Boston Pizza International Adds Seven New Restaurants Opened

Boston Pizza International Adds Seven New Restaurants Opened in 2012
to the Royalty Pool of Boston Pizza Royalties Income Fund 
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 01/02/13 -- Boston
Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) and Boston
Pizza International Inc. ("BPI") announced today that effective
January 1, 2013, the Fund's royalty pool (the "Royalty Pool") has
been adjusted to include the royalties from seven new restaurants
opened across Canada between January 1, 2012 and December 31, 2012
(the "Period"), six of which are full service restaurants and one of
which is a fast casual location. Two full service restaurants were
permanently closed during the Period. This is the eleventh
consecutive annual increase of royalties payable to the Fund and,
with the adjustment for these openings and closures during 2012, the
Royalty Pool now includes 348 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 net of any permanent closures.  
"Boston Pizza continues to open new locations and grow franchise
sales, further strengthening our position as Canada's number one
casual dining brand," said Mark Pacinda, President and Chief
Executive Officer of BPI. "Since the inception of the Fund, the
Royalty Pool has more than doubled, growing by 194 restaurants from
154 in 2002 to 348 Boston Pizza locations today." 
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 since the last Adjustment Date. In return for adding net
additional royalty revenue, BPI receives the right to indirectly
acquire additional units of the Fund ("Additional Entitlements"). The
adjustment for net additional royalty revenue added to the Royalty
Pool is designed to be accretive to unitholders. For each Adjustment
Date occurring after January 2, 2011, the Additional Entitlements are
calculated at 92.5% of the estimated net royalty revenue added to the
Royalty Pool, multiplied by one minus the estimated effective average
tax rate (expressed as a decimal) that the Fund will pay during that
year, 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 both the actual full year
performance of the new restaurants and the effective average tax rate
paid by the Fund are 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 each of the royalty revenues of these
restaurants received from BPI and the effective average tax rate paid
by the Fund is performed. At such time an adjustment is made to
reconcile distributions paid to BPI and the Additional Entitlements
received by BPI. 
In return for adding the royalty revenue from the seven new
restaurants to the Royalty Pool, less revenue from the two permanent
closures, BPI has received 155,559 Additional Entitlements. The
155,559 represents 80% (194,449 represents 100%) of the Additional
Entitlements with the balance to be received (as adjusted) by BPI
when both the actual full year performance of the new restaurants and
the effective average tax rate paid by the Fund are known with
certainty. The 155,559 Additional Entitlements represents 0.9% of the
Fund units on a fully diluted basis. The full 194,449 Additional
Entitlements would represent 1.1% of the Fund on a fully diluted
basis. Including the 194,449 Additional Entitlements described above,
BPI has the right to acquire 2,197,957 Fund Units, representing 12.4%
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 seven new
restaurants in 2013 is $11.6 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 two
permanently closed restaurants during the first 12 month period
immediately following their addition to the Royalty Pool, which is
$3.4 million. Consequently, the estimated annual net franchise
revenue for the new restaurants in 2012 is $8.2 million. The
estimated 4% royalty revenue the Fund will receive in 2013 from these
additional new restaurants is $0.3 million. The pre-tax royalty
revenue for the purposes of calculating the Additional Entitlements,
therefore, is approximately $0.3 million or 92.5%. The estimated
effective average tax rate that the Fund will pay in the calendar
year 2013 is 25.0%. Accordingly, the after-tax royalty revenue for
the purposes of calculating the Additional Entitlements is
approximately $0.2 million ($0.3 million x (1 - 0.25)). Once both the
actual performance of these new restaurants for 2013 and the actual
effective average tax rate paid by the Fund for 2013 are known, the
number of Additional Entitlements will be adjusted in 2014 to reflect
the actual royalty revenue received by the Fund in 2013 and the
actual effective average tax rate paid by the Fund in 2013. As of
January 1, 2013, there are 348 restaurants in the Royalty Pool. 


 
          Summary of Boston Pizza Royalties Income Fund Units               
                                                                            
                                                               Issued &     
                                                     Outstanding Units,     
                                                             Additional     
                                           Issued &     Entitlements, &     
                               Outstanding Units, &         Holdback of     
                                         Additional          Additional     
                                       Entitlements        Entitlements     
                                                                            
Issued and Outstanding Units as                                             
 of Dec. 31, 2012                        15,570,644          15,570,644     
BPI Additional Entitlements -                                               
 Outstanding as of Dec. 31,                                                 
 2012                                     1,959,875           1,959,875     
BPI Additional Entitlements -                                               
 Holdback as of Dec. 31, 2012                   N/A              43,633  (1)
-----------------------------------------------------------------------     
Number of Fully Diluted Units                                               
 as of Dec. 31, 2012                     17,530,519          17,574,152     
                               ----------------------------------------     
                               ----------------------------------------     
                                                                            
Issued and Outstanding Units as                                             
 of Dec. 31, 2012 & Jan. 1,                                                 
 2013                                    15,570,644          15,570,644     
BPI Additional Entitlements -                                               
 Outstanding as of Dec. 31,                                                 
 2012                                     1,959,875           1,959,875     
BPI Additional Entitlements -                                               
 Holdback as of Dec. 31, 2012                   N/A              43,633  (1)
BPI Additional Entitlements -                                               
 Issued & Outstanding as of                                                 
 Jan. 1, 2013  (5 net new                                                   
 Restaurants added to Royalty                                               
 Pool)                                      155,559             155,559  (2)
BPI Additional Entitlements -                                               
 Holdback as of Jan. 1, 2013 (5                                             
 net new Restaurants added to                                               
 Royalty Pool)                                  N/A              38,890  (3)
-----------------------------------------------------------------------     
Number of Fully Diluted Units                                               
 as of Jan. 1, 2013                      17,686,078          17,768,601     
                               ----------------------------------------     
                               ----------------------------------------     
                                                                            
                                                                            
BPI Total Ownership as of Jan.                                              
 1, 2013                                      12.0%               12.4%     
BPI Ownership based on 5 net                                                
 new Restaurants added to                                                   
 Royalty Pool only as of Jan.                                               
 1, 2013                                       0.9%                1.1%     
                                                                            
(1) Additional Entitlements from the 3 net new restaurants added to         
 Royalty Pool on Jan. 1, 2012 determined in 2013, once audited results      
 of the 3 net new restaurants and actual effective average tax rate         
 paid by the Fund are known.                                                
(2) Issued effective Jan. 1, 2013.                                          
(3) Holdback of Additional Entitlements from 5 net new restaurants          
 added to Royalty Pool on Jan. 1, 2013. Actual number of Additional         
 Entitlements will be determined in early 2014, effective Jan. 1, 2013,     
 once audited results of the 5 net new restaurants and actual effective     
 average tax rate paid by the Fund are known.                               

 
The Trustees of the Fund have approved the contents of this news
release. 
(R) 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.
Contacts:
Boston Pizza Royalties Income Fund
Jordan Holm
Vice President, Investor Relations
604-303-6083
investorrelations@bostonpizza.com
www.bpincomefund.com
 
 
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