Boston Pizza Royalties Income Fund Posts 6.1% Same Store Sales Growth in Q3 and Announces October Distribution to Unitholders

Strong Q3 and year-to-date sales growth drives royalty income higher

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 4, 2011) - Boston Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) and Boston Pizza International Inc. ("BPI") each reported today financial results for the period from July 1, 2011 to September 30, 2011 (the "Period") and from January 1, 2011 to September 30, 2011 ("YTD"). A copy of this press release and the consolidated interim financial statements of the Fund and BPI for the Period are available at www.sedar.com and www.bpincomefund.com. The financial results below are reported in accordance with International Financial Reporting Standards ("IFRS") and as a result are not directly comparable to those figures contained within historical financial statements of the Fund that were prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") before the adoption of IFRS. The Fund will host a conference call to discuss the results on November 4, 2011 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time). The call can be accessed by dialling 1-800-319-4610 or 604-638-5340. A replay will be available until December 3, 2011 by dialling 1-800-319-6413 or 604-638-9010 and entering the pin code: 4452 followed by the # sign.

Same store sales growth ("SSSG"), a key driver of distribution growth for unitholders of the Fund, was positive 6.1% for the Period and positive 4.5% YTD, compared to positive 0.1% and negative 2.1%, respectively, in the same periods one year ago. Franchise sales, the basis upon which royalties are paid by the franchisees to BPI, exclude revenue from the sale of liquor, beer, wine and tobacco and approved national promotions and discounts. On a franchise sales basis, SSSG for the Period was positive 5.6% and positive 4.6% YTD, compared to positive 0.8% and negative 1.7%, respectively, for the same periods one year ago. The increases in SSSG for the Period and YTD were principally due to higher take out and delivery sales resulting from continued promotion of Boston Pizza's online ordering system and higher sales of the new chicken wing product that was launched earlier this year through successful national television, radio and online ad campaigns. Other key sales initiatives in the Period included menu features sheets for July and August, and a Boston Pizza Kids Card promotion in September. Franchise sales of restaurants in the royalty pool were $183.2 million for the Period and $521.9 million YTD compared to $171.2 million and $497.6 million, respectively, in the same periods in 2010. The increases in franchise sales for the Period and YTD are largely attributed to positive SSSG.

"We are very pleased with the same store sales growth of 6.1% in the third quarter and 4.5% year-to-date. This is a key metric with respect to distribution growth and continues our trend of steadily improving sales results over the last six quarters," said Mark Pacinda, President and CEO of BPI. "With seven new restaurants opened in 2011 and another 25 locations that have completed renovations this year, we are further expanding Boston Pizza's position as Canada's #1 casual dining brand."

The Fund's net income was $5.5 million for the Period and $15.3 million YTD compared to a loss of $3.6 million and net income of $1.6 million, respectively, in the same periods one year ago. The Fund's net income under IFRS contains many non-cash items that do not affect the Fund's operations or its ability to pay distributions to unitholders. As such, it is not in the Fund's view, the only or most meaningful measurement of the Fund's ability to pay distributions. Consequently, the Fund has provided the non-IFRS metrics of distributable cash and payout ratio (as set forth in the tables contained herein) to provide investors with more meaningful information about the Fund's ability to pay distributions. Readers are cautioned that distributable cash and payout ratio are non-IFRS financial measures that do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. For reconciliation between cash flow from operating activities and distributable cash, please see the table below. For a detailed discussion on the Fund's distributable cash and payout ratio, please refer to the management's discussion and analysis for the Period as filed on SEDAR and posted on the Fund's website at www.bpincomefund.com.

