Pizza Pizza Royalty Corp.

Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp’s earnings call for the second quarter ended June 30, 2021.

Joining me on the call today are Pizza Pizza Limited’s Chief Executive Officer, Paul Goddard, and Chief Financial Officer, Christine D’Sylva. 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 our earnings press release and MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to our non-IFRS financial measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks.

And portfolio managers and media can contact us after the call. Before turning the call over to Paul for the business update, I wanted to spend a few moments reviewing the structure of the Corp, for our new investors.

Pizza Pizza Royalty Corp., indirectly owns the Pizza Pizza and Pizza 73 brands and trademarks through its subsidiary, Pizza Pizza Royalty Limited Partnership. This partnership has two partners; Pizza Pizza Royalty Corp., the public company, which owns 76.5%; and the other partner, Pizza Pizza Limited, the private operating company, which owns the remaining 23.5%.

The Royalty Corp., is a top-line restaurant Royalty Corp. that earns a monthly royalty through a lease 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 Corp.

is derived from increasing the same-store sales of the restaurants in the Royalty Pool and by adding new restaurants to the pool each year. The Royalty Pool is adjusted at the beginning of each year by adding new restaurants opened in the previous year, less any restaurants that have been permanently closed.

For the fiscal year 2021, the Royalty Pool was adjusted on January 1st to include 622 Pizza Pizza restaurants and 103 Pizza 73 restaurants. With that review, I’ll turn the call over to Paul Goddard to provide a business update.

Thank you, Alex. Good afternoon, and thank you, everyone, for taking the time to attend our call today.

Today, we will highlight the results of our second quarter ended June 30, 2021. From a high level perspective, we find it encouraging to see the strong vaccination rates across Canada, leading to gradual reopenings and restrictions being lifted.

That being said, the recurring virus waves and lockdowns we experienced last year and through the first half of this year continued affecting some of our important sales channels, particularly walk-in sales and our nontraditional business. Also, despite a particularly challenging economic backdrop in Alberta, we have maintained our market share.

Same-store sales growth on a combined basis increased 0.8% for the second quarter. Pizza Pizza reported solid sales growth of 2.1% while Pizza 73 reported a same-store sales decrease of 9.5%, reflecting a difficult economic backdrop ongoing in Alberta.

Year-to-date same-store sales on a combined basis decreased 6.5%. And when comparing results of 2021 to 2020, it’s important of course to remember that COVID-19 began impacting operations in mid-March of 2020 and had the greatest adverse impact to us in April of 2020.

For the second quarter, System Sales from the 725 restaurants in the Royalty Pool increased 3.9% to $118 million from $113.5 million in the same quarter last year, when there were 749 restaurants in Royalty Pool. And as mentioned on previous calls, our business is comprised of two revenue streams, our traditional restaurant network, which generates 90% of our Royalty Pool sales and are non-traditional and special event locations which typically generate remaining 10%.

As COVID-19 cases across Canada increased early in the quarter, and the threat of new variants strains emerge, restaurant operations continue to be restricted across all provinces serviced by Pizza Pizza and Pizza 73, and our customers were back home in various stages of lockdowns. Fortunately, since the beginning of the pandemic, our traditional restaurants have remained open for delivery and pickup.

However, as our restaurants continue to comply with all COVID-19-related restrictions, including the closure of all in-restaurant seating areas for the majority of the quarter, our normally very robust walk-in sales, especially those in urban locations were impacted. As we experienced back in 2020, growth in our suburban locations this year has exceeded that in our urban locations.

And with a large proportion of our restaurants in those more urban locations, you can quickly see that walk-in sales are very critical as a channel for us, typically generating about 40% of our total store sales. So, when we were forced to close all of our seating and dine-in areas, this was really going to be a significant impact.

Yet despite this uncontrollable headwind, the good news here is that our delivery and pickup sales, which combined give us that other 60% of our sales, continued to offset a sizable portion of those lost walk-in sales. Our non-traditional locations, which contribute 10% of our overall sales, have for the most part remained closed since the onset of the pandemic, due to these various government mandates.

