GOOD FOOD MAKES GREAT RESULTS A&W REVENUE ROYALTIES INCOME FUND - PowerPoint PPT Presentation

GOOD FOOD MAKES GREAT RESULTS A&W REVENUE ROYALTIES INCOME FUND FEBRUARY 2020

Agenda • Overview/Introduction • Strategy • Climate • Results 2

Constant Evolution 3

Canada’s Fifth Largest Restaurant Brand (1) $1.5 Billion in Total System Sales for all A&W Restaurants in 2019 (2) 990+ restaurants Coast to Coast (1) Source: Canadian Foodservice and Hospitality magazine (June 2019) (2) System Sales is a non-IFRS measure and is reported in respect of all A&W restaurants. See “Non-IFRS Measures” 4

Signature Products 5

Over 550 Freestanding Restaurants Cornwall, ON 6

Over 145 Convenience Locations Exeter, ON 7

Market Leader for Burger Restaurants in Malls 8

75+ Urban Locations 9

#1 Root Beer in 2019 10

A&W – Strong #2 Burger Chain $5,300 (Not to Scale) $1,420 $647 $370 $329 McDonald's A&W Wendy's Burger King Harvey's 2018 Canadian Burger Industry Sales Results Source: Canadian Foodservice and Hospitality magazine (June 2019) 11 (all figures are in millions of dollars)

A&W Strengths • Leadership Experience – (25+ years average experience) • Strategy – (A unique strength – 40+ years) • Climate 12

2018 and 2019 Highlights • Same Store Sales Growth (1) – 2019 +4.1% – 2018 +9.8% • Royalty growth +8.8% in 2019 and 14.7% in 2018 • Annualized distribution rate increased 11.2% in 2019 and 5.1% in 2018 • 44 New restaurants (less 7 closures) added to the Royalty Pool on January 5, 2020 (38 net in 2019) (1) Same Store Sales Growth is a non-IFRS measure. See “Non-IFRS Measures”. 13

Same Store Sales Growth Trend (1) 9.8% 10.0% 9.0% 7.6% 8.0% 6.3% 7.0% 6.0% 4.1% 5.0% 3.4% 4.0% 2.0% 3.0% 2.0% 1.0% 0.0% 2014 2015 2016 2017 2018 2019 (1) Same Store Sales Growth is a non-IFRS measure. See “Non-IFRS Measures”. 14

A&W’s Mission 15

Strategic Thrusts 1 Harnessing the power of natural ingredients 2 Dramatically improve operating standards Capture guest visits and grow restaurant profit 3 4 Become more and more convenient 5 Strengthen and extend our Climate 6 Be most loved 16

1 Harness the power of natural ingredients Position A&W as the leader in providing natural food. 17

Our Ingredient Guarantees 18

2 Dramatically improve operating standards • Guest Connect 19

Capture guest visits and grow restaurant profit 3 • Guest experience • Innovate with our menu • Leverage technology • Improve skills in managing labour and cost of sales 20

4 Become more and more convenient • Open new restaurants, bringing A&W closer to more Canadians and creating excitement and awareness • Create a new pick-up and go and delivery business • Respond to emerging consumer convenience needs and technology ongoing 21

New Restaurant Growth 22

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5 Strengthen and extend our Climate • Demonstrate doing what’s right • Build a powerful connection of trust with our guests • Harness the energy and passion of our partners 25

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6 Be most loved • Fully engage employees: proud to work at A&W • “Share our soul” because it matters to our guests • Be the most trusted QSR brand, doing what’s right for our guests, our environment, and one another 27

Top-Line Income Fund Structure • Royalties are based on Gross Sales reported by restaurants in the Royalty Pool Gross Sales Distributions Less Fund Royalty of Royalty 3% to expenses Income Pool and taxes Unitholders Restaurants 28

Fund Revenue, Expenses and Distributable Cash $k 2017 2018 2019 SSSG (1) +2.0% +9.8% +4.1% Gross Sales (2) 1,188,818 1,362,996 1,482,323 Royalty Income 35,665 40,890 44,470 Admin. Expense 654 713 791 Interest 2,583 2,568 2,267 Current tax 5,985 6,346 8,269 Distributable Cash (3) 26,279 31,262 33,143 (1) SSSG or Same Store Sales Growth is a non-IFRS measure. See “Non-IFRS Measures”. (2) Gross Sales in this table is presented solely in respect of the A&W restaurants included in the Royalty Pool. (3) Distributable Cash is a non-IFRS measure. See “Non-IFRS Measures”. 29

Fund Taxes, Distributions, Surplus Cash $k 2017 2018 2019 Distributable Cash (1) 26,279 31,262 33,143 Refundable tax 371 1,284 (407) Dist. to Unitholders (19,968) (20,933) (24,475) Dividends to Food Services (5,736) (7,316) (7,830) Surplus 946 4,297 431 Surplus – beg of period 2,417 3,363 7,660 Surplus – end of period 3,363 7,660 8,091 (1) Distributable Cash is a non-IFRS measure. See “Non-IFRS Measures”. 30

Fund Distributions and Payout 2017 2018 2019 Distributable cash per unit (1) $1.641 $1.853 $1.863 Refundable tax recovered 0.023 0.076 (0.023) Cash generated after refundable 1.664 1.929 1.840 tax Payout ratio (2) 97.8% 90.3% 99.5% (1) Distributable Cash per unit is a non-IFRS measure. See “Non-IFRS Measures”. (2) Payout ratio is a non-IFRS measure. See “Non-IFRS Measures”. 31

Distribution Increases • Distribution rate was increased three times in 2019: – 2.8% increase effective for the February distribution paid March 29, 2019; – 4.8% increase effective for the April distribution paid May 31, 2019; and – 3.3% increase effective for the July distribution paid August 30, 2019. • Current annualized rate is $1.908 per unit • Total distributions in 2019 were $1.853 per unit – 10.7% increase over 2018 distributions 32

Annual Payout Ratio (1) 99.5% 98.8% 100.0% 97.8% 98.0% 96.0% 94.0% 90.3% 92.0% 90.0% 88.0% 86.0% 84.0% 2016 2017 2018 2019 (1) Payout Ratio is a non-IFRS measure. See “Non-IFRS Measures”. 33

Royalty Pool Gross Sales $1,600 $1,482 $1,363 $1,400 $1,189 $1,138 $1,200 $1,061 $957 $1,000 $710 $736 $777 $794 $823 $856 (millions) $800 $456 $494 $539 $599 $639 $600 $384 $400 $200 $0 34

Number of Restaurants in Royalty Pool 1,000 934 971 896 900 790 814 838 861 800 585 604 620 638 654 660 676 685 700 715 737 760 700 600 500 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 35