Good morning, everyone and thank you for joining us for MTY's 2021 second quarter results conference call. The press release and the MD&A with complete financial statements and related notes were issued earlier this morning and are also available on our website as well as on SEDAR.

During the call, we will be referring to forward-looking statements and to certain indicators that are non-IFRS measures. You can refer to our MD&A for more details.

I also remind you that all figures presented on today's call are in Canadian dollars, unless otherwise stated. Before I begin, I would like to take a moment to thank our customers for their continued support, patience and understanding.

The last 15 months have been an intense rollercoaster of COVID related restrictions, being at times heavier and a time looser. But despite all the changes, our customers have always been there to consume our food with an open mind regarding the type of experience they will get.

Restaurant owners will still have a tough road ahead in their quest to return to profitability while facing a major labor shortage problem and a dislocated supply chain that is also struggling to find its balance. MTY has built its foundation on small entrepreneurs who have trusted us to invest in their business.

Throughout the pandemic, our franchisees have shown a lot of courage and determination when it would have been easy to throw in the towel. They are seeing the benefits today as restrictions are gradually being lifted and customers returning to our dining rooms, food courts and office towers.

I would also like to highlight the work of our franchise partners and their staff who have continued to serve customers under difficult conditions. The resilience and dedication of people who work in the MTY family has been nothing short of exceptional.

I wish to sincerely thank all of them for their commitment to our common goal and success. Now to our results.

We are pleased with our second quarter results during which we operated facing heavy COVID related restrictions in some of our key markets throughout the quarter. During the second quarter, MTY's network lost more than 38,000 business days because of those restrictions and many restaurants that were still operating were doing so in a much reduced capacity.

While the 38,000 lost business days marked a sequential improvement over the first quarter, the number is higher than in the fourth quarter of last year reflecting the new wave of restrictions in Québec and Ontario that started in December 2020. Together, these markets account for approximately a quarter of our total system sales in normal times.

We are extremely pleased to report that adjusted EBITDA for the quarter more than doubled over last year despite the lingering impact of the pandemic and the adverse variation in foreign exchange rates. While the business is far from fully recovered, our recurring streams of revenues are improving, especially in the U.S.

for Cold Stone, Papa Murphy's and a few other brands continued to perform extremely well during the quarter. Once again, we used our strong cash flows to reduce our debt level.

The CAD15 million applied to debt this quarter brings total repayments since the start of the pandemic to close to $145 million, bringing the business well within our target leverage ratios and providing the necessary flexibility to explore various capital allocation possibilities. We finished the second quarter with 6,907 locations.

We opened 61 locations and permanently closed 103, for a net store loss of 42. Although that number remains a net erosion of our network, we are happy to see the number of closures is relatively stable at a level that is lower than in the second quarter of 2020 and 2019.

We still have 359 temporarily closed locations at the end of the quarter. Although we are hopeful those will reopen, we will get a better picture once all restaurants are in a position to reopen.

Just at the end of the quarter, 101 of those have reopened already. As for new store openings, we reached the highest level since the fourth quarter of 2019 and are confident we will continue to improve in the coming quarters.

As indicated in the past few quarters, the pipeline of new franchisees remains healthy and we expect a more normal rate of store openings to resume in upcoming quarters as visibility over the after-pandemic becomes better. System sales for the quarter reached CAD891.5 million, up 33% compared to the second quarter of 2020, a quarter that was materially impacted by the pandemic.

This performance was realized despite the adverse impact of foreign exchange variation which shaved CAD53.8 million from our sales during the quarter. System sales were up 56% in Canada, 24% in the U.S.

and 38% internationally. During the quarter, 23.5% of system sales came from digital channels, compared to 22.6% in the same period last year.

As mentioned in the past, we are aggressively investing in technology to improve the customer experience and our teams are continuously rolling out new solutions that we hope will have a positive impact on our sales. Although the sales mix will shift as other sales channels are reopening, we expect digital channels to grow in the foreseeable future and are hoping to position MTY as a leader in the industry for the quality of its solutions in the next 12 to 18 months.

I will now turn it over to Renée, who will discuss MTY's financial results.

Thank you Eric and good morning everyone. Notwithstanding some challenges that remain ahead of us, we are encouraged by our second quarter financial results, especially since our Canadian network and parts of our USA network were still impacted by ongoing government imposed restrictions related to the COVID-19 pandemic.

