2|A&W Food Services of Canada Inc.
3|A&W Food Services of Canada Inc.
A & W Food Services of Canada Inc.
Management Discussion and Analysis
The following Management Discussion and Analysis (“MD&A”) is dated March 5, 2025 and is intended to
assist readers in understanding the business environment, strategies, performance and risk factors of A & W
Food Services of Canada Inc. (“A&W”, “Food Services” or “the Company”). This MD&A provides readers
with management’s view and analysis of A&W’s financial results for the 16-week and 52-week periods
ended December 29, 2024 and should be read in conjunction with the audited annual consolidated financial
statements and accompanying notes of A&W for the 52-week period ended December 29, 2024. Such
financial statements and additional information about A&W, including its annual information form for the
period ended December 29, 2024 (“AIF”), are available on Food Services’ SEDAR+ profile at
www.sedarplus.ca or at www.awinvestors.ca.
FORWARD-LOOKING INFORMATION
Certain statements in this MD&A contain forward-looking information within the meaning of applicable
securities laws in Canada. The words “anticipates”, “believes”, “budgets”, “could”, “estimates”, “expects”,
“forecasts”, “intends”, “may”, “might”, “plans”, “projects”, “schedule”, “should”, “will”, “would”, “outlook”
and similar expressions are often intended to identify forward-looking information, although not all forward-
looking information contains these identifying words.
The forward-looking information in this MD&A includes, but is not limited to; estimates regarding annual
sales; expectations regarding improvements in sales trends at A&W restaurants; plans to increase guest
traffic; A&W’s expectation that the food service industry, and more particularly the quick service restaurant
(“QSR”) segment, will continue to grow; having sufficient cash on hand to meet future obligations; the
expectations that Food Services will be able to be able to pay down the operating loan facility; the
expectations that Food Services will continue to pay dividends; statements regarding the potential impact of
international conflicts and the impact of tariffs; Food Services’ objectives with respect to the A&W
restaurants and its planned strategies to achieve those objectives; the expectation that Food Services will
remain in compliance with all covenants related to its operating loan facility based on current projections;
timing for the maturity of the operating loan facility; Food Services’ expectation that future restaurant growth
will be funded by franchisees; Food Services’ expectation that it will incur capital expenditures to open new
corporate restaurants and continue to develop the mobile app and loyalty program and that it will have
sufficient capital resources to fund these capital requirements; A&W’s ability to continue to grow and better
position itself to withstand the risks associated with the current economic conditions; delivering strong results
and improved market share as the QSR industry and the QSR burger market continue to grow; future
introductions of new recipes and products to its plant-based line-up; a reduction in environmental impact
through conscious use of packaging, energy and water, and reduction of waste, and high-efficiency equipment
resulting in a reduction in energy usage; expectations for increased loyalty and enhancing performance over
the long term; the expansion of Pret restaurants under the franchise model; successfully securing sites for
4|A&W Food Services of Canada Inc.
new Pret premises; expectations to be able to franchise any future A&W or Pret expansion; our financial
outlook and Food Services remaining committed to the long-term health and success of its franchise network.
The forward-looking information is based on various assumptions that include, but are not limited to:
no material impact to supply chain availability, cost of inputs or franchisee ability to operate
because of the actual or threatened tariffs;
no material impact to consumer discretionary spending because of actual or threatened tariffs;
the general risks that affect the restaurant industry will not arise;
there are no changes in availability of experienced management and hourly employees;
there are no material changes in government regulations concerning menu labelling and disclosure
and drive–thru restrictions, franchise legislation or sales taxes;
no publicity from any food borne illness;
no material changes in competition;
no material changes in the quick service restaurant burger market including as a result of changes in
consumer taste or health concerns or changes in economic conditions or unemployment, or a disease
outbreak;
no material increases in food and labour costs;
the continued availability of quality raw materials;
continued additional franchise sales and maintenance of franchise operations;
Food Services is able to continue to grow same store sales;
Food Services is able to maintain and grow the current system of franchises;
Food Services is able to locate new retail sites in desirable locations;
Food Services is able to obtain qualified operators to become A&W franchisees;
existing franchisees are able to successfully operate and grow their businesses and maintain
profitability;
no material number of closures of A&W restaurants;
no material impact on sales from closures of “anchor” stores in shopping centres;
no material declines in traffic patterns at shopping centres and other retail nodes;
no material closures to shopping centres or other retail nodes in which A&W operates;
no supply disruptions;
franchisees duly pay service fees and other amounts;
no material impact on sales from new or increased sales taxes;
continued availability of key personnel;
continued ability to preserve intellectual property;
no material litigation from guests at A&W or Pret restaurants;
Food Services will receive sufficient revenue in the future to maintain the payment of quarterly
dividends;
Food Services can continue to comply with its obligations under its credit arrangements;
the projections for the A&W business provided by Food Services are accurate; and
Food Services will be successful in executing on its business strategies and such strategies will
achieve their intended results.
Inherent in forward-looking information are risks and uncertainties beyond management’s or Food Services’
ability to predict or control that may cause actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking
5|A&W Food Services of Canada Inc.
information. The forward-looking information in this report is subject to risks, uncertainties and other factors
including, among others, the risks identified in the AIF under the heading “Risk Factors”. The AIF is
available on Food Services’ SEDAR+ profile at www.sedarplus.ca. Additional risks and uncertainties not
currently known to Food Services or that are currently not considered to be material also may impair Food
Services’ business.
All forward-looking information in this report is qualified in its entirety by this cautionary statement and,
except as required by law, Food Services undertakes no obligation to revise or update any forward-looking
information as a result of new information, future events or otherwise after the date hereof.
BASIS OF PREPARATION
The financial results reported in this MD&A are derived from the audited annual consolidated financial
statements and unaudited condensed interim consolidated financial statements of Food Services (formerly
A&W of Canada Inc., as discussed below), which are prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting
Standards”). The accounting policies applied in the audited annual consolidated financial statements for the
52-week period ended December 29, 2024 and this MD&A have been consistently applied to all years
presented.
To align its financial reporting with the business cycle of its operations, Food Services uses a fiscal year
comprising a 52 or 53-week period ending on the Sunday nearest December 31. The fiscal 2024 year was 52
weeks and ended December 29, 2024 (“Fiscal 2024”), fiscal 2023 was 52 weeks and ended December 31,
2023 (“Fiscal 2023”) and fiscal 2022 was 52 weeks and ended January 1, 2023 (“Fiscal 2022”). All references
to “Q4 2024” are to Food Services’ 16-week period ended December 29, 2024; and to “Q4 2023” are to Food
Services’ 16-week period ended December 31, 2023.
Food Services manages the business on the basis of one reportable segment. The functional and reporting
currency of the Company is the Canadian dollar.
The audited annual consolidated financial statements and accompanying notes for Fiscal 2024 and this
MD&A were authorized for issue by Food Services’ Board of Directors (the "Board of Directors") on March
5, 2025.
Overview
Established in 1956, A&W was Canada’s first national burger QSR. Over our 68-year history, Food Services
has established a strong brand name and a reputation as a leader in the burger segment of the QSR market.
With System Sales(i) of $1.87 billion in Fiscal 2024 ($1.85 billion in Fiscal 2023) A&W is the second largest
burger QSR chain(ii) in the $12.5 billion Canadian QSR burger market(iii). A&W restaurants have a loyal
customer base, with hundreds of millions of guest visits across Canada each year.
(i)
System Sales is a non-IFRS measure. Please see “Non-IFRS Measures”, “Selected Financial Information” and “How We
Assess the Performance of Our Business” sections of this MD&A for additional details.
(ii) Per Canada’s Foodservice and Hospitality Top 60 Report (June 2024). Represents 2023 year-end Canada metrics.
(iii) Circana, CREST®, Canada, QSR and QSR Burger Subchannel, YE May 2024.
Food Services is the franchisor of A&W restaurants in Canada and is in the business of developing and
franchising quick service restaurants. The Company has a proven history of growing the number of A&W
6|A&W Food Services of Canada Inc.
restaurants across Canada and today we operate a number of different concepts: freestanding restaurants with
drive–thru facilities, shopping centres locations, urban restaurants on street fronts in highly dense urban areas
and convenience locations which are shared sites with gas/convenience store operators, many in partnership
with Suncor Energy Products Partnership, through their Petro-Canada retail network (“Suncor” or “Petro-
Canada”).
The A&W product line includes hamburgers (The Burger Family®), chicken products through the Chubby
Chicken® and Chicken Cruncher® line of products, russet thick–cut fries, sweet potato fries, A&W Root
Beer®, fresh hand–cut onion rings, breakfast items, soft drinks, coffee, as well as a variety of frozen and
espresso-based beverages that are offered through the A&W Brew Bar®.
As at December 29, 2024 the total number of A&W restaurants in Canada was 1,073 of which 1,063 are
franchised and 10 are corporately owned and are located in Ottawa, Ontario. As at December 29, 2024 Food
Services also operated one corporately owned Pret a Manger (“Pret”) restaurant in Toronto, Ontario as further
described below.
Food Services’ subsidiary, A&W Root Beer Beverages of Canada Inc. (“A&W Beverages”) is in the business
of buying and selling concentrate used in the production of canned and bottled regular and diet A&W Root
Beer. A&W holds a 60% interest in A&W Beverages and the 40% non controlling interest is held by an
outside party.
Food Services’ revenue consists of service fees from franchised restaurants, revenue from the sale of food
and supplies to franchisees and distributors, revenue from the opening of new franchised restaurants, revenue
from company-owned A&W restaurants and one Pret restaurant, revenue from other services sold to
franchisees, contributions to the National Advertising Fund and revenue from sales of A&W Root Beer
concentrate to a licenced bottler who produces and distributes A&W Root Beer for sale in retail grocery
stores and other retail outlets. The National Advertising Fund is funded by all franchised and corporate A&W
restaurants, with contributions based on a percentage of sales, and is recorded as Food Services’ revenue with
a corresponding offset in operating costs.
Operating costs include the cost of materials, supplies and equipment sold either directly to franchisees or to
distributors that service the restaurants or that are sold to the licenced bottler, costs of providing other services
to franchisees, marketing related expenses incurred by the National Advertising Fund and the costs of sales
and other expenses of the Pret and A&W restaurants operated corporately by Food Services, all of which
generally vary with revenue. Operating costs also includes depreciation of plant, equipment, intangible assets
and right-of-use assets. General and administrative expenses include costs associated with providing general
support to the franchised A&W restaurants and establishing new A&W restaurants and are primarily fixed.
Under the terms of the Amended and Restated License and Royalty Agreement (as further defined below),
Food Services paid A&W Trade Marks Limited Partnership (“the Partnership”), a subsidiary of A&W Trade
Marks Inc. (“Trade Marks”), a royalty for use of the trademarks used in the A&W business in Canada (the
“Trademarks” or “A&W Trademarks”) it did not directly own and, as a result, a royalty expense is recognized
and included in the consolidated statements of income for the years ended December 31, 2023 and December
29, 2024. It is important to note that as of October 18, 2024, as a result of the Transaction (as further described
below), Food Services indirectly acquired ownership of the A&W Trademarks by acquiring all issued and
outstanding units of A&W Revenue Royalties Income Fund (the “Fund”) that it did not already own and
7|A&W Food Services of Canada Inc.
since the Transaction, Food Services ceased recognizing the royalty expense in its consolidated statement of
income. As such, the consolidated statement of income for the year ended December 29, 2024 is the final
year in which a royalty expense will be recognized in Food Services’ consolidated statement of income and
royalty expense is only applicable for the period prior to the date of the Transaction.
RECENT EVENTS
Strategic Combination with the Fund
During Fiscal 2024, there were important changes to A&W’s corporate legal entity structure. On October 18,
2024, Food Services completed a transaction (the “Transaction”) in which it acquired all of the issued and
outstanding units of the Fund (“Trust Units”) that it did not already own in exchange for $175,623,000 in
cash and 9,839,091 common shares of Food Services less $18,275,000 in cash and intercompany receivables
assumed upon Trade Marks and the Fund becoming wholly owned subsidiaries of Food Services. The
Transaction was a strategic combination and was completed as a statutory plan of arrangement under the
Canada Business Corporations Act.
Prior to the completion of the Transaction, A & W of Canada Inc. (“A&W Canada”) held a 65.48% interest
in AWFS Holdings Inc. (“AWFS Holdings”) and, as a result, controlled AWFS Holdings, and AWFS
Holdings controlled a predecessor of the Company, also named A & W Food Services of Canada Inc.
(“predecessor A&W Food Services”). An equity interest of 34.52% in AWFS Holdings was owned by an
outside party and was recorded as a non-controlling interest in the consolidated financial statements of
A&W Canada.
The Transaction also involved the amalgamation of predecessor A&W Food Services, the operating
company, with the following holding companies that directly or indirectly owned shares of predecessor A&W
Food Services prior to the Transaction, some of which were created solely to facilitate the amalgamation and
in preparation for the acquisition of the Trust Units: Buddy Holdings Inc., A&W Canada, AWFS Holdings,
A&W Holdings I Inc. and A&W Holdings II Inc. (collectively referred to as the “Holding Companies”). The
amalgamated entity retained the legal name A & W Food Services of Canada Inc.
Prior to the Transaction, predecessor A&W Food Services owned (i) 9.4% of the outstanding Trust Units on
a fully-diluted basis through its ownership of limited voting units of the Fund, with the remaining Trust Units
being publicly traded, and (ii) 21.9% of the issued and outstanding common shares of Trade Marks, which
were exchangeable for Trust Units, with the remaining common shares being owned by the Fund. Food
Services accounted for its investments in Trade Marks and the Fund as investments in associates. As a result
of the completion of the Transaction, Trade Marks and the Fund became wholly owned subsidiaries of Food
Services and therefore Food Services derecognized its investments in associates and does not have any
investments in associates as at December 29, 2024. Subsequent to the year end of December 29, 2024, on
January 3, 2025, the Fund and Trade Marks were dissolved.
In connection with the Transaction, the Trust Units were de-listed from the Toronto Stock Exchange (“TSX”)
and the common shares of Food Services were listed on the TSX under the symbol AW.TO.
8|A&W Food Services of Canada Inc.
The following organizational chart represents A&W’s corporate structure as at December 31, 2023 and in
effect prior to the steps associated with the Transaction and illustrates the relationship with Food Services’
direct and indirect parent companies and the Fund and its subsidiaries:
9|A&W Food Services of Canada Inc.