The Fund's distributable cash was $4.3 million or $0.294 per unit of the Fund ("Unit") for the Period and $12.1 million or $0.832 per Unit YTD compared to $5.5 million or $0.378 per Unit and $15.6 million or $1.077 per Unit for the same periods, respectively, one year ago. The decreases in distributable cash and distributable cash per Unit are a result of the Fund becoming taxable under the specified investment flow through tax ("SIFT Tax") beginning on January 1, 2011. For comparative purposes, if the Fund was not liable to pay SIFT Tax in respect of the Period and YTD, distributable cash for the Period and YTD would have been $5.7 million or $0.394 per Unit and $16.2 million or $1.112 per Unit, respectively. As a result of the SIFT Tax, the Fund pays tax at a rate approximately equal to the rate applicable to income earned by a Canadian corporation, and is prevented from deducting trust distributions when calculating taxable income. The SIFT Tax rate is 26.5% in 2011 and anticipated to be 25.0% for 2012 and beyond. The Fund's liability to pay SIFT Tax reduces the amount available for distributions to unitholders. The SIFT Tax also recharacterizes such distributions as eligible dividends received from a Canadian corporation for individual tax purposes. Eligible dividend treatment for distributions to unitholders will generally be beneficial to Canadian resident investors holding their Units in taxable accounts compared to the previous characterization primarily as other income because of the potential for individuals to claim a dividend tax credit. Distributions for the Period and YTD were funded entirely by cash flow from operations. No debt was incurred at any point during the Period or YTD to fund distributions. The table below sets out the Fund's distributable cash and distributable cash per Unit for the Period and YTD along with comparable figures for the same periods one year ago.

DESCRIPTION Q3 2011 Q3 2010 YTD 2011 YTD 2010
Distributable Cash $4.3 million $5.5 million $12.1 million $15.6 million
Distributable Cash per Unit $0.294 $0.378 $0.832 $1.077
Distributable Cash without SIFT Tax $5.7 million $5.5 million $16.2 million $15.6 million
Distributable Cash per Unit without SIFT Tax $0.394 $0.378 $1.112 $1.077

These rows are provided for comparative purposes only and assume that the Fund was not liable to pay SIFT Tax in respect of the applicable periods

The Fund's payout ratio was 93.7% for the Period and 93.8% YTD compared to 91.2% and 96.6%, respectively, in the same periods one year ago. The Fund's payout ratio for the Period increased compared to the same period one year ago primarily due to the distribution increase beginning with the July 2011 distribution to unitholders. The Fund's payout ratio YTD decreased compared to the same period one year ago primarily due to the higher royalty revenue earned YTD compared to the amount earned in the same period in 2011. A key feature of the Fund is that it is a "top line" structure, in which BPI pays the Fund a royalty equal to 4% of franchise sales from restaurants in the Fund's royalty pool. Accordingly, Fund unitholders are not directly exposed to changes in the operating costs or profitability of BPI or of individual Boston Pizza restaurants. Given this structure, and that the Fund has no current mandate to retain capital for other purposes, it is expected that the Fund will maintain a payout ratio close to 100% over time as the trustees continue to distribute all available cash in order to maximize returns to unitholders.

The trustees of the Fund announced a cash distribution to unitholders of 9.2 cents per Unit for October 2011. The distribution will be payable to unitholders of record at the close of business on November 21, 2011 and will be paid on November 30, 2011. The Fund periodically reviews distribution levels based on its policy of stable and sustainable distribution flow to unitholders.

HIGHLIGHTS

The tables below sets out selected information from the consolidated interim financial statements of the Fund, which includes the accounts of the Boston Pizza Royalties Limited Partnership's (the "Partnership"), together with other data and should be read in conjunction with the consolidated interim financial statements of the Fund for the three and nine month periods ended September 30, 2011 and September 30, 2010.

