Consolidated Financial Statements of
BOSTON PIZZA INTERNATIONAL INC.
Years ended December 31, 2023 and 2022
KPMG LLP
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
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KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global
organization of independent member firms affiliated with KPMG International Limited, a
private English company limited by guarantee. KPMG Canada provides services to KPMG
LLP. Document classification: Confidential.
INDEPENDENT AUDITOR’S REPORT
To the Shareholder of Boston Pizza International Inc.
Opinion
We have audited the consolidated financial statements of Boston Pizza International Inc. (“BPI”), which
comprise:
the consolidated statements of financial position as at December 31, 2023 and December 31, 2022
the consolidated statements of comprehensive income for the years then ended
the consolidated statements of changes in shareholder deficiency for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of material accounting policy
information
(hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated
financial position of BPI as at December 31, 2023 and December 31, 2022, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial
Statements” section of our auditor’s report.
We are independent of BPI in accordance with the ethical requirements that are relevant to our audit of the
financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Page 2
Other Information
Management is responsible for the other information. Other information comprises:
the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions.
the information, other than the financial statements and the auditor’s report thereon, included in a document
likely to be entitled “2023 Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit and remain alert for indications that the other
information appears to be materially misstated.
We obtained information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this
other information, we conclude that there is a material misstatement of this other information, we are required to
report that fact in the auditor’s report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s report thereon, included in a document
likely to be entitled “2023 Annual Report” is expected to be made available to us after the date of this auditor’s
report. If, based on the work we will perform on this other information, we conclude that there is a material
misstatement of this other information, we are required to report that fact to those charged with governance.
Responsibilities of Management and
Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such
internal control as management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing BPI’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate BPI or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing BPI’s financial reporting process.
Page 3
Auditor’s Responsibilities for the Audit of the
Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit.
We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
BPI’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on BPI’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause BPI to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Page 4
Communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Chartered Professional Accountants
The engagement partner on the audit resulting in this auditor’s report is Adam Schell.
Vancouver, Canada
February 13, 2024
1
BOSTON PIZZA INTERNATIONAL INC.
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)
December 31, December 31,
2023 2022
Assets
Current assets
Cash and cash equivalents $ 12,032 $ 12,679
Accounts and other receivables (note 4) 10,081 9,329
Prepaid expenses and other current assets 2,423 839
Income tax receivable (note 13) 188 284
Advertising fund restricted assets 16,472 14,459
Interest receivable from Boston Pizza Royalties Limited Partnership 323 303
41,519 37,893
Long-term receivables (note 4) 60 -
Investment in Boston Pizza Royalties Limited Partnership (note 5) 37,265 36,657
Property and equipment (note 6) 5,253 9,011
Intangible assets (note 7) 4,132 4,732
Deferred income taxes (note 13) 63,017 63,716
Total assets $ 151,246 $ 152,009
Liabilities and Shareholder Deficiency
Current liabilities
Accounts payable and accrued liabilities $ 10,319 $ 9,583
Royalty and distributions payable to the Fund (note 16) 4,412 4,372
Deferred revenue 1,459 1,530
Debt (note 8) 1,543 2,877
Lease obligation (note 9) 298 474
Advertising fund restricted liabilities 16,346 13,577
34,377 32,413
Deferred revenue 1,866 2,737
Debt (note 8) 9,915 16,458
Lease obligation (note 9) 2,689 5,598
Advertising fund restricted liabilities 3,938 4,546
Other long-term liabilities 1,799 1,229
Boston Pizza Canada Limited Partnership units liability (note 10) 116,951 115,587
Deferred gain (note 11) 219,193 222,020
Total liabilities 390,728 400,588
Shareholder deficiency
Share capital 38,248 38,248
Accumulated deficit (277,730) (286,827)
(239,482) (248,579)
Total liabilities and shareholder deficiency $ 151,246 $ 152,009
Subsequent events (note 20)
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of the Board:
_______________________
James Treliving, Director
2
BOSTON PIZZA INTERNATIONAL INC.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2023 and 2022
(Expressed in thousands of Canadian dollars, except per share data)
2023
2022
Revenue
Franchise, restaurant and other
$
97,159
$
91,993
Advertising fund revenue
27,568
24,113
124,727
116,106
Royalty expense (note 16)
37,026
34,200
Distribution expense (note 10 and 16)
12,167
11,273
Restaurant operating costs
8,601
8,540
Compensation expense (note 16)
21,022
18,423
Advertising fund expense
27,716
24,080
Other expenses (note 15)
6,456
4,512
Depreciation and amortization (note 6 and 7)
3,067
4,550
Management fee (note 16)
1,000
500
Amortization of deferred gain (note 11)
(2,827)
(2,827)
Operating expenses
114,228
103,251
Earnings before interest, fair value loss (gain) and taxes
10,499
12,855
Interest income from Boston Pizza Royalties Limited
Partnership (note 16)
(3,990)
(3,690)
Interest income on cash and cash equivalents
(554)
(257)
Interest on debt and financing costs
1,114
1,613
Interest on lease obligations (note 9)
100
256
Net interest income
(3,330)
(2,078)
Fair value (gain) loss on investment in Boston Pizza Royalties
Limited Partnership (note 5)
(608)
899
Fair value loss (gain) on Boston Pizza Canada Limited Partnership
units liability (note 10)
1,364
(2,019)
Total fair value loss (gain)
756
(1,120)
Earnings before income taxes
13,073
16,053
Current income tax expense (note 13)
3,277
1,878
Deferred income tax expense (note 13)
699
2,253
Total tax expense
3,976
4,131
Net and comprehensive income
$
9,097
$
11,922
Basic and diluted earnings per share
$
92.74
$
121.55
The accompanying notes are an integral part of these consolidated financial statements.
3
BOSTON PIZZA INTERNATIONAL INC.
Consolidated Statements of Changes in Shareholder Deficiency
For the years ended December 31, 2023 and 2022
(Expressed in thousands of Canadian dollars)
Share Accumulated Total
Capital Deficit Deficiency
Balance – December 31, 2022 $ 38,248 $ (286,827) $ (248,579)
Net and comprehensive income for the period - 9,097 9,097
Balance – December 31, 2023 $ 38,248 $ (277,730) $ (239,482)
Balance – December 31, 2021 $ 38,248 $ (298,749) $ (260,501)
Net and comprehensive income for the period - 11,922 11,922
Balance – December 31, 2022 $ 38,248 $ (286,827) $ (248,579)
4
BOSTON PIZZA INTERNATIONAL INC.
Consolidated Statements of Cash Flows
For the years ended December 31, 2023 and 2022
(Expressed in thousands of Canadian dollars)
2023
2022
Cash flows generated from (used in)
Operating activities
Net and comprehensive income $ 9,097 $ 11,922
Adjustments for:
Depreciation and amortization (notes 6 and 7) 3,067 4,550
Current income tax expense (note 13) 3,277 1,878
Deferred income tax expense (note 13) 699 2,253
Amortization of deferred gain (note 11) (2,827) (2,827)
Bad debt expense (note 15) 130 (1,110)
Fair value (gain) loss on investment in Boston Pizza Royalties Limited
Partnership (note 5) (608) 899
Fair value loss (gain) on Boston Pizza Canada Limited Partnership units
liability (note 10) 1,364 (2,019)
Loss on sale of assets (note 15) 1,141 -
Interest income from Boston Pizza Royalties Limited Partnership (note 16) (3,990) (3,690)
Interest expense on debt and financing costs 1,114 1,613
Interest expense on lease obligations 100 256
Change in non-cash working capital (note 17(a)) (2,552) (1,283)
Income tax paid (3,311) (2,522)
Income tax received 131 117
Net cash generated from operating activities 6,832 10,037
Financing activities
Repayment of debt (note 8) (7,933) (15,155)
Interest paid on debt, revolving facility and leases (1,128) (1,636)
Lease obligation payments, net of receipt of tenant inducement (note 9) (383) (1,112)
Payment of debt financing costs - (79)
Net cash used in financing activities (9,444) (17,982)
Investing activities
Interest received from investment in Boston Pizza Royalties Limited Partnership 3,970 3,652
Proceeds from sale of assets (note 15) 1,560 -
Purchase of property and equipment, net (note 17(b)) (2,553) (719)
Purchase of intangible assets, net (note 17(b)) (1,012) (1,136)
Net cash generated from investing activities 1,965 1,797
Decrease in cash and cash equivalents (647) (6,148)
Cash and cash equivalents – beginning of period 12,679 18,827
Cash and cash equivalents – end of period $ 12,032 $ 12,679
Supplemental cash flow information (note 17)
The accompanying notes are an integral part of these consolidated financial statements.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
5
1. General information
(a) Organization
Boston Pizza International Inc. was incorporated on May 26, 1982 under the laws of British Columbia
and continued under the Canada Business Corporations Act on August 26, 2002. The principal business
office is located at 13571 Commerce Parkway, Richmond, BC.