The following organizational chart represents A&W’s corporate structure as at December 29, 2024 following
the completion of the Transaction but before dissolving the Fund and Trade Marks which occurred after
Fiscal 2024 year end:
10|A&W Food Services of Canada Inc.
The following organizational chart represents A&W’s corporate structure as at January 3, 2025, following
the full wind up of the Fund and Trade Marks which were dissolved in order to simplify the corporate
structure and resulted in Food Services directly owning the Trademarks:
11|A&W Food Services of Canada Inc.
Under the terms of the Transaction, each of the Fund’s unitholders (the “Unitholders”) (other than Food
Services) could elect to receive in exchange for each Trust Unit:
i)
$37.00 in cash (the “Cash Consideration”)
ii)
one common share in the capital of Food Services (the “Share Consideration”), or
iii)
a combination of 32.54277% of the Cash Consideration (being $12.040825) and 67.45723% of the
Share Consideration (being 0.6745723 of a common share in Food Services)
The elections of Unitholders to receive Cash Consideration or Share Consideration were subject to proration
in the event that Unitholders elected, in the aggregate, to receive more or less than $175,623,000 in Cash
Consideration, such that in all cases, a total of 4,746,582 Trust Units would be purchased for cash at $37.00
per Trust Unit, representing approximately 32.5% of the outstanding Trust Units (not counting the limited
voting units of the Fund owned by predecessor A&W Food Services).
This was accounted for as an asset acquisition in Food Services’ consolidated financial statements. The Cash
Consideration element for the acquisition of the Trust Units was funded by debt of $265,000,000 from a
revolving credit facility (the “Credit Facility”) with a syndicate of banks that was entered into in conjunction
with the completion of the Transaction. The Credit Facility has a maximum borrowing capacity of
$325,000,000. Proceeds from the Credit Facility were also used to repay Trade Marks’ outstanding
borrowings balance, totaling $60,167,000 and to repay non-interest bearing promissory notes payable on
demand with an aggregate principal amount of $12,522,000.
Prior to completion of the Transaction there was an expense sharing agreement (“the Expense Agreement”)
in place that was entered into on February 2, 2024 and outlined an arrangement amongst Food Services, the
Fund and Trade Marks in respect of the payment of certain costs, fees, expenses and disbursements incurred
or to be incurred by the Fund and Trade Marks in connection with their consideration, evaluation and
negotiation of the Transaction incurred at or prior to the public announcement of the Transaction. Pursuant
to the Expense Agreement, Food Services agreed to (a) reimburse the Fund and Trade Marks for certain
expenses paid by the Fund or Trade Marks, (b) advance funds to the Fund and/or Trade Marks to permit the
Fund and/or Trade Marks, as applicable, to pay such expenses or (c) pay such expenses directly, in each case,
subject to certain caps as set forth therein. During Fiscal 2024, Food Services paid a total of $3,998,000 in
costs incurred by the Fund and Trade Marks related to the Transaction under the terms of the Expense
Agreement.
On October 18, 2024, upon completion of the Transaction, Food Services indirectly reacquired the A&W
Trademarks through its acquisition of the remaining outstanding Trust Units. Prior to completion of the
Transaction, the A&W Trademarks were owned by the Partnership and Food Services paid a royalty to the
Partnership for use of the Trademarks under the Amended and Restated Licence and Royalty Agreement (the
“Royalty Agreement”). The royalty paid by Food Services prior to completion of the Transaction was equal
to 3% of sales reported by A&W restaurants in the Royalty Pool and is reflected as an expense in the
consolidated statements of income up until the completion of the Transaction. The Royalty Agreement also
had a mechanism whereby each year, net new A&W restaurants (as defined in the Royalty Agreement) were
added to the pool of restaurants governed by the Royalty Agreement (the “Annual Adjustment”), and for
which Food Service’s would be compensated in additional shares in the Partnership, represented by Limited
Partnership Units adding to the ownership position initially established in 2002, when Food Services sold the
A&W Trademarks to Trade Marks, which subsequently transferred them to the Partnership. The gain realized
on the sale of the Trademarks was deferred and amortized over the term of the Royalty Agreement and
12|A&W Food Services of Canada Inc.
amortization of the gain was recognized on Food Services’ consolidated statements of income up until the
completion of the Transaction. The Annual Adjustment increased the deferred gain and the additions were
amortized each year over the remaining term of the Royalty Agreement from the date of addition.
Post Transaction, through the series of steps further described above, the Partnership was wound up and the
Trademarks were transferred to Trade Marks which became a wholly owned subsidiary of Food Services and
as such, no royalty expense was recognized in Food Services’ consolidated statement of income from the
date of the Transaction to the end of the period ended on December 29, 2024. In addition, following
completion of the Transaction, the deferred gain was derecognized from Food Services’ consolidated balance
sheet and the corresponding amortization of the deferred gain was eliminated from Food Services’
consolidated statement of income as Trade Marks became a wholly owned subsidiary of Food Services
meaning no deferred gain amortization was recorded in Food Services’ consolidated statement of income
from the date of the Transaction to the end of the period ended on December 29, 2024 .
As described above, the Fund and Trade Marks were wound up on January 3, 2025 and the Trademarks are
now directly owned by Food Services.
The directly attributable costs incurred by Food Services and the Fund to complete Food Services’ acquisition
of the A&W Trademarks totaling $18,784,000 have been capitalized and are included in the intangible assets
balance as at December 29, 2024. Financing costs totalling $3,500,000 related to the Credit Facility entered
into as part of the Transaction have been capitalized and presented as a reduction of the carrying cost of the
operating loan facility. Additional costs related to the Transaction, totaling $280,000, were recognized in
Food Services’ Fiscal 2024 consolidated statement of income.
For further information regarding the Transaction, please refer to the Fund’s management information
circular dated August 29, 2024 available on the Fund’s SEDAR+ profile at www.sedarplus.ca.
Pret A Manger
On June 2, 2022, the Company announced that it had signed a Country Agreement (the "Country Agreement")
with UK-based Pret A Manger (Europe) Limited, which sets forth the general terms and conditions granting
Food Services master franchisor rights to Canada for Pret A Manger. Pursuant to the Country Agreement,
Food Services has an exclusive right to expand the Pret brand across Canada. After trialling and testing the
Pret products and concept in eight pop up locations over a two-year period beginning in 2022 (the “initial
test phase”), we finalized a development agreement (the “Development Plan”) with Pret in 2024.
The Development Plan contemplates Food Services continuing to increase the number of physical locations
offering Pret products across Canada over an initial 10-year development term. In January 2024, we opened
a standalone Pret location in Toronto, Ontario. As at December 29, 2024, Pret drip coffee was being served
in A&W restaurants nationwide, and Pret espresso was being served in all A&W restaurants equipped with
the A&W Brew Bar. Select A&W restaurants also started serving Pret pastries on a trial basis at the end of
2023 and we continued to roll out additional test locations in 2024. All of the eight pop up Pret locations
which were opened as part of the initial test phase, which terminated on June 2, 2024, had been closed by the
end of 2024. Food Services is currently pursuing additional opportunities to open Pret locations in accordance
with the Development Plan and as at the date of this MD&A is actively pursuing sites in three key Canadian
cities.
13|A&W Food Services of Canada Inc.
FINANCIAL HIGHLIGHTS
Q4 2024
System Sales(i) of $576.8 million were consistent with Q4 2023
Revenue decreased by $9.7 million (9%) as compared to Q4 2023
Income before income taxes increased by $8.7 million (72%) as compared to Q4 2023
Adjusted EBITDA(i) increased by $0.2 million (1%), as compared to Q4 2023, to $27.9 million
Operating costs decreased by $11.7 million (19%) as compared to Q4 2023
General and administrative expenses decreased by $1.7 million (10%) as compared to Q4 2023
Cash Dividend of $0.3748 per share paid on December 27, 2024
Opened 9 new A&W restaurants
Fiscal 2024
System Sales(i) of $1.87 billion – an all time high for A&W – compared to $1.85 billion for Fiscal
2023
Revenue decreased by $7.0 million (2%) as compared to Fiscal 2023
Income before income taxes increased by $2.9 million (6%) as compared to Fiscal 2023
Adjusted EBITDA(i) increased by $1.2 million (1%), as compared to Fiscal 2023, to $93.5 million
Operating costs decreased by $6.9 million (4%) as compared to Fiscal 2023
General administrative expenses increased by $1.5 million (3%) as compared to Fiscal 2023
Opened 28 new A&W restaurants
Opened first stand-alone Pret restaurant and rolled out Pret coffee to A&W restaurants nationwide
Obtained $325 million credit facility to fund the Transaction and for working capital
Successfully completed the strategic combination of Food Services and the Fund
(i)
System Sales and Adjusted EBITDA are non-IFRS financial measures. Please see “Non-IFRS Measures”, “Selected
Financial Information” and “How We Assess the Performance of Our Business” sections of this MD&A for further details.
SELECTED FINANCIAL INFORMATION
The following tables summarize Food Services’ results for the periods indicated. The selected consolidated
financial information set out in the tables below for Fiscal 2022 has been derived from the annual audited
consolidated financial statements of predecessor A&W Food Services for the 52-week period ended January
1, 2023, with adjustments made by management to reflect consolidation and presentation at the A&W Canada
level so that the periods presented are comparable. The selected consolidated financial information set out
below for Q4 2023 has been derived from the unaudited interim condensed consolidated financial statements
of predecessor A&W Food Services with adjustments made by management to reflect consolidation and
presentation at the A&W Canada level so that the periods presented are comparable. The selected
consolidated financial information set out below for Q4 2024 has been derived from the audited annual
consolidated financial statements of Food Services for the year ended December 29, 2024 less the year to
date information per the unaudited interim condensed consolidated financial statements of predecessor A&W
Food Services for Q3 2024 after giving effect to the consolidation and presentation adjustments at the A&W
Canada level outlined above. The selected consolidated financial information set out in the tables below for
Fiscal 2024 and 2023 has been derived from the annual audited consolidated financial statements of Food
Services for the 52-week periods ended December 29, 2024 and December 31, 2023.
14|A&W Food Services of Canada Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Quarterly Results
Annual Results
(in thousands of Canadian $)
Q4
2024
Q4
2023
Fiscal
2024
Fiscal
2023
Fiscal
2022
Financial Summary
Revenue from franchising
85,633
95,321
267,619
276,121
277,895
Revenue from corporate restaurants
7,563
7,560
24,680
23,193
21,467
Total revenue
93,196
102,881
292,299
299,314
299,362
Operating costs
(49,015)
(60,677)
(157,095)
(163,948)
(171,740)
General and administrative expenses
(15,054)
(16,744)
(48,632)
(47,108)
(43,805)
Royalty expense
(5,776)
(17,045)
(44,036)
(54,863)
(52,100)
Impairment of leases receivable
(192)
(43)
(192)
(43)
521
Net finance expense
(3,837)
(437)
(4,904)
(1,387)
(1,190)
Amortization of deferred gain
398
1,143
3,039
3,703
3,495
Share of income from associates
1,242
3,143
9,472
11,415
10,765
Income before income taxes
20,962
12,221
49,951
47,083
45,308
Income tax expense(i)
(22,075)
(2,337)
(28,273)
(9,071)
(8,906)
Net income (loss)(i)
(1,113)
9,884
21,678
38,012
36,402
Net cash generated from (used in)
operating activities
8,479
(196)
61,228
18,953
5,938
Other Metrics
System Sales(ii)
576,796
577,616
1,868,478
1,853,119
1,776,205
System Sales Growth(ii)
-0.1%
3.4%
0.8%
4.3%
10.4%
Same Store Sales Growth(ii)
-1.9%
2.1%
-0.6%
2.7%
7.4%
New A&W restaurants opened
9
9
28
19
23
A&W restaurants permanently closed
5
3
9
11
6
Number of A&W restaurants
1,073
1,054
1,073
1,054
1,046
Net annual restaurant unit growth
1.8%
0.8%
1.8%
0.8%
1.7%
Adjusted EBITDA(ii)
27,927
27,705
93,469
92,300
87,371
Adjusted EBITDA Margin(ii)
30.0%
26.9%
32.0%
30.8%
29.2%
Free Cash Flow(ii)
7,002
(1,905)
58,322
12,950
1,306
Net Debt to Adjusted EBITDA(ii)
2.5
0.1
2.5
0.1
0.0
Capex/Revenue Ratio(ii)
1.6%
1.7%
1.0%
2.0%
1.5%
(i)
The income tax expense and net income (loss) for Q4 2024 and Fiscal 2024 includes a non-recurring, non-cash deferred tax
expense of $16,943,000 as a result of the Transaction. Please see the “Income taxes” sections of this MD&A under the header
“Results of Operations” for additional details.
(ii) System Sales, System Sales Growth, Same Store Sales Growth, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash
Flow, Net Debt to Adjusted EBITDA and Capex/Revenue Ratio are non-IFRS financial measures, non-IFRS ratios and
supplementary financial measures. Please see “Non-IFRS Measures”, and “How We Assess the Performance of Our Business”
sections of this MD&A and the reconciliations of each non-IFRS measure to the relevant reported IFRS financial measure set
out below for further details.
15|A&W Food Services of Canada Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Annual Results
(in thousands of Canadian $, except per share amounts)
Fiscal
2024
Fiscal
2023
Fiscal
2022
Total revenue
292,299
299,314
299,362
Net income attributable to shareholders of Food Services
11,878
24,106
23,048
Weighted average number of common shares outstanding (in
thousands)
12,444
9,495
9,495
Net income per share(i)
0.95
2.54
2.43
Dividends declared per common share of A&W Canada(ii)
2.0270
1.9906
0.6863
Dividends declared per common share of Food Services(iii)
0.3748
-
-
(i)
Net income per share is calculated by dividing the net income attributable to Food Services shareholders by the weighted
average number of common shares outstanding during the period. In order to ensure comparability of net income per share,
the number of shares used to calculate the net income per share up to October 17, 2024 (the date of the Transaction), has been
adjusted to reflect the equivalent number of common shares of Food Services that were outstanding after the reorganization
steps described in the section titled “Strategic Combination with the Fund” were undertaken, excluding the common shares
issued to the outside party holding a non-controlling interest in Food Services prior to the completion of the Transaction and
those issued to Unitholders as consideration for the Transaction which were incorporated into the weighted average number
of shares from the date of the Transaction onwards.
