains sustainable, while preserving our working capital balance. Maintaining financial stability and protecting long-term shareholder value remain core priorities for our leadership team and our Board. Beyond broader economic pressures, a few additional factors impacted our top line sales comparisons this quarter.

First, tough prior year comps with the 2025 NHL playoff runs, which everyone I'm sure remembers. We faced a difficult comp Q2 of 2025. As a result, and last year's second quarter benefited significantly from that deep extended NHL playoff runs -- multiple runs by multiple Canadian teams, which generated exceptional home viewing -- sorry, viewing, apologies, event-based sales at our nontraditional locations and late night pizza consumption that did not repeat to the same extent this year. Second, declines in international student enrollment, affecting many of our nontraditional sites at colleges. So reduced numbers of international students across Canada at many of these post-secondary campuses. I think many are familiar with that. That just presented direct headwinds for our nontraditional locations at these campuses we have across the country and nearby hubs as well. So this demographic traditionally represents a high frequency, the late-night customer base, and the volume did drop significantly and impacted both transaction counts and overall sales at these sites.

So navigating the shifting consumer dynamics requires us to be agile and creative, and while input costs and market conditions remain challenging, we are focused on execution. And that means driving traffic through value and product innovation, expanding our store network in key markets, and really leading into operational efficiencies to build long-term customer loyalty and engagement. Starting with our value and product offerings, our core pizza category remains resilient, supported by strong value offerings across every price point. In this environment, value gets customers through the door of continuous menu innovation and cultural relevance keeps them coming back. In the second quarter, we executed a comprehensive strategy focused on value leadership, key cultural moments and high-impact product launches. So as an example, first, on value, we took aggressive steps to reinforce our value leadership position and support our walk-in channel.

In mid-May, we introduced our Buck an Inch special featuring Buck Martinez, as many will know, from the Blue Jays, pricing every 2 topping pizza at just $1 per inch from the $10 small up to an $18 XXL pizza. And this simple compelling value message resonated immediately, quickly surging to our #1 selling menu offer in our sales mix. The popularity of this offer has allowed us to remove a number of legacy deals simplifying the menu, and helping streamline operations at the restaurants. In late May, we increased the size of our pizza slices as well nationally by 25% with only a nominal price adjustment to protect profitability. This move delivered a noticeable boost in perceived customer value and elevated the overall slice experience. This return to our famous XXL pizza slices has been extremely well received by customers. And alongside our slice refresh, our $5 meal deal, the Slice and Drink combo continue to perform well, driving sustained improvements in walk-in traffic and sales throughout Q2.

Second, we lean heavily into culture to keep our brands top of mind, capitalizing on the immense viewer engagement during the FIFA World Cup. We introduced Dip Cup Nations featuring dip trios matching participating country flags, which was quite fun and really had good take-up. We also launched a Pitch Party Pizza, transforming our party pizza box into an interactive tabletop football or soccer game, complete with mini nets, driving an increase in party pizza sales and significant increase, I will say. We also capitalized on match play momentum with something called Pie-dration Break instead of hydration breaks. So we have codes associated with that offering 25% off pizzas during match hydration breaks. And our media analysis that showed that we were the #1 search pizza brand in Canada during the activation of the Pie-dration Break. So that was a great success. Together, these activations established Pizza Pizza as the most searched brand, like I said, and we're pretty proud of that. Finally, targeted menu innovation allowed us to drive incremental snack and individual consumption occasions across both brands.

At Pizza 73, we expanded our core chicken category with the launch of Golden Crispy Chicken tenders reinforcing Pizza 73's strength in chicken and providing a premium craveable option for family and group orders. We also brought back our popular 420 rolls -- pre-rolls with new flavors, elevated packaging and an attractive $2 for $5 value offer. This campaign doubled our pre-roll sales during 4/20 week and sustained strong momentum to its month-long LTO run. To capture the growing snacking market, we launched 3 new loaded poutine recipes at Pizza Pizza, driving a 36% year-over-year sales lift in our poutine categories. So we're definitely encouraged by that. So as you can see, hopefully, by balancing everyday value, high-energy cultural campaigns and smart product innovations, we are continuing to give consumers compelling reasons to choose our brands every day.

Turning to our restaurant network with well over 800 restaurants now from coast to coast, we have many points of convenience for our customers to experience our brand. During the quarter, we opened 4 traditional and 2 nontraditional Pizza Pizza locations, and closed 1 traditional and 6 nontraditional Pizza Pizza restaurants, and 1 nontraditional Pizza 73. It is worth noting that while our nontraditional locations saw the majority of the closures, our core high revenue traditional restaurants expanded net positive by 3 locations across B.C., Ontario and Quebec. And as mentioned on numerous -- previous calls, our business is driven by 2 revenue streams, that traditional restaurant network which generates about 90% of our royalty tool sales, and our nontraditional and special event locations, which typically generate the remaining 10%. And as I alluded to earlier, our nontraditional segment continues to face some headwinds, particularly those locations in colleges and universities where lower attendance tied to international student policies, essentially less students coming in from a far, has resulted in reduced operating hours and overall sales and challenges for those colleges themselves.

Looking ahead, we continue to look at growth opportunities across our network. And at the same time, we're taking a more disciplined approach than ever. Carefully setting locations and formats to ensure long-term profitability, particularly in the context of rising costs. We want sales growth, we want network growth, but we want viable, great locations. And I will say our long-term growth track record speaks for itself, both for same-store sales and network growth as we've grown from -- I think it was roughly 500 locations back in 2005 at our IPO to well over 800, as I said, as of '25, and that's a 20-year period. So if you look at things on an ROE basis, return on equity or a CAGR growth rate, I think we look quite good over time. We've had a lot of institutional and long-term holders and retail holders. And as you well know, if you're familiar with our stock, our dividend profit on a 6% to 8% yield range, which represents a reliable, consistent investment for retail and institutional investors alike and we certainly look forward to getting more investors on board as well at these levels.

So we are really now Canada's very owned national Pizza QSR chain leader, and we're excited to grow beyond our orders. First in Mexico, and then on to other countries that suit our system and our brand well. In closing, while we expect the macroeconomic environment to remain challenging in the near term, consumers are hurting, and we know that, we are not standing idly on the sidelines. We are proactively driving our business forward, leaning into our scale, sharpening our value proposition and relentlessly focusing on menu innovation. With a resilient business model, a proven track record to these economic cycles and the dedication of our franchisee partners across Canada, we are fully confident in our ability to navigate this period and strengthen our competitive position.

And as always, I want to give a shout out to our owner operators. They are really the absolute key frontline people and an extension of our bigger team, and also our employees internally. We work very seamlessly together, and it's all about the passion and the hard work day in and day out. And I think that's something that makes us real special and we're very proud of. So thank you again for joining us today. And I'll now ask Christine to provide our detailed financial update.

Thanks, Paul. And as a reminder, Pizza Pizza Royalty Corp is a top line restaurant Royalty Corp. that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the trademarks, Pizza Pizza Limited pays the partnership a monthly royalty calculated as a percentage of Royalty Pool sales. Growth in the corp is derived from increasing the same-store sales of the restaurants that are in the pool, and by adding new restaurants to the pool each year. As announced earlier this year, on Jan 1, 2026, the royalty pool increased by 20 restaurants as a result of adding 39 new restaurants less 19, which permanently closed. So for fiscal 2026, there were 814 restaurants in the Royalty Pool, comprised of 712 Pizza Pizzas and 102 Pizza 73. This is compared to 2025 when there were 794 restaurants in the pool.

So with that, I'll briefly cover the financial results for the quarter. And as Paul mentioned, same-store sales growth is the key driver of yield to the shareholders. And during the quarter, that decreased by 5%. Both brands saw decline in traffic, which resulted in Pizza Pizza restaurants reporting a decrease of 4.9%, and Pizza 73 restaurants reporting a decline of 5.3%. The positive impact of the 20 restaurants added to the pool was offset by the same-store sales decline and resulted in an overall decrease to the Royalty Pool system sales and the corresponding royalty income. The partnership royalty income earned as a percentage of Royalty Pool sales decreased 3.6% to $10 million for the quarter.

As a reminder, the Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in the business. System sales for the first quarter of the year is generally the lowest, while system sales for the last quarter of the year are generally the highest. So turning to partnership expenses. Administrative expenses, including listing costs as well as directors, legal and auditor fees decreased in comparison to the prior year. This quarter, they totaled $181,000 compared to $283,000 in the prior year's comparable quarter. The decrease in the quarter reflects lower professional and director fees. In addition to administrative expenses, the partnership is making interest-only payments on its $47 million credit facility. Interest paid in the quarter was $439,000. As a reminder, in March of 2025, the company renewed the credit facility for 3 years, with maturity now set for April 2028. The balance of the facility remained unchanged. However, the credit spread increased slightly from 0.875 to 1%.

Additionally, in 2025, the partnership entered into a new 3-year forward swap. The 3-year swap locked in interest at 2.51%, which was an increase from the maturing swaps of 1.81%. Now the all-in rate on the credit facility for the next 3 years will be 3.51% compared to the maturing rate of 2.685%. After the partnership received its royalty and interest income, and paid its administrative and interest expense, any resulting cash was then available to distribute to the partners based on their ownership. And after the 2026 pending, Pizza Pizza Limited's ownership increased to 27.2%. Pizza Pizza Royalty Corp. shared in the remaining 72.8% of the partnership distributions. It paid its corporate taxes, and any residual cash was available for dividends to the company's shareholders. As previously announced, and Paul mentioned earlier on the call, the company reduced its monthly dividend from $0.0775 per share to $0.0675 beginning with that May dividend. And this was done in response to the ongoing market conditions and their impact on top line system sales.

So for the quarter, the company declared dividends of $5.2 million or $0.2125 per share compared to $5.7 million or $0.2325 per share. The payout ratio decreased to 102% and from 108% in the prior year's comparable period. And the company used $100,000 of its working capital to end the quarter with $2.2 million. The $2.2 million working capital reserve is available to stabilize dividends and fund other expenditures in the event of short to medium-term sales variability. The company has historically targeted a payout ratio at or near 100% on an annualized basis. And with the recent dividend decisions, the company continues to target this on a go-forward basis. That concludes my financial overview. I'd like to turn the call back to the operator to poll for questions.

[Operator Instructions]

Your first question comes from Cheryl Zhang with TD Cowen.

I wanted to first double quick on consumer behavior. I'm wondering if there's any change in concern behavior that you can point to in Q2 versus Q1? And if you can comment on what are consumers cutting back on in their purchases?

Yes, it's a good question, Cheryl. I mean I think that generally speaking, the backdrop is still quite negative out there. I mean, obviously, we had even less traffic this quarter, which we are not happy about. It does seem like some customers are reducing their frequency. So that obviously impacts overall traffic occasions. And we do sense that people are just generally in this environment, more likely to shop around. Even though we have a loyal customer base, some people are only loyal to their last great deal they received, and they'll pop around and get a similarly priced burger or even another pizza slice et cetera. So that's a factor, just generally customers struggling and then overlying all this.

I made a comment in my prepared remarks was just the fact that the NHL playoffs -- last year, we had that long, long run with the orders and other teams, the least. And we just -- this year, just didn't see that. And we were lapping also for Nations last year as well. And so that was really good for us last year. And we just don't have that this year. So because we are somewhat leveraged to the success or lack of success of the big sports events, that's a factor, at least through that kind of fan base that really likes the eat more pizza when these events are on. But I think just generally speaking, we are seeing a little bit less frequency and just people being a little more choosy, pivoting more to pick up, saving on delivery fee, and also on third-party platforms. I think they're getting expensive not just for us, but I think all restaurants out there.

So some people will use a certain third-party app but we're trying to make it more and more attractive to have them use our organic apps, which are really much more effective to come with our time guarantee and whatnot. And we also see, just from some of our data analysis, people are -- some people are just not having as many add-ons. They might have gone for a drink before or 2 drinks, they might downgrade to 1, maybe not get a dessert, maybe not get a dipping sauce. So we have to counter things like that. We have been really actively promoting things like dipping sauces as add-ons because maybe a little more proactively than perhaps we used to in the past because people are hurting. So I think hard to just get a definitive behavior change just specifically in Q1 and Q2, but certainly, things are not better, I would say, overall.