However, we are starting to see that a number of our non-traditional locations which initially closed have reopened such as Canada’s Wonderland, at the end of July, Toronto Zoo, Centreville at Centre Island and others TFC in Toronto as well for the TFC football team -- soccer team, and we anticipate many more of these non-trad locations should reopen, some in the limited capacity, others fully. And especially, we’ll see a lot more reopening, we anticipate at the colleges and universities in the fall, as allowed by each province while the economy reopens in stages, barring another major wave of lockdowns or other COVID-19-related restrictions.

So, ongoing sales challenges persist as the delivery landscape continues to feel pressure, via rising input costs and increased competition from third-party delivery services, like others. I would say that the third-party aggregators continue to be our biggest competition in the delivery market over the last year.

To meet these challenges, we continue to focus media investments on core value offerings and new product innovations and digital innovations. There’s lots of examples of that.

I’ll get into. With the lifting of restrictions in Ontario late in the quarter, we immediately experienced an increase in our walk-in sales and saw the reopening of a few key nontraditional locations, as I mentioned.

This is positive momentum, no doubt, as we head into the back half of the year, which has historically been our strongest sales quarters, Q3 and Q4. So, as a result, our Board was pleased to announce a 9% increase in the shareholder dividend, effective August 2021.

Now, I’d just like to touch on restaurant operations at PPL, the private operating company behind our underlying business. Pizza Pizza Limited continues to focus on evolving customer needs and driving long-term sustained growth.

When combined with our competitive advantages of convenience, innovation, high-quality menu offerings and geographic diversification, we feel strongly that our restaurants are poised and ready for all sales channels to return stronger than they were pre-pandemic. Our second quarter continued the momentum from our successful Uno card campaign in the first quarter, with a focus on our delivery promises, new product launches and value offerings.

This quarter, we continue to see the benefits of extending our product offerings and creating premium differentiated products as well. At Pizza Pizza, the introduction of three new Gourmet Thin pizzas highlighted our high-quality toppings and new flavor profiles.

[Indiscernible] Prosciutto and Arugula and Spicy Siciliana pizzas, complement our regular pizza offerings and expand our specialty product menu. These pizzas are sold at a premium price and are great profit drivers for our stores.

We were thrilled to see such strong tickup on the Gourmet Thins. Meanwhile, at Pizza 73, we also introduced the Uno card game promotion in late April and followed it with our festival combo, a delicious Pretzel Crust Pizza accompanied with our new Mac & Cheese Wedges, or Cod Bites, which were released in advance of the Calgary Stampede to capitalize on the excitement of this event.

Although, I would just mention outside food vendors like Pizza 73 and others were not allowed to have on-site locations at the Stampede this year, it was great to see the Stampede open and it’s great to see people excited about large summer events like that. And as a former Calgarian, I know it’s hard to be at the Stampede for excitement, too.

So nice to see just signs of normalcy happening. And we are also thrilled to announce that this quarter, we introduced beer as a new beverage in our restaurants.

Our initial launch at 20 locations in Hamilton and Winnipeg have afforded customers the opportunity to purchase beer on-site for takeout or for delivery with any food purchases. After this successful initial test, we plan to roll this out to all Pizza Pizza and Pizza 73 locations across Canada, further expanding our product offering and giving customers what they want, beer with their pizza and wings.

We are the first major pizza chain in Canada to offer this magical combination of pizza and beer, and we are very proud to once again be a first mover and leading innovator in our sector. We know that value is important to our customers, especially as the economy is not fully reopened and unemployment continues to be high, really right across Canada.

As such, we continued our focus on meaningful value offerings. At Pizza Pizza, our promotions focused around our Unlimited $7.99 2-topping medium pizza offering, our ever popular walk-in specials and other lightning rod marketing tactics to drive sales on certain days.

As well at Pizza 73, where we continue to face that economic headwind with one of the worst unemployment rates in the country, we reintroduced our Plenty for $20 value offering, which is a real perennial favorite. This legacy offer has done well with our customers and is a good reminder of the strong value for money we provide, along with great quality food.

Pizza continues to be an affordable and convenient option for our customers and an important tool in retaining customers. So, overall, our diverse high-quality menu, continually enhanced websites and apps, we continue to pour money into those, make them better and better, plus our impressive customer service stats, our high-quality ratings and other aspects have positioned the Company well to weather this pandemic and come out stronger, gain market share and increase our restaurants’ bottom line profits, along with our top line sales.