(ii) Represents dividends declared to shareholders of A&W Canada prior to completion of the Transaction. In order to ensure
comparability of dividends declared per share, the number of shares used to calculate the dividend per share up to October 17,
2024 (the date of the Transaction), has been adjusted to reflect the equivalent number of common shares of Food Services that
were outstanding after the reorganization steps described the section titled “Strategic Combination with the Fund” were
undertaken, excluding the common shares issued to the outside party holding a non-controlling interest in Food Services prior
to the completion of the Transaction and those issued to Unitholders as consideration for the Transaction which were
incorporated into the weighted average number of shares from the date of the Transaction onwards.
(iii) Represents dividends declared to shareholders of Food Services after completion of the Transaction.
SELECTED STATEMENT OF FINANCIAL POSITION DATA
As at
(in thousands of Canadian $)
December
29, 2024
December
31, 2023
January 1,
2023
Total Assets
1,207,663
924,586
886,910
Total non-current financial liabilities
879,751
609,476
595,056
16|A&W Food Services of Canada Inc.
Reconciliation to Non-IFRS Financial Measures
(in thousands of Canadian Dollars)
Reconciliation of System Sales to
Revenue from Corporate Restaurants:
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Fiscal 2022
Revenue from corporate restaurants
7,563
7,560
24,680
23,193
21,467
Sales reported by franchised
restaurants(i)
569,233
570,056
1,843,798
1,829,926
1,754,738
System Sales(ii)
576,796
577,616
1,868,478
1,853,119
1,776,205
(i)
Represents gross sales reported to Food Services by franchisees of such restaurants without any form of independent assurance.
(ii) System Sales is a non-IFRS financial measure. Please see “Non-IFRS Measures” and “How We Assess the Performance of
Our Business” sections of this MD&A for further details.
Reconciliation of EBITDA and
Adjusted EBITDA to Income before
income taxes:
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Fiscal 2022
Income before income taxes
20,962
12,221
49,951
47,083
45,308
Depreciation of plant, equipment,
intangible assets and right-of-use assets
2,034
1,789
6,225
5,010
4,461
Amortization of deferred gain
(398)
(1,143)
(3,039)
(3,703)
(3,495)
Net finance expense
3,837
437
4,904
1,387
1,190
EBITDA(i)
26,435
13,304
58,041
49,777
47,464
Adjustments to EBITDA:
Income before taxes attributable to non-
controlling interest in A&W Beverages
(498)
(299)
(1,782)
(1,648)
(1,653)
Royalty expense
5,776
17,045
44,036
54,863
52,100
Share of income from associates
(1,242)
(3,143)
(9,472)
(11,415)
(10,765)
Impairment of leases receivable
192
43
192
43
(521)
Net loss on disposal of plant and
equipment
-
675
636
675
66
Impairment loss on plant and equipment
-
-
-
-
299
Unrealized loss on foreign exchange
18
1
55
12
7
Stock-based compensation
-
-
-
-
-
Net income impacts created on a deficit
related to the National Advertising Fund
(2,437)
-
888
-
-
Recovery of capitalized costs
(944)
(677)
(1,390)
(1,286)
(1,289)
Start up net losses on Pret
627
756
1,985
1,279
1,663
Transaction costs
-
-
280
-
-
Adjusted EBITDA(i)
27,927
27,705
93,469
92,300
87,371
(i)
EBITDA and Adjusted EBITDA are non-IFRS financial measures. Please see “Non-IFRS Measures” and “How We Assess
the Performance of Our Business” sections of this MD&A for further details.
17|A&W Food Services of Canada Inc.
Reconciliation of Free Cash Flow to
Net cash generated from operating
activities:
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Fiscal 2022
Net cash flows generated from (used in)
operating activities
8,479
(196)
61,228
18,953
5,938
Cash purchase of plant and equipment
(188)
(1,091)
(979)
(2,992)
(1,682)
Cash purchase of intangible assets
(1,289)
(618)
(1,927)
(3,011)
(2,950)
Free Cash Flow(i)
7,002
(1,905)
58,322
12,950
1,306
Reconciliation of Net Debt to
Operating loan facility:
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Fiscal 2022
Operating loan facility
257,149
15,726
257,149
15,726
8,149
Less: Cash and cash equivalents
(22,534)
(3,855)
(22,534)
(3,855)
(5,037)
Net Debt(i)
234,615
11,871
234,615
11,871
3,112
Adjusted EBITDA - trailing 4 quarters
93,469
92,300
93,469
92,300
87,371
Net Debt to Adjusted EBITDA(i)
2.5
0.1
2.5
0.1
0.0
(i)
Free Cash Flow, Net Debt and Net Debt to Adjusted EBITDA are non-IFRS financial measures and non-IFRS ratios. Please
see “Non-IFRS Measures” and “How We Assess the Performance of Our Business” sections of this MD&A for further
details.
SUMMARY OF FACTORS AFFECTING PERFORMANCE
Food Services generally believes that our performance and future success will be attributable to our
significant internal strengths and differentiated products, factors that present significant opportunities for us.
These factors are also subject to a number of inherent risks and challenges, some of which are discussed
below. See also the “Risks and uncertainties” section of this MD&A and the “Risk Factors” section of the
AIF, which is available on Food Services’ SEDAR+ profile at www.sedarplus.ca or at www.awinvestors.ca.
Our mission “Together, to excite Canada’s most avid burger lovers, wherever they are, with the best tasting
burgers they crave, earning even more of their visits and making A&W restaurants even more successful”
will help the A&W brand to continue to grow. Strategic initiatives, including creating “can’t wait to come
back” appeal and guest experience; being highly convenient for our guests both with continued new restaurant
growth and through growing a successful mobile app business and making it easier for franchisees and their
teams to operate successful restaurants, have all contributed to A&W’s strong appeal and the trust it has built
with Canadian consumers and franchisees over many years. These strengths will be key to delivering results
and growth of market share.
A&W’s brand positioning is strong. Growth of new locations, our strengths in innovation, a safe and stable
supply chain, and continued efforts to consistently deliver great food and a better guest experience are all
expected to contribute to building loyalty and enhancing performance over the long term. Food Services
remains committed to the long-term health and success of its franchise network and its shareholders. The
Company believes its strategic initiatives build on its inherent strengths by harnessing its competitive
advantages and by leveraging our positioning in the market. Our strategy is supported by a strong and
experienced senior leadership team with long term tenure and a demonstrated history of success.
18|A&W Food Services of Canada Inc.
Our Brand and Menu Strategy
We are proud to be a Canadian company and a leader in sourcing simple, great-tasting ingredients, farmed
with care. A&W offers a well-known lineup of products --The Burger Family -- including the much-loved
Teen Burger® and Buddy Burger®, as well as the popular Chubby Chicken offerings. A&W Root Beer is
the market dominant brand of root beer sold in Canada, and the Great A&W Root Bear® is an iconic
Canadian mascot.
In 2013, Food Services launched an initiative to focus on natural ingredients and became the first and only
national burger chain in Canada to serve beef raised without artificial hormones or steroids. This introduction
was immediately followed by a continued effort to source other natural ingredient firsts. In 2020, we
announced that all of our beef is grass-fed and grass-finished, from cattle that graze on grass and other forage,
like hay. Independent market consumer research indicates that of the six major QSR burger chains in
Canada, A&W has the best tasting burgers.
In 2018, Food Services was very excited to be the first national burger chain in Canada to offer a plant-based
burger patty. We continue to enhance our position as a leader in great tasting vegetarian options with the
regular introduction of new recipes and products. We are focused on menu innovation that appeals to the
growing number of Canadian consumers who look for multi-cultural flavours and recipes, offering
deliciousness and easy accessibility.
In 2021, Food Services announced that we were expanding the beverage offerings at A&W restaurants with
the phased rollout of the A&W Brew Bar. The A&W Brew Bar offers a variety of frozen beverages as well
as hot and cold espresso-based beverages, using organic Pret coffee. The A&W Brew Bar is now available
in over 700 A&W restaurants across the country and the roll out is substantially complete. Across Canada,
A&W restaurants offer guests A&W Root Beer made from natural cane sugar and all-natural flavours, served
in frosted mugs. This makes for a memorable experience, giving Canadians another reason to visit their local
A&W restaurant.
Proven Franchise System
Food Services is committed to growth through franchising and being an exceptional franchisor. A&W
franchisees operate under a franchising program that has been refined over many decades and the personal
investment by A&W franchisees helps to ensure committed operators. We intend to continue our growth
through franchising by attracting and retaining experienced operators who have the skills to be able to
successfully manage restaurants in a franchise system. Our approach to our development strategy permits us
to grow in a controlled manner and enables us to ensure that each A&W franchise strictly adheres to high
standards of quality and service.
We devote significant resources to providing our franchisees with assistance in site selection, restaurant
design and build, marketing, restaurant initiation and launch, ongoing support of operations and business
management and employee training programs.
We are focused on keeping the cost of becoming an A&W franchisee affordable relative to other competing
franchises in the burger QSR industry which facilitates growth in the number of A&W restaurants. In light
of rising interest rates over the past few years, we have been focused on our strategy to reduce the cost of the
initial capital investment to open an A&W restaurant and focused on reducing the cost of modernizations for
franchisees as well as pursuing a franchisee capital light program associated with other parts of our strategic
initiatives.
19|A&W Food Services of Canada Inc.
Net Annual Restaurant Unit Growth
Each A&W restaurant is clearly identifiable, with a strong brand image and through a history rooted in
innovation, Food Services has been able to adapt its concepts, layouts and designs to continue to grow with
successful new restaurants. We have demonstrated a long history and ability to continue to add new A&W
restaurants through innovation and we have the platform and the skill of an experienced team to be able to
identify real estate opportunities across Canada. We have had a particular focus in recent years in the key
Ontario and Quebec markets but see opportunity to grow throughout Canada and through our partnership
with Suncor for additional convenience locations. We opened 28 new A&W restaurants in Fiscal 2024, 9 of
which were in Q4 2024, and an additional 13 restaurants were under construction as at December 29, 2024.
We believe each restaurant is highly valuable and respect the significant investment franchisees have made
into the A&W business and strive to ensure all restaurants are successful and viable for the long term.
Digital and Delivery Growth
A&W already enjoys a strong and growing delivery business, having established relationships and channels
with Uber, Skip and DoorDash and other local delivery partners to be able to offer guests convenient delivery
options across the country. We also continue to innovate to serve guests even more conveniently with the
launch of a new proprietary A&W mobile app in June 2023. The mobile app allows guests to receive
exclusive offers, easily customize their order and provides guests the option to choose between pick-up,
delivery or dine-in. With a loyalty program currently under development and to be brought to market in 2025,
we believe A&W is poised to continue to grow both digital and delivery sales, an important segment of the
QSR market.
A Proprietary Operating System Delivering High Quality and Quick Service
Food Services has a sophisticated proprietary restaurant operating system designed to deliver high quality
food and fast. A&W’s restaurant operating system is continually being refined and improved to enhance
food quality, guest service, and adherence to standards. Delivering an industry-leading guest experience is a
very important element of A&W’s success and the operating system includes processes and systems which
allow restaurants to offer a superior guest and employee experience. A significant renewal of the restaurant
operating system was designed, tested, and approved in 2024, with system-wide implementation planned for
2025.
CLIMATE
One of A&W’s greatest strengths is the culture that is enabled across the organization and country through
the use of CLIMATE. The first A&W CLIMATE Goals were developed in 1975 to identify the behaviours
critical for the management team to embrace in order for the business to be successful. Today, the
CLIMATE Goals identify the key behaviours that the Company believes will enable it to be successful in
achieving its mission and strategy. Across the country, with important partners, and in all A&W
restaurants, our team members learn about CLIMATE and are enabled with training, tools and support to
leverage a more cohesive and effective work environment to create greater success. As a result of the
commitment to CLIMATE, Food Services believes our culture provides A&W a competitive advantage.
Environment, Social and Governance (“ESG”)
At A&W, “Doing What’s Right” is a strategically driven, organization-wide commitment with positive
impact that reaches far beyond the walls of our restaurants and is embedded in our brand. The leadership and
combined efforts of our entire ecosystem – franchisees, supplier partners, team members, and our guests –
give us a unique opportunity to make a truly significant difference, building sustainability in our supply chain,
20|A&W Food Services of Canada Inc.
in our restaurants and in communities throughout Canada. We focus on areas where we believe we can lead
the most meaningful change: the environment, animal welfare, our people, our community, and our food.
The foundation to our great taste and quality of our burgers lies in selecting simple, high-quality ingredients
from farmers and suppliers dedicated to ethical practices, quality, animal welfare, and social and
environmental responsibility. Our requirements are outlined in our policies and ingredient and final product
specifications. Food safety is always our top priority. We work closely with our suppliers to ensure they
adhere to our own science-based and international food safety standards, including the Global Food Safety
Initiative (“GFSI”) and Good Agricultural Practices (“GAP”). High performance is achieved through an
extensive annual program of audits.
We are committed to reducing our environmental impact through conscious use of packaging, energy and
water, and reduction of waste, evaluating each of these areas with a view to reducing usage and prioritizing
reusability. This journey began with our iconic frosted glass root beer mugs, and we have furthered this
tradition by offering our dine-in guests ceramic plates and metal cutlery for breakfast items in addition to
metal trays and fry baskets at most of our restaurants. We eliminated plastic straws in 2018, and launched
the “A&W One Cup®”, an exchangeable cup program, nationwide in late 2023. Through this initiative
alone, we are well on our way to meeting our goal of saving over one million cups from landfill.
Our restaurants participate in countless charitable and community initiatives. Nationally, we come together
annually for Burgers to Beat MS Day, an initiative backed by advertising and at-restaurant fun and celebration
to raise funds to support the important work of MS Canada. To date, over $21.0 million has been raised
through this campaign over the 16 years of A&W's partnership with MS Canada.
The Company has adopted The Global Diversity, Equity & Inclusion Benchmarks (“GDEIB”) and
collaborated with certified DEI consultants to advance our corporate DEI work, which includes online
training modules on topics tailored for corporate employees as well as the employees of our
franchisees. Throughout the organization, our CLIMATE goals guide our collaboration as partners to
improve our ability to successfully implement our Strategy and achieve our Mission.
