Pizza Pizza Royalty Corp. adds 39 Restaurants to, and removes 19 Restaurants from, the Royalty Pool

TORONTO, Feb. 5, 2026 /CNW/ - Pizza Pizza Royalty Corp. (the "Company") (TSX: PZA) and Pizza Pizza Limited ("PPL") today announced that effective January 1, 2026, the number of restaurants on which royalties are paid to the Company by PPL (the "Royalty Pool") has been adjusted to include 39 new restaurants opened during the prior year vend-in period, offset by 19 restaurants which were closed or recombined during the period.

By brand, 32 new Pizza Pizza restaurants and seven new Pizza 73 restaurants were added to the Royalty Pool; there were 14 Pizza Pizza restaurants and five Pizza 73 restaurants closed and removed from the Royalty Pool. Four of the five Pizza 73 restaurants that closed had their territories recombined with an adjacent restaurant.

For 2026, there will be 814 restaurants (2024 - 794) in the Royalty Pool made up of 712 Pizza Pizza locations and 102 Pizza 73 locations.

The Company, indirectly through the Pizza Pizza Royalty Limited Partnership (the "Partnership"), owns the trademarks and trade names used by PPL in its Pizza Pizza and Pizza 73 restaurants.  The Pizza Pizza trademarks and other intellectual property were licensed to PPL in 2005 for 99 years, for which PPL pays the Partnership a royalty equal to 6% of the System Sales of its Pizza Pizza restaurants in the Royalty Pool. In 2007, the Partnership acquired the trademarks and other intellectual property of Pizza 73 and licensed them to PPL for 99 years, for which PPL pays a royalty equal to 9% of the System Sales of the Pizza 73 restaurants in the Royalty Pool.

January 1, Royalty Pool Adjustment Date (the "Adjustment Date")
Annually, on January 1, the Royalty Pool is adjusted to include the Forecasted System Sales from new restaurants added to the Royalty Pool net of System Sales from restaurants which were closed and removed from the Royalty Pool. The Forecasted System Sales from new restaurants added to the Royalty Pool may also be reduced by (i) any decrease in system sales of a previously existing restaurant whose territory has been adjusted by a new restaurant, and (ii) any decrease in system sales for a closed restaurant whose territory was recombined with an adjacent restaurant.

In exchange for adding new restaurants to the Royalty Pool, PPL is compensated in equivalent Company shares using an agreed-upon formula which is designed to be accretive to current shareholders.  Generally, when restaurants are added to the Royalty Pool, the forecasted increase to PPL's System Sales (and thus, the Company's royalty income) result in an increase in PPL's ownership interest in the Company, reflected through an increase to the Class B and/or Class D Exchange Multipliers. In the case where system sales of the closed restaurants exceed the additional system sales of the additional restaurants added to the Royalty Pool, PPL will pay royalty income on the deficit (the "Make-Whole Carryover Amount") to the Partnership in that year. The Make-Whole Carryover Amount will be carried over and royalties will continue to be paid for subsequent years, until on an Adjustment Date, additional system sales from additional restaurants are sufficient to fully offset the Make-Whole Carryover Amount. As per the Pizza Pizza Royalty Limited Partnership agreement, whenever the Estimated Determined Amount is negative it shall be deemed to be zero. Additional details about this formula can be found in Table 1 below and in the Company's most recent Annual Information Form.

