AUS
NZ
UK
CA
USA
IND
Highlights:
- Royalty income increased by 0.3% in Q3 2024 compared to last year.
- Transaction to amalgamate A&W Food Services approved by unitholders and the court.
- Expansion plans include 19 new restaurants opened in 2024, with more underway.
A&W Revenue Royalties Income Fund has released its third-quarter results for the period ending September 8, 2024. During this quarter, the Fund reported a royalty income of CAD 13,742,000, a slight increase of 0.3% from CAD 13,705,000 in Q3 2023. Gross sales from the Royalty Pool, which includes A&W restaurants, amounted to CAD 458,078,000, reflecting a modest uptick compared to CAD 456,842,000 in the prior year. Year-to-date royalty income reached CAD 38,260,000 based on gross sales of CAD 1,275,348,000, marking a year-over-year increase from CAD 37,917,000 and CAD 1,263,908,000, respectively.
The rise in royalty income can be attributed to the addition of 10 net new restaurants to the Royalty Pool as of January 5, 2024. However, this growth was slightly tempered by the fact that Q1 2024 had one less operational day compared to Q1 2023. Despite the increase in royalty income, the Royalty Pool Same Store Sales Growth for Q3 2024 recorded a decline of 1.0% and remained flat year-to-date. This downturn is primarily driven by a decrease in guest counts, which was partially offset by a rise in the average check size due to inflation in goods, services, and labor costs.
Susan Senecal, President and CEO of A&W Food Services, commented on the expansion efforts, stating, "With 19 new A&W restaurants opened in the first three quarters of 2024 and 20 additional restaurants under construction at the end of the quarter, we are pleased with the pace at which Food Services has been able to expand the A&W brand across Canada this year." She highlighted that the number of new openings puts the company on track to surpass the annual average of new restaurants launched since the COVID-19 pandemic disrupted operations.
On a strategic front, the Fund entered into a combination agreement with Food Services on July 21, 2024, to form a new publicly traded entity called A&W Food Services NewCo. This agreement, which was approved by unitholders on October 8, 2024, will amalgamate Food Services with specific holding companies. The Ontario Superior Court of Justice issued a final order approving the transaction on October 11, 2024, with the transaction set to take effect on October 17, 2024, subject to customary closing conditions.
The ongoing economic climate has affected consumer behavior, as indicated by the decline in guest counts at A&W restaurants. Factors such as rising interest rates, inflation, and general market uncertainty have impacted discretionary spending. In response, Food Services aims to enhance the dining experience by introducing innovative offerings to attract guests and increase traffic to its restaurants.
Overall, while A&W Revenue Royalties Income Fund faces challenges, the strategic expansion and the upcoming amalgamation with A&W Food Services signal a proactive approach to navigating the current market landscape. The Company remains committed to delivering quality service and products, aiming to strengthen its position within the competitive quick service restaurant sector.