Adoption of IFRS

The Fund adopted IFRS on January 1, 2011 and the financial results disclosed in this press release for for all periods commencing on or after January 1, 2010 have all been prepared in accordance with IFRS. Readers are advised that the Fund's transition to reporting its financial results in accordance with IFRS from Canadian GAAP, including consolidating the Partnership accounts with the Fund, has had no impact, nor is it expected to have any future impact, on the operations of the Fund's business, the amount of cash that is available to distribute to unitholders or the contractual obligations between the Fund, the Partnership, BPI or any third parties. However, it has impacted the presentation of certain key financial metrics of the Fund and BPI. The comparative financial results contained in this press release for periods in 2010 have been restated to conform to IFRS. Readers are cautioned that they should refer to the consolidated interim financial statements of the Fund for the periods ended March 31, 2011 and June 30, 2011, respectively, for a full description of the impact of IFRS on the Fund and should refer to the consolidated interim financial statements of the Fund for the Fund's financial results, copies of which are available at www.sedar.com and www.bpincomefund.com.

  Jul 1, 2011 to Sep 30, 2011 Jul 1, 2010 to Sep 30, 2010 Proforma(1) Jul 1, 2010 to Sep 30, 2010
(in thousands of dollars – except restaurants, SSSG, payout ratio and per Unit items)      
Revenues      
Number of restaurants in Royalty Pool(2) 336 335 335
System-wide gross sales(3) 235,911 218,335 218,335
Franchise Sales(4) reported by restaurants in the Royalty Pool 183,163 171,151 171,151
Royalty revenue – 4% of Franchise Sales of Restaurants 7,327 6,846 6,846
Interest income 454 451 451
Total revenues 7,781 7,297 7,297
       
Expenses      
Administrative expenses and interest on bank debt (449) (485) (485)
Interest accrued to holders of Units(5) - - (5,027)
Interest accrued to BPI on Class B Units and Class C Units(6) (1,447) (1,362) (1,362)
Fair value adjustment on Class B Unit liability(7) 1,148 (3,924) (3,924)
Subtotal (748) (5,771) (10,798)
Current income tax expense (1,449) - -
Deferred income tax expense (100) (70) (70)
Total expenses (2,297) (5,841) (10,868)
       
Net Income      
Net income 5,484 1,456 (3,571)
Basic and diluted earnings per Unit 0.401 0.126 (0.218)
       
Distributable Cash/ Distributions / Payout Ratio(8), (9)      
Cash flows from operating activities 7,266 6,963 6,963
  BPI entitlement:      
    Class C distributions (450) (450) (450)
    Class B entitlement (1,077) (1,000) (1,000)
  SIFT tax on Units (1,449) - -
Distributable Cash8 4,290 5,513 5,513
Interest accrued(10) / distributions payable(11) 4,021 5,027 5,027
Payout Ratio9 93.7% 91.2% 91.2%
Distributable Cash per Unit8 0.294 0.378 0.378
Interest10 / distributions payable per Unit11 0.276 0.345 0.345
       
