A&W FOOD SERVICES OF CANADA INC. ANNOUNCES SECOND QUARTER RESULTS FOR FISCAL 2025

VANCOUVER, BC, July 24, 2025 /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 and 24-week periods ended June 15, 2025.

All references to "Q2 2025" are to Food Services' 12-week period ended June 15, 2025, to "YTD 2025" are to Food Services' 24-week period ended June 15, 2025, to "Q2 2024" are to Food Services' 12-week period ended June 16, 2024 and to "YTD 2024" are to Food Services' 24-week period ended June 16, 2024. The fiscal 2025 year is 52 weeks and ends December 28, 2025 ("Fiscal 2025").

"We are pleased to report a stronger second quarter for A&W," announced Susan Senecal, Chief Executive Officer. "We successfully opened 4 new restaurants and achieved 3.4% System Sales Growth⁽ⁱ⁾ and Same Store Sales Growth⁽ⁱ⁾ of 1.6%. The growth in Same Store Sales was driven by increases in both average check and guest counts, reflecting the success of our marketing campaigns, including a two-week Canada-wide Teen Burger promotion." Ms. Senecal added, "We continue to be pleased with the performance of our value offerings and marketing initiatives, which have effectively appealed to the needs of our guests today. A significant highlight of the quarter was the launch of A&W Rewards, our new loyalty program, on April 22nd. A&W Rewards provides guests with access to offers, discounts and free rewards, only available on the mobile app, giving them even more reasons to visit A&W."

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

Q2 FINANCIAL HIGHLIGHTS

For Q2 2025, compared to Q2 2024

• System Sales⁽ⁱ⁾ of $452.3 million increased by $15.0 million (3.4%)
• Revenue increased by $4.5 million (7%) to $68.8 million
• Income before income taxes increased by $6.6 million (63%) to $17.2 million
• Adjusted EBITDA⁽ⁱ⁾ increased by $4.0 million (18%) to $25.5 million
• Operating costs increased by $3.5 million (11%) to $36.0 million, largely attributable to increased marketing-related costs incurred by the National Advertising Fund ("NAF")
• General and administrative expenses decreased by $0.5 million (4%) to $11.1 million
• Cash Dividend of $0.480 per share declared June 2, 2025 and paid June 30, 2025
• Opened 4 new A&W restaurants

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

SUMMARY OF RESULTS

(unaudited, in thousands of Canadian $)	Q2 2025	Q2 2024	YTD 2025	YTD 2024
Financial Summary
Revenue from franchising	62,988	58,620	118,914	112,046
Revenue from corporate restaurants	5,789	5,701	10,996	11,056
Total revenue	68,777	64,321	129,910	123,102
Operating costs	(36,041)	(32,571)	(69,967)	(62,118)
General and administrative expenses	(11,116)	(11,633)	(22,010)	(22,816)
Royalty expense	-	(12,965)	-	(24,518)
Net finance expense	(3,665)	(349)	(7,534)	(834)
Loss on interest rate swap	(757)	-	(757)	-
Amortization of deferred gain	-	881	-	1,761
Share of income from associates	-	2,869	-	5,444
Income before income taxes	17,198	10,553	29,642	20,021
Income tax expense	(4,672)	(1,758)	(7,859)	(3,716)
Net income	12,526	8,795	21,783	16,305
Net cash generated from operating activities	4,794	6,288	5,301	18,099
Other Metrics
System Sales^(i)	452,291	437,309	849,215	826,578
System Sales Growth^(i)	3.4 %	1.6 %	2.7 %	1.8 %
Same Store Sales Growth^(i)	1.6 %	0.3 %	1.1 %	0.5 %
Net annual restaurant unit growth^(ii)	1.9 %	1.3 %	1.9 %	1.3 %
Adjusted EBITDA^(i)	25,485	21,513	44,921	40,865

(i)	System Sales, System Sales Growth, Same Store Sales Growth, and Adjusted EBITDA 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 ending of the reporting period as compared to the end of the prior year comparable reporting period on a trailing 4 quarter basis.

On October 17, 2024, A&W completed a transaction (the "Transaction") in which Food Services indirectly acquired the trademarks used in the A&W business in Canada through the acquisition of all of the units of A&W Revenue Royalties Income Fund (the "Fund") which it did not already own. Due to the Transaction, the financial results for Q2 2025 are not directly comparable to the financial results for Q2 2024.

For further information regarding the Transaction, please refer to Food Services Q2 2025 Management Discussion and Analysis ("MD&A"), Food Services Annual MD&A for the 52-week period ended December 29, 2024 and the Fund's management information circular dated August 29, 2024 available on the Fund's SEDAR+ profile at www.sedarplus.ca.