As mentioned by Eric, Québec, Ontario as well as California, hearing three of our most prominent territories, still have the most restrictions imposed during the second quarter. In total, 977 locations were closed at least one day during the quarter which resulted in over 38,000 lost days of business.

These closures and other government imposed restriction impacted our recurring revenue streams and adjusted EBITDA. Currently we still have 258 restaurants temporarily closed, an improvement over the 359 locations we had closed as at May 31 and we expect this figure to continue to come down as more Canadian provinces move into the reopening phases.

In the second quarter, total revenues improved by 39% to reach CAD136 million as the impact of the pandemic was more severe in Q2 of last year. Our franchise operations revenue increased 49% as recurring revenue streams from franchise location rose CAD8.8 million in Canada and CAD15.5 million in the U.

S. and international.

These are closely related to our system sales which, as mentioned by Eric, were up 33%. Revenues from our food processing, distribution and retail operations increased 33% as it continues to benefit from higher consumer spending and grocery stores' expansion into new provinces and additional SKUs.

The number of branded products for sale in the Canadian market continued to progress in the second quarter reaching 158 compared to 147 in the first quarter and 114 a year ago. Corporate store revenues also saw an increase of 21%, mainly due to the re-opening of locations that were temporarily closed in Q2 of the prior year.

As mentioned by Eric, digital sales for the second quarter increased to reach 23.5% of total system sales compared to 22.6% for the prior year. While Canada was up 26.7% this quarter versus 19.7% last year, the percentage in the U.S.

slightly declined from 23.6% last year to 22.1% this year reflecting the gradual impact of the re-opening. However the year-over-year increase in digital sales remains very solid in Canada with more than doubling its digital sales footprint and the USA increasing by 16.2%.

Our second quarter adjusted EBITDA increased to CAD43.5 million compared to CAD18.2 million for the same period last year. The U.

S. and international segment adjusted EBITDA posted a CAD14.1 million increase year-over-year.

Excluding the impact of foreign exchange, the segment posted organic growth of CAD15.3 million. In Canada, adjusted EBITDA improved CAD11.2 million.

The severe adverse impact of the onset of the COVID-19 pandemic in the second quarter of last year are the primary reasons for the increases which led to an improvement in recurring transaction revenue of CAD24.3 million. MTY also continued to benefit from the Canadian Emergency Wage and Rent Subsidy.

In total, we benefited from these subsidies with a total of CAD1.4 million in wage subsidy, CAD10.5 million in rent subsidies during the quarter. We also by a decrease in expected credit losses on accounts receivable of CAD2.8 million which stems mainly from better than expected collection from franchisees.

These gains were reduced by an increase in wages as MTY have temporarily furloughed about half of its work force at the onset of the pandemic in 2020, most of which were brought back by the third quarter. Net income attributable to shareholders was CAD20 3 million or CAD0.93 per share for the second quarter of 2021, compared to a net loss of CAD99 million or CAD4.01 per share for the same period last year.

Last yea's loss was mostly due to a non-cash impairment charge of CAD120.3 million. As for our liquidity and capital resources, despite the ongoing impact of the pandemic and its negative impact on revenues and EBITDA, MTY generated solid cash flows from operating activities of CAD29.5 million in the second quarter of 2021, compared to CAD19.2 million for the same quarter last year.

As we continue to tightly manage liquidity, free cash flows remained solid in the second quarter of 2021 with a marginal decrease of CAD1.4 million to CAD27.5 million or CAD1.11 per share on a fully diluted share based compared to CAD1.17 for the same period last year. The decrease was mostly due to the franchising of multiple corporate stores in 2020 which generated cash of CAD10.7 million.

On the balance sheet front, at the end of the quarter long term debt stood at CAD426.1 million, mainly in the form of our credit facility and holdbacks on acquisitions. Furthermore, to lower our standby fees and increase our financial flexibility, we renegotiated our existing credit facility during the second quarter.

Our revolving credit facility now has an authorized amount of CAD600 million instead of CAD700 million and an accordion feature was increased by CAD100 million to CAD300 million. The maturity was also extended to April 22, 2024 and many financial covenants were reinstated to pre-pandemic levels thereby lowering overall interest costs.

