Pizza Pizza Opens 37 Restaurants, Increases Fund Ownership to 24.4% and Increases Market Share to 50%



    TORONTO, Jan. 22 /CNW/ - Pizza Pizza Royalty Income Fund (the "Fund") and
Pizza Pizza Limited ("PPL") today announced that effective January 1, 2009,
the pool of restaurants (the "Royalty Pool"), on which royalties are paid to
the Fund by PPL, has been increased to include 18 new Pizza Pizza restaurants
and 19 new Pizza 73 restaurants. Of the 18 new Pizza Pizza restaurants opened
between January 1, 2008 and December 31, 2008, six are traditional restaurants
and 12 are non-traditional locations. The 19 Pizza 73 restaurants are
comprised of 13 traditional restaurants and six non-traditional locations
opened between September 2, 2007 and September 1, 2008. The Royalty Pool will
decrease by nine Pizza Pizza restaurants which were closed during the year, of
which four were traditional and five non-traditional. With the addition of the
28 net, new restaurants, royalties are now paid to the Fund on 637 restaurants
in the Royalty Pool.
    "All of our indicators reveal a market share that is consistently
growing," said Curt Feltner, Chief Financial Officer for PPL. "The latest
available market research for the three-month period from June to August 2008,
showed Pizza Pizza's market share in Ontario's pizza segment to be 50% from a
dollar standpoint while our share of total traffic exceeded 52%, well ahead of
all of the U.S.-based companies and other competitors combined."
    The Fund indirectly owns the Pizza Pizza and Pizza 73 trademarks and
trade names used by PPL in its restaurants. In 2005, the Pizza Pizza
trademarks and trade names were licensed to PPL for 99 years, and in return
PPL pays the Fund a 6% royalty on the Pizza Pizza Royalty Pool system sales.
In 2007, the Fund licensed the Pizza 73 trademarks and trade names to PPL for
99 years, and in return PPL pays the Fund a 9% royalty on the Pizza 73 Royalty
Pool system sales.
    Annually, on January 1 (the "Adjustment Date"), the Royalty Pool is
adjusted to include the forecasted system sales from new Pizza Pizza
restaurants opened on or before December 31 of the prior year, less system
sales from any Pizza Pizza restaurants that have been permanently closed
during the year. Similarly, on the Adjustment Date, the Royalty Pool is
adjusted to include the forecasted system sales from new Pizza 73 restaurants
opened on or before September 1 of the prior year, less any Pizza 73
restaurants permanently closed during the calendar year and further reduced by
any decrease in system sales attributable to certain Pizza 73 restaurants
whose territory has been adjusted (See "Adjusted Restaurant" as defined in the
"Licence and Royalty Agreement for the Pizza 73 Operations").
    PPL holds Class B and Class D units of Pizza Pizza Royalty Limited
Partnership (the "Partnership"), which are exchangeable for a number of Fund
units ("Units") based on the Class B and Class D Exchange Multipliers (the
"equivalent Units"). At each annual Adjustment Date, the number of equivalent
Units held by PPL is adjusted in accordance with a formula which determines
the Class B and Class D Exchange Multipliers for the upcoming year. The
formula and terms are defined in the Partnership's Limited Partnership
Agreement. The formula, designed to be accretive to current Unitholders, is
based on the forecasted sales from new restaurants less sales from any closed
and/or adjusted restaurants, multiplied by the royalty rate, divided by the
yield of the Units, and discounted by 7.5%. From January 1, PPL is entitled to
receive 80% of the calculated, equivalent Units and distributions thereon,
with the balance of the equivalent Units to be determined when the full year's
sales of the new restaurants have been verified by an independent sales audit.
    Effective January 1, 2009, the Class B Exchange Multiplier is adjusted
based on the 2009 forecasted system sales of $4.7 million from the 18 new
Pizza Pizza restaurants less sales of $1.6 million from nine permanently
closed Pizza Pizza restaurants resulting in net, estimated Pizza Pizza sales
of $3.1 million added to the Royalty Pool. The Class D Exchange Multiplier is
adjusted based on 2009 forecasted system sales of $14.1 million from the 19
new Pizza 73 restaurants less $4.9 million in system sales attributable to
eight adjusted restaurants resulting in net, estimated Pizza 73 sales of $9.2
million added to the Royalty Pool.
    In exchange for adding the 28 net, new restaurants to the Royalty Pool,
PPL has received 148,690 additional equivalent Units (through the Class B
Exchange Multiplier) and 660,745 equivalent Units (through the Class D
Exchange Multiplier). These units represent 80% of the full Class B and Class
D entitlements (185,863 and 825,932 equivalent Units, respectively, represent
100%), with the balance to be received when the restaurants' 2009 sales
performance is known with certainty.
    The additional 809,435 equivalent Units described above represent 2.8% of
the Units on a fully-diluted basis. Including these additional units, PPL now
owns equivalent Units representing 24.4% of the Units, calculated on a
fully-diluted basis; the controlling shareholder of PPL and his associates
control an additional 5% of the Units.