For more information on our Doing What’s Right strategy please see the “General Development of the
Business – Description of the Business - Environmental, Social and Governance” section of the AIF, which
is available on Food Services SEDAR+ profile at www.sedarplus.ca or at www.awinvestors.ca and is not
incorporated by reference in this MD&A.
Consumer Trends
The quick service industry, and food service more generally, is subject to shifts in consumer trends,
preferences and consumer spending and our sales and operating results depend, in part, on our ability to
respond quickly and well to such changes. A&W’s differentiated ingredient strategy and strengths in strategy
development and menu innovation provide us with the flexibility to optimize the appeal of our menu, and
this has been a critical driver of our growth. We believe that our track record demonstrates the success of
A&W’s menu and brand strategy at responding to changes in demand, including effective response through
all stages of economic cycles.
21|A&W Food Services of Canada Inc.
Seasonality and Weather
Results of operations for any one quarter are not necessarily indicative of results of operations for the full
fiscal year. We expect that seasonality will continue to be a factor in the quarterly variation of results.
System Sales tend to fluctuate seasonally. In typical years for A&W restaurants in shopping centres, sales
tend to fluctuate due to higher traffic during the back-to-school, “Black Friday” and Christmas shopping
seasons. In the freestanding and other concepts of A&W restaurants, weather and summer travel, among
other things, typically impact sales.
Extreme weather conditions in the areas in which A&W restaurants are located could adversely affect A&W’s
business and financial results. For example, frequent or unusually heavy snowfall, ice storms, rainstorms or
other extreme weather conditions over a prolonged period could make it difficult for guests to travel to A&W
restaurants and thereby reduce A&W’s revenue and profitability.
Average quarterly System Sales over the last three completed fiscal years is as follows:
First fiscal quarter
20.4%
Second fiscal quarter
23.3%
Third fiscal quarter
25.1%
Fourth fiscal quarter(i)
31.2%
Yearly total
100.0%
(i)
Food Services’ fourth fiscal quarter is 112 days, whereas the first, second and third fiscal quarters are 84 days.
NON-IFRS MEASURES
This MD&A makes references to certain non-IFRS measures. These measures are provided as additional
information to complement those IFRS measures by providing further understanding of our results of
operations from management’s perspective. Food Services believes that disclosing these non-IFRS measures
provides readers of this MD&A with important information regarding Food Services’ financial performance.
By considering these measures in combination with IFRS measures, Food Services believes that readers are
provided with additional and more useful information about Food Services than readers would have if they
simply considered IFRS measures alone. We use non-IFRS financial measures including “System Sales”,
“EBITDA”, “Adjusted EBITDA”, “Free Cash Flow” and “Net Debt”; non-IFRS ratios including “System
Sales Growth”, "Adjusted EBITDA margin", Capex/Revenue ratio” and "Net Debt to Adjusted EBITDA”;
and non-IFRS supplementary financial measures such as “Same Store Sales Growth”.
These non-IFRS measures, ratios and supplementary financial measures are used to provide investors with
supplemental measures of our operating performance and thus highlight trends in our core business that may
not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts,
investors and other interested parties frequently use non-IFRS measures and industry metrics in the
evaluation of issuers. A&W’s management also uses non-IFRS measures and industry metrics to facilitate
operating performance comparisons from period to period, to prepare annual operating budgets and forecasts
and to determine components of management compensation.
For definitions of these non-IFRS measures and industry metrics and reconciliations of these non-IFRS
financial measures to the relevant reported measures, please see the “How We Assess the Performance of
Our Business” and “Selected Financial Information” sections of this MD&A. The non-IFRS measures
22|A&W Food Services of Canada Inc.
reported by Food Services do not have a standardized meaning prescribed by IFRS and Food Services’
method of calculating these measures may differ from those of other issuers or companies and may not be
comparable to similar measures used by other issuers or companies. Accordingly, these measures should not
be considered in isolation or as a substitute for analysis of our financial information reported under IFRS.
HOW WE ASSESS THE PERFORMANCE OF OUR BUSINESS
In assessing the performance of our business, we consider a variety of financial and operating measures that
affect our operating results.
System Sales is calculated in respect of all A&W and Pret restaurants in Canada as the sum of (1) gross sales
reported to Food Services by franchisees of such restaurants without audit, verification or other form of
independent assurance, and (2) revenue from corporate restaurants. System Sales reflect sales after deducting
amounts for discounts for coupons and other promotional offerings and applicable sales taxes. Management
believes System Sales is a key performance indicator as it is the main driver of Food Services’ revenues and
provides an indication of the growth of sales of the overall network of restaurants. Refer to the “Selected
Financial Information” section for a reconciliation of System Sales to revenue from corporate restaurants,
the most comparable IFRS measure, for the current and comparable reporting periods.
System Sales Growth is calculated as the percentage change in System Sales for the current reporting period
as compared to the comparable reporting period in the prior year. Management believes that System Sales
Growth is a key performance indicator as it provides an indication of the growth of sales of the overall
network of restaurants. See “System Sales”.
Same Store Sales Growth reflects the change in gross sales of franchised A&W restaurants that have been
open for at least two full fiscal years relative to the same period in the prior fiscal year and is based on an
equal number of days in each period. This measure is a key performance indicator for A&W as it highlights
the performance of existing franchised restaurants.
Net Annual Restaurant Unit Growth reflects the percent increase in A&W restaurants at the ending of the
reporting period as compared to the end of the prior year comparable reporting period on a trailing 4 quarter
basis. This measure is a key performance indicator for A&W as it highlights the growth in restaurant store
count.
EBITDA is calculated by taking income before income taxes and adding back the net finance expense,
amortization of deferred gain and the depreciation on plant, equipment, intangible assets and right-of-use
assets. Management believes that is useful as it is used by A&W as a component of reconciliations to other
non-IFRS measures. Refer to the “Selected Financial Information” section for a reconciliation of EBITDA
to income before taxes, the most comparable IFRS measure, for the current and comparable reporting periods.
Adjusted EBITDA is calculated by taking EBITDA and adding back the income before taxes attributable to
the non-controlling interest in A&W Beverages and adjusting for certain items, including non-cash items
and/or items management considers non-recurring or not representative of Food Services’ ongoing
performance such as royalty expense, share of income from associates, impairment of leases receivable and
plant and equipment, net gains/losses on disposal of plant and equipment, start up net losses on Pret,
unrealized gains/losses on foreign exchange, recovery of capitalized costs, net income impacts created on a
deficit related to the National Advertising Fund which is a timing difference between years, stock-based
compensation and transaction costs. Start up net losses on Pret are comprised of the net loss arising from
23|A&W Food Services of Canada Inc.
operating the stand-alone corporate Pret location plus the investments in the trial phase pop-up locations
including costs for supply chain start up, equipment, general administration and overhead and marketing
costs. Management believes that Adjusted EBITDA represents a useful supplement metric to assess
profitability and measure Food Services underlying ability to generate liquidity through operating cash flows
by excluding the effects of financing and investing activities through the removal of depreciation,
amortization, interest, tax and other non-recurring and/or non-cash income and expenses. Refer to the
“Selected Financial Information” section for a reconciliation of Adjusted EBITDA to income before taxes,
the most comparable IFRS measure, for the current and comparable reporting periods.
Free Cash Flow is calculated by taking net cash flows generated from operating activities and deducting for
cash purchases of plant, equipment and intangible assets. Management believes that Free Cash Flow is a
useful metric because it is an indicator of how much cash is available for dividends, debt repayment and other
investing and financing activities. Refer to the “Selected Financial Information” section for reconciliations
of Free Cash Flow to net cash generated from operating activities, the most comparable IFRS measure, for
the current and comparable reporting periods.
Net Debt can be calculated by taking the current and non-current balance of the operating loan facility and
deducting the cash and cash equivalents balance. Management believes that Net Debt represents a useful
additional measure to assess A&W’s financial position by looking at total bank debt, net of cash and cash
equivalents. Refer to the “Selected Financial Information” section for reconciliations of Net Debt to operating
loan facility, the most comparable IFRS measure, for the current and comparable reporting periods.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenue. Management
believes that EBITDA Margin is useful in assessing the performance of ongoing operations and efficiency of
operations relative to its revenue.
Net Debt to Adjusted EBITDA is calculated as Net Debt divided by Adjusted EBITDA for the trailing four
quarters. Management believes that Net Debt to Adjusted EBITDA is a useful measure of A&W’s leverage
and its financial condition. An increasing ratio would indicate that A&W is utilizing more debt per dollar of
EBITDA generated. Refer to the “Selected Financial Information” section for reconciliations of Adjusted
EBITDA and Net Debt to their most comparable IFRS measures, and for the calculation of Net Debt to
Adjusted EBITDA for the current and comparable reporting periods.
Capex/Revenue Ratio is calculated as the total cash purchases of plant, equipment and intangible assets
divided by total revenue. Management believes that Capex/Revenue Ratio is a useful evaluation of Food
Service’s investment activities and how much the Company is required to invest to generate revenues and
execute its strategy.
24|A&W Food Services of Canada Inc.
RESULTS OF OPERATIONS
Analysis of Q4 2024 Results
The following section provides an overview of the Company’s financial performance in Q4 2024, as
compared to Q4 2023.
Revenue
Food Services’ franchising and corporate restaurants revenue for Q4 2024 was $93,196,000 compared to
franchising and corporate revenue for Q4 2023 of $102,881,000, a decrease of $9,685,000. The decrease in
total revenue is primarily attributable to franchising revenue which decreased by $9,688,000 quarter over
quarter due to lower equipment sales which reflects our strategic focus on reducing the cost of modernizations
for our franchisees and the adoption of an overall capital light strategy for our franchisees beginning in the
fall of 2023. All other revenue streams, including service fees, sales of food and supplies, contributions to
the National Adverting Fund, initial franchise and renewal fees, were relatively flat quarter over quarter.
System Sales(i) for Q4 2024 of $576,796,000 were consistent with System Sales(i) for Q4 2023 of
$577,616,000. Franchising revenue from service fees, contributions to the National Advertising Fund and
revenue generated from the distribution of food and supplies fluctuate with the movement in System Sales
and as such, are consistent quarter over quarter.
Same Store Sales Growth is a function of changes in guest counts and check size, which are impacted by
party size, menu prices and menu mix and changes in consumers discretionary spending. The Same Store
Sales Growth(i) of -1.9% for Q4 2024 is a product of a decrease in guest counts partially offset by an increase
in average check size due in part to industry-wide inflation on goods, services, and labour. The decrease in
guest counts reflects A&W’s proportionate share of an overall decline in traffic at burger QSRs across
Canada. Food Services believes the decline in traffic at A&W restaurants and burger QSR more generally is
attributable to increased interest rates and inflation, along with market uncertainty, which have impacted
consumer discretionary spending. In response to these economic conditions, Food Services continues to seek
new and innovative ways to offer A&W’s guests a delicious and affordable experience and in turn increase
guest traffic.
Revenue from corporate restaurants was $7,563,000 for Q4 2024 consistent with $7,560,000 for Q4 2023.
(i)
System Sales and Same Store Sales Growth are non-IFRS financial measures and supplementary financial measures. Please
see “Non-IFRS Measures”, “Selected Financial Information” and “How We Assess the Performance of Our Business”
sections of this MD&A for further details.
Operating costs
Food Services’ operating costs for Q4 2024 were $49,015,000 compared to operating costs for Q4 2023 of
$60,677,000, a decrease of $11,662,000. The decrease in operating costs is directly associated with the
decrease in franchising revenue discussed above, with lower costs of sale on equipment sold to franchisees,
due to lower volumes sold, being the largest source of the decline in operating costs.
General and administrative expenses
Food Services’ general and administration expenses represent costs of providing services to franchised
restaurants and establishing new restaurants. General and administration expenses for Q4 2024 were
$15,054,000 compared to general and administration expenses for Q4 2023 of $16,744,000 a decrease of
25|A&W Food Services of Canada Inc.
$1,690,000. The decrease in general and administration expenses reflects a decrease in travel costs,
professional fees, and other miscellaneous overhead expenses incurred in the fourth quarter.
Royalty expense
The royalty expense is the royalty that Food Services paid to the Partnership for use of the A&W Trademarks
prior to closing of the Transaction. Royalty expense for Q4 2024 was $5,776,000 compared to $17,045,000
for Q4 2023 with the decrease being a result of A&W no longer recognizing a royalty expense from October
18, 2024 onwards. See “Overview” and “Strategic Combination with the Fund”.
Impairment of lease receivables
The Company is the head lessee for the majority of its franchised locations and enters into agreements
whereby we licence the premises to the franchisee, for which the Company receives a premises licence fee.
Under the licence agreement, the franchisee is responsible for the obligations under the lease. IFRS 16 -
Leases (“IFRS 16”) requires the Company, where it acts as the intermediate lessor, to recognize a lease
receivable. Lease receivables are reviewed for impairment based on expected losses at each balance sheet
date in accordance with IFRS 9 – Financial Instruments. An impairment loss is recorded when the credit risk
is assessed to have increased for the lease receivables. We have developed a risk matrix used to assess the
credit risk of all head leases. The Company has recorded an expected credit loss provision on leases receivable
of $1,541,000 as at December 29, 2024 (December 31, 2023 – $1,779,000). A&W recognized an impairment
loss of $192,000 in Q4 2024 (Q4 2023 - $43,000).
Net finance expense
The net finance expense for Q4 2024 increased by $3,400,000 from Q4 2023 due primarily to the increase in
the average debt balance as Food Service increased its net borrowings by $265,000,000 on October 17, 2024
in order to finance the Transaction. See “Operating Loan Facility”.
Amortization of deferred gain
The gain realized on the sale of the A&W trademarks in 2002 on first establishing the Fund was deferred and
amortized over the term of the Royalty Agreement. The Annual Adjustments to the Royalty Pool increased
the deferred gain and the additions were amortized over the remaining term of the Royalty Agreement from
the date of addition. The amortization of deferred gain for Q4 2024 of $398,000 has decreased from
$1,143,000 in Q4 2023 because the deferred gain was derecognized from Food Services’ consolidated
balance sheet and the corresponding amortization of the deferred gain was eliminated from Food Services’
consolidated statement of income upon completion of the Transaction as Trade Marks became a wholly
owned subsidiary of Food Services. See “Strategic Combination with the Fund”.