These consolidated financial statements include the accounts of Boston Pizza International Inc., its
wholly-owned subsidiaries Laval Corporate Training Centre Inc., Front & John Pizza Ltd., Stadium
District Pizza Ltd., Boston Pizza Canada Holdings Partnership (“BPCHP”) and Boston Pizza Canada
Holdings Inc. (“BPCHI”), and the accounts of Boston Pizza Canada Limited Partnership (“BP Canada
LP”), collectively the “Company” or “BPI”. James Treliving Holdings Ltd. (“JTHL”) is the sole
shareholder of the Company, owning 100% of BPI.
BPI pays Boston Pizza Royalties Income Fund (the “Fund”) a royalty of 4.0% of Franchise Sales (defined
below) of Boston Pizza restaurants in the Royalty Pool (the “Royalty”). The Fund, through its indirect
investment in BP Canada LP is entitled to receive a distribution (the “Distribution”) equal to 1.5% of
Franchise Sales of Boston Pizza restaurants in the Royalty Pool (the “Franchise Sales Participation”)
less the pro rata portion payable to BPI in respect of its retained interest in the Fund. BP Canada LP, a
British Columbia limited partnership controlled and operated by BPI, is the exclusive franchisor of the
Boston Pizza concept in Canada.
(b) Nature of operations
The Company’s principal business activity is the operation and franchising of Boston Pizza restaurants
in Canada. As at December 31, 2023, 372 Boston Pizza restaurants were in operation (December 31,
2022 – 377).
COVID-19 continued to impact the business of the Fund, BPI and BP Canada LP, and the operation of
Boston Pizza restaurants during 2020, 2021 and the first half of 2022. Since then, COVID-19 case
counts have improved, government restrictions related to COVID-19 have largely been eliminated, and
sales levels of Boston Pizza restaurants have returned to more normal levels when compared to times
prior to COVID-19.
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with IFRS Accounting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These
consolidated financial statements were approved by the Director for issue on February 13, 2024.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
6
2. Basis of preparation (continued)
(b) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Company’s
functional currency.
(c) Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires
management to make judgments, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in future periods
affected. Significant areas requiring the use of management estimates and judgment are as follows:
Estimates
• Investment in Boston Pizza Royalties Limited Partnership (“Royalties LP”)
The investment in Royalties LP is principally comprised of Class B general partner units (“Class B
Units”) and, prior to an internal reorganization of corporate structure in 2017 (the “Reorganization”),
Class C general partner units (“Class C Units”). The value of additional Boston Pizza restaurants
rolled into the Royalty Pool (defined below) is also recognized within the Company’s investment in
Royalties LP through the additional entitlement of Class B Units. Annually, on January 1 (each, an
“Adjustment Date”), the number of Boston Pizza restaurants in the Royalty Pool on which the
Company pays a royalty to the Fund are adjusted to include the sales subject to royalty fees
(“Franchise Sales”) from new Boston Pizza restaurants opened on or before December 31 of the
prior year, less Franchise Sales from any Boston Pizza restaurants that have permanently closed
during the year. In return for adding this net Franchise Sales to the Royalty Pool, BPI receives the
right to indirectly acquire additional units of the Fund (“Fund Units”) in respect of its Class B Units
(the “Class B Additional Entitlements”). BPI receives 80% of the estimated Class B Additional
Entitlements on the Adjustment Date with the balance (the “Class B Holdback”) received once the
performance of the new Boston Pizza restaurants and actual effective tax rate of the Fund are known
with certainty. As such, the calculation is dependent on a number of variables including the estimated
sales of the new Boston Pizza restaurants and a tax rate. The value of the Class B Additional
Entitlements as a result of adding new Boston Pizza restaurants to the Royalty Pool could differ from
actual results.
• Class B Unit Fair Value Adjustment
The Company has elected under IFRS to measure the Class B Units as a financial asset at fair value
through profit and loss. This requires that the Company use a valuation technique to determine the
value of the Investment in BP Royalties LP at each reporting date (refer to note 12).
This valuation technique may not represent the actual value of the financial asset should such units
be extinguished and changes in the distribution rate on the Class B Units and the yield of the Fund
Units could materially impact the Company’s financial position and net and comprehensive income.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
7
2. Basis of preparation (continued)
(c) Use of estimates and judgments (continued)
Estimates (continued)
• BP Canada LP Units Liability and Fair Value Adjustment
The Company has elected under IFRS to measure the Class 1 limited partnership units (“Class 1
LP Units”) and Class 2 limited partnership units (“Class 2 LP Units”) of BP Canada LP as financial
liabilities at fair value through profit and loss because the entitlements to distributions are considered
embedded derivatives to the Class 1 LP Units and Class 2 LP Units. This requires that the Company
use a valuation technique to determine the value of the BP Canada LP Units Liability at each
reporting date (refer to note 12).
This valuation technique may not represent the actual value of the financial liability and could
materially impact the Company’s financial position and net and comprehensive income.
• Accounts Receivable
The Company provides an allowance for uncollectable trade receivables based on a customer-by-
customer basis using estimates for past and current performance, aging, arrears status, the level of
allowance already in place, and management’s interpretation of economic conditions specific to the
Company’s customer base. If certain estimates prove to be inaccurate, BPI’s results of operations
and financial position may be impacted.
Judgment
• Consolidation
Applying the criteria outlined in IFRS 10, judgment is required in determining whether BPI controls
Royalties LP. Making this judgment involves taking into consideration the concepts of power over
Royalties LP, exposure and rights to variable returns, and the ability to use power to direct the
relevant activities of Royalties LP so as to generate economic returns. Using these criteria,
management has determined that BPI does not ultimately control Royalties LP.
Applying the criteria outlined in IFRS 10, judgment is required in determining whether BPI controls
BP Canada LP. Making this judgment involves taking into consideration the concepts of power over
BP Canada LP, exposure and rights to variable returns, and the ability to use power to direct the
relevant activities of BP Canada LP so as to generate economic returns. Using these criteria,
management has determined that BPI ultimately controls BP Canada LP through its ability to direct
relevant activities to generate economic returns from BP Canada LP and its governance as general
partner of BP Canada LP.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
8
3. Material accounting policies
The material accounting policies used in the preparation of these consolidated financial statements are
described below.
(a) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for
derivative financial instruments and financial instruments which are measured at fair value with
changes in value recorded through profit or loss in the statement of comprehensive income. The
Company has the following items measured at fair value:
• Investment in Boston Pizza Royalties Limited Partnership relating to the Class B Units (note 5)
• BP Canada LP units liability (note 10)
(b) Consolidation
These consolidated financial statements include the accounts of the following operating entities:
Boston Pizza International Inc. and subsidiaries:
Laval Corporate Training Centre Inc. 100%
Front & John Pizza Ltd. (note 15) 100%
Stadium District Pizza Ltd. (note 15) 100%
Boston Pizza Canada Holdings Partnership 100%
Boston Pizza Canada Holdings Inc. 100%
Boston Pizza Canada Limited Partnership 100%
The parent company of BPI is JTHL.
All intercompany transactions, balances and unrealized gains and losses from intercompany
transactions are eliminated on consolidation.
Subsidiaries are those entities (including special purpose entities) which the Company controls by
having the power to govern the financial and operating policies of such entities so as to obtain
economic benefits from their activities. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Company controls
another entity.
(c) Advertising Fund
The Company operates an Advertising Fund (the “Advertising Fund”) established to collect and
administer funds contributed for use in advertising and promotional programs designed to increase
sales and enhance the reputation of the Company and its franchisees. The Company collects 3% of
Franchise Sales from franchisees and Company-operated restaurants for contribution to the
Advertising Fund. These contributions are used for local, regional and national advertising and
research, menu development, promotional and loyalty programs, brand protection, administration of
the Gift Card Program, and other administration costs.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
9
3. Material accounting policies (continued)
(c) Advertising Fund (continued)
The Company reports contributions and expenditures on a gross basis on the Company’s statement
of comprehensive income. Advertising Fund contributions received may not equal advertising
expenditures for the period due to timing of promotions and this difference is recognized to earnings.
To the extent that cumulative advertising contributions temporarily exceed Advertising Fund
expenditures, the difference is recognized as an accrual owed by the Advertising Fund. The assets
and liabilities held by the Advertising Fund are considered restricted and are recognized as such on
the Company’s statement of financial position.