Amendment to Pizza 73 Licence and Royalty Agreement in 2025
The amended and restated licence and royalty agreement for Pizza 73 operations (the "Pizza 73 Licence and Royalty Agreement") and the Partnership's amended and restated limited partnership agreement (the "Partnership Agreement") have historically provided for adjustments to the calculation of the Partnership's and PPL's respective economic entitlements in relation to "adjusted restaurants", being those Pizza 73 restaurants whose performance may be temporarily adversely affected by opening a new Pizza 73 restaurant in its territory.  The Company and PPL have agreed to certain amendments to the Pizza 73 Licence and Royalty Agreement and the Partnership Agreement, which are based on the adjusted restaurant mechanism and will be applicable in relation to certain Pizza 73 restaurants that permanently close during 2025 and 2026.  If it is expected that the closed Pizza 73 restaurant's business can be effectively migrated to an adjacent Pizza 73 restaurant, the closed restaurant will be treated as a "transitioned restaurant" and the adjacent restaurant that continues to operate will be treated as a "combined restaurant".  In these circumstances, although the transitioned restaurant will not immediately be treated as a closed restaurant for the purposes of the agreements, PPL will make a "recombination payment" to the Partnership in order to "top up" the monthly royalty payments from the combined restaurant, so that the total amount received by the Partnership is not less than the average aggregate monthly royalty payment that had been made in respect of the transitioned restaurant and the combined restaurant in the 12 months preceding the month in which the transitioned restaurant closed.  These monthly recombination payments will continue until the end of the year after the year in which the transitioned restaurant closed (i.e., for a 2025 restaurant closure, the last recombination payment will be made in December 2026).  On the following Adjustment Date (i.e., for that 2025 restaurant closure, January 1, 2027), the transitioned restaurant will be treated as a closed restaurant for the purposes of the Pizza 73 Licence and Royalty Agreement and the Partnership Agreement calculations – the System Sales of the transitioned restaurant will be deducted from additional System Sales added to the Royalty Pool at that date, provided that PPL will receive a credit to the extent that the System Sales of the combined restaurant have increased for the year then ended compared to the 52 weeks preceding the month in which the transitioned restaurant closed.  This credit is intended to reflect the migration of business from the transitioned restaurant to the combined restaurant.  In addition, if the transitioned restaurant was an adjusted restaurant in a prior period, PPL will also receive a credit for any System Sales decreases that it had previously paid for through Royalty Pool adjustments.  The Company and PPL believe that these amendments will help support the effective operation of the Pizza 73 chain, in a manner consistent with the intended treatment of restaurant openings and closures under the agreements, and will provide fair compensation to the Partnership to the extent that System Sales of a transitioned restaurant are not, within a reasonable period of time, fully migrated to its associated combined restaurant.

After the January 1, 2026 Adjustment Date, PPL now owns equivalent Company shares (the "Equivalent Shares") representing 27.2% of the Company's fully diluted common shares ("Shares") as shown in Table 1. Prior to this adjustment, PPL's ownership was 26.2%. PPL's ownership is through its holdings of Class B and Class D units of the Partnership, which are exchangeable for a number of Shares based on the Class B and Class D Exchange Multipliers. The following provides the details supporting the change in PPL's ownership.

January 1, 2026 Royalty Pool Adjustment
On the January 1, 2026 Adjustment Date, $4,393,000 of System Sales from Pizza Pizza restaurants were added to the Royalty Pool ($8,404,000 from the 32 new Pizza Pizza restaurants less $4,011,000 from the 14 permanently closed Pizza Pizza restaurants). In exchange for adding sales to the Royalty Pool, the Class B Exchange Multiplier increased to 2.736117. PPL has received 162,536 additional Equivalent Shares (through the change to the Class B Exchange Multiplier). The additional Equivalent Shares represent 80% of the forecasted Equivalent Shares entitlement to be received (203,170 Equivalent Shares represent 100%), with the final Equivalent Shares entitlement to be determined when the actual sales of the new restaurants are known with certainty in early 2027.

Additionally, $2,132,000 of System Sales from Pizza 73 restaurants were added to the Royalty Pool ($2,332,000 from the seven new Pizza 73 restaurants less $200,000 from the one permanently closed Pizza 73 restaurants; the four recombined restaurants will be adjusted on the January 1, 2027 Adjustment Date in accordance with the amendments described above). The $2,132,000 net, estimated Pizza 73 sales added to the Royalty Pool are applied against the $720,000 Make-Whole Carryforward Amount, reducing the Estimated Determined Amount to $1,412,000 for January 1, 2026. In exchange for adding sales to the Royalty Pool, the Class D Exchange Multiplier increased to 23.23316. PPL has received 78,341 additional Equivalent Shares (through the change to the Class D Exchange Multiplier). The additional Equivalent Shares represent 80% of the forecasted Equivalent Shares entitlement to be received (97,926 Equivalent Shares represent 100%), with the final Equivalent Shares entitlement to be determined when the actual sales of the new restaurants are known with certainty in early 2027.