Q2 2025 Results Compared to Q2 2024

Total revenue increased by $4.5M which was driven by the opening of more turnkey A&W restaurants and the 3.4% increase in System Sales⁽ⁱ⁾. The System Sales Growth⁽ⁱ⁾ of 3.4% reflects an increase in the number of A&W restaurants and positive Same Store Sales Growth.  Revenue from service fees, contributions to the NAF and revenue generated from the distribution of food and supplies fluctuate with the movement in System Sales and as such, were up quarter over quarter. 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 in Q2 2025 versus Q2 2024.

Same Store Sales Growth⁽ⁱ⁾ for Q2 2025 was 1.6%, due to an increase in both average cheque size and guest counts. The increase in average cheque size is partly attributed to industry-wide inflation affecting goods, services, and labour. The increase in guest counts was largely driven by the success of our marketing campaigns, including a two-week nation-wide Teen Burger promotion that ran during Q2 2025.

Income before income taxes increased by $6.6 million largely as a result of the cessation of the royalty expense following the completion of the Transaction and secondarily by an increase in revenue and decrease in general and administrative expenses, partially offset by an increase in operating costs and net finance expense as well as the cessation of the income from associates and amortization of deferred gain following completion of the Transaction.

Food Services reported net income of $12.5 million in Q2 2025 compared to net income of $8.8 million in Q2 2024 due to the factors discussed above which were partially offset by a $2.9 million increase in income tax expense due to an increase in taxable income which is largely due to the cessation of the royalty expense. The amortization of deferred gain and income from associates recognized in Q2 2024 were not taxable and therefore diluted the effective tax rate in Q2 2024.

Food Services reported net income per diluted share of $0.50 in Q2 2025 versus net income per diluted share of $0.58 in Q2 2024 due to the increase in the weighted average number of shares outstanding from 9.5 million in Q2 2024 to 24.1 million in Q2 2025 as a result of the Transaction and the issuance of stock-based compensation, partially offset by the increase in income attributable to shareholders of Food Services.

In order to improve comparability of net income per share, the number of shares used to calculate the net income per share for Q2 2024, has been adjusted to reflect the equivalent number of common shares of Food Services that were outstanding after the reorganization that was undertaken as part of the Transaction.

Adjusted EBITDA⁽ⁱ⁾ increased by $4.0 million largely due to the increase in revenue and decrease in general and administration expenses, partially offset by increased operating costs (excluding depreciation and other items included in general and administration expenses and operating costs that are added back for the purposes of calculating Adjusted EBITDA). Adjusted EBITDA Margin⁽ⁱ⁾ increased from 33.4% in Q2 2024 to 37.1% in Q2 2025 due to the increase in Adjusted EBITDA, partially offset by the increase in revenue.

On June 2, 2025 Food Services declared a cash dividend of $0.480 per share and is committed to maintaining that level of dividends for the foreseeable future.

^(i)	System Sales, System Sales Growth, 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.

YTD 2025 Results Compared to YTD 2024

Total revenue increased by $6.8M which was driven by the opening of more turnkey A&W restaurants and the 2.7% increase in System Sales⁽ⁱ⁾. The System Sales Growth⁽ⁱ⁾ of 2.7% reflects an increase in the number of A&W restaurants and YTD 2025 Same Store Sales Growth⁽ⁱ⁾ of 1.1% that is attributable to an increase in the average cheque size, partially offset by a slight decline in same store guest counts. The slight decrease in guest counts in certain geographical regions that experienced severe weather conditions in Q1 2025 was partially offset by positive guest count growth in Q2 2025 that was largely driven by the success of our marketing campaigns.

Income before income taxes increased by $9.6 million largely as a result of: the cessation of the royalty expense following the completion of the Transaction, an increase in revenue and a decrease in general and administrative expenses. These increases were partially offset by an increase in operating costs and net finance expense as well as the cessation of the income from associates and amortization of deferred gain following completion of the Transaction.

Food Services reported net income of $21.8 million in YTD 2025 compared to net income of $16.3 million in YTD 2024 due to the factors discussed above and a $4.1 million increase in income tax expense due to an increase in taxable income which is largely due to the cessation of the royalty expense. The amortization of deferred gain and income from associates recognized in YTD 2024 were not taxable and therefore diluted the effective tax rate in YTD 2024.

Food Services reported net income per diluted share of $0.88 in YTD 2025 versus net income per diluted share of $1.08 in YTD 2024 due to the increase in the weighted average number of shares outstanding from 9.5 million in YTD 2024 to 24.0 million in YTD 2025 as a result of the Transaction and the issuance of stock-based compensation, partially offset by the increase in income attributable to shareholders of Food Services.

In order to improve comparability of net income per share, the number of shares used to calculate the net income per share for YTD 2024, has been adjusted to reflect the equivalent number of common shares of Food Services that were outstanding after the reorganization that was undertaken as part of the Transaction.

Adjusted EBITDA⁽ⁱ⁾ increased by $4.1 million largely due to the increase in revenue and decrease in general and administration expenses, partially offset by increased operating costs (excluding depreciation and other items included in general and administration expenses and operating costs that are added back for the purposes of calculating Adjusted EBITDA). Adjusted EBITDA Margin⁽ⁱ⁾ increased from 33.2% in YTD 2024 to 34.6% in YTD 2025 due to the increase in Adjusted EBITDA, partially offset by the increase in revenue.

