Boston Pizza Royalties Income Fund
TSX : BPF.UN

Boston Pizza Royalties Income Fund
Boston Pizza International Inc.

Boston Pizza International Inc.

January 04, 2011 18:18 ET

Boston Pizza International Adds Six New Restaurants Opened in 2010 to the Royalty Pool of Boston Pizza Royalties Income Fund

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 4, 2011) - Boston Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) and Boston Pizza International Inc. ("BPI") announced today that effective January 1, 2011, the Fund's royalty pool (the "Royalty Pool") has been adjusted to include the royalties from six new restaurants opened across Canada between January 1, 2010 and December 31, 2010 (the "Period") all of which are full service restaurants. Five full service restaurants and one Quick Express location were permanently closed during the Period. With the adjustment for these openings and closures during 2010, royalties are now payable to the Fund from 340 Boston Pizza restaurants.

The Fund indirectly owns the Boston Pizza trademarks and trade names used by BPI in its Boston Pizza restaurants in Canada. In 2002, the Fund licensed these trademarks to BPI for 99 years and in return BPI pays the Fund a top line royalty of 4% of franchise revenues of Royalty Pool restaurants. Annually, the Royalty Pool of Boston Pizza restaurants is increased to include the new Boston Pizza restaurants that have opened in the prior year. The increase is adjusted to reflect any locations that may have permanently closed during the year.

"Boston Pizza is Canada's number one casual dining brand, serving more customers in more locations than any other full service restaurant chain," said George Melville, Co-Chairman of BPI. "We are very pleased to have added six more locations in 2010, bringing our total to a remarkable 340 Boston Pizzas across ten provinces and two territories. Going forward, we see many more opportunities for Boston Pizza restaurants across the country."

On January 1 of each year (the "Adjustment Date"), an adjustment is made to add to the Royalty Pool new Boston Pizza restaurants that opened, and to remove any Boston Pizza restaurants that permanently closed, during the year prior to that Adjustment Date. In return for adding this additional royalty revenue, BPI receives the right to indirectly acquire additional Fund units (the "Additional Entitlements"). The adjustment for new franchise sales added to the Royalty Pool is designed to be accretive for Unitholders. The Additional Entitlements for the six restaurants added to the Royalty Pool on January 1, 2011 are calculated at 92.5% of the estimated royalty revenue added to the Royalty Pool less the actual royalty revenue received from the six permanently closed restaurants during the first 12 month period immediately following their addition to the Royalty Pool, divided by the yield of the Fund, divided by the weighted average unit price. BPI receives 80% of the Additional Entitlements initially, with the balance received when the actual full year performance of the new restaurants is known with certainty. BPI receives 100% of distributions from the Additional Entitlements throughout the year. Once these new restaurants have been part of the Royalty Pool for a full year, an audit of the royalty revenues of these restaurants received from BPI will be performed. At such time an adjustment will be made to reconcile distributions paid to BPI and the Additional Entitlements received by BPI. Unitholders are reminded that the mechanism through which new Boston Pizza restaurants are added to the Royalty Pool commencing January 1, 2012 has been amended to adjust for the effects of the Specified Investment Flow-Through Tax, which took effect on January 1, 2011. The details of this amendment are described in the Fund's Information Circular dated November 3, 2010 that is filed on www.sedar.com.

In return for adding the royalty revenue from the six new restaurants to the Royalty Pool, less revenue from the six permanent closures, BPI has received 46,387 Additional Entitlements. The 46,387 represents 80% (57,984 represents 100%) of the Additional Entitlements with the balance to be received by BPI when the actual full year performance of the new restaurants is known with certainty. The 46,387 Additional Entitlements represents 0.3% of the Fund units on a fully diluted basis. The full 57,984 Additional Entitlements would also represent 0.3% of the Fund on a fully diluted basis. Including the 57,984 Additional Entitlements described above, BPI has the right to acquire 2,701,077 Fund Units, representing 15.6% of the Fund Units on a fully diluted basis. The issuance of the Additional Entitlements to BPI is subject to approval by the Toronto Stock Exchange.

The estimated annual gross franchise revenue for the six new restaurants in 2011 is $9.2 million. Pursuant to the Amended and Restated Limited Partnership Agreement governing Boston Pizza Royalties Limited Partnership, BPI is required to deduct from this amount the actual gross franchise revenue received from the six permanently closed restaurants during the first 12 month period immediately following their addition to the Royalty Pool, which is $7.0 million. Consequently, the estimated annual gross franchise revenue for the 0 net new restaurants in 2011 is $2.2 million. The estimated 4% royalty revenue the Fund will receive in 2011 from these additional 0 net new restaurants is $0.1 million. The royalty revenue for the purposes of calculating the Additional Entitlements, therefore, is $0.1 million or 92.5%. Once the actual performance of these new restaurants for 2011 is known, the number of Additional Entitlements will be adjusted in 2012 to reflect the actual royalty revenue received by the Fund in 2011. As of January 1, 2011, there are 340 restaurants in the Royalty Pool.



Table 1 - Summary of Boston Pizza Royalties Income Fund Units
Issued &
Outstanding
Units,
Issued & Additional
Outstanding Entitlements, &
Units, & Holdback of
Additional Additional
Entitlements Entitlements
Issued and Outstanding Units as of December
31, 2010 14,570,644 14,570,644
BPI Additional Entitlements - Outstanding as
of December 31, 2010 2,513,441 2,513,441
BPI Additional Entitlements - Holdback as of
December 31, 2010 N/A 129,652(1)
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Number of Fully Diluted Units as of December
31, 2010 17,084,085 17,213,737
---------------------------
---------------------------

Issued and Outstanding Units as of December
31, 2010 & January 1, 2011 14,570,644 14,570,644
BPI Additional Entitlements - Outstanding as
of December 31, 2010 2,513,441 2,513,441
BPI Additional Entitlements - Holdback as of
December 31, 2010 N/A 129,652(1)
BPI Additional Entitlements - Issued &
Outstanding as of January 1, 2011 (0 net
new Restaurants added to Royalty Pool) 46,387 46,387(2)

BPI Additional Entitlements - Holdback as of
January 1, 2011 (0 net new Restaurants
added to Royalty Pool) N/A 11,597(3)
-------------------------------------------------------------------------
Number of Fully Diluted Units as of January
1, 2011 17,130,472 17,271,721
---------------------------
---------------------------

BPI Total Ownership as of January 1, 2011 14.9% 15.6%
BPI Ownership based on 0 net new Restaurants
added to Royalty Pool only as of January 1,
2011 0.3% 0.3%

(1) Additional Entitlements from the 17 net new restaurants added to
Royalty Pool on January 1, 2010 determined in 2011, once audited
results of the 17 net new restaurants were known.

(2) Issued effective January 1, 2011.

(3) Holdback of Additional Entitlements from 0 net new restaurants added
to Royalty Pool on January 1, 2011. Actual number of Additional
Entitlements will be determined in early 2012, effective January 1,
2011, once audited results of the 0 net new restaurants are known.


The Trustees of the Fund have approved the contents of this news release.

® Boston Pizza Royalties Limited Partnership. All Boston Pizza registered Canadian trade-marks and unregistered Canadian trade-marks containing the words "Boston", "BP", and/or "Pizza" are trademarks owned by the Boston Pizza Royalties Limited Partnership and licensed by the Boston Pizza Royalties Limited Partnership to Boston Pizza International Inc.

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