A&W Food Services of Canada Inc. Announces First Quarter Results for Fiscal 2026

VANCOUVER, BC, May 7, 2026 /CNW/ - A&W Food Services of Canada Inc. (TSX: AW) ("A&W", "Food Services", "we" or "our") today announced its financial results for the 12-week period ended March 22, 2026.

All references to "Q1 2026" are to Food Services' 12-week period ended March 22, 2026 and to "Q1 2025" are to Food Services' 12-week period ended March 23, 2025.

"Our first quarter results reflect a tale of two markets, underscoring both the resilience of our brand and the regional headwinds faced during the first couple of months of 2026. Nationally, our Same Store Sales Growth⁽ⁱ⁾ was close to flat at -0.4%, and was the outcome of positive Same Store Sales Growth in Western Canada offset by negative Same Store Sales Growth in Eastern Canada. Our restaurants in the West achieved growth in guest counts and outperformed the market, giving us confidence that our strategic marketing and value-oriented offerings continue to resonate with Canadians. Conversely, A&W restaurants located in the Eastern provinces experienced a decline in guest counts which was primarily driven by severe weather events that forced temporary closures and hindered guest access to restaurants and delivery services. The weather events, alongside the non-recurrence of last year's federal tax holiday, created marked differences in quarter over quarter sales growth in the Eastern provinces," said Susan Senecal, President and CEO. "In Ontario specifically, we are navigating changing demographics and a complex macro-environment characterized by economic and consumer uncertainty and are committed to finding ways to meet the evolving needs of our guests as we move forward" added Ms. Senecal. "Looking ahead, we are excited about the progress being made to expand the Pret A Manger brand in Canada and are pleased to share that we have secured leases for several new locations and expect to open three to four franchised Pret locations by the end of the year."

(i)	Same Store Sales Growth is a supplementary financial measure. Please see the "Non-IFRS Measures" section of this news release for further details.

FIRST QUARTER HIGHLIGHTS

For Q1 2026, compared to Q1 2025

• System Sales⁽ⁱ⁾ of $402.8 million increased by $5.9 million (1.5%)
• Revenue decreased by $1.7 million (3%) to $59.4 million
• Operating costs decreased by $0.6 million (2%) to $33.3 million
• General and administrative expenses increased by $0.8 million (7%) to $11.7 million
• Income before income taxes increased by $1.2 million (10%) to $13.7 million
• Adjusted EBITDA⁽ⁱ⁾ of $19.5 million was consistent with Q1 2025 of $19.4 million and Adjusted EBITDA Margin⁽ⁱ⁾ increased 110 bps to 32.9% from 31.8%
• Cash Dividend of $0.480 per share was declared on March 5, 2026 and paid March 31, 2026
• Opened 4 new A&W restaurants and 1 new corporately owned Pret location
• Secured leases for additional Pret locations and expect to open three to four franchised locations by the end of Fiscal 2026, with construction starting this summer.

(ii)	System Sales, Adjusted EBITDA and Adjusted EBITDA Margin are non-IFRS financial measures and non-IFRS ratios. Please see the "Non-IFRS Measures" section of this news release for further details.

SUMMARY OF RESULTS

(in thousands of Canadian $)	Q1 2026		Q1 2025
Financial Summary
Revenue from franchising	54,325		55,926
Revenue from corporate restaurants	5,065		5,207
Total revenue	59,390		61,133
Operating costs	(33,285)		(33,926)
General and administrative expenses	(11,697)		(10,894)
Impairment of leases receivable	(147)		-
Net finance expense	(3,191)		(3,869)
Gain on interest rate swap	2,585		-
Income before income taxes	13,655		12,444
Income tax expense	(3,750)		(3,187)
Net income	9,905		9,257
Net cash generated from operating activities	13,843		507
Other Metrics
System Sales^(i)	402,845		396,924
System Sales Growth^(i)	1.5 %		2.0 %
Same Store Sales Growth^(i)	-0.4 %		0.4 %
Number of A&W restaurants	1,097		1,079
Net annual restaurant unit growth^(ii)	1.7 %		1.8 %
Adjusted EBITDA^(i)	19,538		19,436
Adjusted EBITDA Margin^(i)	32.9 %		31.8 %
Adjusted EBITDA Margin^(i) – trailing 4 quarters	34.3 %		31.8 %