We are seeing positive economic signs and are more hopeful than we were last quarter that the worst is over. These long-lasting lockdowns have been lifted, so we can get the economy safely back on track with a largely fully vaccinated population, even if Delta or other variants continue to throw us curveballs in the future ahead.

So, finally, I just wanted to provide a quick update on restaurant development as well, which has been an especially exciting area for us this year. During the quarter, Pizza Pizza Limited opened 7 traditional Pizza Pizza restaurants while one traditional and one nontraditional Pizza Pizza restaurant was closed.

Year-to-date, Pizza Pizza Limited opened 10 traditional and 4 nontraditional Pizza Pizza restaurants and closed 2 traditional and 1 nontraditional restaurant. Additionally, at the Pizza 73 brand, the Company opened 2 traditional restaurants and closed 1 nontraditional restaurant.

So, we’re proud of our growth in the last six months as new restaurant construction continues across Canada as part of our longstanding national expansion plan, with growth primarily in British Columbia and Quebec. We’re really pleased to see the growth there and the rapid brand appeal as well.

We are taking full advantage of the opportunities that pandemic has provided despite the hardship, it’s also a great opportunity to focus on growth in our minds. So, rather than go on defense and shut up our stable, we are going on offense with our plans.

And I think our results on the construction side of things are just one great example of that. And while many others are retreating or just having to stabilize their businesses, we think it’s a great opportunity to build our business and make our network even stronger with our growth.

Pizza Pizza Limited management expects to accelerate its restaurant network expansion to 5% traditional restaurant growth and continue its renovation program throughout 2021 and beyond. And to date, we are proud to say that 80% of our restaurants feature our hot and fresh new look.

Customers are noticing this, our reinvigorated restaurant ambiance, even higher food quality than we had before. And for those that have not visited their neighborhood Pizza Pizza for a while, we cannot wait to hear their positive feedback as they experience the new Pizza Pizza.

So, in closing, I just want to mention that, obviously, this year has been such a monumental challenge for everybody, not just at Pizza Pizza, but everywhere, obviously, around the world. But just speaking about our team and our franchisees and our partners in Alberta, I just want to personally say thank you all of you, all of our hardworking employees and our operators for their exemplary hard work, relentless efforts this year.

It’s been a struggle, but it made a stronger and closer as team as well. And I think that’s one of the silver linings of all this.

So, the health and safety of our customers and our restaurant teams is always going to be a top priority for us. I think our team has done a great job of that.

And we’ve implemented strict protocols in our restaurants and on our deliveries to give our customers safe. Our customers appreciate that.

They know that we’re very careful and professional about that with our uniform drivers and our time guarantee, et cetera. So, we’re completely committed to delivering great food and the very best customer service each and every time.

That’s our mission. And we know that, that means we will gain more new and returning loyal customers.

And look, we know that as restrictions continue to lift and customers return to the urban city centers and to our nontraditional sites, we will be ready to greet them with our high-quality food, our welcoming staff and our newly renovated restaurants. Thank you for listening.

And I’ll now ask Christine, our CFO, to provide a brief financial update. Over to you.

Thanks, Paul. Before going into the financial results for the quarter, I just want to remind everyone about the adjustment made to the Royalty Pool on Jan 1st.

As Alex mentioned at the beginning of this call, on January 1, 2021, the Royalty Pool decreased by 24 restaurants. For 2021, there will be 725 restaurants in the Royalty Pool, comprised of 622 Pizza Pizza locations and 103 Pizza 73 locations.

This has been compared to 2020 when there were 749 restaurants in the pool. With that, I’ll just briefly cover some of the financial results for the quarter.

As Paul mentioned, the financial results for the quarter continue to be impacted by COVID-19 as our restaurants remained closed for in-restaurant dining and customers remained home under provincial stay-at-home orders for the majority of the quarter. Same-store sales growth, the key driver of yield for shareholders, increased 0.8% for the quarter and decreased 6.5% for the six-month period.

Royalty Pool System sales for the quarter increased 3.9% to $118 million from $113.5 million in the same quarter last year. By brand, sales from the 622 Pizza Pizza restaurants in the Royalty Pool increased 7.1% to $98.6 million for the quarter, compared to $92.1 million in the same quarter last year.

Sales from the 103 Pizza 73 restaurants decreased 9.8% to $19.3 million for the quarter compared to $21.4 million in the same quarter of last year. The Partnership’s royalty income earned as a percentage of Royalty Pool sales increased 2.7% to $7.7 million for the quarter and decreased 5.9% to $14.7 million for the six-month period.

