A&W Announces Update on its Revenue Royalties Income Fund

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VANCOUVER — A&W Revenue Royalties Income Fund has announced it is resuming monthly distributions to its unitholders in the amount of 10 cents per trust unit. Accordingly, the fund has declared a cash distribution of 10 cents per trust unit for the month of June 2020. 

This distribution will be paid on July 31 to unitholders of record at the close of business July 15 and will be taxed as a non-eligible dividend, as the source of funds to pay the distribution is a dividend from A&W Trade Marks Inc.

The fund also announced that A&W Food Services of Canada Inc. will be resuming regular royalty payments. The royalty of three per cent of system sales of the 971 A&W restaurants in the royalty pool is to be paid on July 10, based upon system sales of A&W restaurants in the royalty pool for the four-week period ended June 14.

The trustees of the fund determined to recommence monthly distributions to unitholders based on recent improvement in the performance of the A&W restaurants in the royalty pool and the resumption of royalty payments by A&W Food Services.

A&W Food Services has deferred royalty payments payable to the fund for three four-week periods, totaling $7.5 million, inclusive of interest, at June 30, 2020. The trustees and A&W Food Services are developing a plan for the payment of this amount with interest to the date of payment.

A&W Trade Marks will declare an equivalent dividend on its shares held by A&W Food Services. However, A&W Food Services has agreed with the fund and A&W Trade Marks that the dividend is not to be paid to A&W Food Services until it has paid all deferred royalties, together with interest, to the fund.

A&W Food Services and the fund are jointly providing a further update on the impact of the COVID-19 pandemic on A&W restaurant operations and the decisions taken by the trustees of the fund. 

The company has also provided an update on its business over the last few months. Same-store sales growth for A&W restaurants in the royalty pool were down 31.6 per cent year over year for the second quarter of 2020. For most of Q2, locations that were operating were restricted to drive thru, delivery and mobile ordering. In a number of locations, restaurants are now permitted to open for limited dine-in and takeout sales.

Actions required in response to COVID-19 have adversely affected restaurant operations across Canada, including the temporary closures of a large number of restaurants. At its peak, a total of 230 A&W restaurants (out of 971 restaurants in the royalty pool) were temporarily closed. There was steady improvement during the second quarter and, at quarter end (June 14, 2020), 109 restaurants in the royalty pool remained temporarily closed. Since then, approximately 85 of those temporarily closed A&W restaurants have re-opened. The balance of the locations are currently expected to re-open when permitted by the appropriate authorities.

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