Now I will turn it back to Eric for the conclusion.

Thank you Renee. With restrictions having been lifted recently in some of our major markets, we are cautiously optimistic about the future even though our industry is still facing many challenges.

Customers are showing they missed our food and our team is excited to deploy a wide array of innovations that will wow our customers even more. Overall, we are confident about our prospects and our goal is to return the business momentum we experienced just prior to the pandemic.

Our optimism is also supported by the tough but necessary actions we had to take which are giving MTY a lot of flexibility today. These decisions now place us in an excellent financial position with CAD41.5 million of cash on hand, over CAD205 million in available credit and with leverage ratios well within our comfort zone.

In light of our financial situation and with more favorable outlook, we are very proud to announce that we are restoring our quarterly dividend. The quarterly dividend resumes at the same level as before which is to say CAD0.185 per share.

The next quarterly dividend will be paid on August 13, 2021 to shareholders registered at the end of the business day on August 3, 2021. Restoring the dividend is a major step for MTY following the crisis we faced in the last 15 months.

It shows the confidence we have in our network and in our ability to continue to produce strong free cash flows. We want to thank our shareholders for their patience with MTY.

We have also renewed their normal course issuer bid and will continue to have the ability to by back our own shares based on internal considerations and market conditions. Finally, with regards to potential acquisitions, we remain active and are in a strong position to take advantage of opportunities.

In closing, I would like to sincerely thank our employees, customers and suppliers for their ongoing support. With that, thank you for your time.

We will now open the lines for questions. Operator?

Thank you. Good morning.

Hi John.

I wanted to ask about Papa Murphy's and Cold Stone. You mentioned, they performed well in the quarter.

Is there any more color you can add there either on a year-over-year basis or maybe versus pre-pandemic? And are you seeing any divergence within those brands in markets that are more re-opened versus ones where restrictions still exist?

Yes. I will start with Cold Stone.

Cold Stone is performing extremely well, well above double digit performance compared to 2020 or 2019. During Q2 and even after Q2ended, Cold Stone is still performing extremely, extremely well.

So we are really happy with that. For Papa Murphy's, Q2 was very strong, still comping strong over 2020 and very, very strong over 2019.

We did lose a little bit of steam since the end of Q2 as were lapping stronger periods and also with the massive heat wave in the Pacific Northwest that we had. We suffered a little bit in terms of our pizza offering.

We are confident we are going to go back to better momentum. We are still over 2019 but we lost a little bit of momentum compared to 2020 since the end of the quarter.

Got it. That's helpful.

Thanks. I wanted to move to Sushi Shop which is now your top five business in the category that's done really well in the pandemic.

Can you just remind us what percent of your system sales come from this category overall? And how they have been performing versus pre-pandemic levels?

You mean the sushi category or just Sushi Shop itself?

The category, in general.

Yes. The category is probably just under 10%.

And it's performed really well during the pandemic and it was already performing extremely well before the pandemic. So there was a lot of good tailwinds for our sushi brands.

Our sushi brands are also, some of those that are the most advanced in terms of technology, online ordering and everything, the marketing is really out there. So those are brands that performed well before the pandemic.

The performed well during the pandemic. And they continue to perform well as we are getting out of that that crisis.

Got it. Thanks.

And then last one from me and I will pass it on. We have seen a flurry of M&A deals of late, mostly smaller but maybe some in areas you would be interested in.

I am curious what comments you can make on deal flow for MTY? What you are seeing on valuations?

And maybe what your preference on M&A versus use of the NCIB through the rest of this year?

Yes. Well, the deal flow seems to be coming back slowly.

There are opportunities that are presented to MTY, more done than we had maybe in the previous 15 months. That being said, it's still not at the normal pace of deal flow and it's probably not also in the sweet spot of what we might be looking for in terms of valuation or in terms of quality of chains that are being offered to us.

So we are still going to be very disciplined. I mean we are eager to do M&A.

We haven't done an inquisition in a certain amount of time. And it's in our DNA to acquire and grow via acquisitions.

So we will eventually go back to do more acquisitions. But we will stay disciplined and if we can't find the right target, we will stay on the sidelines while things settle down and valuations go back to a more normal level.

And ultimately we can buy back our own shares. We can continue to pay down our debt and build a treasure chest.