The decrease in the Royalty Pool sales and the royalty income reflects the same-store sales for the quarter end period. Additionally, while the number of stores in the Royalty Pool are less than the comparative period, the financial effect for shareholders was mitigated by Pizza Pizza Limited continuing to pay royalties as part of the deficit or make-whole payment.

So now, turning to the Partnership expenses. Administrative expenses include director, legal and auditor fees as well as listing costs.

For the quarter, administrative expenses were $159,000 and were $261,000 for the six-month period. In addition to administrative expenses, the Partnership paid interest expense on its $47 million credit facility.

Interest paid in the quarter was $341,000 and $655,000 for the six-month period. The Partnership is presently making interest-only payments on the non-revolving credit facility.

The interest rate swap agreements fixed the facility at the Bankers’ Acceptance rate of 1.81% plus a credit spread. The credit spread ranges based on the level of debt to EBITDA.

Due to the impact of COVID-19 on the Partnership over the trailing 12 months, in April 2021, the credit spread on the facility increased by 25 basis points for a combined interest rate of 2.935%. Please refer to the Company’s MD&A for a full credit spread schedule.

So, after the Partnership has received royalty income, paid administrative and interest expense, the resulting net cash is available for distribution to its two partners, based on their ownership. Pizza Pizza Royalty Corp.

declared shareholder dividends of $4.1 million for the current quarter or $0.165 per share compared to $3.7 million or $0.15 per share in the second quarter of 2020 when the dividend was initially cut due to COVID. The resulting payout ratio for the second quarter of 2021 was 95%.

For the six-month period, the Company declared dividends of $8.1 million or $0.33 per share compared to $9 million or $0.3639 per share in 2020. The payout ratio for the first six months was 100%, compared to 103% in the prior year’s comparative period.

The Company’s working capital reserve increased $200,000 during the quarter and is at $5.4 million as of June 30, 2021. As Paul mentioned, today, after careful consideration, the Board announced a 9% increase in the monthly dividend, beginning with the August dividend, which is payable on September 15th.

The monthly dividend is now $0.06 per share for an annualized rate of $0.72. We will continue to monitor system sales and royalty income and will consider further changes to the monthly dividend, taking into account the duration and impact of the pandemic and the timing and pace of economic recovery in all the markets that Pizza Pizza and Pizza 73 continues to serve.

That concludes the financial overview. I’d like to turn the call back to our operator to ask questions.

Yes. Good evening, everybody.

And I hope you are all well and safe.

Hi, Derek. Thank you.

I just had -- Ihave a few questions. I guess, the first one I had was, I was wondering if you can maybe put into context the sales growth this year as you -- because you’re lapping some pretty -- I guess, you’re lapping much easier comps, given last year’s collapse in sales.

And I guess, what I’m trying to get at is, where are you guys in terms of the sales or volume recovery? And what are some of the early indications that you have that you are on the road to recovery?

Yes. Well, that’s a good question, Derek.

When I tried to cover that a fair bit in my comments, but I guess to get a flavor. I mean, I think we tried to emphasize that it’s sort of a combination of things that seem to be working well for us, just to talk about Pizza Pizza for a second, is the core value offerings that we know are very big volume drivers, continue to be a key part of our mix.

So, I think we’re starting to see those even just get more traffic, which is good. And obviously, like I would say that one thing that we’ve seen, obviously, as walk-in was basically not allowed, like sit down, walk in, that’s obviously lower check, right?

And so, as we sort of see some of that coming back, we -- I hate to -- kind of blends our average check down in my way, but that’s something we expect. Relative to last year, I mean, remember, it’s been kind of choppy this year, the sort of this whole kind of crazy on again, off again year.

I mean, yes, okay, comps were perhaps easy to lap there. We had that really terrible April last year where just -- the world kind of fell apart for everybody, and we kind of crawled out of that pretty quickly.

This year, I just think we’ve seen intensified competition from third-party aggregators. People, I think, in general, have developed -- in some ways, it’s good, a delivery habit of ordering more in for food.

There’s times where they’re in lockdown mode and people get tired of filling their pantries on the grocery side, although groceries were strong, of course. But, there’s a lot of other choices in the market.