And Cheryl, I think I don't remember for Pizza 73, they used to be like 90% delivery, 10% walk-in and pick up. And over the years and even especially in the last few years, they shifted to almost 40% walk-in and pick up as a combination of their sales. So what Paul is saying, people are still coming, but they're shifting and trading down slightly but within our own ecosystem. So that's the trend that we are seeing more of.

Yes. So as much as we can. We're obviously very known for value, and we can segment our customer base in some places where value is not as key, but obviously for our main core value is critical. So pricing and convenience, we know that's one of our advantages. We have a lot of levers to pull there and our omnichannel approach does help to like customers lots of ways to get to us. And so we'll take them however they want to get us, pickup, walk-in, delivery and even third-party app, but we'll take them all. But we do notice, I mean, more than ever, pricing is super competitive, and we've got to have that convenience factor.

That's all very helpful. And speaking of competition, how -- it sounds like competitive activity has increased in Q2 versus Q1. Is that a fair comment? And do you feel that you need to increase promo versus what you have now?

I think our sort of mix of promos to none, it's fairly consistent, although we're certainly not happy with our traffic this quarter. We have noticed, I would say, a little more of the sort of what we call some cases, sort of irrational deep discounting by some significant players where they'll often at the end of a certain period or cycle quarter, they'll have extreme discounting for a period. And that does drive traffic. But we don't think that's a super sustainable economic model. So we're trying not to chase that. We'd rather provide sort of consistent value on those real traffic moving items.

And we're not -- certainly, we do, do discounts and opportunistic things, and we've been successful with things like SMS broadcast to certain customers that are sort of dormant customers and things with very attractive discounts, but that's not to all our customers. It's only the targeted people. So we're trying to be smart about it rather than just discount all of our products out of just extreme desperation for traffic because we want to be sustainable. We want to make sure our operators can also make money at the end of the day. So we're driving top line all the time. That's critical for investors and that network growth, but we got to make sure that the bottom line works for franchisees. So we -- it's always a tight rope, but I think generally, we would trying to find that pretty well.

Yes, absolutely. And then do you feel like you're gaining or losing share versus your pizza category peers in this environment?

I think we do have some recent data basically saying that both in Ontario and nationally, we have gained some share. And so that's positive. I think just like the fact that traffic is down, I think it's so that reflects that the whole pizza segment is a tough place to be even within the tough sector QSR. And I think -- I'm still a big believer in long-term ubiquity of pizza and people still love it, but there are a lot of other choices. And so it does -- we do take some comfort in the fact that we did gain some share there. Even though, look, even when it's in our favor, I will say sometimes market share data, it's sort of directionally helpful. But in absolute terms sometimes the data can be a little bit questionable. That's all I will say.

But we have said that we -- in our biggest market of Ontario, it's gone up and nationally, so that's good. And sometimes it's down a little bit, too, but I think this has been quite encouraging. So I do think some of the things we've been putting out there have been resonating even though traffic is still not where we want it to be.

Okay. That's helpful. And I know it's probably still early, but any initial reads on how things are trending so far in Q3?

I don't think we really have much to say there yet. I mean I would just say that our marketing team continues to have a lot of great innovation success there. I think there's things coming out. And we have just launched our ancient grains as well just recently. So that's -- it's still early, but we're very encouraged by that protein forward product that really speaks to sort of an individual pizza with some really creative recipes that are fun like a Cup-and-char pepperoni with jalapeno and honey -- might saw honey and things like that.

So these are, I think, something that we hope will do really well. That's just one example, but it's a little early to say that. But I think things like that and also the slice, the extra extra large slices that we put out there, we are, I think, encouraged at least early signs of that seems to be hitting people where they have less slice. It's competitive against the $5 offering that someone else might offer, and that's a pretty good deal of slice in a big drink a big slice in a drink. So some of those are a couple of examples of, I think, where we hope for Q3 to go.

And also, we will -- I mean things like the Taber Stampede, that was actually quite successful for us. We had a saddle slice out there. There's 3 deep fried slices, and we had a similar thing here in Toronto that really resonated. I think we became a second place for the most innovative food offering, and it drove a lot of social media and a lot of transactions there. So that's not the biggest sales driver in the company, obviously, but these little victory sometimes do add up. And so we think we really spoke to people there and we're sort of culturally relevant at the right time, and that's something we're pretty proud of the team doing being pretty quick and agile. And what we're trying to do is amplify those and get those things to be more significant, so it's material.

That's great. And in terms of your sales by channel, how much of your sales is from third-party versus your own digital channels and in-store?

Yes. We've -- just for competitive reasons, we'd rather not disclose that. It's a portion that we think it is an important channel, but we are way more driven by our organic channels. And those are something that we're really putting more dollars into. And I think you'll start to see that more over time in the next 6 months as well. I think just the fruits of our labors there. Those are important channels though. The third party -- we know that there are some people that only order on those channels. And so we have to talk to those customers as well. And it's still valuable, but it's a very expensive channel for us and everyone else, and we'd rather pivot them.

So we do things on our packaging and as much as we can to the extent we have customer data or the ability to try and leverage them through the packaging through QR codes and things like that, that say, hey, next time order organically, we'll give you a free coke or 2 free side items or something like that. So we're trying to sort of steal back from those third-party channels as much as we are also using them. But it's -- I would say it's a small portion. It's significant, but it's not -- certainly nothing like a majority of our sales or anything like that. Our organic channels are much more significant. Our walk-in, our delivery are -- we've got a great fleet of drivers, and we've got a great pickup and walk-in capability that we prefer to really have people use.

That's helpful. And maybe switching gears to cost and inflation. I wonder if you can comment on the cost environment? Any notable inflation that you're seeing in either food supply or energy/

I don't want to ask Christine for that, but I don't think on energy or just on supply chain and inflation-wise. I mean there's some areas perhaps. But I don't think there's any major increases there.

We've had some increases in onion and some produce that we were able to mitigate, and also some proteins as well that we're working closely with our suppliers on. But those are industry issues we see at the grocery store as well, and we're certainly not immune to it in the business side.

And we try to use -- we use our buying power because we use are the distributor for all of our Ontario and Quebec stores. So we have some strong buying power in terms of these items. So we have a lot of power to negotiate with our vendors. And we've got a lot of great vendors who we've been in partnership with for many, many years. So we're always working with them to kind of get us through the highs and the lows as we build out and look at the food cost because we do really need to balance the profitability of the stores and what our end customers can afford to cover right now.

Yes. And just the only thing I'd add to that, those good comments, Cheryl, to your point on energy is we do have some long-term marketing deals using our economies of scale with our restaurants. So we sort of essentially control the commodity rate for things like natural gas across most of our restaurants there rather than having them sign up with retail door knockers, for instance, that used to come and sign up on exorbitant energy rates. So we do think that we're helping mitigate cost for franchisees for things like natural gas and to some extent, electricity.

But certainly, with the macro backdrop with oil price pressures, with the same geopolitical issues and things in the Middle East, if crude were to stay up and go up more and more, then we could expect to see some commodity price increases over the longer term. But I think we're generally pretty well insulated from that right now. That hasn't been quite as much of an issue as it used to be. I remember many years ago, 15, 20 years ago with franchisees things like the cost of natural gas were a major, major input cost. So we still really manage it as best we can, to the extent we can. And I think we've actually been pretty successful there. But we certainly keep a close eye on it and do what we can to help the franchisees.

Okay. That's all very helpful context. And maybe last one for me. Can you comment on the health of your franchisees? Any impact on their profitability returns? And if you're seeing any changes in level of interest in new stores?

I think overall, I mean, pipeline-wise, I think we're feeling pretty good. I mean, we're -- that's something that's been very good. I mean, is there anything we have to -- we screen people and we get a lot of interest and see what we can take. And we don't always get the franchisee pipeline where we want them because everyone might want to be in downtown Toronto or something. But I think we're pretty happy with that. And development-wise, we're trying to grow roughly 2% a year. We're going to have 2 dozen sort of traditional stores type of thing. In terms of the average unit volume, the bottom line, I mean, it's certainly tough.

But I think overall, we've been pretty happy with some of our key metrics. Our food cost, we try and really be within a certain range that we know our own KPIs for rents and sales, labor as best we can approximate with the franchisees' labor. And we just really expect good operational field management as well and coaching the franchisees to say, manage your labor carefully, do a great job with service and execution and so that you get a good bottom line. So certainly, rents we always trying to hold the line on as best we can, but there is a level of inflation. Labor is generally always going up with the average hourly wage and things like that. So these are all headwinds and we can't always get price on the revenue side.

So we've really tried to help franchisees, but things like subsidies and things, I think we've done a really good job of managing that and having franchisees [indiscernible] to us more than they used to, even in these tough times. So I would say there's always some people at the bottom of the portfolio that maybe need a little more help, but we really think it's the core average franchisee should be self-sufficient and get a good return. And again, just -- that's a critical driver for us, for our franchisees for the sustainability of the brand and for Pizza Pizza Limited selling items to people. But I just would stress again, as you know, Cheryl, like for the Pizza Pizza Royalty Corp. is really the top line, that's critical.

So we are exposed to that operational risk and some of the franchisees, but we've had a great track record with PPRC because it's just top line revenue sales, that 6% that's driving for the investor and given them that sort of 6% to 7% yield typically and that net network growth. So we'll keep driving hard on that side. That's our duty to do that. And a lot of that is, of course, driven by traffic and sales. But on the side of the franchisee and the private operating company, we do want to make sure it's profitable.

That's great. That's all for me. Thanks so much, everyone.

There are no further questions. I will now turn the call over to Christine D'Sylva for closing remarks.

Thanks, everyone, for joining us on the call today. If you have any questions, please contact us. Our information is on the earnings release. Have a great evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, welcome to the 2026 Annual Meeting of Pizza Pizza Royalty Corp. Please note that this meeting is being recorded. I would like to introduce Neil Lester, Chair of the Board of Directors of Pizza Pizza Royalty Corp. Mr. Lester, the floor is yours.

Good morning, everyone, and welcome. I'll be acting as Chair of today's meeting. With me on this virtual call are Paul Goddard, the President and CEO of Pizza Pizza Limited; and Christine D'Sylva, CFO of Pizza Pizza Limited. We want to thank you for joining us on this virtual platform. Instructions on how to ask questions and the voting procedure will appear on your screens. Please note though, only duly appointed proxy holders and shareholders are able to ask questions and vote. .

As investors, you are aware the company owns and licenses the Pizza Pizza and Pizza 73 rights and marks through 2 license and royalty agreements with Pizza Pizza Limited. The company receives monthly royalty revenue based on the sales from the restaurants in the royalty pool. In 2021, the company entered into a third license agreement with Pizza Pizza Limited, for the use of the Pizza Pizza rights marks in Mexico. The first 4 restaurants have now opened. And although we do not expect any material royalties from this arrangement in the near term, we're excited to see the future growth that awaits us.

A key attribute of the company is that its revenue is based on top line system sales of the Royalty Pool of restaurants and not on the profitability of either Pizza Pizza Limited or the restaurants in the Royalty Pool. Increases in system sales are derived from both the development of new Pizza Pizza and Pizza 73 restaurants and same-store sales growth. Same-store sales growth is the key metric for shareholder yield growth.

With the consent of the meeting, I will ask TSX Trust Company through its representatives to act as scrutineers of the meeting. The Secretary has a confirmation that the notice calling this annual meeting was mailed to shareholders in accordance with the company's bylaws and applicable securities regulations. With the consent of the meeting, the reading of the notice of the meeting will be dispensed with, and I'll ask the secretary to append the confirmation of mailing to the minutes of this meeting as a schedule.

The scrutineer has provided a preliminary report on attendance, and I'll now ask the Secretary to read the report.

The scrutineer's report reads as follows: preliminary report on attendance. We are pleased to report that there are 36 shareholders holding 5,354,713 common shares represented in person or by proxy at this meeting. This represents 21.75% up to 24,618,392 issued and outstanding shares, dated this 9th of June 2026, signed by the TSX Trust Company. .

Thank you. I'll adopt the scrutineer's report and declare accordingly that a quorum is present.

As there is a quorum present and as adequate notice of this meeting has been given, I now declare that the meeting is regularly called and properly constituted for the transaction of business. We'll first deal with the formal business to fulfill the legal requirements of the meeting. After that, Mr. Goddard will present a business update. If you've logged in as a registered holder or a duly appointed proxy holder, you can submit questions at any time during the meeting by clicking the Ask a Question button. If there are any questions, the secretary will take note and the company will contact you with a response after the meeting. I've been advised that we have guests at the meeting. I welcome all guests but remind them that they do not have the legal right to vote on any motion and are not entitled to ask questions.