(i)	System Sales, System Sales Growth, Same Store Sales Growth, Adjusted EBITDA and Adjusted EBITDA Margin are non-IFRS financial measures, non-IFRS ratios and supplementary financial measures. Please see the "Non-IFRS Measures" section of this news release for further details.
(ii)	Net annual restaurant unit growth reflects the percent increase in A&W restaurants at the end of the reporting period as compared to the end of the prior year comparable reporting period on a trailing 4 quarter basis.

Q1 2026 Results Compared to Q1 2025
Total revenue of $59.4 million decreased $1.7 million, or 3%, from Q1 2025's total revenue of $61.1 million.  There were three fewer new A&W restaurants opened in Q1 2026 compared to Q1 2025, as the timing of restaurant openings is subject to various factors and fluctuates each quarter. New restaurant openings impact the revenue generated from the sale of equipment and the revenue associated with turnkey restaurants and as such the lower number of openings in Q1 2026 led to a decrease to those streams of revenue, when compared to Q1 2025. Offsetting the decrease in turnkey and equipment revenues were increases in revenue streams that are primarily driven by System Sales, including advertising fund contributions, service fees and revenue generated from the distribution of food and supplies. The increase in service fee revenue also reflects the continuing migration of A&W restaurants from a 2.5% to a 3.5% service fee rate, leading to a higher weighted average service fee rate, and contributed to the margin expansion in Q1 2026.

System Sales⁽ⁱ⁾ increased 1.5% due to an increase in the number of A&W restaurants. The growth in System Sales from the increase in number of restaurants was partially offset by Same Store Sales Growth⁽ⁱ⁾ of -0.4% which was the outcome of a regional disparity.

Same Store Sales Growth⁽ⁱ⁾ was -0.4% for Q1 2026 and was the outcome of positive Same Store Sales Growth in the Western provinces and territories which was offset by negative Same Store Sales Growth in the Eastern provinces. A&W restaurants located in the Eastern provinces were negatively affected by severe weather events in Q1 2026 that resulted in some restaurants having to temporarily close or reduce their hours of operation and the weather events also made it more difficult for guests to access A&W restaurants and delivery services. In Ontario, where approximately 30% of A&W restaurants are located, sales at restaurants in Q1 2026 were also negatively impacted by general consumer and economic uncertainty stemming from ongoing trade friction, and a notable shift in demographic trends, including rising unemployment and near-zero population growth. Q1 2025 also included 6 weeks of a GST/HST holiday that was non-recurring in Q1 2026.

The positive Same Store Sales Growth in the Western provinces and territories was attributable to an increase in both guest counts and average cheque. The growth in guest counts demonstrates the ongoing success of our marketing campaigns and reflects the attractiveness of our value offerings in the current consumer market. The negative Same Store Sales Growth in the Eastern provinces was attributable to a decrease in guest counts, partially offset by an increase in average cheque. The increase in average cheque size is partially attributed to industry-wide inflation affecting goods, services, and labour.

Revenue from corporate restaurants includes the revenue from the ten A&W restaurants and two Pret restaurants that are owned and operated corporately, all of which are located in Ontario. Revenue from corporate restaurants was $5.1 million for Q1 2026, down 3% from revenue from corporate restaurants of $5.2 million for Q1 2025. The decrease is mainly attributed to the adverse effects of weather, the GST/HST holiday in Q1 2025 and the prevailing economic environment in Ontario which is particularly acute in Ottawa, where all ten A&W corporate restaurants are located, due to government job loss uncertainty. The decrease was partially offset by the opening of the second corporately owned Pret location in Q1 2026.