So, I think, we are in certainly a very intense competition, and we got to make sure we drive organic sales, digital. And I think all of our indicators point to those point in the right direction.

So, I think we’re -- we would say that I think the level of innovation that we have this year and I think in future quarters this year and beyond is more than we’ve had as well. So, I think that that’s starting to pay off.

And just another example of that is sort of our data analytics work. As you know, we’ve got Curt leading up a team that’s really focused on business intelligence and that whole foundation that we have that really enables us our platform to really personalize data menu items, pricing, things like that, more than we’ve ever been able to and just get those insights, and there’s a lot more to come.

And so, I think we’ve learned a lot more. I think it has gotten more competitive out there.

But just to touch on Pizza 73, I mean, obviously, we’re not thrilled with the numbers there. I think 3.1 is a pretty solid quarter for Pizza Pizza, considering no nontraditional, no walk-in, sit down, right?

Our pickups have been great. Our deliveries are strong.

But at Pizza 73, we don’t like to see negative double-digit numbers. We are confident we’ve maintained our share out there in pizza.

We have data saying that the entire pizza spend and traffic for the target pizza segment in Alberta is down. But I don’t want to hide behind that completely.

We do think we need to do a better job. But I’d point out, something like at Pizza 73 as an example, Q2 2019 with no COVID compared to Q2 of 2020.

I mean, we were only down 2% in that rough quarter, Q2 2020 out there, which is pretty incredible, actually, considering what happened, right? And so, yes, we’re negative on that, but it was an unusually strong Q2, I would say out there for us.

And we were happier with that out there than we were at Pizza Pizza. But, I think it’s just -- it’s been so volatile and choppy, right, depending when things were open and closed.

And I think this year, we’ve just seen now finally Ontario open up and Alberta is showing -- obviously, it’s wide open there now. And hopefully, we don’t have a lot of hospitalizations or worse there with less restrictions.

But, I think all in all, it’s a more intensified competitive environment, I will say that. But I think we have a lot of confidence in our core value offerings, coupled with a lot of our innovations.

And so, I think those early indicators on -- we’re always looking at traffic and check and where we’re getting new customers and where we’re getting more app downloads and just evidence of more traction, higher conversion rates on our digital assets, a whole bunch of different things and innovations and that’s, I think, putting us in a better place and for Pizza 73, despite the rough market out there.

Yes. That’s good color, Paul, on -- particularly on Pizza 73.

I don’t think everybody was aware that you were down so little last year.

Yes. That’s right.

So, I want to point that out because that is -- that was actually a good thing at that time, but I would say an unusually strong quarter, and we’re glad about that. But, it’s a fast-changing market, right?

There’s a lot of choices out there. And so, obviously, we’re adapting as fast as we can.

But, those are some of the factors, I think, that I would give you there.

Okay. That’s fair.

And maybe on some of the lifting of the restrictions that you did point out. I thought that Ontario was in Phase 3, which meant that you were able to open the in-dining part of the restaurants.

Is that true? .

I think Christine could probably help me out with the exact date, but I think it was limited capacity at 15% capacity for quite a while. And I’m not sure if someone has the data, and I actually don’t.

But, I think that was, I thought, June-ish where that became fully opened but a lot of quarter wasn’t

Yes. Derek, we were pretty much closed most of June.

It was the last week of June that things were starting to reopen in limited capacity. In-restaurant dining though reopened in July.

So, that will affect Q3.

Okay. So, Christian, are you fully -- is it -- I guess, there must be some restrictions.

I just -- I’m remembering off the top of my head from Cineplex had some lifting of restrictions as well. So, what are the -- I guess, what’s the capacity limit?

Initially, it was 50% capacity limit. And that started July 16th.

Okay.

And now, they’ve limited it to -- you have to keep not a percentage capacity, but it’s a space capacity that you have to be able to keep the physical 6 feet distance between your guests.

Okay. Perfect.

And on the nontraditionals, you mentioned a few of the key ones that were open and universities are still closed. But, is it still most of the nontraditionals remain closed at this point?

Yes. I would say, as a number, yes.

We have a lot of universities and colleges. And then, really until that comes back, those large food service partners that we have that really run those really 3 or 4 companies that we partner with in those locations, we really won’t know.

But, we’ve had a lot of inbound from them saying, okay, we’re getting ready, the fall we anticipate opening. There’s obviously still some uncertainty as to what the different universities and colleges and hospitals’ policies will be, food courts and all these places.