(d) Gift cards
The Company operates a gift card program (the “Gift Card Program”) which allows customers to
prepay for future purchases at participating Boston Pizza restaurants by loading a dollar value onto
their gift card through cash or credit card, when and as needed.
The purpose of the Gift Card Program is to expand the Boston Pizza brand through increased
exposure, as well as to increase Franchise Sales. The restricted cash related to the gift cards
recognized in Advertising Fund restricted assets represents the prepaid amounts not yet redeemed
by customers. These cash balances as well as the outstanding customer obligations for these gift
cards are recognized as Advertising Fund restricted assets and liabilities on the consolidated
statement of financial position.
When a customer uses a gift card to purchase product at a corporately owned and operated Boston
Pizza restaurant, the restaurant recognizes the revenue from the sale of the product.
When a customer uses a gift card at a franchised restaurant, the Company recognizes revenues, in
the form of franchise fees, arising from the sale of the product.
The Advertising Fund recognizes income on unredeemed gift cards (“Gift Card Breakage”) when it
can determine that the likelihood of the gift card being redeemed is remote and that there is no legal
obligation to remit the unredeemed gift card value to relevant jurisdictions. The Company determines
Gift Card Breakage based on historical redemption patterns. Based on historical information, the
likelihood of a gift card remaining unredeemed can be determined 24 months after the gift card is
issued. At that time, breakage income is recognized by the Advertising Fund.
(e) Property and equipment
Property and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent
costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the
Company and the costs can be measured reliably. The carrying amount of a replaced asset is
derecognized when replaced. Repairs and maintenance costs are charged to the statement of
comprehensive income during the period in which they are incurred.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
10
3. Material accounting policies (continued)
(e) Property and equipment (continued)
The Company allocates the amount initially recognized in respect of property and equipment to its
significant parts and depreciates each such part. Residual values, methods of depreciation and
useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of property and equipment are determined by comparing the
proceeds with the carrying amount of the asset and are included as other expense in the statement
of comprehensive income.
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other
amount substituted for cost, less its residual value.
The Company provides for depreciation of property and equipment over their estimated useful lives
as follows:
Assets Basis Rate
Office furniture and equipment Declining balance 20 – 30%
Right-of-use assets Straight-line term of lease
Leasehold improvements Straight-line shorter of term of
the lease or useful life
(f) Intangible assets
Intangible assets include computer software costs which are amortized on a declining balance basis
at a rate of 30% per year and reacquired franchise rights which are amortized over the term of the
franchise agreement. Amortization of intangible assets is charged to depreciation and amortization
on the statement of comprehensive income.
(g) Income taxes
Income tax comprises current and deferred taxes. Current tax is the expected tax payable on taxable
income for the period, using tax rates enacted, or substantively enacted, at the end of the reporting
period, and any adjustments in respect of previous periods.
In general, deferred tax is recognized in respect of temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred income tax is determined on a non-discounted basis using tax rates and laws that have
been enacted or substantively enacted at the balance sheet date and are expected to apply when
the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is
probable that the assets can be recovered.
Deferred income tax is primarily provided on temporary differences arising on the investment in
Royalties LP, the deferred gain, subsequent additional entitlements, unit sales and non-capital
losses.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
11
3. Material accounting policies (continued)
(g) Income taxes (continued)
Deferred income tax assets and liabilities are netted and presented as non-current.
In determining the amount of current and deferred tax the Company takes into account the impact
of uncertain tax positions and whether additional taxes and interest may be due. The Company
believes that its accruals for tax liabilities are adequate based on many factors, including
interpretations of tax law and prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgments about future events. New information may
become available that causes the Company to change its judgment regarding the adequacy of
existing tax liabilities; such changes to tax liabilities would impact tax expenses in the period that
such a determination is made.
(h) Revenue recognition and deferred revenue
(i) Franchise revenues
Monthly franchise fee
Monthly franchise fees are recognized as they are earned.
Franchise fee deposits
Franchise fee deposits are deferred and recognized net of expenses incurred relating to the sale
of the franchise. When the franchise commences operations, the franchise deposits are
recognized as franchise revenue and the related costs are included as an expense.
Franchisee renewal fees
Franchisee renewal fees related to the franchise agreement are deferred and recognized as
revenue over the period of the renewal term.
(ii) Advertising fund revenue
Monthly advertising fees
Monthly advertising fund contributions are recognized as they are earned.
Gift card breakage income
Gift card breakage income is recognized when the likelihood of the gift card being redeemed is
remote.
(iii) Corporately owned restaurant revenues
Corporately owned restaurant revenues are recognized at the time of sale.
(iv) Supplier contributions
The Company receives supplier contributions from franchisee suppliers to be used for various
franchise activities. Supplier contributions are recognized as other revenue as they are earned.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
12
3. Material accounting policies (continued)
(i) Deferred gain
The gain realized on the sale of the BP Rights is being deferred and amortized over the 99 year
term of the license and royalty agreement. Amortization of the gain on BP Rights is recorded as
amortization of deferred gain on the statement of comprehensive income. Annually, on January 1,
the number of Boston Pizza restaurants in the Royalty Pool on which the Company pays a Royalty
to the Fund are adjusted to include Franchise Sales from new Boston Pizza restaurants opened on
or before December 31 of the prior year, less Franchise Sales from any Boston Pizza restaurants
that have permanently closed during the year. In return for adding this net Franchise Sales to the
Royalty Pool, Boston Pizza receives Class B Additional Entitlements and Class 2 Additional
Entitlements (defined in note 10). The Class B Additional Entitlements are included in the deferred
gain.
(j) Financial instruments
(i) Recognition, classification and measurement
Financial assets are initially recognized at fair value and subsequently classified as measured at
amortized cost, fair value through other comprehensive income, or fair value through profit and loss
(“FVTPL”).
A financial asset is measured at amortized cost if it meets both of the following conditions and is not
designated as FVTPL:
• the asset is held within a business model whose objective is to hold the asset to collect
contractual cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
Financial liabilities are initially recognized at fair value and subsequently classified as measured at
amortized cost or FVTPL. On initial recognition, the Company may irrevocably designate a financial
liability at FVTPL when doing so results in more relevant information, because either:
• the designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring assets or liabilities or recognizing the gains and
losses on them on different bases; or
• a group of financial liabilities or financial assets and financial liabilities is managed with its
performance evaluated on a fair value basis, in accordance with a documented risk
management or investment strategy, and information about the group is provided internally on
that basis to key management personnel.
For financial assets classified as measured at FVTPL or designated at FVTPL, changes in fair value
are recognized in profit and loss in the consolidated statement of comprehensive income. For
financial assets and other financial liabilities measured at amortized cost, interest income and
interest expense is calculated using the effective interest method and is recognized in profit and loss
in the consolidated statement of comprehensive income.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
13
3. Material accounting policies (continued)
(j) Financial instruments (continued)
(ii) Business model assessment
The Company makes an assessment of the objective of a business model in which an asset is held
at a portfolio level because this best reflects the way the asset is managed and information is
provided to management. The information considered includes:
• how the performance of the portfolio is evaluated and reported to management;
• how managers of the business are compensated;
• whether the assets are held for trading purposes;
• the risks that affect the performance of the financial assets held within the business model and
how those risks are managed; and
• the frequency, volume and timing of sales in prior periods, the reasons for such sales and its
expectations about future sale activity.
(iii) Contractual cash flow characteristics assessment
In assessing whether the contractual cash flows are solely payments of principal and interest,
‘principal’ is defined as the fair value of the financial asset on initial recognition and ‘interest’ is
defined as consideration for the time value of money and for the credit risk associated with the
principal amount outstanding during a particular period of time and for other basic lending risks and
costs, as well as a profit margin.
The Company considers the contractual terms of the financial asset and whether the asset contains
contractual terms that could change the timing or amount of cash flows such that it would not meet
the condition of principal and interest. Contractual terms considered in this assessment include
contingent events that would change the amount and timing of cash flows, leverage features,
prepayment and extension terms, terms that limit the claim to cash flows from specified assets, and
features that modify the consideration from time value of money.
The carrying value of current financial assets and liabilities approximate their fair value due to their
short-term nature. The carrying value of long-term receivables approximates fair value as there are
no significant changes in credit risk associated with the receivables since recognition. The long-
term debt approximates fair value based on prevailing market interest rates in effect.