Share of income from associates
Prior to completion of the Transaction, A&W equity accounted for its investments in Trade Marks and the
Fund. Following completion of the Transaction, both Trade Marks and the Fund became wholly owned
subsidiaries of Food Services and therefore no income from associates was recognized after October 17, 2024
resulting in income from associates decreasing from $3,143,000 in Q4 2023 to $1,242,000 in Q4 2024.
Income taxes
Income tax is recognized based on management’s best estimate of the weighted average annual income
tax rate expected for the full fiscal year. To the extent that forecasts differ from actual results, adjustments
are recognized in subsequent period. The statutory income tax rate for Q4 2024 and Q4 2023 was 26.9%.
26|A&W Food Services of Canada Inc.
Income tax expense for Q4 2024 was $22,075,000, compared to $2,337,000 in Q4 2023 and the effective tax
rates for Q4 2024 and Q4 2023 were 105.3% and 19.1%, respectively. The income tax expense and effective
tax rate for Q4 2024 were impacted by $16,943,000 in deferred tax expense recognized upon completion of
the Transaction. The $16,943,000 in deferred tax expense is a non-cash, non-recurring expense and
corresponds to the deferred tax assets and liabilities associated with the investment in associates and deferred
gain balances that were derecognized from Food Services’ consolidated balance sheet upon completion of
the Transaction. The effective tax rate of Q4 2024, excluding the $16,943,000 in deferred tax recognized in
Q4 2024 related the Transaction, is 24.5%.
Net income (loss) and Net income (loss) per share
Food Services reported a net loss of $1,113,000 in Q4 2024 compared to net income of $9,884,000 in Q4
2023 due to the factors discussed above. The net loss in Q4 2024 is not comparable to the net income in Q4
2023 due to the impact of the Transaction on the Q4 2024 results, particularly the non-cash, non-recurring
deferred tax expense of $16,943,000 that was recognized upon completion of the Transaction as discussed
above in the income taxes section.
Food Services reported a net loss per share of $0.13 in Q4 2024 versus net income per share of $0.67 in Q4
2023 due to the decrease in net income (loss), which is largely due to the impact of the non-cash, non-
recurring deferred tax expense recognized upon completion of the Transaction discussed above, and the
increase in the weighted average number of shares outstanding from 9,495,363 in Q4 2023 to 19,077,318 in
Q4 2024 as a result of the Transaction. In order to ensure comparability of net income per share, the number
of shares used to calculate the net income per share up to October 17, 2024 (the date of the Transaction), has
been adjusted to reflect the equivalent number of common shares of Food Services that were outstanding
after the reorganization steps described in the section titled “Strategic Combination with the Fund” were
undertaken, excluding the common shares issued to the outside party holding a non-controlling interest in
Food Services prior to the completion of the Transaction and those issued to Unitholders as consideration for
the Transaction which were incorporated into the weighted average number of shares from the date of the
Transaction onwards.
Net income attributable to non-controlling interests
The net income attributable to non-controlling interest represents an outside party’s share of A&W’s net
income prior to completion of the Transaction and an outside party’s 40% interest in A&W Beverages.
Following completion of the Transaction, the outside party owns publicly traded shares of A&W and
therefore their share of A&W’s income is not reported as non-controlling interest and the remaining non-
controlling interest represents the outside party’s 40% interest in A&W Beverages.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA(i) increased by $222,000 as compared to Q4 2023 to $27,927,000 for Q4 2024. The
increase in Adjusted EBITDA is primarily attributable to the decrease in operating costs and general and
administration expenses, partially offset by a decrease in revenue. Adjusted EBITDA Margin(i) increased
from 26.9% in Q4 2023 to 30.0% in Q4 2024 due to the increase in Adjusted EBITDA and decrease in
revenue. See “Operating costs”, “General and administrative expenses” and “Revenue”.
27|A&W Food Services of Canada Inc.
Free Cash Flow and Capex/Revenue Ratio
Free Cash Flow(i) increased by $8,907,000 as compared to Q4 2023 to $7,002,000 for Q4 2024. The increase
in Free Cash Flow is due to the $8,675,000 increase in net cash generated from (used in) operating activities
and a $232,000 decrease in cash purchases of plant, equipment and intangible assets.
Due to the Transaction in Fiscal 2024, Food Services ceased paying a royalty for the use of the A&W
Trademarks beginning on October 18, 2024 primarily leading to the positive improvement in Q4 2024 versus
Q4 2023 on net cash generated from (used in) operating activities.
In Q4 2023 Food Services invested capital in plant and equipment readying the Pret stand-alone location for
opening in early 2024 leading to a reduced capital investment in plant and equipment in Q4 2024 versus Q4
2023.
(i)
Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Capex/Revenue Ratio are non-IFRS financial measures
and non-IFRS ratios. Please see “Non-IFRS Measures”, “Selected Financial Information” and “How We Assess the
Performance of Our Business” sections of this MD&A for further details.
Analysis of Fiscal 2024 Results
The following section provides an overview of the Company’s financial performance in Fiscal 2024, as
compared to Fiscal 2023.
Revenue
Food Services’ franchising and corporate restaurants revenue for Fiscal 2024 was $292,299,000 compared
to franchising and corporate revenue for Fiscal 2023 of $299,314,000, a decrease of $7,015,000. The decrease
in total revenue was driven by the decrease in franchising revenue which decreased by $8,502,000 year over
year largely due to lower equipment sales which reflects a focus on reducing the cost of modernizations and
the adoption of an overall capital light strategy for our franchisees beginning in fall of 2023. The decrease in
franchising revenue was partially offset by a $1,487,000 increase in revenue from corporate restaurants due
to an improvement in sales at the corporately owned A&W restaurants located in shopping centres and on
urban street fronts, and the addition of sales from the first standalone Pret restaurant which opened in Q1
2024.
System Sales(i) for Fiscal 2024 of $1,868,478,000 were up 0.8% from Fiscal 2023 System Sales(i) of
$1,853,119,000. The increase in System Sales and System Sales Growth is primarily generated from the
additional sales arising on the net new restaurants opened over the last two years offset by slightly negative
Same Store Sales Growth over the prior year. Franchising revenue from service fees, contributions to the
National Advertising Fund and revenue generated from the distribution of food and supplies fluctuate with
the movement in System Sales and as such have increased proportionally year over year, partially offsetting
the decrease in revenue from equipment sales to existing restaurants.
Same Store Sales Growth is a function of changes in guest counts and check size, which are impacted by
party size, menu prices and menu mix and changes in consumers discretionary spending. The Same Store
Sales Growth(i) of -0.6% for Fiscal 2024 is a product of a decrease in guest counts partially offset by an
increase in average check size due in part to industry-wide inflation on goods, services, and labour. The
decrease in guest counts reflects A&W’s proportionate share of an overall decline in traffic at burger QSRs
across Canada. Food Services believes the decline in traffic at A&W restaurants and burger QSR more
generally is attributable to increased interest rates and inflation, along with market uncertainty, which have
impacted consumer discretionary spending. In response to these economic conditions, Food Services
28|A&W Food Services of Canada Inc.
continues to seek new and innovative ways to offer A&W’s guests a delicious and affordable experience and
in turn increase guest traffic.
(i)
System Sales and Same Store Sales Growth are non-IFRS financial measures and supplementary financial measures. Please
see “Non-IFRS Measures”, “Selected Financial Information” and “How We Assess the Performance of Our Business”
sections of this MD&A for further details.
Operating costs
Food Services’ operating costs for Fiscal 2024 were $157,095,000 compared to operating costs for Fiscal
2023 of $163,948,000, a decrease of $6,853,000. The decrease in costs of sale of equipment sold to franchise
decrease, which is in line with the decrease in revenue from the sale of equipment, was partially offset by
increased costs of sales at the corporate A&W and Pret location, which corresponds to the increase in revenue
at corporate restaurants and a year over year increase of $1,187,000 in amortization of intangible assets.
General and administrative expenses
Food Services’ general and administration expenses for Fiscal 2024 were $48,632,000 compared to general
and administration expenses for Fiscal 2023 of $47,108,000 an increase of $1,524,000. The increase in
general and administrative expenses is primarily attributable to costs for the A&W National Convention and
secondarily attributable to inflationary increases primarily in wages and labour. The National conference
which was held in the second quarter of 2024 for the first time post the COVID-19 pandemic, is an important
investment we make to connect with franchisees and suppliers and to align franchisees and important A&W
business partners to our strategic goals. As normal course, the National Convention is held only every two
years. These increases were partially offset by a reduction in costs related to travel and professional fees.
Royalty expense
The royalty expense is the royalty that Food Services paid to the Partnership for use of the A&W trademarks
prior to closing of the Transaction. Royalty expense for Fiscal 2024 was $44,036,000 compared to
$54,863,000 for Fiscal 2023 with the decrease being a result of the Company no longer recognizing a royalty
expense from October 18, 2024 onwards. See “Overview” and “Strategic Combination with the Fund”.
Impairment of lease receivables
The Company is the head lessee for the majority of its franchised locations and enters into agreements
whereby Food Services licences the premises to the franchisee, for which we receive a premises licence fee.
Under the licence agreement, the franchisee is responsible for the obligations under the lease. IFRS 16
requires the Company, where it acts as the intermediate lessor, to recognize a lease receivable. Lease
receivables are reviewed for impairment based on expected losses at each balance sheet date in accordance
with IFRS 9 – Financial Instruments. An impairment loss is recorded when the credit risk is assessed to have
increased for the lease receivables. Food Services has developed a risk matrix used to assess the credit risk
of all sub-leases and has recorded an expected credit loss provision on leases receivable of $1,541,000 as at
December 29, 2024 (December 31, 2023 – $1,779,000). In Fiscal 2024, we recognized an impairment loss
of $192,000 (Fiscal 2023 - $43,000).
Net finance expense
The net finance expense for Fiscal 2024 increased by $3,517,000 from Fiscal 2023 due primarily to the
increase in the average debt balance in Q4 2024 as the Company increased its borrowings by $265,000,000
on October 17, 2024 in order to finance the Transaction. See “Operating Loan Facility”.
29|A&W Food Services of Canada Inc.
Amortization of deferred gain
The gain realized on the sale of the A&W Trademarks in 2002 was deferred and amortized over the term of
the Royalty Agreement. The Annual Adjustments to the Royalty Pool increased the deferred gain and the
additions were amortized over the remaining term of the Royalty Agreement from the date of addition. The
amortization of deferred gain for Fiscal 2024 of $3,039,000 has decreased from $3,703,000 in Fiscal 2023
because the deferred gain was derecognized from Food Services’ consolidated balance sheet and the
corresponding amortization of the deferred gain was eliminated from Food Services’ consolidated statement
of income upon completion of the Transaction as Trade Marks became a wholly owned subsidiary of Food
Services. See “Strategic Combination with the Fund”.
Share of income from associates
Prior to completion of the Transaction, Food Services equity accounted for its investments in Trade Marks
and the Fund. Following completion of the Transaction, both Trade Marks and the Fund became wholly
owned subsidiaries of Food Services and therefore no income from associates was recognized after October
17, 2024 resulting in income from associates decreasing from $11,415,000 in Fiscal 2023 to $9,472,000 in
Fiscal 2024.
Income taxes
Income tax is recognized based on management’s best estimate of the weighted average annual income
tax rate expected for the full fiscal year. To the extent that forecasts differ from actual results, adjustments
are recognized in subsequent period. The statutory income tax rate for Fiscal 2024 and Fiscal 2023 was
26.9%.
Income tax expense for Fiscal 2024 was $28,273,000, compared to $9,071,000 for Fiscal 2023 and the
effective tax rates for Fiscal 2024 and Fiscal 2023 were 56.6% and 19.3%, respectively. The income tax
expense and effective tax rate for Fiscal 2024 were impacted by the $14,941,000 in deferred tax expense of
which $16,943,000 was recognized upon completion of the Transaction. The $16,943,000 in deferred tax
expense attributable to the Transaction is a non-cash, non-recurring expense and corresponds to the deferred
tax assets and liabilities associated with the investment in associates and deferred gain balances that were
derecognized from Food Services’ consolidated balance sheet upon completion of the Transaction. The
effective tax rate of Fiscal 2024, excluding the $16,943,000 in deferred tax recognized in 2024 related the
Transaction, is 22.7%. The increase in the effective tax rate year over year is primarily due to Food Services’
ceasing to recognize the amortization of deferred gain and income from associates after completion of the
Transaction, both of which increased net income but did not increase taxable income and therefore reduced
the effective tax rate percentage in the prior year.
Net income and Net income per share
Net income for Fiscal 2024 was $21,678,000 compared to net income of $38,012,000 in Fiscal 2023 due to
the factors discussed above. The net income in Fiscal 2024 is not comparable to the net income in Fiscal
2023 due to the impact of Transaction on the Fiscal 2024 results, particularly the non-cash, non-recurring
deferred tax expense of $16,943,000 that was recognized upon completion of the Transaction as discussed
above in the income taxes section.
Net income per share for Fiscal 2024 was $0.95 versus net income per share of $2.54 in Fiscal 2023 due to
the decrease in net income, which is largely due to the impact of the non-cash, non-recurring deferred tax
expense recognized upon completion of the Transaction discussed above, and the increase in the weighted
30|A&W Food Services of Canada Inc.
average number of shares outstanding from 9,495,363 in Fiscal 2023 to 12,443,657 in Fiscal 2024 due to the
Transaction. In order to ensure comparability of net income per share, the number of shares used to calculate
the net income per share up to October 17, 2024 (the date of the Transaction), has been adjusted to reflect the
equivalent number of common shares of Food Services that were outstanding after the reorganization steps
described in the section titled “Strategic Combination with the Fund” were undertaken, excluding the
common shares issued to the outside party holding a non-controlling interest in Food Services prior to the
completion of the Transaction and those issued to Unitholders as consideration for the Transaction which
were incorporated into the weighted average number of shares from the date of the Transaction onwards.
Net income attributable to non-controlling interests
The net income attributable to non-controlling interest represents an outside party’s share of A&W’s net
income prior to completion of the Transaction and an outside party’s 40% interest in A&W Beverages.
Following completion of the Transaction, the outside party owns publicly traded shares of A&W and
therefore their share of A&W’s income is not reported as non-controlling interest and the remaining non-
controlling interest represents the outside party’s 40% interest in A&W Beverages.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA(i) increased by $1,169,000, as compared to Fiscal 2023, to $93,469,000 for Fiscal 2024.