So, there’s still that question mark there. But, what we’ve seen already is it’s encouraging where they have opened, albeit some bigger events like Wonderland, it’s a little different than a Pizza Pizza restaurant at Queens University, obviously, a much bigger location.

But, we do think that it will really respond faster. I mean, just talked with our Head of Marketing today.

And I mean, he put it pretty well, I thought, which is we do really well and customers are moving around. We do really well in there at home as well, especially when there’s bad weather, a lot of rain this summer, so we like that, for deliveries.

But, when our customers are mobile and they’re going to school, going to work when they’re walking around downtown, especially in the urban areas, we will see that resurge back. And there’s a question as to, will it fully return?

Will it partly return? But we’ve been pretty encouraged with these early indicators that volume comes back pretty quickly.

The Wonderland is opened, Centerville, the zoo, even out west, we would couldn’t be at the Stampede this year, but I believe we’re going to be at PNE in Vancouver. Cineplex is -- we’re not on every Cineplex, but as they start to get traffic, we will too.

It’s just sort of automatic. If the people are there, we’re going to get the business.

Yes, awesome. Okay.

And I’m going to switch gears and maybe have a more positive tone on the questions. I’ve known you guys a long time now, and I know how conservative you typically are.

I was just wondering how you think we should be reading into the 9% dividend increase?

Well, it’s a good question, Derek. You do know us well, right?

I mean, I think we are -- we try and be, I think, middle of the road and then find that balance. And I guess, we think it’s the right level.

I mean, keep in mind, we didn’t take any pleasure last year and taking the dividend down to 30%, but we didn’t chop our dividend like some people had to, right, and we didn’t cut it in half. But, we cut 30% in June, right?

And then, we boosted it back up by 10% in November. And now, this is another 9%.

So, I mean, it’s definitely significant. But remember, we’re still -- when you add that up, the net, we’re still 16% below our pre-COVID dividend, right, which was whatever $0.85 on the year and now we’re talking $0.72, right?

So, if you like, we’re not at 100% confidence level either. So, yes, we’re super optimistic in one way, but there’s still a heck of a lot of uncertainty out there, right?

If we got another an Epsilon variant or something unexpected and even more lockdowns and colleges and schools don’t come back. Well, there’s still risk there.

But I think if you look at a combination of factors, just our overall iterating strength, especially Pizza Pizza. I think 73, we obviously got some work to do to make those numbers look better, and team at Pizza Pizza, but I think it’s -- we like the momentum there.

We’re still 16% down our pre-COVID dividend. So, if you look at it one way, you could say, well, we’re only 84% as confident as we were before, right?

So, I think if you put that in context, we felt it was an appropriate level, given a lot of different factors, still reflecting some uncertainty. We tried to make clear in our remarks and my quote and things.

But, we’re certainly optimistic. We think in this market we’ve proven to be super agile.

We continue to reinvest in the business, and I think our sort of innovation bias and our hunger to really do better, it’s sort of proving that we’re really the strong leader. And so, it’s sort of -- we feel it’s the right level.

So, I guess, it’s optimistic. It’s a healthy dividend increase, but we could have been more, I supposed too, or we could have said we’re not going to increase it yet.

But, we felt it was appropriate, and we think it’s just the right balance.

Derek, we’re also going into our strongest two quarters of the year. And if we look back at 2020, the payout ratio for those two quarters was below 85%.

So, we’re pretty confident that this level of dividend is sustainable, barring what Paul said, any fourth wave or further variance that could come up.

Okay. Thanks, Christine.

And I guess, nice to see the beer offering. Obviously, I think virtually [Technical Difficulty].

Just wondering how much of a lift in the ticket do you think that this could drive?

That’s really difficult to say, Derek. I mean, I think it will be probably a little bit patchy and it will probably be -- the average will dilute the true message.

I mean, that’s -- we’ve learned a lot from the early days. We’re very encouraged with Winnipeg and Hamilton.

There’s a lot of work to do to get these other regions. I mean, the regulator is very favorable with us, but it’s just a lot of red tape with a different especially municipal level that you have to get through.

It’s a ton of legwork. And in one way, honestly, it’s such a barrier to others doing it.