(k) Impairment of financial assets
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortized cost
are credit impaired. A financial asset is ‘credit impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer;
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
14
3. Material accounting policies (continued)
(k) Impairment of financial assets (continued)
• a breach of contract such as a default or being more than 90 days past due;
• the restructuring of a loan or advance by the Company on terms that the Company would not
consider otherwise;
• it is probable that the borrower will enter bankruptcy or other financial reorganization; or
• the disappearance of an active market for a security because of financial difficulties.
Loss allowances for financial assets measured at amortized cost are deducted from the gross
carrying amounts of the assets.
Financial instruments and contract assets
The Company recognizes loss allowances for expected credit losses (“ECL”) on financial assets
measured at amortized cost.
The Company measures loss allowances at an amount equal to lifetime ECLs, except for the
following, which are measured at 12-month ECLs:
• debt securities that are determined to have low credit risk at the reporting date; and
• other debt securities and bank balances for which the credit risk has not increased significantly
since initial recognition.
Loss allowances for trade receivables are measured at an amount equal to lifetime ECLs. Lifetime
ECLs are the ECLs that result from all possible default events over the expected life of a financial
instrument. ECLs are probability-weighted estimate of credit losses, and credit losses are measured
as the present value of cash shortfalls from a financial asset.
The Company determines whether the credit risk of a financial asset has increased significantly
since initial recognition and when estimating lifetime ECLs, by considering reasonably available
quantitative and qualitative information based on the Company’s credit risk experience, forward
looking information, and other reasonable estimates.
(l) Impairment of non-financial assets
Property and equipment and intangible assets are tested for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. Long-lived assets that are
not amortized are subject to an annual impairment test. For the purpose of measuring recoverable
amounts, assets are grouped at the lowest levels for which there are separately identifiable cash
flows. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use (being the present value of the expected future cash flows of the relevant asset). An impairment
loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The Company evaluates impairment losses for potential reversals when events or
circumstances warrant such consideration.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
15
3. Material accounting policies (continued)
(m) Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its common shares.
Basic EPS is calculated by dividing the profit or loss attributable to the common shareholder of the
Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to the common shareholder and
the weighted average number of common shares outstanding for the effects of all dilutive potential
common shares. There are no dilutive factors affecting EPS for the Company.
(n) Accounting standards and amendments issued and adopted
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
On February 12, 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1
and IFRS Practice Statement 2). The amendments require the disclosure of material accounting
policies rather than significant accounting policies. The amendments are effective for annual periods
beginning on or after January 1, 2023. The Company has done an assessment of these
amendments and there is no material impact to the Company’s financial statements or disclosure.
The Company adopted these amendments in its consolidated financial statements for the annual
period beginning on January 1, 2023.
(o) Accounting standards and amendments issued but not yet adopted
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued Presentation of Financial Statements (Amendments to IAS
1) and on October 31, 2022, the IASB issued Non-current Liabilities with Covenants (Amendments
to IAS 1). The amendments are effective for annual periods beginning on or after January 1, 2024.
These amendments clarify the classification of liabilities as current or non-current and improve the
information a company provides about long-term debt with covenants. For the purposes of non-
current classification, the amendments removed the requirement for a right to defer settlement or
roll over of a liability for at least twelve months to be unconditional. Instead, such a right must exist
at the end of the reporting period and have substance. In addition, covenants with which a company
must comply after the reporting date do not affect the liability’s classification at the reporting date.
The Company has done an initial assessment of these amendments and does not anticipate an
impact on the Company’s business, financial statements or disclosure. The Company intends to
adopt these amendments in its consolidated financial statements for the annual period beginning on
January 1, 2024.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
16
4. Accounts and other receivables
December 31, December 31,
2023 2022
Trade receivables and other (net of allowance) $ 8,863 $ 8,425
Tenant inducements receivable, net of lease obligations
(i)
686 885
Receivables due from associated companies 532 19
Total current receivables $ 10,081 $ 9,329
Long-term trade receivables (net of allowance) 60 -
Total long-term receivables $ 60 $ -
Trade receivables from franchisees are classified as long-term when payment is expected to take longer
than twelve months. The Company makes every effort to collect all long-term receivable balances,
including establishing payment plans with existing franchisees.
(i) As at December 31, 2023, the balance represents the net current portion of lease obligations for a
lease the Company entered into for a new corporate office during the year ended December 31,
2022. The balance is in a net asset position because the current lease obligation includes $0.8
million (December 31, 2022 - $1.1 million for two corporate offices) of tenant inducement that is
expected to be received in the next 12 months. The balance also includes $0.1 million (December
31, 2022 - $0.2 million) in current lease obligation (netted against the asset balance) relating to these
leases due within the next 12 months. Refer to note 9 Lease Obligations for further details.
The aging of accounts and other receivables (net of allowance) at the reporting dates are as follows:
December 31, December 31,
2023 2022
Current $ 9,360 $ 8,413
Past due 1-30 days 294 294
Past due 31-60 days 257 368
Past due 61-90 days 162 208
Past due over 90 days 68 46
$ 10,141 $ 9,329
The allowance for doubtful accounts was $2.5 million as at December 31, 2023 (December 31, 2022 –
$2.5 million) with $1.7 million (December 31, 2022 – $1.6 million) applied against short-term trade
receivables and other and $0.8 million against long-term trade receivables (December 31, 2022 – $0.9
million). The Company’s collections policy is to first apply cash receipts against the oldest outstanding
invoices.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
17
5. Investment in Boston Pizza Royalties Limited Partnership
Royalties LP was established to hold the trademarks and trade names used in connection with the
operation of Boston Pizza restaurants in Canada (collectively, the “BP Rights”). Royalties LP and the
Company also entered into a license and royalty agreement (the “License and Royalty Agreement”)
to allow the Company the use of the BP Rights for a term of 99 years commencing in 2002, for which
the Company pays Royalties LP a Royalty expense, being 4% of the Franchise Sales of certain
restaurants located in Canada (the “Royalty Pool”).
The investment in Royalties LP is principally comprised of Class B Units. The value of additional Boston
Pizza restaurants rolled into the Royalty Pool (as defined in the License and Royalty Agreement) is also
recognized within the Company’s investment in Royalties LP through the additional entitlement of Class B
Units. Annually, on the Adjustment Date, an adjustment is made to add to the Royalty Pool new Boston
Pizza restaurants that opened and to remove any Boston Pizza restaurants that permanently closed since
the previous Adjustment Date. In return for adding net additional Royalty revenue to the Fund, BPI
receives Class B additional entitlements to indirectly acquire additional Fund Units. BPI receives the
Class B Holdback once the performance of the new Boston Pizza restaurants and the actual effective tax
rate paid by the Fund are known for certain.
It is possible that on an Adjustment Date, the net additional Royalty and Distribution is negative as a
result of the estimated Royalty and Distribution expected to be generated by new Boston Pizza
restaurants being less than the Royalty and Distribution that is lost from permanently closed Boston Pizza
restaurants (the amount by which it is less is the “Deficiency”). In such case, the Company would not
receive any additional Class B Additional Entitlements, however, nor would the Company lose any of the
Class B Additional Entitlements previously received. Rather, on future Adjustment Dates, the Company
would be required to make-up the Deficiency by first adding Royalty and Distribution in an amount equal
to the Deficiency before receiving any further Class B Additional Entitlements.
The investment in Royalties LP is considered an equity interest. The Fund controls the relevant activities
of Royalties LP and thus consolidates its financial results. The Class B Units are accounted for as a
financial asset which is measured each reporting date at fair value. The value of the investment has
exposure to variability as it relates to the Company’s ownership of the Class B Units measured at fair
value using the closing price of a Fund Unit. The determination of the fair value of the Investment in
Royalties LP is described in note 12. The statement of comprehensive income includes interest revenue
as earned, and the impact of the fair value adjustments on the Class B Units.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
18
5. Investment in Boston Pizza Royalties Limited Partnership (continued)
The investment in Royalties LP is comprised of:
Issued and
outstanding
Additional
Entitlements
Issued and
outstanding
Additional
Entitlements
including
Holdback
Class B
Unit
Entitlement
Balance as at December 31, 2021 2,430,823 2,430,823 $ 37,556
Class B Additional Entitlements granted January 1, 2022
(1)
- - -
Fair value loss - - (899)
Balance as at December 31, 2022 2,430,823 2,430,823 $ 36,657
Class B Additional Entitlements granted January 1, 2023
(2)
- - -
Fair value gain - - 608
Balance as at December 31, 2023 2,430,823 2,430,823 $ 37,265
(1)
On January 1, 2022, four Boston Pizza restaurants that closed during the period from January 1, 2021 to December 31, 2021
were removed from the Royalty Pool. The Franchise Sales from restaurants removed from the Royalty Pool on January 1,
2022 was negative $6.2 million. This resulted in a Deficiency of $0.3 million related to lost Royalty and Distribution income.