Income before income taxes increased by $1.2 million in Q1 2026 largely as a result of the $2.6 million gain on the interest rate swap, a decrease in operating costs and a decrease in net finance expense. These decreases were partially offset by a decrease in revenue and an increase in general and administration expenses.

The decrease in operating costs is attributed to fewer restaurant openings and was partially offset by increased costs incurred by the advertising funds which is largely a difference in timing of spend as compared to Q1 2025. There was a $1.4 million quarter over quarter negative variance in net income before taxes that is due to the timing of expenses incurred by the advertising funds⁽ⁱ⁾. The decrease in net finance expense reflects the decrease in the average debt balance which also led to a reduction in the interest rate on the operating loan. The increase in general and administration expenses is largely related to increased employee compensation (which includes stock-based compensation), partially driven by inflation and the addition of resources to support the expansion of the Pret brand. Of the $0.8 million increase in general and administration expenses, $0.3 million is attributable to stock-based compensation, which was introduced at the end of Q1 2025, following the adoption of the omnibus long-term equity incentive plan in October 2024. 

(i)

Under IFRS, income or loss is recognized when advertising funds are in deficit position. The income or loss is calculated as the change in the deficit balance during the reporting period. This income or loss is excluded from Adjusted EBITDA, as it represents timing differences between advertising expenditure and contributions to the advertising funds.

Food Services reported net income per share of $0.40 ($0.40 per diluted share) in Q1 2026 versus net income per share of $0.37 ($0.37 per diluted share) in Q1 2025 due to the increase in income attributable to shareholders of Food Services, partially offset by a slight increase in the weighted average number of shares outstanding as a result of stock-based compensation.

Adjusted EBITDA⁽ⁱ⁾ of $19.5 million for Q1 2026 was consistent with Adjusted EBITDA for Q1 2025 of $19.4 million. The decrease in operating costs excluding depreciation and expenses associated with the advertising funds which are added back for the purposes of calculating Adjusted EBITDA, resulted in an increase to Adjusted EBITDA. The decrease in operating expenses was offset by decreases in revenue, excluding the revenue related to the advertising fund contributions that are excluded for the purposes of calculating Adjusted EBITDA and the increase in general and administrative expenses, excluding items such as depreciation and stock-based compensation which are added back for the purposes of calculating Adjusted EBITDA. Adjusted EBITDA Margin⁽ⁱ⁾ increased from 31.8% in Q1 2025 to 32.9% in Q1 2026.

^(i)	System Sales, Adjusted EBITDA, Adjusted EBITDA Margin and Same Store Sales Growth are non-IFRS financial measures, non-IFRS ratios and supplementary financial measures. Please see the "Non-IFRS Measures" section of this news release for further details.

2026 OUTLOOK
Food Services' outlook for Fiscal 2026⁽ⁱⁱ⁾, along with its underlying assumptions, remains consistent with the ranges announced on March 5, 2026:

• Adjusted EBITDA⁽ⁱ⁾ to be between $103 million and $105 million ($100 million in Fiscal 2025, Income before income taxes of $76.7 million in Fiscal 2025);
• Total A&W restaurants to be between 1,112 and 1,120 by the end of Fiscal 2026 (1,094 at the end of Fiscal 2025); 
• System Sales Growth⁽ⁱ⁾ of 2.5% - 5.0% (2.8% in Fiscal 2025); and
• Same Store Sales Growth⁽ⁱ⁾ of 0.5% - 3.0% (1.2% in Fiscal 2025).

(i)	System Sales Growth, Adjusted EBITDA and Same Store Sales Growth are non-IFRS financial measures, non-IFRS ratios and supplementary financial measures. Please see the "Non-IFRS Measures" section of this news release for further details.
(ii)	Fiscal 2026 is a 53-week period and ends January 3, 2027. System Sales Growth and Same Store Sales Growth for Fiscal 2026 are based on 52-weeks so that they are comparable to other years.