Other      
Same store sales growth (SSSG) 6.1% 0.1% 0.1%
Number of restaurants opened during the period - 1 1
Number of restaurants closed during the period 2 3 3
  Sep 30, 2011   Dec 31, 2010
Total assets 261,339   258,547
Total liabilities 94,504   96,968
  Jan 1, 2011 to Sep 30, 2011 Jan 1, 2010 to Sep 30, 2010 Proforma1 Jan 1, 2010 to Sep 30, 2010
(in thousands of dollars – except restaurants, SSSG, payout ratio and per Unit items)      
Revenues      
Number of restaurants in Royalty Pool2 336 335 335
System-wide gross sales3 672,159 639,158 639,158
Franchise Sales4 reported by restaurants in the Royalty Pool 521,864 497,577 497,577
Royalty revenue – 4% of Franchise Sales of Restaurants 20,875 19,903 19,903
Interest income 1,361 1,351 1,351
Total revenues 22,236 21,254 21,254
Expenses      
Administrative expenses and interest on bank debt (1,462) (1,366) (1,366)
Interest accrued to holders of Units5 - - (13,373)
Interest accrued to BPI on Class B Units and Class C Units6 (3,772) (3,787) (3,787)
Gain on retirement of Unit liability - 46 46
Fair value adjustment on Class B Unit liability7 2,577 (787) (787)
Subtotal (2,657) (5,894) (19,267)
Current income tax expense (4,078) - -
Deferred income tax expense (220) (410) (410)
Total expenses (6,955) (6,304) (19,677)
Net Income      
Net income 15,281 14,950 1,577
Basic and diluted earnings per Unit 1.097 1.075 0.150
Distributable Cash / Distributions / Payout Ratio8, 9      
Cash flows from operating activities 20,453 19,760 19,760
BPI entitlement:      
Class C distributions (1,200) (1,200) (1,200)
Class B entitlement (3,053) (2,986) (2,986)
SIFT tax on Units (4,078) - -
Distributable Cash8 12,122 15,574 15,574
Interest accrued10 / distributions payable11 11,365 15,049 15,049
Payout Ratio9 93.8% 96.6% 96.6%
Distributable Cash per Unit8 0.832 1.077 1.077
Interest7 / distributions payable per Unit11 0.780 1.035 1.035
Other      
Same store sales growth (SSSG) 4.5% (2.1%) (2.1%)
Number of restaurants opened during the period 5 4 4
Number of restaurants closed during the period 4 5 5

OUTLOOK

The Canadian Restaurant and Foodservices Association has forecast sales growth of 2.6% for the Canadian full-service restaurant sector in 2011. BPI's management believes that Boston Pizza is well positioned to continue outperforming this growth rate by attracting a wide variety of guests into the restaurant, sports bar and take-out/delivery parts of each location and offering a compelling value proposition to our guests. The two principal factors that affect SSSG are changes in customer traffic and changes in average guest cheque. BPI's strategies to drive higher guest traffic include a larger marketing budget versus the previous year along with a revised calendar of national and local store promotions. Increased average cheque levels will be achieved through a combination of menu design and annual re-pricing. In addition, BPI's franchise agreement requires that each Boston Pizza restaurant undergo a complete store renovation every seven years and 25 locations have already completed renovations in 2011 with more underway or planned for later in 2011. Restaurants typically close for two to three weeks to complete the renovation and experience an incremental sales increase in the year following the re-opening.

Boston Pizza remains well positioned for future expansion as evidenced by the seven new Boston Pizza restaurants that have opened to date in 2011 and an additional two that are currently under construction and scheduled to open in early 2012. BPI's management believe that Boston Pizza will continue to strengthen its position as the number one casual dining brand in Canada by pursuing further restaurant development opportunities across the country.

Certain information in this press release may constitute "forward-looking information" that involves known and unknown risks, uncertainties, future expectations and other factors which may cause the actual results, performance or achievements of the Fund, Boston Pizza Holdings Trust, the Partnership, Boston Pizza Holdings Limited Partnership, Boston Pizza Holdings GP Inc., Boston Pizza GP Inc., BPI, Boston Pizza restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. When used in this press release, forward-looking information may include words such as "anticipate", "estimate", "may", "will", "expect", "believe", "plan" and other similar terminology. This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this press release. Except as required by law, the Fund and BPI assume no obligation to update previously disclosed forward-looking information.

For a complete list of the risks associated with forward-looking information, please refer to the complete forward looking information disclaimer included in the Fund's most recent Management's Discussion and Analysis for the Period available at www.sedar.com and www.bpincomefund.com. The trustees of the Fund have approved the contents of this press release.

(1) The results shown in this column assume that the units were classified under IFRS as equity at all times during the applicable period rather than as a financial liability and that amounts paid by the Fund to unitholders during or in respect of the applicable period were classified under IFRS as distributions rather than interest expense. These results are not audited and are provided only for information purposes.

(2) Number of restaurants in the royalty pool excludes restaurants that permanently closed during the applicable period.