As a result of the Deficiency, the Company did not receive any Class B Additional Entitlements on January 1, 2022.
(2)
On January 1, 2023, six Boston Pizza restaurants that closed during the period from January 1, 2022 to December 31, 2022
were removed from the Royalty Pool. The Franchise Sales from restaurants removed from the Royalty Pool on January 1,
2023 was negative $6.8 million. This resulted in a Deficiency of $0.4 million related to lost Royalty and Distribution income.
As a result of the Deficiency, the Company did not receive any Class B Additional Entitlements on January 1, 2023.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
19
6. Property and equipment
Office
furniture and Right-of-use Leasehold
Cost equipment assets improvements Total
At January 1, 2022 $ 10,873 $ 10,815 $ 12,212 $ 33,900
Additions 246 1,626 537 2,409
Adjustments - 392 - 392
At December 31, 2022 11,119 12,833 12,749 36,701
Additions 469 261 2,100 2,830
Dispositions
(1)
(621) (4,599) (6,613) (11,833)
Adjustments - (32) - (32)
De-recognition
(2)
(1,020) (2,910) (5,382) (9,312)
At December 31, 2023 $ 9,947 $ 5,553 $ 2,854 $ 18,354
Office
Accumulated furniture and Right-of-use Leasehold
Depreciation equipment assets improvements Total
At January 1, 2022 $ 9,559 $ 7,318 $ 8,239 $ 25,116
Depreciation 513 963 1,098 2,574
At December 31, 2022 10,072 8,281 9,337 27,690
Depreciation 354 142 747 1,243
Dispositions
(1)
(461) (1,867) (4,192) (6,520)
De-recognition
(2)
(1,020) (2,910) (5,382) (9,312)
At December 31, 2023 $ 8,945 $ 3,646 $ 510 $ 13,101
Office
furniture and Right-of-use Leasehold
Net book value equipment assets improvements Total
At December 31, 2022 $ 1,047 $ 4,552 $ 3,412 $ 9,011
At December 31, 2023 1,002 1,907 2,344 5,253
(1)
During the year ending December 31, 2023, there were net dispositions of $2.6 million of office
equipment and leasehold improvements relating to the sale of assets for Stadium District Pizza Ltd.
and Front & John Pizza Ltd. (note 15). Further, net dispositions of $2.7 million of right-of-use assets
were recorded for the restaurant leases relating to the sales. No such dispositions were recorded in
the year ended December 31, 2022.
(2)
In 2023, property and equipment of $9.3 million with a net book value of nil were de-recognized as
these assets no longer provide any future economic benefit to the Company.
As at December 31, 2023, the right-of-use assets include a balance of $0.2 million (December 31, 2022
- nil) in lease incentives which is being amortized over the terms of the leases.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
20
7. Intangible assets
Computer Reacquired
Software and Franchise
Cost other Rights Total
At January 1, 2022 $ 24,252 $ 2,014 $ 26,266
Additions 1,387 - 1,387
At December 31, 2022 25,639 2,014 27,653
Additions 1,406 - 1,406
Dispositions
(1)
(57) (2,014) (2,071)
At December 31, 2023 $ 26,988 $ - $ 26,988
Computer Reacquired
Software and Franchise
Accumulated Amortization other Rights Total
At January 1, 2022 $ 19,215 $ 1,730 $ 20,945
Amortization 1,874 102 1,976
At December 31, 2022 21,089 1,832 22,921
Amortization 1,767 57 1,824
Dispositions
(1)
- (1,889) (1,889)
At December 31, 2023 $ 22,856 $ - $ 22,856
Computer Reacquired
Software and Franchise
Net book value other Rights Total
At December 31, 2022 $ 4,550 $ 182 $ 4,732
At December 31, 2023 4,132 - 4,132
(1)
During the year ending December 31, 2023, there were net dispositions of $0.1 million in reacquired
franchisee rights relating to the sale of assets from Stadium District Pizza Ltd. (note 15). No such
disposition was recorded in the year ended December 31, 2022.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
21
8. Debt
The Company’s debt consists of the following:
December 31, December 31,
2023 2022
Term Loan bearing variable interest at CDOR plus between
1.25% and 2.10% per annum and due in 2026
(a)
$ 11,600 $ 18,200
BDC non-revolving facility bearing variable interest rates - 1,333
less 1.75% per annum and due in 2023
(b)
Deferred financing fees (142) (198)
11,458 19,335
Current portion of debt 1,600 2,934
Current portion of deferred financing fees (57) (57)
$ 9,915 $ 16,458
Prior to June 28, 2022, BPI had credit facilities with a Canadian chartered bank (the “Bank”) in the
amount of up to $34.0 million (originally $43.3 million) expiring on December 31, 2022 (the “Original
Credit Facilities”). On June 28, 2022, BPI entered into a second supplemental credit agreement (the
“Second Supplemental Credit Agreement”) with the Bank to amend and extend the Original Credit
Facilities (the Original Credit Facilities, as amended and extended by the Second Supplemental Credit
Agreement, the “Credit Facilities”).
(a) The Credit Facilities are in the amount of up to $21.6 million that expires on June 1, 2026. The
Credit Facilities are comprised of: (i) a $10.0 million committed revolving facility to cover BPI’s day-
to-day operating requirements if needed (the “Operating Line”); and (ii) a $11.6 million committed
non-revolving term facility that was used to finance the reorganization of BPI and its shareholders
that completed on September 30, 2017 (the “Term Loan”). The Credit Facilities bear interest at
variable interest rates comprised of either, or a combination of, the Bank’s bankers’ acceptance
rates or Canadian dollar offered rates (“CDOR”) plus between 1.25% and 2.10%, or the Bank’s
prime rate plus between 0.00% and 0.90%, depending upon the Total Funded Net Debt to EBITDA
ratio, and interest is payable monthly in arrears. The Term Loan and the principal amount drawn on
the Operating Line are due and payable upon maturity. The principal amount drawn on the Term
Loan must be reduced by quarterly payments of $0.4 million each.
The Credit Facilities are guaranteed by all of BPI’s subsidiaries except BP Canada LP, and BPI and
each of those subsidiaries have granted general security over their assets to secure their obligations
under the Credit Facilities and such guarantees. No security has been given by BP Canada LP in
respect of the Credit Facilities. Neither the Fund nor any of its subsidiaries has guaranteed or
provided any security in respect of the Credit Facilities. BPI and each of BPI’s subsidiaries (including
BP Canada LP) have also granted Royalties LP security over their assets to secure BPI’s and BP
Canada LP’s obligations to pay Royalty and Distributions.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
22
8. Debt (continued)
On August 25, 2023, BPI made a voluntary payment of $5.0 million (December 28, 2022 - $5.0
million) to the Term Loan, in addition to the required quarterly payments of $0.4 million which were
paid throughout the year. As of December 31, 2023, $11.6 million was drawn on the Term Loan. As
of December 31, 2023 and December 31, 2022, no amount was drawn on the Operating Line.
(b) BPI had credit facilities with the Business Development Bank of Canada (“BDC”) in the amount of
$2.0 million (the “BDC Loan”) under the federal government’s COVID-19 relief programs. The BDC
Loan had a term of three years and bore interest at BDC’s floating base rate less 1.75%. The security
held by BDC was subordinate to the security held by the Bank to secure the Credit Facilities with
the Bank and the security held by the Fund to secure BPI’s obligation to pay the Fund Royalty and
Distributions. On April 3, 2023, the remaining balance of $1.2 million on the BDC Loan was paid in
full.
(c) In addition to the Credit Facilities, one of BPI’s wholly-owned subsidiaries had a $3.3 million
committed non-revolving term loan that was established to fund a 2016 restaurant purchase and
renovations (the “Acquired Restaurant Credit Facility”). Principal payments were required to be
made monthly on the facility until the maturity date. On February 14, 2022, the remaining balance
of $2.5 million on the Acquired Restaurant Credit Facility was paid in full.
(d) BPI had credit facilities with the Bank under the Export Development Canada’s business credit
availability program (the “BCAP Loan”) in the amount of $6.25 million. The BCAP Loan had a term
of one year, which could be extended annually at the request of BPI for up to five years subject to
compliance with certain requirements. The BCAP Loan bore interest at the Bank’s prime rate plus
2.50% and was subject to an annual fee equal 1.80% of the total amount of credit available (i.e.
$6.25 million).