The increase in Adjusted EBITDA is primarily attributable to the decrease in operating costs and general and
administration expenses, partially offset by a decrease in revenue. Adjusted EBITDA Margin(i) increased
from 30.8% in Fiscal 2023 to 32.0% in Fiscal 2024 due to the increase in Adjusted EBITDA and decrease in
revenue. See “Operating costs”, “General and administrative expenses” and “Revenue”.
Net Annual Restaurant Unit Growth
We increased the pace and number of restaurant openings to 28 in Fiscal 2024, an improvement over the
previous fiscal year opening of 19 restaurants. Whereas in 2023 we closed 11 restaurants, we closed only 9
in 2024 leading to a net restaurant count increase in 2024 of 19 versus the prior year net increase in restaurants
of 8.
This means that Net Annual Restaurant Unit Growth was 1.8% in 2024 compared to 0.8% in 2023 which
results from an increasing pace of restaurant openings as a result of stabilizing construction timelines
following the multi-year slowdown in real estate transactions and construction timelines following the Covid-
19 pandemic which brought about a significant slowdown in the construction and real estate industries.
Free Cash Flow and Capex to Revenue Ratio
Free Cash Flow(i) increased by $45,372,000 as compared to Fiscal 2023 to $58,322,000 for Fiscal 2024. The
increase in Free Cash Flow is due to the $42,275,000 increase in net cash generated (used in) operating
activities and a $3,097,000 decrease in cash purchases of plant, equipment and intangible assets.
Due to the Transaction in Fiscal 2024, Food Services ceased paying a royalty for the use of the A&W
Trademarks beginning on October 18, 2024 primarily leading to the positive improvement year over year on
net cash generated in operating activities.
In Fiscal 2023 Food Services invested capital in plant and equipment readying the Pret stand-alone location
for opening in early 2024 leading to a reduced capital investment in plant and equipment in Fiscal 2024
versus Fiscal 2023. In addition, the significant capital investments made in intangible assets related to the
31|A&W Food Services of Canada Inc.
A&W proprietary mobile app in Fiscal 2022 and Fiscal 2023 resulted in significant draws on our free cash
flow in those years, and in Fiscal 2024, while our intangible capital investment included readying for
implementation of a loyalty program for launch in fiscal 2025, the loyalty development has required far less
capital investment in intangible investments for Fiscal 2024 than Fiscal 2023 when we were investing in the
build and launch of the mobile app itself.
The Capex/Revenue Ratio(i) decreased from 2.0% in Fiscal 2023 to 1.0% in Fiscal 2024 due primarily to these
decreased cash purchases of plant, equipment and intangible assets, partially offset by the decrease in
revenue. See “Analysis of Fiscal 2024 cash flows” and “Revenue”.
(i)
Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow and Capex/Revenue Ratio are non-IFRS financial measures
and non-IFRS ratios. Please see “Non-IFRS Measures”, “Selected Financial Information” and “How We Assess the
Performance of Our Business” sections of this MD&A for further details.
DIVIDENDS
Prior to the closing of the Transaction, Food Services paid dividends to its shareholders totaling $29,325,000,
of which $10,078,000 was paid to an outside party with a non-controlling interest in Food Services.
On December 27, 2024 Food Services paid a dividend to its shareholders equal to $0.3748 per common share
and totalling $8,994,000. The dividend is designated as an eligible dividend for Canadian tax purposes.
Food Services paid dividends totalling $28,956,000 in Fiscal 2023, of which $10,055,000 was paid to an
outside party with a non-controlling interest in Food Services.
In Fiscal 2024, A&W Beverages paid a dividend of $1,240,000 to an outside party that holds a non-
controlling interest (Fiscal 2023 - $1,076,000).
Subsequent to the period ended December 29, 2024, on March 5, 2025, Food Services declared a dividend
of $0.480 per share. The dividend is payable in cash on March 28, 2025 to holders of common shares of
record on March 14, 2025. The dividend will be taxed as an eligible dividend.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Food Services is primarily a franchise business with 1,063 of its 1,073 A&W restaurants (as at December 29,
2024) being franchised locations. Food Services’ capital requirements are related to its ten corporate A&W
restaurants, one stand-alone Pret restaurant and head office and investments in technology and information
systems including the A&W mobile app.
Future restaurant growth is expected to continue to be funded by franchisees although from time to time,
Food Services expects to incur capital expenditures to open new corporate restaurants and to continue
development of the A&W mobile app. Food Services expects to have sufficient capital resources to fund
these capital requirements and have sufficient cash on hand to meet its obligations. During the first quarter
of 2024, Food Services opened its first corporately owned and operated Pret stand-alone location however,
future expansion of Pret restaurants is expected to be primarily accomplished under the franchise model
where the capital obligations are taken on by the franchisee awarded the location.
32|A&W Food Services of Canada Inc.
Operating Loan Facility
Prior to October 17, 2024 predecessor Food Services had a $40,000,000 demand operating loan facility
(“Former Credit Facility”) with a Canadian chartered bank (the “Bank”). The facility was used to fund
working capital requirements and for general corporate purposes. On May 15, 2024, predecessor A&W Food
Services extended the maturity date on the Former Credit Facility by one year to May 31, 2025. Under the
Former Credit Facility account overdrafts bear interest at the Bank’s prime rate plus 0.75% (at the Bank’s
prime rate plus 1% prior to the amendment). As part of the amendment, and in response to the cessation of
Canadian Dollar Offered Rate which is the benchmark interest rate on bankers acceptances (“BAs”), the
Former Credit Facility was also amended to transition from BAs to CORRA (as defined below) loans, in
which the interest rate benchmark is Canadian Overnight Repo Rate Average (“CORRA”). The remaining
terms and conditions were consistent with those of the Former Credit Facility that was in place prior to the
May 15, 2024 amendment.
Amounts under the Former Credit Facility could be advanced in the form of an account overdraft or in the
form of CORRA loans and were repayable on demand. The Former Credit Facility contained covenants
including the requirement to meet certain debt to earnings before interest, taxes, depreciation, amortization
and non-cash charges/income (“EBITDA”) ratios and debt to Food Services’ investment in Trade Marks
ratios during each trailing four quarter period. Food Services was also required to pledge 5,000,000 Trade
Marks common shares.
On October, 17, 2024, Food Services replaced the Former Credit Facility with the Credit Facility. The Credit
Facility is revolving and allows for Food Services to borrow up to $325,000,000 Canadian dollar equivalent,
with a $10,000,000 sublimit for letters of credit and letters of guarantee and a $20,000,000 sublimit for a
swingline.
The Credit Facility matures on October 17, 2029 and is available on a revolving basis by way of prime rate
loans, term CORRA loans and daily compounded CORRA Loans in Canadian dollars, and U.S. base rate and
term Secured Overnight Financing Rate (“SOFR”) loans in U.S. dollars, and letters of credit in Canadian and
U.S. dollars. The marginal rate payable on the prime rate loans and U.S. base rate loans ranges from 0.75%
to 2.0%, based on Food Services’ ratio of Total Debt to EBITDA, as defined in the credit agreement. The
marginal rate payable on the term CORRA loans, daily compounded CORRA loans, term SOFR loans and
letters of credit ranges from 1.75% to 3.0%, based on Food Services’ ratio of Total Debt to EBITDA, as
defined in the credit agreement. The Credit Facility is secured by a first priority lien over all of the present
and future undertakings and property of Food Services.
On October 17, 2024 Food Services drew down $265,000,000 on the Credit Facility and used the proceeds
to pay off Trade Marks’ $60,000,000 term loan and the accrued interest, which totaled $60,167,000, finance
the $175,623,000 purchase of 4,746,582 of the Trust Units and pay $3,500,000 in financing fees associated
with the Credit Facility. The Credit Facility will be used to fund working capital requirements and for general
corporate purposes on an ongoing basis.
The Credit Facility contains covenants including the requirement to meet certain debt to EBITDA and interest
coverage ratios, as defined in the credit agreement, during each trailing four quarter period. Food Services
was in compliance with all of its financial covenants as at December 29, 2024, December 31, 2023 and
January 2, 2023.
33|A&W Food Services of Canada Inc.
Financing fees of $3,500,000 related to the Credit Facility entered into on October 17, 2024 are presented as
a reduction to the carrying amount of the operating loan facility. The financing fees will be amortized over
the remainder of the five-year term of the Credit Facility.
The following table presents the operating loan facility for the Company:
December 29,
2024
December 31,
2023
January 1,
2023
Amount of Former Facility
-
40,000
40,000
Amount of Credit Facility
325,000
-
-
Amounts drawn on Former Facility
-
15,726
8,149
Amounts drawn on Credit Facility
260,509
-
-
Less: Unamortized balance on financing fees
(3,360)
-
-
257,149
15,726
8,149
Letters of guarantee issued under Former Facility
-
198
198
Letters of guarantee issued under Credit Facility
198
-
-
198
198
198
Amount available on Former Facility
-
24,076
31,653
Amount available on Credit Facility
64,293
-
-
Subsequent to the period ended December 29, 2024, $10,157,000 was repaid on the Credit Facility.
Cash Flows
The following table presents cash flows for the periods indicated:
(in thousands of Canadian $)
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Net cash generated from (used in)
operating activities
8,479
(196)
61,228
18,953
Net cash generated from (used in)
investing activities
(176,387)
2,808
(168,377)
5,127
Net cash generated from (used in)
financing activities
170,800
(1,103)
125,828
(25,262)
Increase (decrease) in cash and cash
equivalents
2,892
1,509
18,679
(1,182)
Analysis of Q4 2024 cash flows
Net Cash Generated from (Used in) Operating Activities
Net cash generated from operating activities totaled $8,479,000 in Q4 2024 compared to net cash used in
operating activities of $196,000 in Q4 2023. This change was driven by the increase in Adjusted EBITDA,
discussed above, and lower use of working capital due to timing of payments, partially offset by a reduction
in deposits on equipment sales.
34|A&W Food Services of Canada Inc.
Net Cash Generated from (Used in) Investing Activities
Net cash used in investing activities totaled $176,387,000 in Q4 2024 compared to net cash generated from
investing activities of $2,808,000 in Q4 2023. This change was driven by the cash outflows related to the
Transaction, particularly the $175,623,000 cash paid to acquire the Trust Units and a reduction in the amount
of dividends received from the Fund and Trade Marks. See “Strategic Combination with the Fund” and
“Operating Loan Facility”.
Net Cash Generated from (Used in) Financing Activities
Net cash generated from financing activities totaled $170,800,000 in Q4 2024 compared to net cash used in
financing activities of $1,103,000 in Q4 2023. This change was driven by the $265,509,000 draw on the
operating loan facility to fund the cash outlays required to complete the Transaction discussed above, partially
offset by the $60,167,000 paid to settle Trade Marks bank debt, the repayment of non-interest bearing
promissory notes payable on demand totalling $12,522,000, repayments of the operating loan, and the
$3,500,000 payment of financing fees. See “Strategic Combination with the Fund” and “Operating Loan
Facility”.
Analysis of Fiscal 2024 cash flows
Net Cash Generated from Operating Activities
Net cash generated from operating activities totaled $61,228,000 in Fiscal 2024 compared to net cash
generated from operating activities of $18,953,000 in Fiscal 2023. This change was driven by lower use of
working capital due to timing of payments, an increase in deposits on franchise and equipment sales and the
cessation of the royalty expense after completion of the Transaction.
Net Cash Generated from (Used in) Investing Activities
Net cash used in investing activities totaled $168,377,000 in Fiscal 2024 compared to net cash generated
from investing activities of $5,127,000 in Fiscal 2023. This change was driven by the cash outflows related
to the Transaction, particularly the $175,623,000 cash paid to acquire the Trust Units and a reduction in the
amount of dividends received from the Fund and Trade Marks. See “Strategic Combination with the Fund”
and “Operating Loan Facility”.
Net Cash Generated from (Used in) Financing Activities
Net cash generated from financing activities totaled $125,828,000 in Fiscal 2024 compared to net cash used
in financing activities of $25,262,000 in Fiscal 2023. This change was driven by the $265,509,000 draw on
the operating loan facility to fund the cash outlays required to complete the Transaction discussed above,
partially offset by the $60,167,000 paid to settle Trade Marks bank debt, the repayment of non-interest
bearing promissory notes totalling $12,522,000, repayments of the operating loan, and the $3,500,000
payment of financing fees. See Strategic Combination with the Fund” and “Operating Loan Facility”.
35|A&W Food Services of Canada Inc.
Contractual obligations and commitments
The following table summarizes the undiscounted contractual payments of the Company’s financial
liabilities as at December 29, 2024:
(in thousands of Canadian dollars)
Total
Less than 1
year
1 – 3 years
4 – 5 years
After 5
years
Accounts payable and accrued
liabilities
67,126
67,126
-
-
-
Lease liabilities
956,378
60,714
174,156
105,129
616,379
Operating loan facility
333,907
15,881
47,643
270,383
-
Purchase obligations(i)
113,172
113,172
-
-
-
1,470,583
256,893
221,799
375,512
616,379
(i) Purchase obligations for supply to franchisees for food, supplies, packaging and equipment of $113,172,000 are not recognized
on Food Services consolidated balance sheet as at December 29, 2024.
OFF-BALANCE SHEET ARRANGEMENTS
As at December 29, 2024 Food Services had $198,000 in letters of guarantee outstanding that had been issued
to banks to assist two franchisees in securing financing. Other than the letters of guarantee, A&W does not
have any other off-balance sheet arrangements.
FINANCIAL INSTRUMENTS
Food Services’ financial instruments consist of cash and cash equivalents, accounts receivable, leases
receivable, other receivables, accounts payable and accrued liabilities and operating loan facility. These
financial instruments are used in the normal course of business which by their nature involve risk, including
market risk and the credit risk of non-performance by counterparties. These financial instruments are subject
to normal credit standards, financial controls, risk management and monitoring procedures. See “Risks and
Uncertainties”.
Management estimates that the fair values of cash and cash equivalents, accounts receivable, other
receivables, and accounts payable and accrued liabilities and operating loan facility approximate their
carrying values given the short term to maturity of these instruments. Any income or expense associated with
these financial instruments is recognized in net income.