And when the time comes, we will be ready to pounce. But I would say, the deal flow is starting to be better.

So I am cautiously optimistic about the future.

Okay. That's helpful.

Thank you very much.

Yes. Thanks.

And good morning Eric. Congratulations to you and your team navigating through all this craziness.

Just anecdotal observation, like we were in Toronto in the past couple of days. The drive-thru at McDonald's alone was at least a half an hour.

Even our hotel restaurant was closed on Monday and Tuesday and everything was because of the shortage of labor which you did point to and some inflation pressures. Just wondering, I guess, how you are seeing the impact play out currently?

And what's your view for you guys ability to pass on prices?

Yes. Well, shortage of labor is certainly a big problem everywhere in North America.

There are pockets where we are better and there are pockets where it's more of a problem. But all-in-all, there's just not enough work force to work in hospitality and even for our suppliers and their manufacturers.

It's also not enough quality people. And even for the unqualified labor that we might be looking for certain duties, it's hard to find good reliable staff.

So there's going to be an impact on the cost of labor, for sure. We are already paying more than we were paying before the pandemic, even though labor was already a problem before the pandemic in a lot of regions.

So we are going to end up paying more. Suppliers are also paying more for their staff.

Our distributors are also struggling to find drivers and struggling to find people to work in their distribution centers. So the problem is everywhere.

And in terms of our ability to pass prices, it's not like we have any options here because the ability of our franchisees to absorb these costs is nonexistent. We work with very tiny margins.

We are a penny business and then we will need to figure it out. But it's either going to be through gaining efficiencies, working with our suppliers to reduce the number of hours we need to work in our restaurants or it's going to have to go through prices.

But our franchisees can't absorb more. So ultimately, we are going to need to do pricing and pass it on to our customers and hopefully we will be able to revamp some of our menus to focus more on the better food cost items.

We are going to be able also to do promotions to direct our customers to items that are a little bit more profitable for our franchisees. But ultimately pricing will need to happen.

And I don't think we are any different from anyone else in the industry. Everyone's going to have to take prices not only for the shortage of labor but also for the inflation that's happening in food costs at the moment.

Has some of those pricing actions already taken place or been implemented?

Yes. We had to do some pricing already.

There's going to be more pricing in the next few months also. It depends.

Some brands get it early, some brands get it late. In some cases, we staged it at over two or three different increments of price increases.

So it's going to have to happen over time. But the situation is evolving so quickly that it's hard to say.

I am going to do one batch of price increases and that's going to be it. We need to be more nimble than that.

We just look at the price of a container, for example, is probably the best example where you ship something from Asia, the cost of the container is probably about 10 times what it was a year ago. So it's not even the food.

It's just shipping it that's costing a lot more. And then that changed over a four to six weeks span.

So if we are not nimble with our pricing, we are going to end up in a place where we can't support the cost structure anymore.

Okay. Thanks.

I guess, but you also had a strong rebound in your margins this quarter. I assume a lot of that is just operating leverage.

But are you are to point to any other positive margin contributors this quarter?

Yes. Well, there's one large item there that's contributing to the margins that might be a little bit more pollution than anything else.

It's the reversal of expected credit losses. Last year when we looked at our numbers, we had a certain number of risks and a lot of uncertainty and collection was lower.

So it forced us to take a little bit more provisions fro these expected credit losses and now we are collecting more than anticipated at this time. So we had to reverse a certain amount of it.

So that does contribute to the margins for sure. And that that's not going to last forever.

I mean once we reverse the provision, it's reversed and it's not coming back. So that contributes.

But the rest, you are right. It's operating, we are more efficient and as we grow sales we bring in royalties.

Our cost structure is pretty much fixed so as the business continues to recover you might see a little bit more weight on the topline and not necessarily more weight on the bottomline, the middleline with the expenses. So margins should continue to be strong if everything stays constant and business keeps improving.

Okay. Thanks for that, Eric.

And one last one for me actually. Have your traditional revenues or your revenues from your traditional business fully recovered to pre-pandemic levels?

And then maybe if you could just talk to us about the outlook for the nontraditional and sort of the mall office sites and where those sales are in relation to pre-pandemic?

Yes. We are not even close to where we were pre-pandemic and we are not even close to being fully recovered.