However, if you do have questions, please contact us after the meeting. We'll conduct today's votes by a single electronic ballot. If you have already voted in advance by proxy, you do not need to do anything when balloting is open. Unless you wish to change your previously submitted vote. Voting can only be done through our virtual meeting platform. We note that the proxies received to date indicate that the company has sufficient votes to pass all matters in accordance with the recommendations of management. The online voting polls are now open and will remain open as we proceed. The financial statements of the company for the year ended December 31, 2025, and the report of the auditors thereon were mailed to the shareholders prior to this meeting.

I would invite you to raise any questions concerning the financial statements in the questions section of the platform. Test item of business before the meeting relates to the appointment of auditors of the company. I will now ask for someone to move a motion that KPMG LLP, Chartered Accountants, be appointed as auditors for the company for the ensuing year and that the directors be authorized to fix the remuneration to be paid to the auditors. Who will move the motion?

So moved.

I second the motion?

Is there any discussion on the motion? As there is no discussion, I now call for a vote on the motion before the meeting. but all voting shareholders please enter your votes.

[Voting]

It is now in order to proceed with the nomination and election of directors. The number of independent directors of the company has been fixed at 5 for the coming year. This meeting is now open for nominations for election as a director for the ensuing year. I'll now ask the Secretary to read the names of persons nominated as directors as listed in the company's information circular.

The names of the persons nominated as directors of the company for the ensuing year are Neil Lester, George Michel, Evan Nash, Michelle Savoy, and Annmarie Thomas. .

Since the number of nominees is the same as the number of vacancies to be filled, I now ask for someone to move a motion that the persons nominated for election as directors be elected as directors of the company to hold office until the next Annual General Meeting. Who will move the motion?

So moved.

Who will second the motion. .

I second the motion.

And is there any discussion on this motion? As there is no discussion, I now call for a vote on the motion before the meeting with all voting shareholders please enter your votes.

[Voting]

Proxies representing the shares were submitted in advance of the meeting. We will report the specific voting results when we receive the scrutineer's formal report, but the preliminary count shows a majority support for each resolution. Voting is now closed. Based on the preliminary report of the scrutineers, proxies were received from a sufficient number of shares relative to the votes cast at the meeting such that I declare that all the resolutions have been carried as follows:

I declare that the motion on the appointment of the corporation's auditors has passed, and I declare each of the 5 nominees to the Board of Directors elected. I hereby direct that a copy of the scrutineer's final voting results be appended to the minutes of the meeting. That concludes our formal business I wish to thank you for attending, and I now declare the formal part of the meeting to be terminated.

I would now like to call upon the Chief Executive Officer of Pizza Pizza Limited to review the business of the company and Pizza Pizza Limited. As a cautionary note, the presentation may contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements of the company and Pizza Pizza Limited to differ materially from those disclosed here today. We are also adopting the cautionary language regarding forward-looking statements that is set out in the company's annual information form to which we refer you for additional details concerning the risks, uncertainties and assumptions relating to our forward-looking statements.

With that, I am pleased to introduce Mr. Paul Goddard, President and CEO of Pizza Pizza.

Thank you, Neil, and good morning, everyone. Welcome to our Annual General Meeting. To kick things off, I will say that 2025 was not without its challenges, but despite a difficult industry-wide backdrop, we achieved growth in our restaurant network and overall positive sales growth, and I'm eager to share our business and financial update with you today. .

Before I discuss our financial results, I wanted to quickly review the corporate structure and key pieces of shareholder information for any new shareholders or guests here today. Through its ownership of the Pizza Pizza Royalty Limited partnership, Pizza Royalty Corp., or PRC, owns the Pizza Pizza and Pizza 73 trademarks and brand names along with a number of other trademarks and brand names as well. Back in 2005, following our initial public offering, the brands were licensed to Pizza Pizza Limited, the private operating company, in exchange for a royalty equal to 6% on the sales of Pizza Pizza restaurants and 9% royalty on the sales of Pizza 73 restaurants.

Now to briefly explain the royalty stream as you see here, the company, and by that, I specifically mean Pizza Pizza Royalty Corp. or PPRC receives royalty and interest income and pays administrative expenses interest on its credit facility and taxes. As a reminder, the company has no employees nor capital expenditures. So after the basic expenses I just mentioned, all remaining cash is available for distribution to shareholders. The company, as a top line Royalty Corp. is insulated from the operating results of the private company, Pizza Pizza Limited, and its restaurants. The success of Pizza Pizza Royalty Corp. is driven by the operating company's ability, that is Pizza Pizza Limited's ability to grow sales through same-store sales growth and new store openings.

We also want to provide you a brief overview of some key pieces of important shareholder information. As of today, Pizza Pizza Royalty Corp. is trading under the TSX ticker, [indiscernible] has 24.6 million shares issued in outstanding or on a fully diluted basis, 33.8 million shares and this fully diluted figure includes Pizza Pizza Limited's 9.2 million equivalent shares. Pizza Pizza Limited's ownership represents 27.2% or over 1/4 of the fully diluted shares of PPRC. So of course, this clearly demonstrates year after year that PPL has a lot of skin in the game and has always been closely aligned with the interest of PPRC and its public shareholder base. The PZA shares of PPRC pay a monthly dividend of [ $0.0675 ] per share or $0.81 per year, providing a yield of roughly 6% to 7%. As of today, with PZA trading around $12.70 a share, the dividend yield is approximately 6.4%.

Let's turn now to PZA and our share performance. As you can see here, it's generally a positive story going way back, but we are seeing pressure in the last 3 months. As our business built on its history of consistent sales growth, we utilized that momentum and increased our dividend 8 times in the last 6 years. The history of sales growth and dividend increases over the last 4 years culminated in a 5-year high share price, which is more than double where it was in the depths of COVID, days we all want to forget.

However, due to continued pressure on consumer discretionary spending, softening demand and a highly competitive promotional environment, sales growth has experienced a decline, and this led to a reduction in the company's royalty income. The use of the company's cash reserves over the past 2 years was a trend that could not be sustained indefinitely. So the Board made a decision in May 2026 to adjust the dividend, and specifically, that's down $0.01 from [ $0.075 to $0.0675 ] per month or just under 13% to better align with the current royalty income levels.

The decline in sales growth in the first quarter of 2026 and the subsequent dividend reduction has impacted the PZA share's trading price as you'd expect. But if we step back for a second, you might ask what has driven our long-term share performance. And the answer is sales growth. That's the key driver of growth. Our 2025 results reflect the continuing challenging economic environment we operate in. With softer same-store sales, our overall Royalty Pool sales for 2025 were slightly higher than prior year at $636 million. This resulted in $40.8 million of royalty income and the company paid out annual dividends of $0.93 per share, leaving the company with a working capital reserve of $3.7 million.

While our sales results were weaker than we hoped for, we did successfully open an additional net 20 new restaurants, which we're happy about, yet the overall macroeconomic conditions remain challenging through the first quarter of 2026. The year began with the annual adjustment to the Royalty Pool, an increase of 20 net new restaurants, as I said; negative same-store sales growth in a highly competitive and challenging economic environment; and we ended the quarter with $2.3 million in working capital reserve. And as a reminder, the first quarter is generally our softest quarter in terms of system sales and why we often see a greater than 100% payout ratio in Q1. And on an annualized basis, you do target a 100% payout ratio.

Looking here at our dividend growth. Driving our payout ratio is our dividend. And you can see our strong track record year going way back, well 2011 there. In the last 4 years, we have increased monthly do it in 8x as I said. However, in May 2026, due to the extending pressure on sales growth and use of the company's cash reserves over the past 2 years, as I mentioned earlier, the Board made a decision to proactively adjust that dividend to better align with current royalty income levels. The dividends have been funded by operations and our working capital balance. Our working capital balance is available to support our dividends when they're short- to medium-term sales variability.

And speaking of working capital, PPRC has a working capital balance of $2.3 million as of March 31, 2026, as [ laid ] on the graph, which starts the movement in same-store sales growth in relation to our working capital. So as you can see, for the last 2 years, the company funded the dividend through its working capital balance. And so just to clarify, again, the use of the working capital and the pressure on same-store sales growth resulted in the decrease in the monthly dividend effective in May.

The Board always closely monitor sales and working capital levels to determine whether any upward or downward dividend adjustments are appropriate. So with that overview of PPRC, the Royalty Corp structure and the flow of funds, I'd now like to provide a business update for Pizza Pizza Limited, the private operating company. As a reminder, Pizza Pizza Limited is the private operating company, not public, and the success of the Royalty Corp. depends on the operating company's ability to maintain and increase restaurant system sales both through new restaurant openings and increases in same-store sales.

We are truly proud of our long-standing reputation as a real innovation leader in our industry in terms of our food, our marketing and our technology evidenced through our wide array of digital ordering options, new product launches and many industry-leading marketing awards and recognitions. Additionally, our strong management team has developed a proven franchise business model, which we will continue to leverage and scale as we execute on our national and now international expansion program. In fact, our construction pace over the last 3 years or so has never been stronger.

I'm very proud of our entire team, and that includes not only our corporate employees, but our owner operators, that being our franchisees and our joint venture partners out in Alberta in our restaurants. We really do just think of ourselves as one big team. And as PPL continually reinvest in all aspects of our business, so to do our restaurant operators who likewise see the benefits of reinvesting in their restaurants on an ongoing basis to ensure they provide our customers in the modernized setting to enjoy our hot and fresh menu offerings.

For our newer investors, I wanted to highlight our 3 key brands, Pizza Pizza, which operates across the entire country, is our main brand; while Pizza 73, our sister brand that was acquired in 2007 operates primarily in Alberta; and lastly, our newest sister brand, [indiscernible], a Gourmet oriented Express brand is our new international expansion brand. Within our primary 2 Canadian brands, we have both traditional and nontraditional locations. Our traditional restaurants comprise roughly 90% of our business in terms of sales and offer a full menu with customer seating, takeout and delivery. These restaurants are usually located in high-traffic areas that are easily accessible.

Meanwhile, our nontraditional restaurants comprised the remaining 10% of our business sales-wise and are typically located in sports and entertainment venues. In the last few years, we began to roll out more nontraditional locations in colleges, hospitals as well as other high-traffic sites such as high-traffic gas stations, some chain convenience stores selectively and especially in cities or towns where we do not have a traditional restaurant presence. Some of these nontraditional restaurants offer both pickup and delivery as well. So they act as a great bridge between a full-size traditional restaurant and a smaller restaurant with limited offerings.

And currently, in Mexico, we have 4 traditional restaurants and are soon to open our fifth restaurant there. It is still early days, but we do plan to continue to scale up [indiscernible] based on our success to date in Mexico. We also see opportunities to open more nontraditional [indiscernible] as time goes on, both internationally and also within Canada. And in fact, we already have 5 [indiscernible], nontraditional locations in Canada, operating in some colleges and also at Canada's Wonderland, where we also have multiple successful Pizza Pizza restaurants.

We remain focused on growing our business right across Canada, and we are known and respected as a major homegrown national brand and the leading pizza chain in the country. We've continued our focus on our national restaurant expansion program, taking us coast to coast with growth in markets from [ Newfoundland ] right out to BC. From a restaurant growth perspective, I'm pleased to share we started the year stronger than the prior 5 years. In the first 3 months of 2026, our new traditional restaurants spanned the country with openings in B.C., Manitoba, Ontario, Quebec and 2 in Newfoundland.

Having the ability to interact with our customers through our expansive restaurant footprint across Canada, whether it's through our wide delivery network or in-store, ensures that we are able to reach customers in all metropolitan areas across Canada. And in fact, our restaurant locations are within a 10-minute drive of 60% of Canadian households.

At the end of 2025, we had 815 restaurants in our Canadian network with 587 being traditional Pizza Pizza and Pizza 73 restaurants, the most in company history. We have almost 50% more sites than we had at the time of our IPO in 2005. During 2025, Pizza Pizza opened 12 traditional restaurants and 20 nontraditional Pizza Pizza locations and opened 5 traditional Pizza 73 restaurants. The new restaurants were opened across most provinces, Pizza Pizza operates in, including B.C., Quebec, Ontario, Alberta, Manitoba and [ Atlantic Canada ].