People can try and a lot of people in the industry know that we’re doing this now, and they’re trying to be a second mover, I guess, but we are encouraged. I mean, I guess, we will explore both, the on-premise part and the delivery, but we’ve priced it well.

So, the food cost is good. And we think people will -- if it’s a Friday night, you’re about to watch an Argos game or the Raptors game in the fall or what have you.

I mean, we still have that time guarantee. I mean, there are others that deliver beer right now.

I mean, a good friend of mine was telling me, "Hey, I get beer, I love my micro brew, but it takes two days to arrive. " And I’m saying, "Well, ours is -- four different choices are really popular beers and you’ll still get it in 40 minutes or free”.

So, we think we can really blend it powerfully with a lot of our existing specials at a valuable -- value price, and what the mix we’ll probably have to play. Honestly, there’ll probably be some missteps here and there.

I mean, we’re armed with a lot of data, but until we really go there and try some combinations and things, it will take us probably a little while to refine it. So, I really don’t think I’m sure to give direct X percent of orders we’ll have beer and this is what it’s going to do to our check and our franchisees bottom line, et cetera, or our top line sales.

But we’re certainly pretty enthusiastic about the attention we’ve got from the markets that we started with. So, that’s why we’re saying, let’s continue the rollout.

Okay. And correct me if I’m wrong, Paul, but the -- I guess, the liquor license, you have to apply that on a franchisee per franchisee basis, right?

Yes. That’s right.

And so, there’s quite a bit of work there and sometimes inspections required and other aspects. It varies a lot by municipality.

We certainly had a favorable inception from the regulators wherever we’ve tried, but it’s just a lot of kind of really detailed pony work sometimes to get whether it’s maybe a fire inspector has to come by and check out our story, even though we’ve been operating it for 25 years in a certain location or something. And there’s some hoops and forms you got to fill out and things.

But I think the regulator has been very positive that we’re known as a really solid reputable company that’s going to prioritize safety and food smart, drivers have to be Smart Serve certified and all that. So, there’s a lot in there, and we’ve been pretty happy with our partners that we’ve used.

It’s a nonexclusive arrangement, but we’ve been working with Molson out of the gate and they’ve been a great partner so far, really making it happen.

Okay. And one last one for me is, maybe if you can just talk a bit more on how the BC expansion is going?

How many stores do you have out there? And what’s the -- I guess, what has been the initial response to the brand out west?

Yes. Good question.

We’re super excited about BC as a bottom line. I think we’ve got 18 as we speak, but it will be 19, but we’re at least 18 and will be soon 20 and north of that, and we see a lot of potential.

So, we’ve been very encouraged by how quickly we’ve gotten traction there as not everyone knows our brand out there. And we don’t yet have the scale really to do a ton of media buy and things like that, but we are doing some local store marketing.

We’re doing active initiatives in the community and things like that. And really, the franchisees have been really building their customer base and their loyalty just with great service and great food.

So, there’s obviously a lot of incumbent players in that market, and there’s also a lot of independents in Vancouver and other parts of BC. We’re focused really on that lower mainland area in and around Vancouver right now.

But, it’s been positive. And I think there’s some public information that’s out there about some other competitors in the market, at least one that’s having a lot of trouble with franchisees and things.

And so, we just think it’s another opportunity to go on offense. We have a great relationship with our franchisees.

They’re hungry. They’re well trained.

And so, we’re expanding a lot out there, and we’ve got a really good team on the ground there as well. And also, I would say, with Quebec, we continue to be very aspirational.

There we’ve got well over 60 restaurants there, so 3 times what we have in Vancouver at the moment. But, we were also very happy to see how quickly Montreal gelled and I think our partnership with the Habs has been very constructive and also the fact that they obviously made it to the cup.

They didn’t go all the way to win it, but that’s been a good longstanding relationship as well. And both regions are really the biggest growth engines for us right now.

So, really encouraged by what we see. And I think there’s opportunities in the rest of the country as well.

But primarily, the big growth in network growth is going to be for the next while, BC and Quebec.

Okay. Well, let’s hope for a continued improvement in the health status.

Good luck going forward, guys.

Thanks a lot, Derek. I appreciate your support.

Great questions. Thank you.

Thank you, everyone, for joining us on the call this afternoon. If you have any questions after the call, please feel free to get in contact with us.

Our information is on the press release. Thanks, and have a great evening.