CURRENT SHARE INFORMATION
Food Services’ authorized share capital is comprised of an unlimited number of common shares. As at March
5, 2025, Food Services had 23,997,781 common shares issued and outstanding.
As at December 29, 2024 and December 31, 2023 no awards had been granted under the Equity Incentive
Plan. Subsequent to the period ended December 29, 2024 certain Directors of Food Services elected to receive
a portion of their director’s fees for fiscal 2025 in the form of deferred share units (“DSUs”) in accordance
with the Equity Incentive Plan.
RELATED PARTY TRANSACTIONS AND BALANCES
Royalty expense in Fiscal 2024 was $44,036,000 (Fiscal 2023 – $54,863,000). As of December 31, 2023
$4,094,000 was payable to the Partnership by Food Services. Following the completion of the Transaction
36|A&W Food Services of Canada Inc.
the royalty expense has been fully eliminated upon Trademarks becoming a wholly owned subsidiary of Food
Services.
During Fiscal 2024, Trade Marks declared and paid dividends of $6,966,000 (Fiscal 2023 – $8,237,000) to
Food Services.
During Fiscal 2024, the Fund declared distributions of $2,329,000 (Fiscal 2023 – $2,893,000) payable to
Food Services as a result of its ownership of limited voting units of the Fund. As at December 31, 2023 Food
Services had recorded a $241,000 distribution that was declared by the Fund on December 7, 2023 but
payable to Food Services subsequent to the period end on January 31, 2024 as a current asset. There were no
distributions receivable as at December 29, 2024 as the Fund did not declare any distributions subsequent to
the completion of the Transaction.
During Fiscal 2024, Food Services recognized $152,000 (Fiscal 2023 – $190,000) as an offset to general and
administrative expenses as a result of administrative services provided to Trade Marks and the Fund.
Following the completion of the Transaction, this arrangement was wound up and Food Services is no longer
receiving payment from Trade Marks for administrative services.
During the period, the directors of the Company earned director’s fees totaling $165,000 (December 31, 2023
- $nil), all of which was in accounts payable and accrued liabilities as at December 29, 2024 (December 31,
2023 $nil; January 1, 2023 – $nil).
During Fiscal 2023, Food Services paid $90,000 to a professional baseball club, of which a director of Food
Services was a part owner, in exchange for advertising the A&W brand at the ballpark and tickets to the
baseball games. The director disposed of his investment in the baseball club in 2023.
Other related party transactions and balances are referred to elsewhere in this MD&A, including, without
limitation, under the heading “Strategic Combination with the Fund”.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS Accounting Standards requires management
to make estimates and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. It is reasonably possible that circumstances may arise that would cause actual
results to differ from management estimates; however, management does not believe it is likely that such
differences will materially affect A&W’s financial position. Significant areas requiring the use of
management estimates and judgements are: the accounting for the Transaction, impairment of indefinite life
intangible assets, lease receivables, supplementary retirement benefit plan, deferred income taxes and
investments in associates. The supplementary retirement benefit plan and deferred income taxes are not
“critical accounting estimates” as (i) they do not require Food Services to make assumptions about matters
that are highly uncertain at the time the estimate is made, and (ii) different estimates that could have been
used, or changes in the accounting estimates that are reasonably likely to occur from period to period, would
not have had a material impact on Food Services’ financial condition, changes in financial condition or
financial performance. Following completion of the Transaction, the investments in associates balance was
derecognized from Food Services’ financial statements.
37|A&W Food Services of Canada Inc.
The following discusses the most significant accounting judgements made by management in the preparation
of A&W’s consolidated financial statements.
In respect of the Transaction, the Company determined, by taking into account the consolidation
provisions within IFRS 10 - Consolidated Financial Statements, that the consolidating entity prior to the
closing of the Transaction is A&W Canada. The Company also determined that the reorganization steps
undertaken involving the Holding Companies in preparation of the acquisition of the Trust Units,
represent a capital reorganization accounted for at carrying values on the basis that the reorganization
steps were performed at no consideration and ensured equal ownership value for each ownership party -
before and after the reorganization. The Company also determined that the acquisition of the Trust Units
meets the definition of an asset purchase as opposed to a business combination as per IFRS 3 - Business
Combinations.
Lease terms- whether the Company is reasonably certain, at the lease commencement date, it will exercise
available renewal or termination options and include such options in the lease term.
The following discusses the most significant accounting estimates made by management in the preparation
of A&W’s consolidated financial statements.
Impairment of indefinite life intangible assets - estimates in the impairment testing model, which include
estimates of future cash flows, growth rates and discounts rates.
CHANGES IN ACCOUNTING POLICIES
Food Services’ consolidated financial statements have been prepared in accordance with IFRS Accounting
Standards. These are the first consolidated financial statements that have been prepared for Food Services
under IFRS Accounting Standards and as such, IFRS 1, First-time Adoption of International Reporting
Standards (“IFRS 1”), has been applied.
The principal accounting policies applied in the preparation of Food Services’ consolidated financial
statements are set out below. These policies have been applied retrospectively and consistently applied except
where specific exemptions permitted an alternative treatment upon transition to IFRS Accounting Standards
in accordance with IFRS 1. Food Services has applied the following permitted exemptions:
Lease liabilities and Right-of-use assets are measured in accordance with IFRS 16 in their respective
subsidiaries.
Deemed cost: Plant and equipment has been measured at amortized cost at the date of transition to
IFRS Accounting Standards.
In 2020 the International Accounting Standards Board published amendments to IAS 1 - Presentation of
Financial Statements that clarify the criteria for classifying liabilities with covenants as current or non-
current. The amendments also require companies to provide additional note disclosure on non-current
liabilities with covenants. The effective date is for annual periods beginning on or after January 1, 2024. As
the Fiscal 2024 consolidated financial statements are the first consolidated financial statements that have
been prepared for Food Services under IFRS Accounting Standards, Food Services applied this amendment
38|A&W Food Services of Canada Inc.
for all periods presented in its consolidated financial statements. The amendment had no impact to the
classification of its liabilities or its note disclosures.
The International Accounting Standards Board issued IFRS 18 - Presentation and Disclosure in the
Financial Statements (“IFRS 18”), in April 2024 which is effective for annual reporting periods beginning
on or after January 1, 2027. Management is currently assessing the impact of IFRS 18 to these consolidated
financial statements.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER
FINANCIAL REPORTING
Management is responsible for establishing and maintaining a system of disclosure controls and procedures
over the public disclosure of financial and non-financial information regarding the Company. Such controls
and procedures are designed to provide reasonable assurance that all relevant information is gathered and
reported to senior management on a timely basis, including the Chief Executive Officer (“CEO”) and the
Chief Financial Officer (“CFO”), so that they can make appropriate and timely decisions regarding public
disclosure. As required by CSA National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual
and Interim Filings (“NI 52-109”), an evaluation of the adequacy of the design and effective operation of the
Company’s disclosure controls and procedures was conducted under the supervision of management,
including the CEO and CFO. They concluded that, as at December 29, 2024 the design and operation of its
disclosure controls and procedures was effective in providing reasonable assurance that material information
regarding this MD&A, the consolidated financial statements and other disclosures was made known to them
on a timely basis.
Management is also responsible for establishing and maintaining adequate internal controls over financial
reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial reports for external purposes in accordance with IFRS Accounting Standards. The Company’s
internal controls over financial reporting include, but are not limited to, detailed policies and procedures
relating to financial accounting and reporting, and controls over systems that process and summarize
transactions. The Company’s procedures for financial reporting also include the active involvement of
qualified financial professionals, senior management and its Audit, Finance and Risk Committee.
As also required by NI 52-109, management, including the CEO and CFO, evaluated the adequacy of the
design and the effective operation of the Company’s internal control over financial reporting as defined in
NI 52-109. In making this assessment, management, including the CEO and CFO, used the framework set
forth in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, the CEO and the CFO have concluded
that the design and operation of the Company’s internal control over financial reporting, as defined by NI
52-109, were effective as at December 29, 2024. In designing such controls, it should be recognized that due
to inherent limitations, any control, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives and may not prevent or detect misstatements.
Additionally, management is required to use judgment in evaluating controls and procedures. Therefore, even
when determined to be designed effectively, disclosure controls and internal controls over financial reporting
can provide only reasonable assurance with respect to financial statement preparation and presentation.
39|A&W Food Services of Canada Inc.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There has been no change in A&W’s internal controls over financial reporting during the period covered by
this MD&A that has materially affected, or is reasonably likely to materially affect, A&W’s internal control
over financial reporting.
OUTLOOK
Food Services’ is pursuing a growth strategy as more fully described in the AIF with a focus on opening new
restaurants across Canada particularly in the strategic markets of Ontario and Quebec, and in partnership with
Suncor, while also growing same store sales through menu innovation, digital and delivery sales growth and
through expanded beverage offerings for guests via the A&W Brew Bar® beverage business. We are
additionally focused on making restaurants easier to operate for franchisees and continuing to drive
franchisee profitability.
The purpose of the financial outlook set out below is to provide readers with an indication of management’s
expected and targeted financial results as of the date of this MD&A. Readers are cautioned that using this
information for other purposes may not be appropriate. The financial outlook is forward-looking and is based
on certain assumptions and subject to a number of risks and uncertainties, including those identified under
“Forward-Looking Information”. The financial outlook is also based on the following assumptions: Food
Services increasing the total number of A&W restaurants as contemplated; continued Same Store Sales
Growth (driven in part by brand appeal, menu developments and growing a successful mobile app and Brew
Bar business); no significant changes in economic conditions that impact consumer spending (including
economic recession, actual or threatened tariffs or changes in rates of inflation or deflation); and revenue
growth outpacing growth in costs which is expected to be achieved by leveraging the existing platform over
a larger scale. See also the “Risks and Uncertainties” section of the MD&A. As such, undue reliance should
not be placed on this forward-looking information. Management may review and revise the outlook as
economic, geopolitical, market and regulatory environments change.
2025 Outlook
• The Company expects fiscal 2025 Adjusted EBITDA(i) to be between $98.0 million and $103.0 million.
• The Company expects total A&W restaurants to be between 1,080 and 1,095 by end of fiscal 2025.
• The Company expects annual System Sales Growth(i) of 5.0% - 7.0% for fiscal 2025.
• The Company expects annual Same Store Sales Growth(i) of 3.0% - 4.5% for fiscal 2025.
(i) Adjusted EBITDA, System Sales Growth and Same Store Sales Growth are non-IFRS financial measures, non-IFRS ratios and
supplementary financial measures. Please see “Non-IFRS Measures”, “Selected Financial Information” and “How We Assess the
Performance of Our Business” sections of this MD&A for further details.
RISKS AND UNCERTAINTIES
For a detailed description of risk factors associated with A&W, refer to the “Risk Factors” section of the AIF,
which is available under Food Services’ SEDAR+ profile at www.sedarplus.ca or at www.awinvestors.ca.
In addition, we are exposed to a variety of financial risks in the normal course of operations including credit,
interest rate, liquidity and equity price risk.
Credit risk
Food Services’ exposure to credit risk is as indicated by the carrying amount of its accounts receivable, other
receivables and leases receivables. Receivables are due from franchisees and distributors. Management does
40|A&W Food Services of Canada Inc.
not believe Food Services has a significant exposure to any individual franchisee. As at December 29, 2024,
$11,419,000 is receivable from one distributor of which $11,177,000 is less than 30 days past due and all of
which was paid subsequent to the period end.
Interest Rate Risk
Food Services’ operating loan facility bears a floating rate of interest and therefore Food Services is exposed
to market risks relating to changes in interest rates on outstanding balances. Cash and cash equivalents earn
interest at market rates. All of Food Services’ other financial instruments are non-interest bearing.
Liquidity risk
Liquidity risk refers to the risk that the Company is unable to fund obligations and dividend payments. The
primary sources of funds are the fees received from franchised restaurants and revenues from the
development of franchised restaurants, the sale of food and supplies to franchisees and distributors, revenue
from A&W-owned restaurants and the sale of A&W Root Beer concentrate. The liquidity risk is assessed as
low due to the nature of the income Food Services receives from the franchisees, the operating loan facility
that Food Services has in place to manage liquidity and Food Services’ ability to reduce future dividends if
necessary.
Equity Price Risk
Food Services is exposed to risk arising from the cash settlement of our deferred share units (“DSUs”) and
restricted share units (“RSUs”), under Food Services’ omnibus long term incentive plan (“LTIP”) as an
appreciating share price increases the potential cash outflow. When RSUs and DSUs are issued, Food
Services will record a liability for their potential future settlement by reference to the fair value of the liability.
Furthermore, the industry and economic environment we operate in provides additional risks including
economic environment risk.
Economic Environment Risk
A&W’s profitability is indirectly impacted by consumer discretionary spending which is influenced by
general economic conditions. These economic conditions could include economic recession or changes in
the rate of inflation or deflation, unemployment rates and household debt, political uncertainty, interest rates
currency exchange rates or derivative or commodity prices, such as fuel and energy costs or the impact of
tariffs threatened or imposed by global trade partners, including the United States of America (the “U.S.”).
A number of these conditions could impact consumer spending and, as a result, payment patterns could
deteriorate or remain unpredictable due to global, national, regional or local economic volatility. Uncertain
economic conditions may adversely impact demand for A&W’s products and services which could adversely
affect Food Services’ financial performance.
Subsequent to the period ended December 29, 2024, on February 1, 2025, the U.S. President issued three
executive orders directing the U.S. to impose new tariffs on goods imported from Canada, Mexico and
China. On March 4, 2025 the tariffs came into effect, adding an additional 25% duty on Canadian and
Mexican imports into the U.S. (with the exception of certain imports which are subject to a lower duty or
the duty has been temporarily paused) and a 20% duty on Chinese imports into the U.S. In response, the
Canadian Prime Minister announced retaliatory tariffs of 25% on certain U.S. imports into Canada. We are
assessing the direct and indirect impacts that the tariffs imposed by both the U.S. and Canada may have on
our business, and such impacts could be material.
41|A&W Food Services of Canada Inc.