During the year, 3 traditional and 11 nontraditional Pizza Pizza restaurants closed and 5 traditional Pizza 73 restaurants closed permanently. Notably, 4 of the 5 Pizza 73 closures involve territory transfers to nearby locations, minimizing any impact on overall sales.

So we are proud of our accelerated unit growth last year and expect to maintain this pace with projected unit growth of 2% or so in our traditional restaurants in 2026 with continued focus in Quebec, British Columbia and Atlantic Canada, while also further penetrating our largest 2 markets, Ontario and Alberta. However, we continue to take a very disciplined approach, carefully selecting locations and formats to ensure long-term profitability, particularly in the context of rising costs.

As you may recall, in November 2021, we entered into an international franchise agreement with partners based in Mexico to expand our footprint internationally for the first time. And in 2023, we opened our first restaurants. We're happy with the growth of the first 4 stores we're achieving, and we're excited about the long-term potential of this high-growth, high pizza consuming market. We will see more sites built in Mexico and are encouraged by our early success there. Mexicans are clearly loving our delicious pizza and other menu items such as chicken and fries. In fact, since the successful launch of our restaurants in Mexico, we've been approached by multiple potential partners regarding further international expansion.

Our customers recognize our strong value proposition and convenience and our innovative marketing activities and partnerships continue to be recognized as industry best-in-class and are always well received by Canadians driving visibility and incremental sales. So I wanted to quickly highlight a few points about our brand strength and activations.

In terms of building our brands, Pizza Pizza Limited is unique in that our exceptional in-house marketing team manages a spend that is approaching $30 million annually and funded entirely by our restaurants. In 2025, we continue to own key days occasions, but we also like to be at the forefront of current trending topics. In 2025, we took it up further with the timely and actionable reverse tariff promotion providing Canadians with memorable advertising and true financial savings in the form of a 25% discount.

In addition to ongoing media executions, highlighting our brand value, convenience and menu innovations through billboards and social media, we integrated our campaign messaging into key sports partnerships. Our well-known and loved [ score slice and score pride ] promotions at our partner arenas across the country are well established. So in the first quarter of 2026, we leveraged our sponsorships with the [ Principa Recipe ] and Pizza 73, product endorsement with the legendary [ Gene Principe ].

Our partnership with the Blue Jay superstore of Vladimir Garo Jr., literally and figuratively hit it out of the park in the fourth quarter of 2025. The campaign featured our XL 18-inch 3-topping pizza at a value price point of 1999 and giving Canadians across the country a large, shareable and affordable pizza to enjoy during the games. This promotion exemplified how we effectively leverage brand partnerships while reinforcing our value propositions.

At Pizza Pizza, our in-house research and development team is always looking to introduce new high-quality menu additions based on relevant consumer trends. We've always been an early adopter, and we were the first to introduce a [ cauliflower crust and a keto crust ]. Continuously refreshing the pizza category with new crusts, recipes and toppings brings new life to our pizza menu and represents the investments we continuously make in our food quality. We're also known for our non-pizza food innovations, such as our range of [indiscernible], unique chicken offerings and famous dipping sauces.

In addition, as shown in these few quick examples you see here, we are continuously looking at items that complement our core pizza offerings such as our [ 2 for $5 ] pre-rolls new innovations with our stuffed crust offerings, the fund [indiscernible] different pizza and our new chicken tender offerings at both brands. And even with that level of quality and innovation, we maintain our value to customers. We know that customers are very value conscious, particularly at this time, given food inflation and the challenging macroeconomic environment. So we have to find the right balance of perceived value for money. In achieving this, we promote key specials and issue new products at price points that attract customers.

Many of our marketing messages are centered around our always-on value offerings that resonate with consumers, including our [ XXL pizza, our Plenty for $20 offer and our $5 slice ] and drink offer in addition to our always on block in and pickup specials. Supporting our top line sales is a robust network of infrastructure. Over the years, we've built and invested in our platforms and our company for the future. The largest single investment we've made has been in our digital ordering platforms. Going right back to circa 2009, Pizza Pizza clearly saw how critical it would be to develop an industry-leading iPhone app and website and invest in our end-to-end digital platforms. No other pizza player in Canada has more digital channels for hungry customers to choose from. So no one is more convenient or able to capitalize on this digital e-commerce momentum in the Pizza Quick service sector.

Our continuous IT investment and strategy showed their value during the pandemic and post-pandemic periods as our online ordering platforms performed exceedingly well, having been active for years while other industries struggle to develop their own as quickly as possible. We also developed contactless ordering and [ preshipping ] features within our app very quickly and our website within mere days of the pandemic starting, which showed our team's capability and agility as well, and we continue to be extremely fast when it comes to putting in new changes and enhancements to our system.

And most recently, we launched a similarly new website [indiscernible] Pizza 73, allowing our customers to have an even smoother, faster, more enjoyable ordering experience. And in 2026, we are working on a new website and loyalty program newly enhanced for Pizza Pizza. So stay tuned there.

Customer delivery and pickup orders transacted through our array of digital ordering platforms account for approximately 2/3 of all orders, and this percentage will only continue to increase, benefiting our customers, our company and our franchisees. Additionally, we've invested in AI infrastructure heavily with partners such as Google and others that provide, for instance, in one case, intelligent delivery order tracking within our app with a slick live mapping interface for our customers so they can see where the delivery person is on a map as they approach their location. And of course, we'll meet our famous delivery time guarantee of 40 minutes are free.

Our customers right across Canada love how they can so easily track exactly where their delivery driver is, follow them along their route and have the additional comfort of having a uniform piece pizza delivery person bringing in their hot and fresh pizza order. Meanwhile, other pizza players rely solely on third-party aggregators to provide this type of functionality and detailed visual tracking.

Over the last 3 years, we have seen a shift in customer behavior with customers moving increasingly to pickup orders. And with 800-plus locations across Canada, we are ideally positioned to capture all audiences, especially those looking to save on delivery, [ tip ] and other surcharges that many companies charge. Our in-store pickup channel has grown steadily over the last 4 years and is at the highest sales level it has ever been at. When customers visit our restaurants, they also see and appreciate our renovated refreshed new look as well and we believe that, that ambience and overall experience is a cut above the competition and really speaks to our emphasis on quality and continuous evolution as a brand. And we're proud to say that over 95% of our restaurants feature our hot and fresh new look.

As you can see here, here's a quick look at some of our store interiors. And we're committed to ensuring store experience is one that keeps customers coming back when coupled with our extensive menu, industry-leading apps and website and our friendly in-store team who are there to deliver on our vision of all the best food and especially for you. And we're very proud of our franchise system, and we work as one team right alongside our franchise, as I said earlier.

For the past 13 consecutive years, the Canadian Franchise Association has awarded Pizza Pizza the Franchisees' Choice Award, a huge vote of confidence from our restaurant operators. This franchise relationship is absolutely key to our record of strong growth and also our future growth. In 2023, we were named the champion for diversity and inclusion by Canadian Franchise Association and Brand of the Year by Strategy Magazine. Additionally, in the last 3 years, we are recognized as one of Canada's most admired corporate cultures and one of Canada's greatest -- sorry, Canada's Certified Great Places to Work, a true testament to the commitment, impact and passion of our teams. And in April 2025 and again in April 2026, we were ranked the #1 franchise in Canada by Elite franchise awards. That's 2 consecutive years, another award we're extremely proud of that speaks for itself.

We also have a long track record of community involvement, including all levels of sports sponsorships and our well-known [ Slices for Smiles Foundation ], which donates to 6 kids hospitals right across the country as well as [indiscernible] right across Canada and countless live entertainment venues. We're particularly proud of our pioneering sponsorship with the [indiscernible] in 2024 as part of our strategy to connect with sports fans right across the country.

And on the sustainability front, as you know, we've always been a leader on the environmental and sustainability front. However, recently, we've been challenging ourselves to do even more. For example, our boxes are made with recycled content, and our head office has a rooftop with solar panels. We have wind turbines on site to generate additional clean energy. We also utilize a [indiscernible] gain wall that automatically provides us with about 60% of our heating needs for free in the wintertime, which translates into reduced natural gas usage in a material way.

And being active in our communities is an important ingredient of our corporate strategy. Annually, we have -- our [indiscernible] fundraising campaigns supporting children's hospitals right across the country, as I mentioned. And we also participate in comes fundraising initiatives, focusing on our customers and their communities by supporting events and sponsoring local organizations, be it a soccer league or a local fundraiser at school. We've also partnered with [indiscernible] to help us reduce food waste and feed our communities and continue to be a strong community partner to second harvest.

So with that brief business overview and understanding of our business operations, I'd like to quickly summarize the key advantages of being a PZA shareholder. As a top line Royalty Corp., the company's royalty structure reduces risk to the bottom line by eliminating exposure to restaurant operations. The company is also a high-yield dividend corp, currently yielding 6% to 7% and holds working capital reserve of $2.3 million to support this dividend. With almost 60 years of experience in the quick service industry since 1967, the operating company has a strong history of increasing sales and our brands hold market-leading positions with exceptional brand recognition, and we know how to weather storms. We've certainly seen many over the years.

Lastly, as the company's largest shareholder, the operating company, Pizza Pizza Limited, has its interest aligned with the public shareholders, ensuring that every pizza created doesn't just add value to the customer but also to the shareholder. We are proud of what we built and continue to be ambitious about our future growth as one of Canada's leading homegrown brands.

Thank you for listening today. We truly appreciate it. And I'd now like to hand things back over to Neil Lester, Chair of PPRC.

Thanks very much, Paul. As previously stated, if you have asked a question, the secretary will be taking note and responding to you directly after the meeting. That concludes the agenda for the meeting. Thank you for your attendance today.

Thank you for attending today's meeting. You may now disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to the Pizza Pizza Royalty Corp.'s Earnings Call for the First Quarter of 2026. [Operator Instructions] As a reminder, this conference is being recorded on May 1, 2026.

I will now turn the call over to Christine D'Sylva, CFO. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp.'s Earnings Call for the First Quarter ended March 31, 2026. Joining me on the call today is Pizza Pizza Limited's President and Chief Executive Officer, Paul Goddard.

Just a quick note, our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with our cautionary language in the earnings press release and the risk factors included in our annual information form. Please refer to our earnings press release and the MD&A in the Investor Relations section of our website for a full reconciliation of other disclosures related to non-IFRS measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call.

I'll now turn the call over to Paul for a business update.

Thank you, Christine, and good afternoon, everyone. We appreciate you joining our call. This afternoon, we released our results for the First Quarter of 2026, which you can find posted on our website. The overall macroeconomic conditions remained challenging through the first quarter of 2026. We saw the impact on consumer confidence, spending and demand, all of which negatively impacted our retail sales, specifically traffic.

In the first quarter, our overall same-store sales growth was actually negative 4.1%. Pizza Pizza restaurants were down 4.3%, while Pizza 73 restaurants were down 2.7%. Beyond the current macroeconomic impact on sales, the impact of last year's nonrecurring sales tax holiday was also felt at both brands. So while consumer confidence remains low, businesses continue to face rising costs and ongoing uncertainty. In this environment, we are focused on controlling what we can, strengthening our product offering, further expanding our footprint across Canada and driving operational discipline.

Starting with product offerings. Our core pizza category remains resilient, supported offerings at all price points. And while value continues to be critical, staying top of mind through innovation is equally important. Our innovation pipeline allows us to attract new customers, encourage trade-up within our existing mix through premium offerings and deepen overall brand engagement. This quarter, following the success of the Volcano Dipper Pizza at Pizza 73, we rolled out the product at Pizza Pizza. This unique, ownable new product provided us with the opportunity to showcase Pizza Pizza and our food in a fun and playful narrative while enforcing -- reinforcing our gift leadership position.

We also recently introduced a $5 Meal Deal slice and drink combo in late March to strengthen our walk-in channel and compete with other QSRs offering entry-level value meals. We saw immediate improvements in both sales and traffic within this channel, which is exciting. We remain focused on delivering strong value to our customers, knowing that we're competing for a share of increasingly constrained consumer spending.