Table 1 – Summary of the Company's Outstanding and Fully-Diluted Shares, including an analysis before and after the 20% entitlement holdback:

		Issued & Outstanding Shares, Equivalent Shares and Holdback of Equivalent Shares
	Issued & Outstanding Shares, and Equivalent Shares
Shares outstanding & issuable after January 1, 2026 Annual Adjustment
Public float	24,618,392	24,618,392
Class B Equivalent Shares held by PPL	6,700,299	6,700,299	(1)
Class D equivalent Shares held by PPL	2,244,975	2,244,975	(2)
Additional PPL Class B equivalent Shares as of January 1, 2026   (80%)	162,536	162,536	(3)
Additional PPL Class B equivalent Shares - 20% Holdback as of January 1, 2026	-	40,634	(4)
Additional PPL Class D equivalent Shares as of January 1, 2026   (80%)	78,341	78,341	(3)
Additional PPL Class D equivalent Shares - 20% Holdback as of January 1, 2026	-	19,585	(4)
Number of fully-diluted Shares	33,804,543	33,864,762
Percentage of fully-diluted Shares available for exchange by PPL at January 1, 2026	27.2 %	27.3 %

(1)	In early January 2026, adjustments to royalty payments and PPL's Class B Exchange Multiplier were made based on the actual performance of the 44 new restaurants added to the Royalty Pool on January 1, 2025.  As a result of the adjustments, the new Class B Exchange Multiplier is 2.671316 and Class B Units can be exchanged for 6,700,299 shares, effective January 1, 2025.
(2)	In early January 2026, adjustments to royalty payments and PPL's Class D Exchange Multiplier were made based on the actual performance of the one Pizza 73 restaurant added to the Royalty Pool on January 1, 2025. As a result of the adjustments, the Class D Exchange Multiplier remains unchanged at 22.44976 and Class D Units can be exchanged for 2,244,975 shares effective January 1, 2025.
(3)	Additional Class B and Class D equivalent Shares available January 1, 2026 are shown in the table and determined by the following three steps:
	(a) Determined Amount = 92.5% x (1-Tax%) x [(Additional System Sales of Additional Restaurants – System Sales of Closed Restaurants – Make-Whole Carryover Amount) x Royalty rate]
	Share Yield
	(b) Exchange Multiplier increase = (80% of Determined Amount / Market Price of Shares determined on the Adjustment Date)
	Class B Partnership Units Outstanding
	(c) Issuable Equivalent Shares = Exchange Multiplier increase amount x Class B Partnership Units Outstanding
		New Class B Exchange Multiplier = 2.736117 Tax % = 22.5% Net Additional System Sales = $4,393,000 Royalty rate = 6% Share yield = 6.05% Class B Partnership Units Outstanding = 2,508,239
		New Class D Exchange Multiplier = 23.23316 Tax % = 22.2% Net Additional System Sales = $1,412,000 Royalty rate = 9% Share yield = 6.05% Class D Partnership Units Outstanding = 100,000
(4)	A preliminary calculation of the 20% holdback of equivalent Shares was done as of January 1, 2026 using the net 2026 Forecasted Sales. The final Class B and D equivalent Shares entitlement will be determined in early 2027, effective January 1, 2026 once actual sales of the restaurants are known.

Forward-Looking Statements

Certain statements in this press release, including those concerning forecasted sales performance of new restaurants and related adjustments to the Class B and Class D Exchange Multipliers, may constitute "forward-looking" statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

When used in this press release, such statements include such words as "may", "will", "expect", "believe", "plan", and other similar terminology in conjunction with a discussion of future operating or financial performance.  These statements reflect management's current expectations regarding future events and operating performance of the restaurants added to the Royalty Pool and speak only as of the date of this press release. Material factors or assumptions reflected in the presentation of Forecasted Additional System Sales include: demographic and competitive studies, historical sales performance of similar stores and economic forecasts for the retail industry.  These forward-looking statements involve a number of risks and uncertainties. The following are some factors that could affect the forecasted performance of these restaurants, causing actual results to differ materially from those expressed in or underlying such forward-looking statements: competition, the store owner's performance, changes in demographic trends, changing consumer preferences and discretionary spending patterns, changes in national and local business and economic conditions, and legislation and governmental regulation. These factors could also affect PPL's ability to develop new restaurants. The foregoing list of factors is not exhaustive and should be considered in conjunction with the other risks and uncertainties described in the Company's most recent Annual Information Form. The Company assumes no obligation to update these forward-looking statements, except as required by applicable securities laws.

www.pizzapizza.ca and www.pizza73.com or www.sedar.ca.

SOURCE Pizza Pizza Royalty Corp.

For further information: Christine D'Sylva, Chief Financial Officer, Pizza Pizza Limited, Telephone: [phone] extension 393, [email protected]