Prime Restaurants Royalty Income Fund

Prime Restaurants Royalty Income Fund

January 10, 2007 16:30 ET

Prime Restaurants Royalty Income Fund: Press Release

MISSISSAUGA, ONTARIO--(CCNMatthews - Jan. 10, 2007) - Prime Restaurants Royalty Income Fund (the "Fund") (TSX:EAT.UN) and Prime Restaurants of Canada Inc. ("PRC") announced that as of January 1, 2007, the gross sales of six new Prime restaurants, opened during the period November 1, 2005 through December 31, 2006, will be added to the royalty pool (the "Royalty Pool") on which the Fund earns royalty revenue. The Royalty Pool is expected to receive an increase in net gross sales of approximately $1.7 million from the addition of approximately $11.3 million in estimated gross sales from the six new restaurants less the reduction of approximately $9.6 million in actual gross sales from six closed restaurants. The addition of these six restaurants, after taking into account the closure of the six Prime Restaurants during the year, will maintain the total number of restaurants in the Royalty Pool at 156.

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, 2007 contribution of the additional net of approximately $1.7 million in sales to the Royalty Pool, PRC's Additional Entitlement will be approximately 31,678 Fund units.

Also, the January 1, 2006 addition of restaurants to the Royalty Pool has been finalized. The actual gross sales for the seven new restaurants added to the Royalty Pool for the 52 weeks ended October 31, 2006 was approximately $12.6 million, for a net sales increase (net of gross sales from restaurants closed in the corresponding period) of $549,021, which was in excess of the amount originally estimated at $nil. This resulted in PRC receiving a prior year entitlement equivalent to 11,391.49 Fund units as compared to the nil Fund units originally estimated.

PRC will have an entitlement to approximately 3,188,571 Fund units, representing 34.29% of the Fund units on a fully diluted basis on January 1, 2007.

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.

This press release may contain certain "forward looking" statements reflecting Prime Restaurants Royalty Income Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward looking statements involve risks and uncertainties, including changes in market and competition, competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada.

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