Turning to our restaurant network. In terms of restaurant development, I'm pleased to share that we started the year stronger than we have in the last 5 years. And as a reminder, with over 800 restaurants from coast to coast, we have more points of convenience than any other QSR pizza chain in the country. During the quarter, we opened 6 traditional and 3 nontraditional Pizza Pizza locations and closed 1 traditional and 1 nontraditional Pizza 73 restaurant. Our new traditional restaurants span the country with openings in BC, Manitoba, Ontario, Quebec and 2 in Newfoundland. And as mentioned on previous calls, our business is driven by 2 revenue streams. First, our traditional restaurant network, which generates 90% of our Royalty Pool sales; and secondly, our nontraditional and special event locations, which typically generate the remaining 10%.

Our nontraditional segment is currently facing some headwinds, particularly locations within colleges and universities where lower attendance tied to international student policies stemming from reduced immigration, et cetera, has resulted in reduced operating hours and overall sales. But looking ahead, we continue to see growth opportunities across our network. At the same time, we are taking a more disciplined approach, carefully selecting locations and formats to ensure long-term profitability, particularly in the context of rising costs.

As I close out my comments, we expect us to continue to face headwinds across our entire system in the near future. Consumer confidence is still low, and there continues to be much uncertainty. However, we will continue to be there to provide our customers with the best food and especially for them. Our platform is solid and battle tested. We will drive further value and innovation, and we have the experience and track record to do so. The strength of our brands and experience of our team and our owner operators as a critical part of that team have enabled us to navigate through these challenging conditions before, and we have great confidence in our ability to successfully manage well through this latest period of economic uncertainty and leveraging our proven competitive advantages and leading brand platform.

So thank you again for listening in today. And I'll now ask Christine to provide a financial update.

Thanks, Paul. As a reminder, Pizza Pizza Royalty Corp. is a top line restaurant Royalty Corp. that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its operations, Pizza Pizza Limited pays the partnership a monthly royalty calculated as a percentage of the Royalty Pool sales.

Growth in the Corp. is derived from increasing the same-store sales of the restaurants in the pool and by adding new restaurants to the pool each year. As we announced earlier this year, on January 1, 2026, the Royalty Pool increased by 20 net new restaurants as a result of adding 39 new locations less than 19 restaurants which permanently closed. So for fiscal 2026, there will be 814 restaurants in the Royalty Pool, comprised of 712 Pizza Pizzas and 102 Pizza 73. This is in comparison to 2025 when the pool was 794 restaurants.

So now briefly covering the financial results for the quarter. As Paul mentioned, same-store sales, the key driver of yield for shareholders, decreased 4.1% in the quarter. Both brands saw a decline in traffic, which resulted in Pizza Pizza restaurants reporting same-store sales decrease of 4.3% and Pizza 73 restaurants reporting a decline of 2.7%. The positive impact of the 20 net new restaurants added to the Royalty Pool was offset by the same-store sales decline and resulted in an overall decrease to the Royalty Pool System sales and the corresponding royalty income.

Royalty Pool System sales for the quarter decreased 3.5% to $145.8 million from $151.3 million in the same quarter last year. By brand, sales from the 712 Pizza Pizza restaurants decreased 4.1% to $124.5 million and sales from the 102 Pizza 73 restaurants decreased 0.9% to $21.3 million for the quarter. The partnership's royalty income earned as a percentage of Royalty Pool sales decreased 3.5% to $9.4 million in the quarter.

As a reminder, the Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System sales for the first quarter of the year are generally the lowest, while system sales for the last quarter are generally the highest.

So turning to partnership expenses. Administrative expenses, which include listing costs as well as director, legal and auditor fees decreased in comparison to the prior year. This quarter, they totaled $132,000 compared to $152,000 in the prior year. In addition to administrative expenses, the partnership is making interest-only payments on the $47 million credit facility. Interest paid in the quarter was $435,000. The all-in rate for the credit facility for the next 3 years will be 3.51% compared to the maturing rate that expired in April of 2025 of 2.685%.

So after the partnership received royalty income and interest income and paid administrative and interest expense, the resulting net cash was available to distribute to its 2 partners based on their ownership. After the [ event ] on January 1, 2026, Pizza Pizza Limited's ownership increased to 27.2% and Pizza Pizza Royalty Corp. shared in the remaining 72.8% of the partnership distribution. The Royalty Corp. received distributions, paid taxes on its share of the earnings and any residual cash was available for dividends to the company's shareholders.

The company declared shareholder dividends of $5.7 million in the quarter or $0.2325 per share, which was consistent with the prior year. The payout ratio for the quarter was 134% and resulted in the company's working capital decreasing by $1.4 million to end the quarter at $2.3 million. This $2.3 million working capital reserve is available to stabilize dividends and fund expenditures in the event of short- to medium-term variability in system sales and interim royalty income. The company has historically targeted a payout ratio near 100% on an annualized basis, and any dividend decisions will be made with this target in mind.

That concludes our financial overview. I'd like to turn the call back to our operator to poll for questions.

[Operator Instructions] Your first question comes from Cheryl Zhang of TD Cowen.

So obviously, certainly not an easy quarter for anyone in the QSR space. I'm curious what you're seeing that customers are cutting back on in particular? And is there any notable changes in consumer behavior compared to last quarter?

Yes, it's a good point, Cheryl. I think we see the landscape we live in and some common issues people face. I think just generally, not unlike our last call, I mean traffic is overall weak. I mean, we still did see some growth positively in pickup but certainly, people are shying away from delivery. So we saw negative in delivery, and that's something we certainly have some plans to try and address. We've been trying for a while, but we have some other ideas we think we will be more successful.

So I think there are some signs of light, but definitely, people are just really hurting. I mean you've got the global geopolitical situation. Gas prices are on everyone's mind. I think we're $2 gas in British Columbia, things like that. And so really since sort of mid-Feb really, we and I think the whole market has seen just all that much more conservative, careful behavior on the part of customers. So that translates into things like less frequency, less add-ons, people just getting what they really need and not sort of treating themselves as much and as often. So we just sense it's just been weakening as we saw really in the quarter, weaker than it was even in the last quarter.

I see. That makes sense. And curious if you could offer any early reads on the trends so far in Q2?

Well, it's still a little early, right? I mean we're just kind of end of April here. So I think we really need to see. We've got a lot of menu innovation going on and other things we're planning on doing later this year. But I think things like our $5 slice and a coke deal, we think that's out in the market that that's going to have a big impact in walk-in in a positive way. That's something that's really unique to us really as a major chain. There's others that do slice, but nowhere near kind of the volume that we do. So that's just one example. Things like that, we're actually pretty optimistic about having a material impact.

But the overall landscape is still very tough. People are looking for value and you're seeing some extreme discounting -- extreme,extreme discounting by other folks that we don't think is really sustainable. So we certainly discount ourselves, but we're also trying to play the long game here and play to our advantages. So I think some of our menu innovations have done well, and we're going to keep pushing things like organic delivery a little more, and we've had some signs of success there. But I'd say it's still a little early for the quarter to really make more comment on that.

Yes. Speaking of competition, how do you feel about your pricing and offering compared to competitors? And how do you think about keeping your value edge without escalating discount? You mentioned in your prepared remarks some subsequent improvement after you launched the $5 new deal, and I'm curious if you could add some color to it.

Yes. I mean I think we generally have a good sense of price. I mean when we look at competitors, which we're doing all the time and seeing where we have traffic strength, traffic dropping off, what's happening with relative check. I mean we saw check was up, generally speaking, but traffic was down. It's always hard to find that balance. We think we're well priced. I mean we are not shy to change prices. We've changed prices on a la carte items. We've changed prices on specials from time to time. So I think generally, we feel like we're in the right zone for what we offer. I mean we know we offer very high quality relative to some others. And yet we think with our cost structure, we can be very competitive with our pricing.

So I think we feel we're sort of in the right zone, but we do see downward pressure overall from people that are being extremely aggressive, I guess, you could say. So we're aware of that. We have to get good results. We have to get top line sales growth. That's our job. But we also got to make sure it's profitable for our franchisees as well.

So I think just overall, we're really looking to play to our strengths. So things like the slice deal, we launched chicken tenders at Pizza 73, some unique items there. We've got more in the pipeline. I think BOGO has been successful out there for us as well. So I think we've had some success with things that we think will work well and some other things that maybe haven't resonated quite as well. I mean one example would be the Volcano Dipper, which we did very well in Pizza 73, we translated it over here, didn't quite get the pickup that we thought, to be honest. So not everything we try does work, but we have a pretty quick cycle time on our innovative marketing team. So we don't always hit it right, but we thought that was great value. But we also have more success with things like our Vladdy Junior Special, the XXL [ $19.99 ] 3-topping pizza, which became very quickly one of our top mixing specials and it's certainly fantastic value in a fun way and especially in our major markets, it's done really, really well.

So it's just not doing well enough because customers are still, at the end of the day, hurting so much that even though it's a great deal and talking to a lot of customers, even that only has limited potential. So we're also looking at how do we get something even better, more interesting that can drive traffic further. But overall, I think we're well placed as a value player overall. We're really careful about our pricing. We're looking for opportunities to accentuate things like dips as well, which we're really famous for having the best dips as add-ons. But we know people are cautious. So we need to really get more and more creative about how we can really leverage our advantages, still be a value player and get that traffic up. It's just all about transaction count, getting that traffic up and doing whatever we need to do to do so.

And then to add on to that, Cheryl. We do have the multiple channels, right? We make sure that we have value at every point where the customer is interacting with us. If we're coming in for a walk-in, we've got a walk-in special. If you want to come in to pick up to save on the delivery and the tip, which as consumers are getting more constrained in their available spend, we have pickup specials that are available to you. So you can save on the delivery and tip. And we always have our delivery specials like the XXL Vladdy deal. So we try to make sure that at every price point and at every convenience point, we have something to offer our customers.

And across dayparts as well, I mean, we slice and dice the numbers every way you can imagine, of course, but we're always looking for growth in various dayparts and those sort of omnichannels, like Christine said. So that is some flexibility that others don't have. But at the end of the day, we're still not getting enough transactions. We know we've got to get traffic up. And we are pretty excited about some of the things coming down the line. And some of them will take longer as well to bear fruit, to be honest, but it's kind of a -- we have kind of a long view on the platform and what we can do to really win over more people from competitors and then get our loyal customers actually coming to us more often, more frequently and adding on more items. So it's a bit of a long game, but we do think there's some signs of hope, but the overall economic climate is still pretty concerning.

It's very helpful. Actually, I did mention that you still see some improvement in organic delivery. I'm curious if there are any drivers for that, that you could highlight? Is it because of better speed visibility? Or is it SMS tracking from all construct like free delivery or anything that you could highlight there?

Yes. I mean we do think there's benefits to the customer and there's economic benefits. I mean we've actually been -- as of the last couple of months, I think it was sort of the end of Q2, correct me Christine if I'm wrong, but the -- with the sort of time, the guarantee time, and we try to highlight that a little more because that is something that we -- people don't get on a third-party platform. So we do use those as a channel like everyone else, but customers can rely on a uniform Pizza Pizza delivery driver with really good tracking times. We have much like the third-party providers, a customer tracking map, see where your order is on the map as it comes to the customer with an SMS reminder as it's supposed to get to your door. So it's better service, better speed, it's cheaper rather than paying commission to a third-party aggregator.

So we -- and we think that's helpful because our delivery charges are really nominal really compared to those. And we think that's a real competitive advantage we have. We're famous for our guarantee. And although the third parties are a channel that some people only order from, they're also shying away from that. I think we see some weakness overall in the sector there for third party because delivery is just so expensive. So we see people trending more towards pickup. But we think leveraging things like loyalty and cross-channel marketing, getting people to behave in multiple channels, loyal customers or winning new ones in some of our multiple channels, that's a good pathway to success.

We also have on game days, because we have such big partnerships with a lot of the sports teams across Canada, we have free game day delivery. So we try to get those customers who are watching the game with friends at home, ordering and saving on that delivery fee to keep them coming to us. And we always promote our on time or free, right? We are always less than 40 minutes with a guarantee that Pizza Pizza has always had, and we're proud of it and the fact that you can trust your order now is something that our marketing team has done a great job this quarter of promoting as well.

That's great. And just last one for me. What are you expecting for network expansion in 2026? And are you seeing any early impacts from the rising costs like fuel costs? Any impact on equipment construction costs or input costs that might impact franchisee profitability and interest in opening new stores?