The BCAP Loan was guaranteed by all of BPI’s subsidiaries except BP Canada LP, and was secured
by the same security that secures the Credit Facilities to the Bank. That security shared priority with
the general security agreements granted by BPI and its subsidiaries to the Bank under the Credit
Facilities. On June 22, 2022, the remaining balance of $4.7 million on the BCAP Loan was paid in
full.
(e) Principal repayments on debt are as follows:
December 31,
2023
2024 $ 1,600
2025 1,600
2026 and thereafter 8,400
$ 11,600
The fair value of the Company’s debt was $11.6 million (December 31, 2022 – $19.5 million) based on
prevailing market rates that approximate the rate on the Company’s debt. The impact of a 1% increase
in the variable rate would result in a minimal impact on the fair market value and the statement of
comprehensive income.
BPI was in compliance with all of its financial covenants and financial condition tests as of December
31, 2023.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
23
9. Lease obligations
The Company’s lease obligations are initially measured at the present value of the lease payments that
are not paid at the commencement date using the Company’s incremental borrowing rate. After initial
recognition, the lease liabilities are measured at amortized cost using the effective interest method. The
Company’s lease obligations consist of:
December 31, December 31,
2023 2022
Balance, beginning of year $ 6,072 $ 4,281
Additions 261 1,626
Dispositions (2,732) -
Adjustments (8) 1,277
Principal payments (606) (1,112)
Balance, end of year 2,987 6,072
Current portion of lease obligations 298 474
Long-term portion of lease obligations $ 2,689 $ 5,598
Total cash outflow for leases for the year ended December 31, 2023 was $0.7 million (2022 – $1.4
million) which includes $0.6 million of principal payments (2022 – $1.1 million) and $0.1 million in interest
for lease obligations (2022 – $0.3 million). In addition, BPI received $0.2 million in tenant inducements
for the year ended December 31, 2023 (2022 – nil). Expenses for lease of low-dollar value items are not
material. All extension options have been included in the measurement of lease obligations where
applicable.
The annual lease obligations for the next five years and thereafter are as follows:
December 31, December 31,
2023 2022
Within 1 year
(1)
$ (247) $ (127)
2 to 3 years 1,042 2,186
4 to 5 years 734 1,767
Over 5 years 1,472 2,791
Total undiscounted lease obligations $ 3,001 $ 6,617
(1)
Included as an offset in the obligation balance is $ 0.8 million relating to tenant inducements expected to be received (note 4).
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
24
10. Boston Pizza Canada Limited Partnership units liability
Limited partnership units
The Class 1 LP Units entitle the Fund to a cash distribution equal to the interest payable on the Fund’s
Credit Facility D plus 0.05% to a maximum amount of 1.5% of Franchise Sales. The Class 2 LP Units
entitle the Fund to a cash distribution equal to 1.5% of Franchise Sales less the Class 1 LP Units
distribution amount, less BPI’s proportionate share. Refer to note 12 for the fair value calculation of the
BP Canada LP Unit Liability.
The BP Canada LP units liability is comprised of:
Issued and
outstanding
LP Units
Investment in
BP Canada LP
Class 1 LP Units
Class 1 LP Units at December 31, 2023 and 2022
1,000
$
33,314
Class 2 LP Units
Class 2 LP Units at December 31, 2022
5,455,762
$
114,113
Fair value gain on Class 2 LP Units - cumulative
(31,840)
Balance at December 31, 2022
5,455,762
82,273
Fair value loss on Class 2 LP Units
1,364
Class 2 LP Units balance at December 31, 2023
5,455,762
$
83,637
Total LP Units balance at December 31, 2023
$
116,951
General partnership units
BPI receives its proportionate share of the 1.5% of Franchise Sales of Boston Pizza restaurants in the
Royalty Pool through distributions on Class 2 general partnership units (“Class 2 GP Units”) of
BP Canada LP that are exchangeable for Fund Units. These units are eliminated upon consolidation
with BP Canada LP. The Company continues to pay the Fund the balance of the Fund’s interest in
Franchise Sales of Royalty Pool restaurants in the form of Royalty.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
25
10. Boston Pizza Canada Limited Partnership units liability (continued)
The number of Fund Units that the Company is entitled to receive in exchange for its Class 2 GP Units is
adjusted periodically to reflect the addition of new Boston Pizza restaurants to the Royalty Pool (the
“Class 2 Additional Entitlements”, and together with the Class B Additional Entitlements, the
“Additional Entitlements”), with 80% of the estimated Class 2 Additional Entitlements being received
on the Adjustment Date with the balance (the “Class 2 Holdback”, and together with the Class B
Holdback, the “Holdback”) being received once the performance of the new restaurants and the actual
effective tax rate of the Fund are known for certain, similar to adjustments to the Class B Units that the
Company holds.
It is possible for a Deficiency to exist on an Adjustment Date (refer to note 5). In such case, the Company
would not receive any Additional Entitlements, however, nor would the Company lose any of the
Additional Entitlements previously received. Rather, on future Adjustments Dates, the Company would
be required to make-up the Deficiency by first adding Royalty and Distribution in an amount equal to the
Deficiency before receiving any further Additional Entitlements.
BPI also has the right to further increase the Fund’s Franchise Sales Participation by up to an additional
1.5% of Franchise Sales of Royalty Pool restaurants (in 0.5% increments) upon meeting certain financial
thresholds designed to ensure that the additional Franchise Sales Participation is accretive to the Fund
and that BPI retains the financial capacity to satisfy its obligations to the Fund.
As at December 31, 2023, the Company had the right to receive 831,354 (December 31, 2022 – 831,354)
Fund Units when it exercises its rights to exchange its Class 2 GP Units into Fund Units.
Issued and
outstanding Class 2
GP Additional
Entitlements
Issued and
outstanding
Class 2 GP
Additional
Entitlements
including Class 2
GP Holdback
Balance at December 31, 2021
831,354
831,354
Class 2 Additional Entitlements granted January 1, 2022
(1)
-
-
Balance at December 31, 2022
831,354
831,354
Class 2 Additional Entitlements granted January 1, 2023
(2)
-
-
Balance at December 31, 2023
831,354
831,354
(1)
On January 1, 2022, four Boston Pizza restaurants that closed during the period from January 1, 2021 to December 31, 2021
were removed from the Royalty Pool. The Franchise Sales from restaurants removed from the Royalty Pool on January 1,
2022 was negative $6.2 million. This resulted in a Deficiency of $0.3 million related to lost Royalty income and Distribution
income. As a result of the Deficiency, the Company did not receive any Class 2 Additional Entitlements on January 1, 2022.
The Company will be required to make-up the Deficiency on future adjustment dates by first adding Royalty and Distribution
in an amount equal to the Deficiency before receiving any future Class 2 Additional Entitlements.
(2)
On January 1, 2023, six Boston Pizza restaurants that closed during the period from January 1, 2022 to December 31, 2022
were removed from the Royalty Pool. The Franchise Sales from restaurants removed from the Royalty Pool on January 1,
2023 was negative $6.8 million. This resulted in a Deficiency of $0.4 million related to lost Royalty income and Distribution
income. As a result of the Deficiency, The Company did not receive any Class 2 Additional Entitlements on January 1, 2023.
BPI will be required to make-up the Deficiency on future adjustment dates by first adding Royalty and Distribution in an amount
equal to the Deficiency before receiving any future Class 2 Additional Entitlements.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
26
11. Deferred gain
The gain realized on the sale of BP Rights is being deferred and amortized over the 99 years term of the
License and Royalty Agreement. In return for adding net Franchise Sales to the Royalty Pool, BPI
receives Class B Additional Entitlements which are included in the deferred gain. The Class B Additional
Entitlements are calculated as 92.5% of the net Franchise Sales added to the Royalty Pool from the net
new Boston Pizza restaurants, multiplied by 4% (being the Royalty that is payable on such net Franchise
Sales), multiplied by one minus the effective average tax rate to be paid by the Fund, divided by the yield
of the Fund, divided by the weighted average price of a Fund Unit over a specified period. The Company
receives 80% of the estimated Class B Additional Entitlements initially with the balance received when
the actual full year performance of the new restaurants and the actual effective tax rate of the Fund is
known with certainty. Monthly distributions from the Fund are based on full Class B Additional
Entitlements and are subject to adjustment early in the next fiscal year when full performance of the
restaurants and actual effective tax rate of the Fund is known with certainty. It is possible for a Deficiency
to exist where the Company would not receive any Additional entitlements (refer to note 5) for the year.
In the case of a Deficiency, there will be no amounts added to deferred gain with respect to the year the
Deficiency was generated.