So if you look the major urban centers, those have not come back yet. Anything that's in a mall hasn't come back.

I mean you just look at Ontario is under lockdown, still not allowed to have dining rooms or food courts operating properly. So malls are not even close.

And even if you look at the other major areas like Quebec, for Q2 we were still under lockdown for pretty much the entire quarter. We are a little bit more relaxed in terms of restrictions now but for the quarter we were still under lockdown.

So our mall operations are not close to being back. And in terms of nontraditional, airports are certainly not back to where they were, although in the U.S., it's starting to get better.

University campuses, for example, are not back yet. So we do have a long road ahead to fully recover in terms of our sales.

Okay. Thanks Eric.

Hi. Thanks for taking my question.

I just wanted to follow-up on some of the questions asked earlier, particularly on inflation. I was noticing that inflation at restaurants in general seems to be meaningfully higher than inflation at grocery stores.

And I am wondering in general if you agree with that perspective for your banners? And number two, if as a result of this higher inflation at restaurants, if you see the restaurant sector eventually grabbing back all the share that it lost to grocery stores?

Is that viable? Or is that still in the open?

Yes. I am not sure how we can compare grocery stores and restaurants because obviously there are items in the grocery stores that are not necessarily comparable to what we saw in restaurants.

But I would say, in our case, the inflation in our restaurants hasn't been that much higher than what you would witness in the grocery store if you wanted to buy the ingredients to prepare that same type of food. We try to be pretty cautious with price increases and we don't do more than we need to do.

So yes, it's hard to compare. In terms of what happens in the future to grocery stores, to restaurants in terms of inflation, I wouldn't risk trying to speculate about where all that's going.

But yes, I do think that restaurants will fully recover at some point. When that's going to happen, I am not sure.

But I do think restaurant sales will recover fully and resume growth, perhaps maybe in the next few years. I don't know exactly when that's going to happen because I wish I had a crystal ball that would be very reliable but unfortunately I don't.

Okay. And continuing along the same theme, I noticed that the grocery stores are seeing a little bit more pressure year-over-year in their recent months.

But the food processing business at MTY seems to still be doing quite well. So wondering what you attribute that to?

Is it market share gains? Is it new products?

And how should we think about that business going forward?

Yes. Well, that segment is made up of three different sub-segments.

You have our distribution centers that are serving our brands. In Q2, those were really struggling because our brands were more or less idle, the brands that are supported by these distribution centers.

Our food processing was doing well though. Our food processing does products for retail and does products for some of our brands that are performing well.

So the food processing was doing well and it seems to be in a really good place now where we can see some good growth in the future. And in terms of our retail operations, I think we are capturing market share as we are launching new SKUs that have been successful.

We have a few champions there in terms of our products that we are really proud of and that seems to be performing really well. We are developing new sales channels as well and trying to expand in terms of geography where we sell those products.

So it's really promising in terms of the retail, in terms of selling to grocery stores, selling to other retailers like Costco or Walmart or Giant Tiger or other retailers like that. So I am pretty optimistic about that segment and the growth that we can see in coming years, even though grocery stores might be seeing, feeling the weight of lapping a very strong year.

I think in our case, we can capture market share with our existing products and with new products as well.

Okay. And hoping to expand upon your thoughts on acquisitions.

Has this pandemic changed the way MTY thinks about acquisitions? And when you talked about your sweet spot earlier, I am wondering what is your sweet spot in terms of region of acquisition, in terms of types of acquisition, is it turnaround, is it a larger chain, smaller chain?

Is there any more color you can give us in what constitutes a good deal for MTY?

Yes. Well in terms of geography, we are pretty agnostic.

So as long as it's in North America, we are happy if there are any opportunity. We are present everywhere.

And I think we can integrate well throughout North America. The type of offering is the same thing.

There are a few things that we would rather stay away from. But in general, the type of food doesn't really matter for us.

So it's more in terms of where the business is in its life cycle and the valuation that's related to it. And it needs to be, the sweet spot is a moving target depending on which brand we are considering and where it is in its life cycle.

So I am not necessarily going to give you numbers. But we do have a certain number of metrics that we use internally that we want any acquisition to fit in.

And if we don't find something that does go into that sweet spot, we will not necessarily go after it. We want to be disciplined about it.