Yes, we are. I mean we still are, I would say, on offense growth-wise. So we think in terms of traditional stores, we're still looking at 2% to 3% range. I mean last -- this quarter has been encouraging in that respect. And so we do think really most parts of the country, we have lots of green space to grow on it while others perhaps are being a little more defensive. We're certainly defensive about our key markets, but on offense on the store development side.

So I think we are getting suppliers increasingly looking for fuel surcharges and things like that. But that does indirectly impact us. We're holding the line on that as best we can. We haven't seen sort of equipment costs necessarily go up yet, but I wouldn't be surprised if we see more of that in the future. And we've been really challenging our construction team to also ensure that the unit economics look good for a franchisee. Can we reduce construction costs? Can we skip certain items or reduce the cost of certain items so that the investment for the franchisee is more palatable? So I think we're being pretty creative with some aspects like that, and that's pretty exciting. I think we have a good record, a good franchisee pipeline.

But certainly, there's headwinds. I mean with the inflationary pressure depending on how long this big crisis goes on overseas and just even without that general economic malaise, I mean, that's what we expect. So we say, well, if it's a tough environment, we still need to be successful. So what do we got to do? And if it ends up not being as bad, well, then we'll look even better. But we are seeing some pressure, things like fuel. Most of our Canadian ingredients are Canadian, for instance, so we mirror that quite well, and we've held the line pretty well there. But certainly, we'll control what we can control and make sure that the food basket overall is okay. And same with lease costs and things like that for franchisees. So we're trying to make sure that our economic -- unit level economics are attractive even in a sort of really not helpful economic backdrop.

[Operator Instructions] There are no further questions at this time. I would hand over the call to Christine D'Sylva for closing comments. Please go ahead.

Thank you. Thank you, everyone, for joining us on the call today. If you have any further questions after the call, please feel free to contact us. Our information is on the earnings release. And thank you for your support of Pizza Pizza Royalty Corp. You may now disconnect your lines.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to Pizza Pizza Royalty Corp.'s Earnings Call for the Fourth Quarter of 2025. [Operator Instructions] As a reminder, this conference is being recorded on March 25, 2026.

I will now turn the call over to Christine D'Sylva, CFO. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp.'s earnings call for the fourth quarter ended December 31, 2025. Joining me on the call today is Pizza Pizza Limited's President and Chief Executive Officer, Paul Goddard.

Just a quick note that our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from those projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary language in our earnings press release and the risk factors included in our AIF. Please refer to our earnings press release and the MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to non-IFRS measures mentioned on the call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call.

I'll now turn the call over to Paul for a brief business update.

Thank you, Christine, and good afternoon, everyone. Thanks for listening in. We always appreciate it. This afternoon, we released our 2025 4th quarter and year-end results, which you can find posted on our website. While the macroeconomic conditions continued to deteriorate over the course of the year, our fourth quarter performance highlights the resilience of our operating company and the strengths of our brands, people and core fundamentals.

During the year, we opened 37 new restaurants, bringing our 3-year total to 130 new locations opened across Canada. We started off 2025 strong. And for the full year, Pizza Pizza restaurants delivered same-store sales growth of 0.7% and Pizza 73 achieved sales growth of 1.9%. In the fourth quarter, our brands achieved a combined same-store sales increase of 0.2%. Pizza Pizza restaurants experienced a slight decline of 0.1% and while Pizza 73 reported same-store sales growth of 1.8% for the quarter. For the third consecutive quarter, we were happy to see growth in Pizza Pizza's organic delivery channel, which helped increase the overall average check. However, at both brands, we did see a decrease in transactions as we faced heightened competition and felt the impact of reduced consumer spending.

So we saw a more cautious consumer environment develop throughout 2025, but we remained focused on executing our strategy. And as a reminder, that's really leveraging the strength of our brands, delivering compelling everyday value propositions, anchored in our core products and supported by menu innovation and maintaining a strong seamless customer experience across all channels.

So starting with brand strength, Q4 is always our most important quarter, driven by key occasions like Halloween and New Year's Eve along with the turn of our major sports partnerships. This year, Pizza Pizza launched a new partnership with Vladimir Guerrero Jr., ahead of the Toronto Blue Jays playoff run, while Pizza 73 partnered with Ryan Lomberg of the Calgary Flames to strengthen our hockey positioning. Overall, it was a highly engaging quarter for both our marketing team and our brands.

We continue to build on successful programs like Score a Slice and Score a Pie at Pizza 73, promotions across NHL and NBA partners nationwide. These initiatives drive customers to our apps and enable ongoing engagement that encourages repeat visits. And for fans watching the games at home, we offered free game day delivery, where on game days, customers receive their orders of no delivery charge. And that's certainly been a very popular promo for people too, which we're really happy about.

Our partnership with the Blue Jays super star Vladimir Guerrero Jr. or Vlad, as he is known, literally and figuratively hit it out of the park. The campaign featured our Double XL 18-inch 3-topping pizza at a value price point of $19.99 and giving Canadians across the country a large, shareable and affordable pizza to enjoy during the games. It was actually really exciting for us when he and his agent reached out to us directly. So that was a great time of last year. We're really excited and really kudos to our marketing team for really executing well on that with him. And this promotion really exemplified how we effectively leverage brand partnerships while reinforcing our value propositions.

Turning to our second pillar, value. We remain focused on delivering strong value across our core products. This was particularly important as we lap the sales tax holiday in December 2024 and as we saw customers becoming more diligent in how they choose to spend their money. We reinforced our position as a value leader through a range of price-conscious offerings. At Pizza Pizza, everyday offerings like the $19.99 mix and match and $15.99 pizza and pop deals remain customer favorites, complemented by limited time offers like the 20 wings for $20 deal, demonstrating our consistent commitment to providing high-quality meals but under $20.

At Pizza 73, we continue to promote the Double XL offer and brought back the popular holiday helper promotion during the December period. Our core pizza category remains resilient, supported by offerings across all price points from slices and pickup specials for value-focused customers to more bundled options designed for families, gatherings and special occasions.

While value remains critical, staying top of mind through innovation is also important. Our innovation pipeline allows us to attract new customers, trade up our existing pizza mix with more premium offerings and deepened brand engagement. This quarter, as an example, Pizza 73 launched the Volcano Pizza, generating strong consumer buzz and millions of impressions on social media. And due to its success there at Pizza 73, the Volcano Pizzas were rolled out to Pizza Pizza in Q1 of 2026.

All of these efforts are underpinned by our third and most critical pillar, customer experience. We serve customers through multiple channels, including in-store, by phone, and on our organic digital channels and also on third-party food delivery platforms. In a highly competitive landscape, delivering a seamless end-to-end experience is essential. So to meet and exceed customer expectations, we continue to invest in our digital ecosystem with plans to relaunch our website, mobile apps and loyalty platform in 2026. At the same time, phone ordering remains an important channel, accounting for roughly 1/4 of our orders.

Our customer contact center is fully staffed to ensure minimal wait times. On Halloween, our busiest day in company history our systems performed exceptionally well due to our robust, highly scalable and reliable technology infrastructure and exceptional people working together. So congrats to the team on your effort there on Halloween, it was record-setting.

And beyond ordering, we are focused on ensuring our restaurants are accessible, modern and welcoming. This quarter, we have 90% -- 95%, pardon me, of Pizza Pizza locations and 50% of Pizza 73 locations refreshed which will further enhance customer satisfaction and engagement.

Turning to our restaurant network. We ended the year with 815 locations in Canada, nice to cross that 800 mark. And that includes 712 Pizza Pizzas and 103 Pizza 73 restaurants along with 4 international locations in Guadalajara, Mexico. During the year, we opened 12 traditional, 20 nontraditional Pizza Pizza locations as well as 5 traditional Pizza 73 restaurants. We closed 3 traditional and 11 nontraditional Pizza Pizza locations along with 5 Pizza 73 restaurants. And notably, 4 of the 5 Pizza 73 closures involve territory transfers to nearby locations. So it's really more of an aggregation exercise for a bigger territory, thereby minimizing any impact on overall sales.

Looking ahead, we continue to see opportunities for growth within our restaurant network. However, we are taking a more disciplined approach, carefully selecting locations and formats to ensure long-term profitability, particularly in the context of rising costs. As I close out my comments, I expect that we will continue to face more headwinds across our system in the near future. Consumer confidence is still low. Businesses are facing rising costs, and there continues to be much uncertainty. However, we will continue to be there to provide our customers with the best food, made especially for them.

Finally, I would like to thank you for the continued interest in Pizza Pizza, and I would like to thank our entire team of employees, franchisees and our operating partners for the support and resilience in this difficult macro operating environment. So thank you again for listening in, and I'll now hand it back to Christine to provide closing remarks and a financial update.

Thanks, Paul. So just as a reminder, Pizza Pizza Royalty Corp. is a top line restaurant royalty corp. that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its restaurant operations. Pizza Pizza Limited pays the partnership a monthly royalty calculated as a percentage of royalty pool sales. Growth in the corporates derived from increasing the same-store sales of the restaurants in the pool and by adding new restaurants to the pool. As previously announced on January 1, 2025, the royalties pool increased by 20 restaurants. So for fiscal 2025, there were 794 restaurants in the pool comprised of 694 Pizza Pizzas and 100 Pizza 73s.

So briefly covering some financial results for the quarter. As Paul mentioned, same-store sales, the key driver yield for shareholders increased 0.2% for the quarter. Pizza Pizza restaurants were slightly down for the quarter, and same-store sales decreased by 0.1%, while Pizza 73 restaurants increased 1.8%. The combination of the 20 new restaurants added to the royalty pool on January 1 and the same-store sales resulted in an increase in royalty pool system sales and the corresponding royalty income. The partnership's royalty income earned as a percentage of royalty pool sales increased 2.3% to $10.6 million for the quarter. As a reminder, Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System sales for the first quarter of the year are generally the slowest while system sales in the last quarter are generally at their peak.

Beyond royalty income, the partnership also earned some interest income on its cash and short-term investments. For the quarter, the partnership earned $31,000. This is a decrease from the prior year as the overall balance decreased and the interest rate applied on that balance decreased.

Turning to partnership expenses. Administrative expenses, including listing costs as well as director, legal, professional and auditor fees decreased in comparison to the prior year. This quarter, they totaled $211,000 compared to $221,000 in the prior year. In addition to administrative expenses, the partnership is making interest-only payments on its $47 million credit facility. Interest paid in the quarter was $443,000. As a reminder, in March of 2025, the company renewed its credit facility for 3 years with maturity now set for April 2028. The balance of the facility remains unchanged. However, the credit spread increased slightly.

Additionally, in April 2025, the partnership entered into new 3-year forward swaps. The 3-year interest rate swaps commenced when the existing ones expired. The new locked-in rate is 2.51%, which is an increase from the maturing swaps of 1.81%. So the all-in rate on the facility for the next 3 years will be 3.51% compared to maturing rate of 2.685%.

So now after the partnership has received royalty and interest income and has paid its administrative and interest expenses, the resulting cash is available for distribution to its 2 partners based on our ownership percentage. Pizza Pizza Royalty Corp. shares in 73.8% of the partnership distributions. It pays taxes on its share of partnership earnings and the residual cash is available for dividends to company shareholders.

Speaking about shareholder dividends, the company declared shareholder dividends of $5.7 million in the current quarter or $0.2325 per share, which was consistent with the prior year. The payout ratio in the quarter was 105% and resulted in the company's working capital reserve decreasing $300,000 and ending the year at $3.7 million. The $3.7 million working capital reserve is available to stabilize the dividends and fund other expenditures in the event of short- to medium-term variability in sales, which we have seen over the past few years. The company has historically targeted a payout ratio at or near 100% on an annualized basis, and any future dividend decisions will be made with this target in mind.

That concludes our financial overview. I'd like to turn the call back to the operator to poll for questions.

[Operator Instructions] Your first question comes from Derek Lessard of TD Cowen.

I definitely think you guys are in an enviable position compared to your peers. Just on the -- like Q4 tends to be a little bit updated by the time everyone reports now, given that the quarter is kind of like it was 3 months ago, closed 3 months ago. Just curious, Paul, and you might have touched on it in your prepared remarks, but how do you -- maybe talk about the current environment, whether it's the consumer behavior you're seeing now, the macro backdrop. It's just obviously a lot more in the world than there was 3 months ago, and it seems to be changing daily, just to get your view on the overall market.