December 31, December 31,
2023 2022
Balance, beginning of year $ 222,020 $ 224,847
Class B Additional Entitlements
(1)
- -
Amortization of deferred gain (2,827) (2,827)
Balance, end of year $ 219,193 $ 222,020
(1)
No Class B Additional Entitlements were issued to BPI in 2023 since a Deficiency existed in respect of the January 1, 2023
adjustment date (see note 5).
The following table summarizes the number of Class B Additional Entitlements received by the Company
in return for the net Franchise Sales added to the Royalty Pool from the net new restaurants on January 1:
January 1,
2023
January 1,
2022
Restaurants in Royalty Pool
377
(1)
383
Estimated Franchise Sales from adjustments to Royalty Pool
$
(6,837)
$
(6,195)
Class B Units Additional Entitlement (including Holdbacks)
(1)
0 units
0 units
Class B Holdback (20% of total entitlement)
(2)
0 units
0 units
Adjustment to prior year Class B additional entitlement
(3)
0 units
0 units
(1)
On January 1, 2023, the six Boston Pizza restaurants that permanently closed during 2022 were removed from the Royalty
Pool. Accordingly, the total number of restaurants in the Royalty Pool decreased to 383 from 377. The net Franchise Sales
from the four Boston Pizza restaurants that permanently closed was negative $6.8 million. This resulted in negative Royalty
and Distribution to the Fund of $0.4 million. As a result of the Deficiency, BPI did not receive any additional entitlements on
January 1, 2023.
(2)
Unissued and not eligible for exchange into Fund Units until January 1 of next year.
(3)
Adjusted for actual performance of new restaurants added to the Royalty Pool and actual effective tax rate of the Fund.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
27
12. Financial Instruments
(a) Financial Assets and Liabilities by Categories and Fair Value Information
The following table shows the carrying values of assets and liabilities for each of these categories at
December 31, 2023 and 2022. Unless otherwise noted, the fair values on the instruments
approximate their carrying amount. The Company must classify fair value measurements according
to a hierarchy that reflects the significance of the inputs used in performing such measurements.
The fair values of the financial instruments carried at fair value have been measured by one of the
following valuation methods:
• Level 1 – quoted prices (unadjusted) are available in active markets for identical assets or
liabilities as of the reporting date. Active markets are those in which transactions occur in
sufficient frequency and volume to provide pricing information on an ongoing basis.
• Level 2 – pricing inputs are other than quoted in active markets included in Level 1. Prices in
Level 2 are either directly (that is, as prices) or indirectly (that is, derived from prices) observable
as of the reporting date.
• Level 3 – valuations in this level are those with inputs for the asset or liability that are not based
on observable market data.
December 31,
2023
December 31,
2022
Fair value through profit and loss
Class B Units Investment in Boston Pizza Royalties
Limited Partnership
(i)
Level 2
$
37,265
$
36,657
Class 1 Boston Pizza Canada Limited Partnership units
liability
(ii)
Level 2
$
(33,314)
$
(33,314)
Class 2 Boston Pizza Canada Limited Partnership units
liability
(iii)
Level 2
$
(83,637)
$
(82,273)
Amortized cost
Cash
$
12,032
$
12,679
Accounts receivable
$
10,081
$
9,329
Interest receivable from Boston Pizza Royalties Limited
Partnership
$
323
$
303
Accounts payable and accrued liabilities
$
(10,319)
$
(9,583)
Royalty and distribution payable to the Fund
$
(4,412)
$
(4,372)
Debt
$
(11,458)
$
(19,335)
Lease obligations
$
(2,987)
$
(6,072)
Other long-term liabilities
$
(1,799)
$
(1,229)
(i) The Class B Units are exchangeable for Fund Units and therefore, the fair value of the Class B
Units is estimated to be equivalent to the number of Fund units into which Class B Units are
exchangeable. The Fund estimates the fair value of its Class B units liability by multiplying the
issued and outstanding Class B Additional Entitlements (including Class B Holdback) held by BPI
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
28
12. Financial Instruments (continued)
(a) Financial Assets and Liabilities by Categories and Fair Value Information (continued)
at the end of the period by the closing price of the Fund Units on the last business day of the
period. As at December 31, 2023, the closing price of a Fund Unit was $15.33 (December 31,
2022 – $15.08) while the number of Fund Units BPI would be entitled to receive if it exchanged
all of its Class B Units (including Class B Holdback) was 2,430,823 (December 31, 2022 –
2,430,823) resulting in a valuation of Class B Units at a fair value of $37.3 million (2022 – $36.7
million). For the year ended December 31, 2023, the increase of $0.6 million is due to fair value
gain (2022 – fair value loss of $0.9 million). This valuation technique may not represent the actual
value of the financial asset should such Class B Units be exchanged.
(ii) The Class 1 LP Units are entitled to distributions with respect to the interest cost incurred on a
certain credit facility held by the Fund. Thus, the fair value of the Class 1 LP Units is estimated
using a market-corroborated input (interest rate on the credit facility). The Company estimates
the fair value of Class 1 LP Units at carrying value adjusted for interest rate risk.
(iii) The Class 2 LP Units have similar cash distribution entitlements and provisions to the Class 2
GP Units held by BPI, which are exchangeable for Fund Units. The fair value of the Class 2 LP
Units is determined using a market approach, which involves using observable market prices for
similar instruments. The fair value of the Class 2 LP Units is determined by multiplying the issued
and outstanding Class 2 LP Units indirectly held by the Fund at the end of the period by the
closing price of a Fund Unit on the last business day of the period. As at December 31, 2023,
the closing price of a Fund Unit was $15.33 (December 31, 2022 – $15.08) while the number of
issued and outstanding Class 2 LP Units held by the Fund was 5,455,762 (December 31, 2022
– 5,455,762) resulting in a Class 2 LP Units fair value of $83.6 million (December 31, 2022 –
$82.3 million). The fair value loss on the Class 2 LP units liability for the year ending December
31, 2023 was $1.4 million (2022 – $2.0 million fair value gain).
(b) Financial Instruments and Related Risks
The Company primarily has exposure to interest rate risk, liquidity risk and credit risk as they relate
to the Company’s identified financial instruments.
Interest rate risk
Interest rate risk is the risk that the fair values and future cash flows of the Company’s financial
instrument will fluctuate because of changes in market interest rates. The Company is exposed to
interest rate cash flow risk primarily on its bank indebtedness, long-term debt subject to floating rates
of interest and lease obligations. The Company is exposed to interest rate fair value risk on its lease
obligations subject to fixed rate of interest. The Company monitors its exposure to interest rates by
monitoring the fluctuation in the bankers’ acceptance rates, prime interest rate and evaluates interest
rate swaps when necessary. The Company had $11.6 million (December 31, 2022 – $19.5 million)
in floating rate debt and $3.0 million in lease obligations (December 31, 2022 – $6.1 million) as at
December 31, 2023. The annual impact for every 1% increase in the variable rate would result in an
additional interest expense of $0.1 million.
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the
replacement of some interbank offered rates (“IBOR”) with alternative rates. On December 16, 2021,
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
29
12. Financial Instruments (continued)
(b) Financial Instruments and Related Risks (continued)
the Canadian Alternative Reference Rate working group (“CARR”) recommended that the
administrator, Refinitiv Benchmark Services UK Limited (“RBSL”), cease publication of the CDOR
settings immediately after June 28, 2024. On May 16, 2022, following public consultation, RBSL
announced that all remaining CDOR settings will cease publication immediately after June 28, 2024,
in line with CARR’s recommendations. As at December 31, 2023, the Company’s IBOR exposure is
indexed to CDOR. The alternative rate for CDOR is the Canadian Overnight Repo Rate Average
(“CORRA”). The Company has had preliminary discussions with the Bank regarding amending the
Credit Facilities prior to June 28, 2024 to replace the current rates that are based upon CDOR with
corresponding rates that are based upon CORRA. While the precise rates that will be based on
CORRA have not yet been agreed upon by the Company and the Bank, the Company does not
expect these amendments to result in a material increase in the Company’s cost of borrowing under
the Credit Facilities.
Liquidity risk
Liquidity risk results from the Company’s potential liability to meet its financial obligations. The
Company constantly monitors its operations and cash flows to ensure that its current and future
obligations will be met. The Company believes that its current sources of liquidity are sufficient to
cover its currently known short and long-term cash obligations.