And if the pandemic showed us one thing is that we need to be very careful in terms of how we deploy capital and we need to be very protective of MTY because there's no guarantee that the business is going to keep growing forever and that there's not going to be another pandemic at one point, maybe in five years, in 10 years, in 20 years, I don't know. So we need to be careful what we buy, how we buy it, how we integrate it and how comfortable we are with everything that becomes part of MTY's portfolio.

Okay. And maybe lastly, you commented that Papa Murphy's performance as slowing a little bit subsequent to quarter-end, if I got that right.

I was just wondering if you could comment on some of the initiatives, the improvement initiatives you implemented at the brand and whether you are pleased with those initiatives? If they are working or not in your estimation?

And what's next brand should we anticipate MTY to rollout its improvement initiatives to?

Yes. Well, we are really proud of the progress we have made with Papa Murphy's.

Some of the initiatives related to technology are really paying off. The online ordering and the constant improvement of those platforms is really interesting.

The investments we are making with the marketing also are really paying off. The research and development that we are doing is interesting.

We have a product now that's gotten a lot of attention in the U. S.

and even in regions where we are not operating with our Fritos Outlaw pizza joint partnership with Pepsi. So that was huge for us.

So there's a number of things that we are doing now that are really paying off and gives me a lot of hope to be that we are going to continue to grow that brand in the future. So really happy with it.

We are pushing hard now on development because we feel the brand is ready to start growing again. So all-in-all, a lot of positives.

And in terms of the other brands, I would say all the other brands are pushing hard now on major initiatives when it comes to technology, online ordering, better usage of data, more efficient marketing. So there's a lot going on for all our brands in Canada and in the U.

S. So I wouldn't necessarily be able to pinpoint one brand in particular and tell you this one is doing more than the others because we are pushing on all fronts now.

Okay. Thank you.

Hi. Good morning guys.

Congratulations on a strong quarter. I just wanted to ask about the store openings, so the 61 in the quarter.

Eric, can you maybe give us a little bit of flavor in terms of what's being opened, maybe by banners or by geographies? Maybe some flavor there?

Yes. Well, we are opening a lot of the brands that performed well during the pandemic.

So the brands that we are opening are the ones you would expect to open. So it's not necessarily the answer you might be looking for but unfortunately this is reality.

We are opening a lot of Yuzu, a lot of Cold Stone. We are still opening Planet Smoothies.

So those are brands performed well during the pandemic and that keep opening. And you should be expecting, I guess, those brands to continue to open for certain amount of time because there's good momentum there.

Okay. And maybe focusing on the closures, they are obviously lower than what we have seen in the past.

But I am just wondering to what extent do you think that will pick up again when you know the aids, the government aid subsides or continues to subside into the fall?

Yes. I am hoping that by that time the sales will be high enough that we won't see a flurry of closures.

And what we are seeing now is that in general, sales for the majority of our restaurants are picking up nicely. And so I don't necessarily expect a flurry of closures.

I am not seeing a huge amount of risk. I am not saying there's going to be none, but I am not seeing a huge amount of risk in Canada or in the U.

S. for massive closures in the future.

I would say, international might be a little bit more challenging as there's still massive lockdowns going on in certain countries. But for Canada and U.S., I am not expecting a flurry of closures.

Okay. Great.

And just getting back to your commentary about Papa Murphy's losing steam exiting the quarter. Obviously, there's a COVID hangover.

But I am just wondering how much of that is maybe due to aggressive promotions we are seeing by some of our more delivery focused competitors in the pizza category? And do you guys at all plan on responding to that?

Yes. There's certainly an impact.

I mean we are seeing some of the major competitors really go aggressive on the pricing and on promotions. I mean Papa Murphy's has always been a little bit more expensive than these guys.

Our product is higher quality. So we don't necessarily want to discount our product the same way they do.

We do have some value offers that are going on. But would we go to the same levels these guys are going?

I mean the brand has done it in the past. It's shown that it increases the topline.

So for the franchise, maybe it's good but it doesn't necessarily increase the franchisees bottomline which is ultimately the goal for all of us. So we are not necessarily going to that deep discounting strategy because we don't believe that's the long term solution for our franchisees and for the industry in general.

Okay. And just then last one for me, Eric, on the credit rehearsals that you guys called out.