Yes, it's a good insight, Derek, it's true. And you're right about the timing too, Q4 was a while ago. I think just generally, and I don't think this is a surprise to anybody, but just the macro environment, I think, just looks scarier than ever, really. I mean, right now, there's just so many things going on the geopolitical level. I mean there was so much concern on the, let's say, the U.S. tariff side a year ago, let's say, and that's still kind of the big question mark, but now it's sort of with all the geopolitical oil shock type thing happening in the Middle East and beyond. From an already sort of fragile consumer mentality, I think, things have gotten a lot scarier for the average consumer.

So we just sort of sense that there's just greater caution. People are going to be extra careful, more careful than they already were being, I think, this year. So generally speaking, we do see that -- and we've come to this one before that people have pivoted from things like delivery to pick up in our case. They're still ordering, but we do notice people just generally ordering less, trying to save money and same on delivery platforms. I think some of them have seen reductions in volumes as well.

So I mean I think it's just a scary market right now, very competitive. A lot of competitors are doing deep discounting. Everyone's desperate to get that value customer. And we are in an enviable place because we are known for value, which is great. And I think we did a great job with things like the XXL and even at Pizza 73, under $10 snack boxes and things like that. We have good offerings for people, but we do sense that overall transactions are challenged. I mean, just not only for us but others just in the macro picture is just not looking very good right now.

Absolutely. And that's totally fair. I think it's clearly industry-wide. And I guess one question, too. So when you think about value, is it helping you guys win share in this environment? Or is it sort of -- is it primarily a tool to help everybody sort of hold the ground in a competitive market?

Yes. It's very true. I mean it's really -- it's such a battleground for sure. And so I think we did have some data saying that in Q4, we did gain some share which is encouraging, but it's really a battle. It's really a slog out there. I mean we had some gains there, but not major, I would say. So we'll take it. We're happy with any gain in share right now, and we just need to push harder to get more, but it's -- we noticed as well, we had some data saying that pizza traffic transactions generally in Canada, I forget the source, but credible source saying that they're still growing and still positive, but it did drop off in the fourth quarter, the whole pizza sector. So we were -- we sort of felt that as well. And I think even North America wide, you're sort of seeing that trend, some pizza QSRs having some difficulties.

So I think we actually, overall, we're very happy that we're able to eke out a positive year, but the macro environment is troubling. I mean, we see definitely headwinds, as I said, and we know how to pivot into that pretty well. But the fact that customers are hurting, and they're going to probably be ordering less food in general, not just from us but others. So we're conscious of that, and we'll have to be creative about how we deal with that, but it might be a while, I think, look, the way things are looking this year, there's just so much uncertainty in not only Canadian market, but geopolitically and globally with what's going on.

I mean you can see things potentially with the oil shock continuing if you don't see a quick resolution, let's say in the Middle East and just the inflationary knock-on effects of expensive oil right down to the pumps and beyond, and that's a lot of important discretionary -- or nondiscretionary spend for a lot of people. So it really does have a massive trickle down, not only in Toronto, but all over Canada, all over the world. So we'll have to sort of see how that plays out.

Absolutely. And I guess the -- are the competitive pressures more intense in certain markets? Or particularly urban or delivery heavy regions? Like how do you -- I guess, how do you manage that?

Yes, I would say we tailor our marketing regionally anyway. We do notice differences. I would say -- we -- certainly in the urban environments where we're really well known for our established markets, I think, we still generally are pretty happy overall, but I mean it's patchy. I mean we'll get even in very successful urban markets that we'll do very successful in a geographic region, most stores, but you'll actually have a few stores that are anomalies there. And same with somewhere like BC, where we're certainly a newer brand there to most people. And a lot of those locations are more disparate. We're not -- we don't have huge urban concentration there yet, but it's a mixed bag. It's a mixed bag somewhere out there. And I don't think I would say it's because it's rural or less urban, let's say, it's just kind of the nature of it. It's -- we haven't really been able to ascertain regionally, there's certain weakness. It's more store by store.

So we're trying to sort of make sure that we take lessons from the best performing stores, and we have kind of a very much internal optimization program internally to really motivate stores to hit a higher level in their performance. And then we try to share those learnings and do a lot of sort of community clustering of stores and get the operators to share their best practices and things like that.

So it's kind of -- I don't notice anything specifically in certain regions. But I would say that we are happy overall with the organic delivery growth because that we've been really trying to push our organic apps and web. And I mentioned we are going to be making that even better. But we are really happy with how that's going and pickup wise, we do a great job as well, whether it's over the phone or through the app, for instance. So I think we do have those kind of multiple channels, which allow us some flexibility with good value offerings, but we are going to have to be extra creative going forward for sure because customers are hurting.

Absolutely. And so I don't want to be the downer on the call, but I promise one last hard question on this. And I think you did talk about it in your prepared remarks. It feels like you're just -- in terms of your store development plans going to be a little bit more targeted given the inflationary pressures and the other pressures out there. Just maybe -- maybe just talk about how you guys feel about your pool of available franchisees.

Yes. I think we're -- I mean, I think we feel pretty good about the pipeline for franchisees. I think probably what's more difficult is finding attractive real estate economics in the places where we want to be and also the construction cost. Because of the uncertainty, I think I commented on a prior call about cost of things like ovens, which we generally do source from the U.S. because they tend to be the best made and actually most affordable, but there's always tariff uncertainty. Are they going to -- they can rule it illegal, but I'm sure there's going to be some sort of attempt to still keep them in place.

So we've seen some of the unit construction costs still be an issue. So it's not so much pipeline of the franchisee issue, we still see a lot of interest as it is. I guess, getting the real estate we want and the construction costs we want to make it a sort of very viable option. So -- and we often do see like, if anything, growth in the pipeline for franchisees, when times are tough like this.

So I anticipate our -- I haven't seen our latest pipeline stats, but they're probably actually ballooning, but the other challenge is we don't always get franchisees where we want them, right? They'll say, "Well, I want to be in Toronto." And I'd say, well, we actually are pretty good in Toronto. We don't -- we have a little bit of growth here, but it's more of these rural locations across Canada or even some urban locations even in Vancouver. And in Quebec, we've got a pipeline of locations, sites we really like, but we're still -- I'd say we've been a little bit slower there lately selling some stores in the places that are not in urban Montreal.

So that's really where we're -- getting the demand where the supply is, is sort of the trick. So we have been -- we're trying to be very responsible there and say, look, let's keep a really close eye on construction costs. We do have some ideas on how to just try and reduce our construction costs, maybe slightly smaller stores than we're already doing and certain materials and things like that. So that we still end up on budget. Because we are starting to see the beginning of -- we haven't seen it en masse, but I anticipate that we will see more headwinds with suppliers for different items, whether it's food, nonfood or construction with the headwinds that we see.

Yes. Again, I think you guys are operating well given the environment. One positive is your -- is the performance at Pizza 73. Curious if you see -- is there any potential takeaways from that outperformance that you think you could roll out to the to the rest of the network, whether it's marketing, promo or anything else that's working for you out there that you might try at the Pizza Pizza banners?

Yes. We always try and look at what are the things we can share across whether we take it West or bring it East. And 1 example, was that volcano thing, which we piloted out at Pizza 73 and it really did well there. And so we basically took a slightly different tone with it, but basically it's a very similar product with creamy garlic in the middle, which is popular here more so than Pizza 73. So that's 1 example. And I think just the create your own, the snack boxes out there, things like poutine, chicken under $10 price point have done well. And so that's something that we think, okay, perhaps we could promote those more heavily here.

But here, obviously, we've got the slice market as well, and we've -- we've got a 2 for 6 slice model that's worked quite well, but we're looking at more of a $5 combo now that is more of a drink in a slice that we think will really help drive walk-in back here. But we always are looking to see which are the successful promos and positioning either brand. And we have -- we've got some new marketing resources relatively new that really -- I think it really hit stride there.

Even though it's very much a battleground in Alberta too, but some of the initiatives we have, I think, are really getting some attention more with the Calgary Flames, the Edmonton Oilers with Gene Principe, the sportscaster now that's very famous and kind of did a cheeky TV commercial for us. So people notice that stuff and does seem to kind of put the Pizza 73 brand in a little more of a refresh light from what it was, I think, maybe being seen as before. So we always are looking at that from a marketing perspective and also IT and operations perspective, what -- how can we get the best of both brands.

Yes. Okay. Perfect. And I guess without giving too much away, I know in your prepared remarks, you did talk about plans to upgrade the website and the app and again, without giving too much away. Just curious on what you are looking to accomplish with the revamp?

Yes, I think it's just to get -- we're actually very happy with our loyalty program overall at Pizza Pizza. It has been very, very good. And we do see a lot of people that are very loyal as a result of it. But we think that there's just a way to enhance it in such a way that we just get -- frequency is a big one and just make us the preferred choice more often and just make it more multifaceted, a little easier to use and really just make it more intuitive on our web and apps. And we'll be putting dollars behind it once it's ready to really drive the benefits of the loyalty.

So frequency. And then obviously, we're hoping to get more size and things too so that hopefully check does increase, albeit with a very value-conscious customer. But some of these things are built also for many years, right, not just this current environment. We're sure things will kind of bounce back at some point, but we still nevertheless need to build for the future. So I think we'll have value offerings that are threaded in with a loyalty program and that should help us, I think, hopefully get check and frequency really that and also just more traffic in general. So those are the levers because this will drive our same-store sales.

[Operator Instructions] There are no further questions at this time. I would hand over the call to Christine D'Sylva for closing comments. Please go ahead.

Thank you, everyone, for joining us on the call today. If you have any further questions after this call, please reach out to Paul and myself. Our information is on the release. And thank you for your continued support of Pizza Pizza, and we look forward to speaking to you again in May.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to the Pizza Pizza Royalty Corp.'s Earnings Call for the Third Quarter of 2025. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded on November 5, 2025. I will now turn the call over to Christine D'Sylva, CFO.

Thank you. Good morning, everyone, and welcome to Pizza Pizza Royalty Corp.'s Earnings Call for the Third Quarter ended September 30, 2025. Joining me on the call today is Pizza Pizza Limited's Chief Operating Officer, Philip Goudreau.

Just a quick note, our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary language in our earnings press release and the risk factors included in our annual information form.

Please refer to the earnings press release and the MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to non-IFRS financial measures mentioned on this call.

As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call. With that, I'd like to turn the call over to Philip to introduce himself and provide a business update.

Thank you, Christine, and good morning, everyone. As Christine mentioned, my name is Philip Goudreau, the Chief Operating Officer at Pizza Pizza Limited, and I'm standing in today for Paul Goddard, our Chief Executive Officer, who was planning on being on today's quarterly call, as always, but due to a delayed and diverted flight overseas, he will still be in the sky during our call today. So he's unable to join. Paul sends his regrets for not being here today. I've been with Pizza Pizza Limited for 14 years in various senior roles, including Senior Vice President of Operations and Development out West, leading the Pizza [ W2 ] brand since 2011.

And in 2019, I was promoted to the Chief Operating Officer at Pizza Pizza Limited working closely alongside Paul Goddard for many years, along Christine D'Sylva, our Chief Financial Officer; and the rest of our elite and senior management team. Like Paul and Christine, I'm also an executive management representative, Pizza Pizza Limited and each of the Pizza Pizza Royalty Corp. Board meetings.

I'd like to start this call off by stating how proud we are of our network of franchisees, our partners and our entire team and staff of Pizza Pizza for their unwavering support resilience working tirelessly in this ultra-competitive environment. Working together, we remain laser focused on improving speed and quality of service and delivering favorable new options -- sorry, incredible new offerings that will continue to differentiate our brands and drive growth.

This quarter, our brand reported a compound same-store sales growth of 0.1%, with Pizza Pizza restaurants reporting 0.3% growth and Pizza 73 restaurants reporting a decline of 1.1%. For the second consecutive quarter, we're happy to see growth in Pizza Pizza's organic delivery channel, which has helped increase our average check. However, at both brands, we saw an overall decrease in transactions as we faced heightened competition and we saw the impact of reduced consumer spending, mainly and earlier in the quarter in July. The trend is impacting much over much of the QSR industry, but since we can't control the macroeconomic environment, we're staying proactive and focused on our fundamentals or sharpening our value messaging, optimizing partnerships and promotions and continuing to invest in digital and loyalty to drive customer frequency and retention.