The maturities of the Company’s financial liabilities are as follows:
December 31, December 31,
2023 Maturity 2022 Maturity
Accounts payable and accrued liabilities $ 10,319 < 1 year $ 9,583 < 1 year
Current portion of debt $ 1,543 < 1 year $ 2,877 < 1 year
Debt $ 9,915 2025-2026 $ 16,458 2024-2026
Lease obligations $ 2,301 2024-2033 $ 5,187 2023-2033
Other long-term liabilities $ 1,799 2025 $ 1,229 2024
Credit risk
Credit risk is defined as the risk of financial loss to the Company if a counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Company’s trade
accounts receivable and long-term receivables from companies under common control. The
Company’s maximum exposure to credit risk is the value of its current and non-current accounts
receivable of $12.6 million (December 31, 2022 – $11.8 million). The allowance for doubtful accounts
was $2.5 million at December 31, 2023 (December 31, 2022 – $2.5 million).
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
30
12. Financial Instruments (continued)
(c) Capital disclosures
The Company’s objectives in managing its liquidity and capital are:
• To safeguard the Company’s ability to continue as a going concern
• Provide financial capacity and flexibility to meet its strategic objectives
• To provide an adequate return to shareholders commensurate with the level of risk
• Return excess cash through dividends
The capital of the Company consists of items included in shareholder deficiency, deferred gain, and debt,
net of cash and cash equivalents as follows:
December 31, December 31,
2023 2022
Liquidity:
Cash $ 12,032 $ 12,679
Undrawn credit facilities (note 8) 10,000 10,000
Total liquidity $ 22,032 $ 22,679
Capitalization:
Debt (note 8) $ 11,458 $ 19,335
Total debt $ 11,458 $ 19,335
Deferred gain (note 11) $ 219,193 $ 222,020
Shareholder deficiency (239,482) (248,579)
$ (20,289) $ (26,559)
The Company manages its capital mainly through the periodic sales of Class B Units and Class 2 GP
Units, accumulated deficit, as well as through the use of short-term financing. The Company maintains
formal policies to manage capital. Liquidity and capital structure are managed by adjusting for changes
to economic conditions, understanding the underlying risks inherent in its operations and managing the
capital requirements to maintain and grow its operations.
The Company is not subject to any statutory capital requirements and has no commitments to sell or
otherwise issue common shares.
The Company’s credit facility includes a $10.0 million secured line of credit which is subject to certain
financial covenants.
The Company’s debt includes credit facility agreements that are subject to certain financial covenants
(note 8).
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
31
13. Income taxes
Income tax expense as reported differs from the amount that would be computed by applying the
combined Federal and Provincial statutory income tax rates to earnings before income taxes. The
reasons for the differences are as follows:
2023 2022
Earnings before income taxes $ 13,073 $ 16,053
Combined Canadian federal and provincial tax rates 26.8% 26.8%
Computed expected tax expense 3,504 4,302
Increased (reduced) by:
Permanent differences 166 81
Fair value adjustment on BP Canada LP units liability 366 (541)
Valuation allowance on investment in BP Royalties LP (71) 281
Differences from changes in statutory rates and other (4) 17
Other 15 (9)
Income tax expense $ 3,976 $ 4,131
BPI’s deferred income tax expense is primarily comprised of temporary differences related to the
following:
2023 2022
Deferred gain $ 698 $ 751
Deferred revenue 252 372
Non-capital loss carryforwards (753) 489
Other 502 641
Deferred income tax expense $ 699 $ 2,253
The tax effects of temporary differences that give rise to significant portions of the deferred income tax
assets and liabilities are:
December 31, December 31,
2023 2022
Deferred gain $ 58,794 $ 59,492
Deferred revenue 789 1,041
Non-capital loss carryforwards 2,147 1,394
Other 1,287 1,789
Deferred income tax asset $ 63,017 $ 63,716
The Company believes that it is probable that the results of future operations will generate sufficient
taxable income to realize the above noted deferred income tax assets. Deferred tax assets that have not
been recognized as part of the above was $0.7 million (2022 - $0.7 million) relating to the deductible
temporary difference relating to the fair value adjustment on BP Royalties LP.
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
32
14. Share capital
The Company has an unlimited number of Common Shares without par value authorized of which 98,087
were issued and outstanding as at December 31, 2023 and 2022.
15. Other expenses
The following are the components of other expenses:
December 31, December 31,
2023 2022
Travel $ 1,608 $ 1,102
Research and development 653 654
Marketing and advertising 598 1,565
Office, rent and utilities 536 895
Professional fees 462 418
Bad debt expense (recovery)
(1)
130 (1,110)
Loss on sale of assets
(2)
1,141 -
Other 1,328 988
$ 6,456 $ 4,512
(1)
In 2022, bad debt expense recovery of $1.1 million was recorded in relation to trade accounts
receivables that were no longer deemed unrecoverable.
(2)
On July 24, 2023, Stadium District Pizza Ltd. sold an existing Boston Pizza restaurant to a franchisee
of BP Canada LP for $0.6 million, recording a loss on sale of assets of $0.4 million. Proceeds of $0.5
million were received during the year, with the remaining $0.1 million to be received at a later date.
On December 4, 2023, Front & John Pizza Ltd. sold an existing Boston Pizza restaurant to a
franchisee of BP Canada LP for $1.1 million, recording a loss on sale of assets of $0.7 million.
Proceeds of $1.1 million were received during the year.
16. Related party and subsidiary transactions
The following are components of related party and subsidiary transactions:
December 31, December 31,
2023 2022
Accounts receivables due from associated companies $ 532 $ 19
Accounts payable due to associated companies 59 93
Royalty payable to Royalties LP 3,361 3,330
Distributions payable to Holdings LP 1,051 1,042
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
33
16. Related party and subsidiary transactions (continued)
(1)
The Fund has engaged Royalties LP, its administrator, to provide certain administrative services on
behalf of the Fund. In turn, certain of the administrative services are performed by BPI as a general
partner of Royalties LP.
17. Supplemental cash flow information
(a) Change in non-cash operating items:
2023
2022
Accounts receivable $ (1,083) $ (2,505)
Prepaid expenses and other current assets (1,584) (18)
Advertising fund restricted assets (2,013) (2,031)
Accounts payable and accrued liabilities 869 1,894
Royalty and distributions payable to Fund 40 950
Advertising fund restricted liabilities 2,161 1,999
Deferred revenue (942) (1,572)
_________________________________________________________________________________
$ (2,552) $ (1,283)
(b) Supplementary information:
2023
2022
Non-cash transactions:
Property & equipment additions included in accounts payable $ (16) $ (64)
Intangible asset additions included in accounts payable (394) (251)
Amortization of deferred financing fees, net against debt (57) (219)
Lease obligation non-cash adjustments (2,503) 2,018
2023
2022
Fees charged to the Fund in respect of administrative
services
(1)
$
427
$
400
Royalty expense to the Fund
37,026
34,200
Distribution expense to the Fund
12,167
11,273
Management fees paid for services rendered by companies
under common control
1,000
500
Interest income from Royalties LP
(3,990)
(3,690)
Key management personnel compensation
5,601
4,485
BOSTON PIZZA INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(in thousands of Canadian dollars, except where noted)
34
18. Seasonality
Boston Pizza restaurants experience seasonal fluctuations in Franchise Sales, which are inherent in the
full service restaurant industry in Canada. Seasonal factors such as tourism and better weather allow
Boston Pizza restaurants to open their patios and generally increase Franchise Sales in the second and
third quarters compared to the first and fourth quarters.
19. Comparative figures
Certain of the comparative figures have been reclassified to conform to the financial statement
presentation adopted in current year.
20. Subsequent events
(a) On January 1, 2024, one new Boston Pizza restaurant that opened across Canada between January
1, 2023 and December 31, 2023 was added to the Royalty Pool and the six restaurants that
permanently closed during 2023 were removed from the Royalty Pool. Accordingly, the total number
of restaurants in the Royalty Pool decreased to 372 from 377. The estimated net Franchise Sales
from the one new Boston Pizza Restaurant less the six Boston Pizza restaurants that permanently
closed is negative $7.5 million. This resulted in negative Royalty and Distribution to the Fund of $0.4
million. As a result of the Deficiency, BPI did not receive any Additional Entitlements on January 1,
2024. However, BPI did not lose any of the Additional Entitlements it received in respect of previous
years. Instead, BPI will be required to make-up the cumulative Deficiency for 2020 through 2023
(total of $2.0 million) on future Adjustment Dates by first adding Royalty and Distribution in an amount
equal to the Deficiency before receiving any further Additional Entitlements.
(b) In the first quarter of 2024, no adjustments were made to the Deficiency related to 2022 since no new
restaurants were opened during 2022 nor were added to the Royalty Pool on January 1, 2023.
