Ms. Christine D'Sylva reports

PIZZA PIZZA ROYALTY CORP. ADDS 45 RESTAURANTS TO, AND REMOVES 14 RESTAURANTS FROM, THE ROYALTY POOL

Effective Jan. 1, 2024, the number of restaurants on which royalties are paid to Pizza Pizza Royalty Corp. by PPL (the royalty pool) has been adjusted to include 45 new restaurants opened during the prior-year vend-in period, offset by 14 restaurants which were closed during the period.

By brand, 41 new Pizza Pizza restaurants and four new Pizza 73 restaurants were added to the royalty pool; there were 13 Pizza Pizza restaurants and one Pizza 73 restaurant closed and removed from the royalty pool. Of the 45 new restaurants, 23 were traditional restaurants and 22 were non-traditional locations, while the 14 closures comprised seven traditional restaurants and seven non-traditional locations.

For 2024, there will be 774 restaurants (2023 -- 743) in the royalty pool made up of 672 Pizza Pizza locations and 102 Pizza 73 locations.

The company, indirectly through the Pizza Pizza Royalty Limited 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 per cent 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 per cent of the system sales of the Pizza 73 restaurants in the royalty pool.

Jan. 1 royalty pool adjustment date )

Annually, on Jan. 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 any decrease in system sales of a previously existing restaurant whose territory has been adjusted by a new 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 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 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 herein and in the company's most recent annual information form.

After the Jan. 1, 2024, adjustment date, PPL now owns equivalent shares representing 25.2 per cent of the company's fully diluted shares as shown herein. Prior to this adjustment, PPL's ownership was 24.5 per cent. 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.

Jan. 1, 2024, royalty pool adjustment

On Jan. 1, 2024, adjustment date, $7,522,000 of system sales from Pizza Pizza restaurants were added to the royalty pool ($14,243,000 from the 41 new Pizza Pizza restaurants less $6,721,000 from the 13 permanently closed Pizza Pizza restaurants). In exchange for adding sales to the royalty pool, the Class B exchange multiplier increased to 2.410163. PPL has received 285,250 additional equivalent shares (through the change to the Class B exchange multiplier). The additional equivalent shares represent 80 per cent of the forecasted equivalent shares entitlement to be received (356,563 equivalent shares represent 100 per cent), with the final equivalent shares entitlement to be determined when the actual sales of the new restaurants are known with certainty in early 2025.

Additionally, $1,024,000 of system sales from Pizza 73 restaurants were added to the royalty pool ($1,714,000 from the four new Pizza 73 restaurants less $690,000 from the one permanently closed Pizza 73 restaurant). The $1,024,000 net, estimated Pizza 73 sales added to the royalty pool are applied against the $1,497,000 make-whole carryforward amount, reducing the estimated determined amount to nil for Jan. 1, 2024. The remaining make-whole carryover amount of $473,000 will be carried over, and a royalty will continue to be paid for subsequent years, until on an adjustment date, additional system sales of additional restaurants are sufficient to offset the Pizza 73 system sales attributable to all closed Pizza 73 restaurants. Additionally, since the estimated determined amount is negative it shall be deemed to be zero. Accordingly, the Class D exchange multiplier remained unchanged at 22.44976. The second adjustment to the Class D exchange multiplier will be adjusted to be effective Jan. 1, 2024, once the actual performance of the new restaurants is determined in early 2025.

We seek Safe Harbor.