The third quarter is always a busy quarter for our nontraditional locations and special events partnerships. As a reminder, our nontraditional sales typically account for 10% of our total sales and it has been exciting to see the special events in nontraditional locations active again this summer. We saw Pizza Pizza and Pizza 73 brands come alive in communities across Canada via our best-in-class sponsorships and marketing program.

In addition to record sales at critical events like the CNE in Toronto and the Calgary Stampede in Calgary, our team innovated our product offerings at both this year, and we introduced a deep fried pizza on a stick. This fun promotion drove national media attention and helped double our sales at the CME versus previous years. Pizza 73, we employed a layered approach to Stampede this year to leverage our strong brand position with the key annual cultural event in Calgary. The partnership that was brought to life in restaurants on the festivals grounds and across social media channels, our digital presence, partnering with content creators highlighted our food innovation.

And as a brand, we developed something that was a lot of fun, the pony express where we had a real cowboy on real horse delivering with saddle bags, delivering pizzas in Calgary. This media campaign garnered over 1 million social impressions and brought the event to life in our stores through a Stampede special combo in partnership with our partners at Coca-Cola. Speaking of brand-building promotions and engagement, we also build our brand engagement through exciting menu innovations.

As interest in fried chicken items continue to grow, when we introduced our new chicken tenders at Pizza Pizza and new wing flavors at Pizza 73. The chicken tender offering posed an opportunity to deliver more individual stackable options within our existing chicken assortment, and it also provided an opportunity to speak to our well-known and loved assortment of dips. Additionally, at Pizza 73, we leaned into our brand's best-in-class 100% fresh wings with 2 new delicious flavors.

We continue to see success promoting our key value offerings as Canadians look for ways to save on food and without comprising quality. This quarter, we continue to promote our differentiating 18-inch, double XL, 2 Topper Pizza deal at $19.99. This is one of Canada's best deals on pizza and has become a core stone of our menu from coast to coast. We continue to support this deal with broadcast, out-of-home and digital and have been seen a significant shift in our assortment of customers trade up to the higher and larger size.

To further solidify our value credentials this quarter, while staying relevant and topical we brought back early on in the quarter, a reverse tariff discount supporting the deal with a new TV and digital video. This offer was once again a hit and it help support not only the volume messaging, but our credibility as being truly Canadian, authentically Canadian, because we truly are. All of our promotions and activations would not be successful from the time of placing your order to receiving your pizza, if not for an array of ordering channels from placing an in-store order, to calling in, ordering online or in-house developed website apps and order taking platforms that really support the business 24 hours a day, 7 days a week for both brands.

And with the rollout of our visual delivery tracking feature, similar interface that we would see on third-party platforms, we're able to improve our customer experience and the average speed of delivery this year is significantly better than a year ago. As we look towards rebuilding our loyalty program and improving our customer ordering experience, we are currently redesigning and enhancing our web and app extensions for customers. These enhancements will not just improve the speed and simplicity of ordering, they will improve our loyalty functionality and data-driven insights.

We'll continue to further distance ourselves from the competition with our ongoing tech advantage with more customer-focused capabilities as time goes on, please stay tune for future updates earlier next year. Before I turn things over to Christine, I just wanted to discuss our restaurant network growth. We ended the second quarter with a total of 811 locations in Canada, we're really excited for achieving the 800 location milestone. 706 of are our Pizza Pizza sites and 105 are Pizza 73s. We opened 4 traditional and 10 nontraditional Pizza Pizza locations during the quarter. Meanwhile, at Pizza 73, we opened up 2 traditional locations. We also closed 1 traditional and 3 nontraditional Pizza Pizzas and 1 traditional Pizza 73.

While our growth has been a little slower than in the past, we're also being a lot more discerning about where we grow and how we grow. That said, we do expect to pick up the pace of growth in the last quarter of this year as we still expect to grow our traditional business of traditional network by 2% to 3%. While we continue our restaurant development, we also continue the exciting renovation programs and refresh programs with our traditional core business. We have over 95% of our traditional Pizza Pizza stores having the new look.

Our restaurant features have a refresh on the interior and exterior and significant upgrades made in regards to equipment such as more efficient ovens, digital menu boards and further in-store technology. As I close off here, we are now in our busiest quarter of the year, and we'll see us continue to leverage our brand assets, our strengths as we implement new and timely promotions, backed by our core product propositions, ongoing menu innovations, conveniently located restaurants and an award-winning tech platform and a fully staffed and led customer contact center.

We look forward to closing off the year in strong fine form. Thank you for listening in. And now I'll hand things over to Christine D'Sylva, our Chief Financial Officer, and she'll provide an update on our details on our financials.

Thanks, Philip. As a reminder, Pizza Pizza Royalty Corp. is a top line restaurant Royalty Corp. that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its restaurant operations, Pizza Pizza Limited pays the partnership a monthly royalty as a percentage of Royalty Pool sales. Growth in the Corp is derived from increasing same-store sales of restaurants in the Royalty Pool and by adding new restaurants to the Pool each year.

As previously announced, on January 1, 2025, the Royalty Pool increased by 20 restaurants. So for fiscal 2025, there are 794 restaurants in the Royalty Pool comprised of 694 Pizza Pizza and 100 Pizza 73. So with that brief information, let's turn to the financial results for the quarter. As Philip mentioned, same-store sales, the key driver of yield growth for shareholders increased 0.1% for the quarter, with Pizza Pizza restaurants reporting sales growth of 0.3% and Pizza 73 restaurants supporting a decline of 1.1%.

The combination of the 20 new restaurants added to the Royalty Pool and the same-store sales resulted in an overall increase to Royalty Pool system sales and the corresponding royalty income. Royalty Pool System Sales for the quarter increased 2% to $158.8 million from $155.8 million in the same quarter last year. By brand, sales from the 694 Pizza Pizza restaurants in the Pool increased 2.3% to $138 million for the quarter, while sales from the 100 Pizza 73 restaurants was unchanged at $20.8 million for the quarter.

The partnership's royalty income earned as a percentage of Royalty Pool sales increased 1.9% to $10.2 million for the quarter. Beyond royalty income, the partnership also earns interest income on its cash and short-term investments. For the quarter, the partnership earned $37,000. This decrease from the prior year as the overall balance decreased and the rate applicable on that balance decreased. Now turning to partnership expenses, administrative expenses, including listing costs as well as director, legal and auditor fees, were consistent with the prior year.

This quarter, they totaled $181,000 compared to $176,000 in the prior year. In addition to administrative expenses, the partnership is making interest-only payments on its $47 million credit facility. Interest paid in the quarter was $444,000 and as a reminder, in March of 2025, the company renewed the facility for 3 years with maturity now set for April 2028. The balance of the facility remains unchanged, however, the credit spread table increased slightly, with the lowest tier increasing from 0.875% to 1%.

Additionally, in April of 2025, the partnership entered into a new 3-year forward swap. The new 3-year swap commenced when the existing one expired. The locked-in rate is now 2.51%, which is an increase in the maturing swap of 1.81%. The overall all-in rate for the credit facility for the next 3 years will be 3.51% compared to the maturing rate of 2.685%. And after the partnership received royalty and interest income, pays administrative and interest expense, the resulting net cash was available for distribution to its 2 partners based on their ownership.

After the 2025 vend-in, Pizza Pizza Limited's ownership increased to 26.2%. Pizza Pizza Royalty Corp. shares in the remaining 73.8% of the partnership. It pays taxes on its share of the partnership earnings and any residual cash is then available for dividends to company shareholders. The company declared shareholder dividends of $5.7 million for the quarter or $0.2325 per share, which was consistent with the prior year. The payout ratio for the quarter was 111% and resulted in the company's working capital decreasing $800,000 to end the quarter at $4 million. The $4 million working capital reserve is available to stabilize dividends and fund other expenditures in the event of short- to medium-term variability in sales and thus royalty income.

The company historically has targeted a payout ratio at or near 100% on an annualized basis. And we continue to do so. That concludes our financial overview. I'd like to turn the call back to our operator to poll for questions.

[Operator Instructions] The first question comes from Derek Lessard of TD Cowen.

Philip. Nice to meet you, who needs Paul anyway, right? The 1 question I had was I was curious if you saw a change in, I guess, consumer behavior from Q2 where you guys reported a nice modest same-store -- positive same-store sales print to the current quarter where it was kind of flattish.

I think, Derek, in terms of overall consumer behavior, we're definitely seeing a shift. We're seeing customers reducing their frequency of visits, and that's now been increasing the competitive landscape because everyone's fighting for those visits. We're also seeing them continue to be more discerning in how they're spending their dollars. They're managing their overall spend, so they might not be adding the dips and the pop to their orders, the to get their pizza from us. So we are seeing that aspect happening. And we're also continuing to see a shift in how they're getting their pizza. I think we've talked about in the past where we've seen an increase in our pickup channel, and we continue to see a pickup increase this year at both brands.

And in fact, at Pizza 73, where we used to be 90% delivery and 10% walk-in pick up. We're seeing a shift to where the walk in and pick up at that brand is almost 25%. So that is definitely something we are seeing overall. But I think in terms of this quarter, we were definitely impacted by weather in the early part in July. Additionally, the fact that there was a Canada Post strike. So we made the decision to not issue flyers in July, definitely did impact the business at that point..

And whether in what way, Christine, was it -- remind me, we are...

Yes. If it was poor weather in July, so a lot of our outdoor events were definitely impacted and in Alberta, so Philip can speak more to this, they were impacted by tourism and the fact that BAM and those kinds of locations were not getting as many tourists from the U.S. So that definitely did impact our July month. We did see, though, that as the quarter progressed, then did pick up in the right direction.

Okay. And maybe just a follow-up to that, Christine. You guys are, I'd say, the environment is, obviously, it's not necessarily I guess, conducive for delivery sales, but it looks like you guys did get some pretty good organic growth there and you're punching above your weight. Just maybe talk about the drivers behind that?

Definitely, so -- go ahead, Phil.

Yes. On my end, Derek, what we've been seeing is just year-over-year, where we have a customer tracking system that is really helping our franchisees and our team just control and making sure that we're exceeding customers' expectations. And we're about a minute quicker this year than we were last year on deliveries, and we could tell exactly where the delivery driver is at any given moment and it just helps plan things out. So I do feel that we're seeing less third-party business. But internally, we're getting our organic deliveries. And we've basically been seeing improvements week after week, period after period for the last few, which we're pleased with.

We're also doing a lot more specials like the XXL, where you're ordering a bigger item and typically, that would lead to people having others over so they want to deliver to their house. And to talk more to the tech that Philip was mentioning, we're alerting customers via SMS when their order is being delivered, so that they know to go in and track their orders. So we're trying to engage customers more on our organic platform to keep them there and we want them to stay on that platform. It's just more profitable For our overall [ value ].

Okay. Okay. Makes sense. And I guess last quarter, you had, if I recall correctly, some timely I think, sports-related marketing campaigns, curious if any of that carried over into Q3? And maybe just a comment on any traction from the long Blue Jays run.

Yes. So the long Blue Jays will definitely impact our Q4, definitely the October baseball is something we did. And I think you would see in the market over the last few weeks, we actually partnered with Vladimir Guerrero Jr. for our XL pizza, so that's a Q4 impact that we would be seeing from that one. But definitely, it's the love of baseball across Canada and the fact that we are a Canadian pizza brand, and we have locations across the country, definitely will be at Q4.

Well, there was definitely a lot of eyeballs, right? I think there was 10 million Canadians who tuned in to Game 7?

Yes. And I think right away, as Vladimir hit his first home run, we had a XXL commercial on, so it was great. So timing was perfect. So yes, Q4 is definitely a big sports quarter for us with October baseball and then the start-up, our partnerships with all of the NHL teams across the country and the [ roster.] So we're excited for sports. A big driver for us.

Okay. Awesome. Maybe one last one for me. You get on the 800 stores. Just maybe talk about -- we don't talk about it often, but maybe just -- could you just talk about the progress on the Mexican initiative?

Yes. So we currently have 4 locations in Mexico. It's our first foray into that international expansion. It's slower than we would like, but we know that the partners down there are very much committed to it and so is our management team here at Toronto. There are a few more in the hopper towards the end of the year. But it's definitely a market where we see significant amount of potential. The Mexican pizza market is actually greater than the American pizza market. So once we get this region of Guadalajara up and running, it will definitely be gravy for all of our PPC investors.

Ladies and gentlemen, there are no further questions at this time. That concludes today's conference call. Thank you for your participation. You may now disconnect.