Prime Restaurants Royalty Income Fund

Prime Restaurants Royalty Income Fund

January 04, 2008 16:30 ET

Prime Restaurants Royalty Income Fund Announces January 1, 2008 Adjustment to Royalty Pool

MISSISSAUGA, ONTARIO--(Marketwire - Jan. 4, 2008) - Prime Restaurants Royalty Income Fund (the "Fund") (TSX:EAT.UN) and Prime Restaurants of Canada Inc. ("PRC") announced that as of January 1, 2008, the gross sales of five new Prime restaurants, opened during the period January 1, 2007 through December 31, 2007, will be added to the royalty pool (the "Royalty Pool") on which the Fund earns royalty revenue. The Royalty Pool is not expected to receive an increase in net gross sales from the addition of $9.824 million in estimated gross sales from the five new restaurants due to the reduction of $9.824 million in actual gross sales from six closed or divested restaurants. With the addition of these five restaurants, after taking into account the closure of the six Prime Restaurants during the year, the total number of restaurants in the Royalty Pool will be 155.

Annually on January 1st, the Royalty Pool is adjusted to include the gross sales from new Prime restaurants that have opened during the prior year, after deducting the gross sales from any Prime restaurants that permanently closed during the same time. In return for adding these net sales to the Royalty Pool, PRC receives the right to acquire indirectly additional Fund units (the "Additional Entitlement"). This Additional Entitlement is determined based on 92.5% of the royalty revenue added to the Royalty Pool divided by the annual yield of the Fund units. PRC receives 80% of the estimated Additional Entitlement initially, with the balance received when the actual full-year performance of the new restaurants is known with certainty.

As a result of the January 1, 2008 contribution of the additional net $nil sales to the Royalty Pool, PRC's Additional Entitlement will be nil Fund units.

Also, the January 1, 2007 addition of restaurants to the Royalty Pool has been finalized. The actual gross sales for the six new restaurants added to the Royalty Pool for the 52 weeks ended December 31, 2007 was approximately $12,508,023, for a net sales increase (net of gross sales from restaurants closed in the corresponding period) of $2,892,019, which was in excess of the amount originally estimated by $1,218,795. This resulted in PRC receiving a prior year entitlement equivalent to 54,753 Fund units as compared to the 31,678 Fund units originally estimated.

PRC will have an entitlement to approximately 3,211,645 Fund units, representing 34.45% of the Fund units on a fully diluted basis on January 1, 2008.

About Prime Restaurants of Canada

PRC operates and franchises a diversified portfolio of leading brands of casual dining restaurants and premium pubs in Canada. As a pioneer in the Canadian casual dining industry since 1980, it is considered an important innovator in the development of strong brands, and today has three core brands: East Side Mario's, Casey's and Fionn MacCool's. PRC and its franchisees employ over 12,000 people across the country.

Prime Restaurants Royalty Income Fund (the Fund) is a limited purpose trust with an unlimited number of Trust Units (Units) established to invest in PRC Trademarks Inc. (TradeMarkCo). The source of revenue for the Fund is through its ownership in TradeMarkCo. The Fund receives interest income on the TradeMarkCo Note from TradeMarkCo based on 11.25% per annum which it distributes to its Unitholders. TradeMarkCo owns the Prime Restaurants of Canada Inc. (PRC) trademarks and licenses their use to PRC which operates the restaurant and bar business. In return, TradeMarkCo receives royalty income based on 3.25% of gross revenue from the royalty pooled restaurants operated by PRC.

Certain information included in this news release is forward looking and based on current expectations and entails various risks and uncertainties. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2007 and beyond, our strategies or future actions, and our targets or expectations for our financial performance and condition (including estimated revenue from royalty pooled restaurants and the prospective number of new restaurants and pubs). Although management of the Fund and PRC believe that the expectations represented in such forward looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions (such as, on the demand for the goods and services provided under the Prime Marks) and are subject to inherent risks and uncertainties, including those discussed in the current annual information form of the Fund and annual and quarter MD&A of the Fund and PRC, which are available at There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers not to place undue reliance on our forward-looking statements because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements are made as of the date hereof. Except as required by applicable securities laws, the Fund does not undertake to update any forward-looking statement, whether written or oral, that it may make or that may be made, from time to time, on its behalf.

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