Do you have that number for this quarter? How much the total number was?

And maybe I guess more importantly, maybe for like Q3 and Q4, should we expect similar the more level of reversals, like half the reversal this quarter? Anything you can give us there, would be appreciated?

Yes. The number is presented in the tables in the MD&A.

It's CAD2.8 million. So we really put it on a single line because we didn't want to hide it.

We wanted to make it obvious. Are we going to have the same level of reversals in the future?

I don't think so. This is all based on actuarial models that we have that the team is running every quarter.

But yes, once the expected credit loss is reversed, it can't be reversed again. So I don't think there's going to be the same level going forward.

Okay. Thank you.

Hi and thanks a lot for taking my question. A lot of them were already asked.

But I still have a few. Just to confirm, the reversal of provisions in the quarter was CAD2.8 million, right?

That's the contribution to EBITDA.

That's correct.

Got it. Okay.

And if you can comment on how food court stores in malls have performed after the very limited re-opening that was seen recently? I know a lot of the food courts, you can't sit in there but you can takeout and some people went back to malls to shop.

Any comments on what you are seeing in terms of performance from food court locations in malls?

Yes. It's recovering slowly.

We need to recreate habits and customers. So it's going to take a certain amount of time.

I am not sure how long it's going to take. But what we are seeing is that it's recovering slowly.

But at least we are trending in the right direction. Some malls are performing a lot better than others.

Some malls are more lifestyle type of malls where people will go hang out and I guess those are performing better. Some malls are more in and out type of operation and those tend to take a little bit longer.

So we will see what the future holds for us. But at least we are trending in the right direction.

And can you comment on health of the franchisees, particularly in the food court?

Yes. Well, obviously our franchisees have been under pressure due to massive lockdowns and then the re-opening with no seating.

And so it's been challenging for our franchisees. Most of our landlords have been really good to us and working with us to alleviate some of that pain.

So at least we have good collaboration from our important business partners. But it's going to take a while for franchisees to make up the losses of the past 15 months.

So we are working hard with them to make the offering as good and as relevant as possible and to try to help their operations at least go back to profitability now and then recover.

So you don't expect a wave of closures due to franchisee health in the food court over the next year?

Not a big wave. No, there might be a few here and there and I guess that can have some surprises.

There always some surprises. But I am not expecting a massive wave of closures, no.

Understood, Eric. Thank you.

And in terms of food courts in the office towers. Those have been hit particularly hard.

What's the strategy there? And also in terms of franchisee health there, I presume these have been hit very hard and it's still uncertain how long the re-opening period will really take, how many people will eventually get back to the office.

Any comments on that?

Yes. Office towers, they have been beaten up.

Hey, the good news is that most of the landlords are working with us and the abatement on rent is pretty aggressive for most of them. So at least the fixed cost portion of our franchisees operations is taken care of.

And where landlords refused to help, there has been some store closures just because it's not possible to make a living if you are not selling, if you don't have any customers in the office tower. So this is more challenging.

Where landlords work with us, I think we have a path forward to re-open and be profitable as people come back to the offices. But we need that collaboration.

Now the good news is that we are gradually seeing people come back to offices. New York seems to be a little bit more busy now.

We are seeing people coming back in offices in Montreal now. Toronto is still locked down.

So it's fewer people. But we are seeing some major cities come back to life and hopefully office towers will be back in full force in the fall and then our franchisees can resume operations and hopefully profits.

Okay. Understood.

Thanks for that. And so you already addressed a question about acquisitions.

I just want to dig deeper, if possible. Is there a particular price target above which you wouldn't go?

Also you mentioned you have some certain sweet spot metrics. If you can just talk to us about what metrics in particular are you looking at, financial metrics and operating metrics when you make an acquisition?

Yes. We don't want to close the door on any specific price tag.

So if the price tag is heavy but the business is good opportunity, we will go for it. So we don't want to limit ourselves or close the door on something just for one reason.

So I mean, every business needs to be evaluated for its own merits without us placing hurdles where there shouldn't be. And in terms of giving you more accurate numbers or more precise numbers, I won't.

For competitive reasons, it would not be a right and a smart move for me to say how much we are willing to pay for something because then that that pretty much sets the price tag for the next time someone calls us.