    
    Table 1 - Summary of Pizza Pizza Royalty Income Fund Outstanding and
    Fully-Diluted Units:

                                                                 Issued &
                                                               Outstanding
                                                                  Units,
                                                 Issued &       Equivalent
                                               Outstanding        Units
                                                Units, and   and Holdback of
                                                Equivalent      Equivalent
                                                  Units           Units
    Units outstanding & issuable
     on December 31, 2008
    -------------------------------------------------------------------------
    Public float                                21,818,392     21,818,392
    Class B equivalent Units held by PPL         5,430,699      5,430,699
    PPL Additional Class B equivalent Units -
     Holdback as of December 31, 2008                  N/A         99,839 (1)
    Class D equivalent Units held by PPL           558,750        558,750
    PPL Additional Class D equivalent Units -
     Holdback as of December 31, 2008                  N/A        139,687 (2)
                                               ------------------------------
    Fully-diluted Units                         27,807,841     28,047,367
                                               ------------------------------
                                               ------------------------------
    Percentage available for exchange by PPL
     at December 31, 2008.                           21.5%          22.2%

    -------------------------------------------------------------------------
    Units outstanding & issuable on
     January 1, 2009
    -------------------------------------------------------------------------
    Public float                                21,818,392     21,818,392
    Class B equivalent Units held by PPL         5,430,699      5,430,699
    PPL Additional Class B equivalent Units -
     Holdback as of December 31, 2008               99,839         99,839 (1)
    Class D equivalent Units held by PPL           558,750        558,750
    PPL Additional Class D equivalent Units -
     Holdback as of December 31, 2008              139,687        139,687 (2)

    Additional PPL Class B equivalent Units
     as of January 1, 2009 (80%)                   148,690        148,690 (3)
    Additional PPL Class B equivalent Units -
     Holdback as of January 1, 2009 (20%)              N/A         37,173 (4)
    Additional Class D equivalent Units issued
     to PPL on January 1, 2009 (80%)               660,745        660,745 (3)
    PPL Additional Class D equivalent Units -
     Holdback as of January 1, 2009 (20%)              N/A        165,187 (5)
                                               ------------------------------
    Number of fully-diluted Units               28,856,802     29,059,162
                                               ------------------------------
                                               ------------------------------
    Percentage available for exchange by PPL
     from January 1, 2009                            24.4%          24.9%

    (1) 20% holdback of equivalent Units from 28 net Pizza Pizza restaurants
        added to the Royalty Pool on January 1, 2008. Actual number of
        equivalent Units will be determined in early 2009, effective
        January 1, 2008, once audited sales of the restaurants are known.

    (2) 20% Holdback of equivalent Units from 9 net Pizza 73 restaurants
        added to the Royalty Pool on January 1, 2008. Actual number of
        equivalent Units will be determined in early 2009, effective
        January 1, 2008, once audited sales of the restaurants are known.

    (3) Equivalent Units available January 1, 2009

    (4) 20% holdback of equivalent Units from 9 net Pizza Pizza restaurants
        added to the Royalty Pool on January 1, 2009. Actual number of
        equivalent Units will be determined in early 2010, effective
        January 1, 2009, once audited sales of the restaurants are known.

    (5) 20% holdback of equivalent Units from 19 net Pizza 73 restaurants
        added to the Royalty Pool on January 1, 2009. Actual number of
        equivalent Units will be determined in early 2010, effective
        January 1, 2009, once audited sales of the restaurants are known.
    

    %SEDAR: 00022262E




For further information:

For further information: Curtis Feltner, Chief Financial Officer, Pizza
Pizza Limited, Telephone: (416) 967-1010, cfeltner@pizzapizza.ca; Christine
D'Sylva, Investor Relations, Pizza Pizza Limited, Telephone: (416) 967-1010,
cdsylva@pizzapizza.ca; Web: www.pizzapizzaroyaltyincomefund.com and
www.pizzapizza.ca

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PIZZA PIZZA ROYALTY INCOME FUND

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