Full quarterly results are available on Food Services' SEDAR+ profile at www.sedarplus.ca.

^(i)	System Sales, System Sales Growth, 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.

2025 OUTLOOK
Food Services' annual financial guidance for Fiscal 2025, along with its underlying assumptions, remains consistent with the ranges announced on May 2, 2025:

• Adjusted EBITDA⁽ⁱ⁾ to be between $96 million and $101 million ($93.5 million in Fiscal 2024, Income before income taxes of $50.0 million in Fiscal 2024);
• Total A&W restaurants to be between 1,085 and 1,100 by the end of Fiscal 2025 (1,073 by end of Fiscal 2024);
• Annual System Sales Growth⁽ⁱ⁾ of 1.5% - 4.5% (0.8% in Fiscal 2024); and
• Annual Same Store Sales Growth⁽ⁱ⁾ of 0.0% - 3.0% (-0.6% in Fiscal 2024).

^(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.

CONFERENCE CALL
A&W will hold a conference call to discuss its Q2 2025 results on Thursday, July 24, 2025 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time).

The call will be webcast live and may be accessed at https://events.q4inc.com/attendee/953430725. Participants who wish to ask questions or are unable to join via webcast may dial-in by calling toll-free 1-800-549-8228 and by quoting the conference ID "74497" when prompted by the operator. For those unable to participate in the live call, a replay will be made available for one year at https://events.q4inc.com/attendee/953430725.

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 Q2 2025 MD&A (and, in the case of Fiscal 2024 results, in Food Services Q4 2024 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 the Q2 2025 MD&A (and, in the case of Fiscal 2024 results, in Food Services Q4 2024 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.

Reconciliation of System Sales to Revenue from Corporate Restaurants:	Q2 2025		Q2 2024		YTD 2025		YTD 2024
Revenue from corporate restaurants	5,789		5,701		10,996		11,056
Sales reported by franchised restaurants	446,502		431,608		838,219		815,522
System Sales	452,291		437,309		849,215		826,578

Reconciliation of EBITDA and Adjusted EBITDA to Income before income taxes:	Q2 2025		Q2 2024		YTD 2025		YTD 2024
Income before income taxes	17,198		10,553		29,642		20,021
Depreciation of plant, equipment, intangible assets and right-of-use assets	1,624		1,411		3,182		2,751
Amortization of deferred gain	-		(881)		-		(1,761)
Net finance expense	3,665		349		7,534		834
EBITDA	22,487		11,432		40,358		21,845
Adjustments to EBITDA:
Income before taxes attributable to non-controlling interest in A&W Beverages	(516)		(462)		(1,012)		(785)
Royalty expense	-		12,965		0		24,518
Share of income from associates	-		(2,869)		0		(5,444)
Net loss on disposal of plant and equipment	-		-		23		-
Unrealized (gain) loss on foreign exchange	1		11		(7)		19
Unrealized loss in interest rate swap	757		-		757		-
Stock-based compensation	528		-		598		-
Net income impacts created on a deficit related to the NAF	2,373		-		4,344		-
Recovery of capitalized costs	(448)		-		(758)		(111)
Start up net losses on Pret	303		436		618		823
Adjusted EBITDA	25,485		21,513		44,921		40,865

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: the expectations that Food Services will continue to pay dividends at the current level; A&W Rewards' ability to drive guest counts; and Food Services' 2025 outlook.

The forward-looking information, including the 2025 outlook, is based on assumptions that management considered reasonable at the time it was prepared, which assumptions include, but are not limited to:

• there are no changes in availability of experienced management and hourly employees;
• there are no material changes in government regulations concerning menu labelling and disclosure and drive-thru restrictions;
• no incidences of food borne illness;
• no material changes in competition;
• no material impact to supply chain availability, cost of inputs or franchisee ability to operate because of the 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;
• no material increases in food and labour costs;
• the continued availability of quality raw materials;
• continued additional franchise sales and maintenance of franchise operations;
• A&W is able to maintain and grow the current system of franchises;
• Suncor being able to execute their development plan to open new A&W restaurants in their Petro-Canada retail locations;
• A&W is able to locate new retail sites in desirable locations;
• A&W is able to obtain qualified operators to become A&W or Pret franchisees;
• existing franchisees are able to successfully operate and grow their businesses and maintain profitability;
• no material impact from new or increased sales taxes upon gross sales;
• continued ability to preserve intellectual property;
• no material litigation from suppliers, franchisees, key partners or guests at A&W or Pret restaurants;
• Food Services can continue to comply with its obligations under its credit arrangements;
• the projections for the A&W business provided by management are accurate; and
• A&W 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' Q2 2025 MD&A and Food Services' annual information form for the period ended December 29, 2024, ("AIF") under the heading "Risk Factors".  The Q2 2025 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