CONFERENCE CALL
A&W will hold a conference call to discuss its Q1 2026 results on Thursday, May 7, 2026 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).

The call will be webcast live and may be accessed at https://events.q4inc.com/attendee/941362176. Participants who wish to ask questions will need to register in advance of the conference call using the following link: https://events.q4inc.com/analyst/941362176?pwd=chK7lRMA

For those unable to attend the live call, a replay will be made available for one year at https://events.q4inc.com/attendee/941362176.

NON-IFRS MEASURES
This news release makes references to certain non-IFRS measures. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective.  Food Services believes that disclosing these non-IFRS measures provides readers of this news release with important information regarding Food Services' financial performance. By considering these measures in combination with IFRS measures, Food Services believes that readers are provided with additional and more useful information about Food Services than readers would have if they simply considered IFRS measures alone. We use non-IFRS financial measures including "System Sales", "EBITDA", and "Adjusted EBITDA"; the non-IFRS ratios of "System Sales Growth" and "Adjusted EBITDA Margin" and non-IFRS supplementary financial measures such as "Same Store Sales Growth".

These non-IFRS measures, ratios and supplementary financial measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures and industry metrics in the evaluation of issuers. A&W's management also uses non-IFRS measures and industry metrics to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. The non-IFRS measures reported by Food Services do not have a standardized meaning prescribed by IFRS and Food Services' method of calculating these measures may differ from those of other issuers or companies and may not be comparable to similar measures used by other issuers or companies.  Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS.

Certain information, including definitions, about non-IFRS financial measures, non-IFRS ratios, and supplementary financial measures is found in Food Services' Q1 2026 MD&A and is incorporated by reference. This information is found in the sections entitled "How We Assess the Performance of our Business", "Non-IFRS Measures" and "Selected Financial Information" of Food Services' Q1 2026 MD&A which is available on Food Services' SEDAR+ profile at www.sedarplus.ca. Reconciliations for each non-IFRS financial measure can be found below.

(in thousands of Canadian Dollars)
Reconciliation of System Sales to Revenue from Corporate Restaurants:	Q1 2026		Q1 2025
Revenue from corporate restaurants	5,065		5,207
Sales reported by franchised restaurants^(i)	397,780		391,717
System Sales^(ii)	402,845		396,924
(i)  Represents gross sales reported to Food Services by franchisees of such restaurants without any form of independent assurance.
(ii)  System Sales is a non-IFRS financial measure.
Reconciliation of EBITDA and Adjusted EBITDA to Income before income taxes:	Q1 2026		Q1 2025
Income before income taxes	13,655		12,444
Depreciation of plant, equipment, intangible assets and right-of-use assets	1,461		1,558
Net finance expense	3,191		3,869
EBITDA^(iii)	18,307		17,871
Adjustments to EBITDA:
Income before taxes attributable to non-controlling interest in A&W Beverages	(511)		(496)
Impairment of leases receivable	147		-
Net loss on disposal of plant and equipment	-		23
Unrealized loss (gain) on foreign exchange	14		(8)
Gain on interest rate swap	(2,585)		-
Stock-based compensation	399		70
Net income impacts created by advertising fund deficits^(iv)	3,322		1,971
Recovery of capitalized costs	-		(310)
Start up net losses on Pret	445		315
Adjusted EBITDA^(iii)	19,538		19,436
(iii) EBITDA and Adjusted EBITDA are non-IFRS financial measures.
(iv) Under IFRS, income or loss is recognized when advertising funds are in deficit position. The income or loss is calculated as the       change in the deficit balance during the reporting period. This income or loss is excluded from Adjusted EBITDA, as it represents        timing differences between advertising expenditure and contributions to the advertising funds.