That's fine. And any comments on maybe EBITDA margins or revenue growth profile that you are looking at?

Yes. Well again, there's a price for everything.

I mean there's a price for a mature business that might not be growing and there's a price for a strong growth business. So we adjust our buying strategy based on the business we have.

Obviously, especially with COVID now, there have been some concepts that have shown more COVID proof than others. So maybe those tend to be a little bit more attractive.

And then franchisee profitability and franchisee health is a major criteria. Buying a network of franchisees that are under is not necessarily something that's that interesting for us at the moment.

Understood. Okay.

And if you can comment on some of your older brands, how they are doing in particular Country Style and Mr. Sub and there was a couple of more.

Yes. Well, you know what, Country Style, it largely depends on business rafters on frequency of purchases and everything.

So like most of our coffee brands, Country Style has been affected by the pandemic and as traffic resumes and as people commute a little bit more, I think we are going to see the business recover. In terms of Mr.

Sub, it's a really well performing brand. It's a mature brand but that's performing extremely well.

I am really proud of what the team came up with in terms of marketing, in terms of product offerings. The brand image is spot on.

So I am really proud of that brand and it's performing really well and it has been for many years.

Is it growing organically or declining? And how much?

If you can give any details on the growth profile?

Yes. I am not necessarily going to give specific numbers on the brand.

So yes, I will stop my comment there.

Okay. And any comments on the Extreme Pita and Mucho Burrito?

Extreme Pita has been struggling for, much since we acquired it. And the pandemic affected it even more.

So we are working hard on Extreme Pita. We have a new product line that's being tested at the moment that hopefully will reverse the trend for Extreme Pita.

So cautiously optimistic about it. We have a lot in the pipeline to try to bring it back to where it should be because we always believed in the foods but for some reason we weren't able to either market it or communicate it well to our customers or the response wasn't the one we expected.

But we have a lot of new things going on for Extreme Pita. So cautiously optimistic.

Mucho Burrito is still one of our top growth brands. It's a very strong brand, really good product offering.

Still working on the brand, on the product, on the marketing, on even the store image, the design and everything. So constantly evolving that.

But in general, we are really proud of Mucho Burrito and it's one of our top growing brands and we want to keep it that way.

And when you made that acquisition back some time ago, in terms of the store numbers, did the majority relate to Extreme Pita? Or like what was the split between Extreme Pita and Mucho Burrito.

That was back in 2013, I think.

Yes. You are going pretty deep in my memory.

So I won't be able to quote you the exact numbers. But I can tell you, Extreme Pita was a lot larger than Mucho Burrito at the time.

And now that's reversed. Extreme Pita has reduced the number of restaurants since we acquired it.

And Mucho Burrito has grown really nicely. So where Extreme Pita was the larger brand back then, now Mucho Burrito is much larger than Extreme Pita.

Understood. Okay.

Thank you so much.

Hi. Good morning.

Just Eric, you called out the CAD2.8 million credit loss provision. What's the item on there?

It says variance due to impact of IFRS 16 on impairment of lease receivables. It was CAD1.3 million in the quarter.

Is that a one-time item? Or is that something else?

No. It's something that we reassess every quarter and it's a little bit more complicated but it's basically an estimation of our collection ability on the leases that will be receivable in the future, not necessarily for what was receivable in the past.

So it's an assessment, I would say going looking forward assessment of our ability to collect.

Okay. So it would kind of bounce back and forth between this type of level in any given period?

It could go up and down, yes, depending on various different factors.

And any comments you can give on the outlook for working capital over coming quarters, like any notable items that we should think about?

Well, not necessarily. I mean as the business is growing and recovering, I think we are going to have higher sales and that's going to generate higher accounts receivable and that's a good thing, I guess, because it means the business is doing better.

I think you should expect our prepaids to be amortized over the next two quarters. We have some pretty heavy payments in the first two quarters.

But other than that, in terms of working cap, I don't see anything major coming in in the next few quarters.

Okay. And then I think and you can correct me if I am wrong, I think you made a comment during the opening remarks just about strong royalty collections during the period.

Is that something you said? Or did I mishear something?

No. You did hear that.

We are collecting more of our old royalties than we had anticipated. And that's why you have the reversal on expected credit loss.

Okay. Thanks for taking the questions.