(3) System-wide gross sales means the gross revenue: (i) of the corporate Boston Pizza restaurants in Canada owned by BPI; and (ii) reported to BPI by franchised Boston Pizza restaurants in Canada, without audit or other form of independent assurance, and in the case of both (i) and (ii), including revenue from the sale of liquor, beer, wine and tobacco and revenue from BPI approved national promotions and discounts and excluding applicable sales and similar taxes ("System-wide Gross Sales").

(4) Franchise sales is the basis on which the royalty is payable; it means the revenues of Boston Pizza restaurants in respect of which the royalty is payable ("Franchise Sales"). The term "revenue" refers to the gross revenue: (i) of the corporate Boston Pizza restaurants in Canada owned by BPI; and (ii) reported to BPI by franchised Boston Pizza restaurants in Canada, without audit or other form of independent assurance, and in the case of both (i) and (ii), after deducting revenue from the sale of liquor, beer, wine and tobacco and revenue from BPI approved national promotions and discounts and excluding applicable sales and similar taxes. Nevertheless, BPI periodically conducts audits of the Franchise Sales reported to it by its franchisees, and the Franchise Sales reported herein include results from sales audits of earlier periods conducted during the year.

(5) Units are classified as a financial liability under IFRS in respect of the period from January 1, 2010 through December 6, 2010, and as a result the amounts paid by the Fund to unitholders in respect of that period are classified as interest expense of the Fund and not distributions. From and after December 7, 2010, amounts paid by the Fund to unitholders are classified as distributions of the Fund as the units are classified as equity from and after December 7, 2010.

(6) The Class B general partner units of the Partnership (the "Class B Units") and the Class C general partner units of the Partnership (the "Class C Units") are classified as financial liabilities under IFRS, and as such, amounts paid by the Partnership to BPI in respect of the Class B Units and Class C Units are classified as interest expense and not distributions.

(7) Because the Class B Units are classified as a financial liability under IFRS, the Fund is required under IFRS to fair value that liability at the end of each period and adjust for any increase or decrease in the fair value of that liability as compared to the fair value of that liability at the end of the immediately preceding period. This adjustment has no impact on the Fund's distributable cash.

(8) Distributable cash is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. This non-IFRS financial measure provides useful information to investors regarding the amount of cash the Fund has available for distribution on the Units. Investors are cautioned that this should not be construed as an alternative net income measure of profitability. The applicable table provides a reconciliation from this non-IFRS financial measure to cash flows from operating activities, which is the most directly comparable IFRS measure.

(9) Payout Ratio is calculated by dividing the interest / distributions payable by the Fund in respect of the applicable period by the Distributable Cash earned in that period. This non-IFRS financial measure provides investors with useful information regarding the extent to which the Fund distributes cash on the Units. Investors are cautioned that this should not be construed as an alternative net income measure of profitability.

(10) Units are classified as a financial liability under IFRS in respect of the period from January 1, 2010 through December 6, 2010, and as a result the amounts paid by the Fund to unitholders in respect of that period are classified as interest expense of the Fund and not distributions. From and after December 7, 2010, amounts paid by the Fund to unitholders are classified as distributions of the Fund as the units are classified as equity from and after December 7, 2010.

(11) Under the Declaration of Trust, the Fund pays interest / distributions on the Units in respect of any particular calendar month not later than the last business day of the immediately subsequent month. Accordingly, interest / distributions on the Units in respect of the calendar month of January are paid no later than the last business day of February, interest / distributions on the Units in respect of the calendar month of February are paid no later than the last business day of March and so forth. Consequently, interest / distributions payable by the Fund on the Units in respect of the Period were the July 2011 distribution (which was paid on August 31, 2011), the August 2011 distribution (which was paid on September 30, 2011) and the September 2011 distributions (which was paid on October 31, 2011). Similarly, the interest / distributions payable by the Fund on the units in respect of any other period are the interest / distributions paid in the immediately subsequent month of each month comprising such other period.

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