FORWARD-LOOKING INFORMATION
Certain statements in this news release contain forward-looking information within the meaning of applicable securities laws in Canada. The words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "schedule", "should", "will", "would", "outlook" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.

The forward-looking information in this news release includes but is not limited to: Food Services' expectation that it will open three to four franchised Pret locations in Fiscal 2026 and that the construction of such restaurants will start this summer and Food Services' 2026 outlook.

The forward-looking information, including the 2026 outlook, is based on assumptions that management considered reasonable at the time it was prepared, which assumptions include, but are not limited to:

• no material impact to supply chain availability, cost of inputs or franchisee ability to operate because of international conflict and/or actual or threatened tariffs;
• no material impact to consumer discretionary spending due to changes in economic conditions including economic recession or changes in the rate of inflation or deflation, employment rates and household debt, political uncertainty, interest rates, currency exchange rates, derivative and commodity prices or actual or threatened tariffs;
• the general risks that affect the restaurant industry will not arise;
• there are no changes in availability of experienced management and hourly employees;
• there are no material changes in government regulations concerning drive–thru restrictions, franchise legislation or sales taxes;
• no incidences of food borne illness;
• no material changes in competition;
• no material changes in the quick service restaurant burger market including as a result of changes in consumer taste or preferences or changes in economic conditions or unemployment, or a disease outbreak;
• no material increases in food and labour costs;
• the continued availability of quality ingredients;
• continued additional franchise sales and maintenance of franchise operations;
• Food Services' continued ability to grow same store sales;
• Food Services is able to maintain and grow the current system of franchises;
• Food Services is able to locate new retail sites in desirable locations;
• Food Services is able to obtain qualified operators to become A&W and Pret franchisees;
• A&W franchisees are able to successfully operate and grow their businesses, maintain profitability and consistently pay rent and other payments required under their leases and franchise agreement;
• no material number of closures of A&W restaurants;
• no material impact on sales from closures of "anchor" stores in shopping centres;
• no material declines in traffic patterns at shopping centres and other retail and urban nodes;
• no material closures to shopping centres or other retail nodes in which A&W operates;
• no supply disruptions;
• no material impact on sales from new or increased sales taxes;
• no material impact on sales from new or increased fees related to third-party delivery services;
• continued availability of key personnel;
• continued ability to preserve intellectual property;
• no material litigation from guests at A&W or Pret restaurants;
• Food Services will receive sufficient revenue in the future to maintain the payment of quarterly dividends;
• Food Services can continue to comply with its obligations under its credit arrangements;
• the projections for the A&W business provided by Food Services are accurate; and
• Food Services will be successful in executing on its business strategies and such strategies will achieve their intended results.

Inherent in forward-looking information are risks and uncertainties beyond management's or Food Services' ability to predict or control that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. The forward-looking information in this news release is subject to risks, uncertainties and other factors including, among others, the risks identified in Food Services' Q1 2026 MD&A and Food Services' annual information form for the period ended December 28, 2025, ("AIF") under the heading "Risk Factors".  The Q1 2026 MD&A and AIF are both available on Food Services' SEDAR+ profile at www.sedarplus.ca. Additional risks and uncertainties not currently known to Food Services or that are currently not considered to be material also may impair Food Services' business.

All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as required by law, Food Services undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.

INVESTOR COMMUNICATIONS
For important updates and information regarding A&W, including the timing of future earnings calls, visit A&W's investor relations website at www.awinvestors.ca. A&W uses this website as a primary channel for disclosing key information to its investors.

ABOUT FOOD SERVICES
A&W is a publicly traded company and is the second largest quick-service hamburger restaurant chain in Canada. Operating coast-to-coast, A&W restaurants feature famous trade-marked menu items such as The Burger Family®, Chubby Chicken® and A&W Root Beer®. A&W's shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol "AW".

SOURCE A&W Food Services of Canada Inc.

For further information: Kelly Blankstein, Chief Financial Officer, 604-988-2141, Email: [email protected], www.awinvestors.ca