SUMMARY OF QUARTERLY RESULTS AND CERTAIN PERFORMANCE MEASURES
The following table summarizes the financial results for the eight most recently completed quarters. The
financial results for Q4 2024 has been derived from the audited annual consolidated financial statements for
the year ended December 29, 2024 less the year-to-date information per the unaudited interim condensed
consolidated financial statements of predecessor A&W Food Services for Q3 2024 after giving effect to the
consolidation and presentation adjustments at the A&W Canada level. The selected consolidated financial
information set out below for Q1 2023 through Q3 2024 has been derived from the unaudited interim
condensed consolidated financial statements of predecessor A&W Food Services with adjustments made by
management to reflect consolidation and presentation at the A&W Canada level so that the periods presented
are comparable. Due to seasonality, the results of operations for any quarter are not necessarily indicative of
the results of operations for the fiscal year.
(i)
The net loss, net loss attributable to shareholders of Food Services and the net loss per share for Q4 2024 includes a non-
recurring, non-cash deferred tax expense of $16,943,000 as a result of the Transaction. Please see the “Income taxes”
sections of this MD&A under the header “Results of Operations” section for additional details.
(in thousands of Canadian $ except per share amounts)
Q4
2024
Q3
2024
Q2
2024
Q1
2024
Financial Summary
Total revenue
93,196
76,001
64,321
58,781
Net income (loss)(i)
(1,113)
6,486
8,795
7,510
Net income (loss) attributable to shareholders of
Food Services(i)
(2,432)
4,009
5,539
4,763
Net income (loss) per share(i)(iii)
(0.13)
0.42
0.58
0.50
Other Data
System Sales(ii)
576,796
465,104
437,309
389,269
System Sales Growth(ii)
-0.1%
0.4%
1.6%
2.0%
Same Store Sales Growth (ii)
-1.9%
-1.0%
0.3%
0.6%
Number of A&W restaurants
1,073
1,069
1,062
1,060
Adjusted EBITDA(ii)
27,927
24,677
21,513
19,352
Adjusted EBITDA Margin(ii)
30.0%
32.5%
33.4%
32.9%
Number of days in the quarter
112
84
84
84
(in thousands of Canadian $ except per share amounts)
Q4
2023
Q3
2023
Q2
2023
Q1
2023
Financial Summary
Total revenue
102,881
64,653
72,561
59,219
Net income
9,884
9,456
10,957
7,715
Net income attributable to shareholders of Food
Services
6,330
5,940
6,973
4,861
Net income per share(iii)
0.67
0.63
0.73
0.51
Other Data
System Sales(ii)
577,616
463,284
430,409
381,810
System Sales Growth(ii)
3.4%
2.8%
4.0%
8.3%
Same Store Sales Growth (ii)
2.1%
1.1%
2.5%
6.1%
Number of A&W restaurants
1,054
1,048
1,048
1,046
Adjusted EBITDA(ii)
27,705
23,988
22,085
18,522
Adjusted EBITDA Margin(ii)
26.9%
37.1%
30.4%
31.3%
Number of days in the quarter
112
84
84
84
42|A&W Food Services of Canada Inc.
(ii) System Sales, System Sales Growth, Same Store Sales Growth, Adjusted EBITDA and Adjusted EBTIDA Margin are non-
IFRS financial measures, non-IFRS ratios and supplementary financial measures. Please see “Non-IFRS Measures”,
“Selected Financial Information” and “How We Assess the Performance of Our Business” sections of this MD&A for
further details.
(iii) Net income per share is calculated by dividing the net income attributable to Food Services shareholders by the weighted
average number of common shares outstanding during the period. In order to ensure comparability of net income per share,
the number of shares used to calculate the net income per share up to October 17, 2024 (the date of the Transaction), has
been adjusted to reflect the equivalent number of common shares of Food Services that were outstanding after the
reorganization steps described in the section titled “Strategic Combination with the Fund” were undertaken, excluding the
common shares issued to the outside party holding a non-controlling interest in Food Services prior to the completion of the
Transaction and those issued to Unitholders as consideration for the Transaction which were incorporated into the weighted
average number of shares from the date of the Transaction onwards.
The following table provides a reconciliation of System Sales to Revenue from Corporate Restaurants, the
most comparable IFRS measure, for the quarterly periods indicated.
(in thousands of Canadian $)
Q4 2024
Q3 2024
Q2 2024
Q1 2024
Revenue from corporate restaurants
7,563
6,061
5,701
5,355
Sales reported by franchises restaurants
569,233
459,043
431,608
383,914
System Sales(i)
576,796
465,104
437,309
389,269
(in thousands of Canadian $)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Revenue from corporate restaurants
7,560
5,438
5,144
5,051
Sales reported by franchises restaurants
570,056
457,846
425,265
376,759
System Sales(i)
577,616
463,284
430,409
381,810
(i) System Sales is a non-IFRS financial measure. Please see “Non-IFRS Measures”, “Selected Financial Information” and “How
We Assess the Performance of Our Business” sections of this MD&A for further details.
43|A&W Food Services of Canada Inc.
The following table provides a reconciliation of EBITDA and Adjusted EBITDA to Income before income
taxes, the most comparable IFRS measure, for the quarterly periods indicated.
(in thousands of Canadian $)
Q4 2024
Q3 2024
Q2 2024
Q1 2024
Income before income taxes
20,962
8,968
10,553
9,468
Depreciation of plant, equipment,
intangible asset and right-of-use assets
2,034
1,440
1,411
1,340
Amortization of deferred gain
(398)
(880)
(881)
(880)
Net finance expense
3,837
233
349
485
EBITDA(i)
26,435
9,761
11,432
10,413
Adjustments to EBITDA:
Income before taxes attributable to non-
controlling interest in A&W Beverages
(498)
(499)
(462)
(323)
Royalty expense
5,776
13,742
12,965
11,553
Share of income from associates
(1,242)
(2,786)
(2,869)
(2,575)
Impairment of leases receivable
192
-
-
-
Net loss on disposal of plant and
equipment
-
636
-
-
Impairment loss on plant and equipment
-
-
-
-
Unrealized loss on foreign exchange
18
18
11
8
Stock-based compensation
-
-
-
-
Net income impacts created on a deficit
related to the National Advertising Fund
(2,437)
3,325
-
-
Recovery of capitalized costs
(944)
(335)
-
(111)
Start up net losses on Pret
627
535
436
387
Transaction costs
-
280
-
-
Adjusted EBITDA(i)
27,927
24,677
21,513
19,352
(i) EBITDA and Adjusted EBITDA are non-IFRS financial measures. Please see “Non-IFRS Measures”, “Selected Financial
Information” and “How We Assess the Performance of Our Business” sections of this MD&A for further details.
44|A&W Food Services of Canada Inc.
(in thousands of Canadian $)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Income before income taxes
12,221
12,926
12,559
9,377
Depreciation of plant, equipment, intangible
asset and right-of-use assets
1,789
1,260
986
975
Amortization of deferred gain
(1,143)
(853)
(807)
(900)
Net finance expense
437
300
342
308
EBITDA(i)
13,304
13,633
13,080
9,760
Adjustments to EBITDA:
Income before taxes attributable to non-
controlling interest in A&W Beverages
(299)
(526)
(424)
(399)
Royalty expense
17,045
13,705
12,773
11,340
Share of income from associates
(3,143)
(2,984)
(3,170)
(2,118)
Impairment of leases receivable
43
-
-
-
Net loss on disposal of plant and equipment
675
-
-
-
Impairment loss on plant and equipment
-
-
-
-
Unrealized loss on foreign exchange
1
2
1
8
Stock-based compensation
-
-
-
-
Net income impacts created on a deficit
related to the National Advertising Fund
-
-
-
-
Recovery of capitalized costs
(677)
43
(427)
(225)
Start up net losses on Pret
756
115
252
156
Transaction costs
-
-
-
-
Adjusted EBITDA(i)
27,705
23,988
22,085
18,522
(i) EBITDA and Adjusted EBITDA are non-IFRS financial measures. Please see “Non-IFRS Measures”, “Selected Financial
Information” and “How We Assess the Performance of Our Business” sections of this MD&A for further details.
45|A&W Food Services of Canada Inc.
A & W Food Services of
Canada Inc.
Consolidated Financial Statements
December 29, 2024 and December 31,
2023
(in thousands of dollars)
46|A&W Food Services of Canada Inc.
PricewaterhouseCoopers LLP
PwC Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T.: +1 604 806 7000, F.: +1 604 806 7806, Fax to mail: ca_vancouver_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Shareholders of A & W Food Services of Canada Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of A & W Food Services of Canada Inc. and its subsidiaries (together, the Company)
as at December 29, 2024, December 31, 2023 and January 2, 2023, and its financial performance and its
cash flows for the 52-week periods ended December 29, 2024 and December 31, 2023 in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated balance sheets as at December 29, 2024, December 31, 2023 and January 2, 2023;
the consolidated statements of income for the 52-week periods ended December 29, 2024 and
December 31, 2023;
the consolidated statements of comprehensive income for the 52-week periods ended
December 29, 2024 and December 31, 2023;
the consolidated statements of changes in shareholder’s equity (deficiency) for the 52-week periods
ended December 29, 2024 and December 31, 2023;
the consolidated statements of cash flows for the 52-week periods ended December 29, 2024 and
December 31, 2023; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
47|A&W Food Services of Canada Inc.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the 52-week period ended December 29, 2024. These
matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of indefinite life
intangible assets
Refer to note 3 – Material accounting policy
information and note 12 – Intangible assets to the
consolidated financial statements.
The Company had $447.2 million of intangible
assets as at December 29, 2024, of which $440.9
million was related to the A & W trademarks which
have an indefinite life. An impairment assessment
is conducted annually at the balance sheet date or
earlier if events and circumstances dictate. An
impairment loss is recognized if the carrying
amount of the indefinite life intangible assets
exceeds its recoverable amount.
The recoverable amount is the higher of the
intangible assets’ fair value less costs to sell and
value in use. Management used a value-in-use
model to determine the recoverable amount of the
indefinite life intangible assets. The significant
assumptions applied by management in estimating
the recoverable amount included the revenue
growth rates and the discount rate. No impairment
loss was recorded during the year.
We considered this a key audit matter due to the
significant judgments made by management in
developing assumptions to determine the
recoverable amount. This in turn resulted in
significant audit effort and subjectivity in performing
audit procedures to test the recoverable amount
determined by management. Professionals with
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the
recoverable amount of the indefinite life
intangible assets, which included the following:
Tested the reasonableness of the revenue
growth rates by comparing them to the
current and past performance of the A & W
restaurants.
o
With the assistance of professionals
with specialized skill and knowledge in
the field of valuation, assessed the
appropriateness of management’s
value-in-use model, as well as the
discount rate applied.
o
Tested the underlying data used in the
value-in-use model.
Examined the disclosures made in the
consolidated financial statements related to the
significant assumptions used to determine the
recoverable amount of the indefinite life
intangible assets.
48|A&W Food Services of Canada Inc.
Key audit matter
How our audit addressed the key audit matter
specialized skill and knowledge in the field of
valuation assisted us in performing our procedures.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
49|A&W Food Services of Canada Inc.
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Company as a basis for forming an opinion on
the consolidated financial statements. We are responsible for the direction, supervision and review of
the audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
50|A&W Food Services of Canada Inc.
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Paulina Prokop.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
March 5, 2025
51|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Consolidated Balance Sheets
(in thousands of dollars)
The accompanying notes form an integral part of these consolidated financial statements.
On behalf of the Board of Directors
_________________________________ Director _________________________________ Director
Note
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Assets
Current assets
Cash and cash equivalents
22,534
3,855
5,037
Accounts receivable
6
41,934
40,122
39,713
Distributions receivable
26
-
241
241
Leases receivable
7
32,457
31,608
25,825
Inventories
12,170
14,439
16,396
Prepaid expenses
5,376
4,276
3,309
Income taxes recoverable
-
3,945
1,937
114,471
98,486
92,458
Non-current assets
Investments in associates
8
-
169,828
152,944
Other receivables
3,374
2,051
2,079
Deferred tax assets
9
10,567
27,386
29,695
Right-of-use assets
10
22,490
20,085
18,689
Leases receivable
7
600,616
589,023
576,152
Plant and equipment
11
8,953
11,405
10,819
Intangible assets
12
447,192
6,322
4,074
Total assets
1,207,663
924,586
886,910
Liabilities
Current liabilities
Accounts payable and accrued liabilities
13
67,126
44,551
50,058
Operating loan facility
17
-
15,726
8,149
Royalties payable
26
-
4,094
3,891
Lease liabilities
14
35,610
33,923
27,836
Deposits on franchise and equipment sales
19
14,861
11,581
16,689
Deferred revenue
19
2,584
2,535
2,557
Income taxes payable
2,866
-
-
123,047
112,410
109,180
Non-current liabilities
Deferred gain
15
-
285,434
272,537
Deferred revenue
19
29,848
28,456
29,139
Operating loan facility
17
257,149
-
-
Lease liabilities
14
622,602
609,476
595,056
Supplementary retirement benefit plan
16
10,974
11,232
10,849
Other long-term liabilities
11
30
33
1,043,631
1,047,038
1,016,794
Shareholder's equity (deficiency)
Share capital
18
417,925
14,043
14,043
Accumulated deficit
(254,246)
(225,970)
(230,627)
163,679
(211,927)
(216,584)
Non-controlling interest
353
89,475
86,700
Total equity (deficiency)
164,032
(122,452)
(129,884)
Total liabilities and equity (deficiency)
1,207,663
924,586
886,910
Commitments and contingencies
23
Subsequent events
27
52|A&W Food Services of Canada Inc.
Paul Hollands
Andrew W. Dunn
A&W Food Services of Canada Inc.
Consolidated Statements of Income
(in thousands of dollars)
The accompanying notes form an integral part of these consolidated financial statements.
Note
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Revenue
Franchising
19
267,619
276,121
Corporate restaurants
24,680
23,193
292,299
299,314
Expenses (income)
Operating costs
157,095
163,948
General and administrative expenses
48,632
47,108
Royalty expense
26
44,036
54,863
Impairment of leases receivable
7
192
43
Finance income
21
(25,199)
(22,896)
Finance expense
21
30,103
24,283
Amortization of deferred gain
15
(3,039)
(3,703)
Share of income from associates
8
(9,472)
(11,415)
242,348
252,231
Income before income taxes
49,951
47,083
Provision for income taxes
9
Current
13,332
6,561
Deferred
14,941
2,510
28,273
9,071
Net income for the period
21,678
38,012
Net income attributable to
Shareholder of A&W Food Services of Canada Inc.
11,878
24,106
Non-controlling interest
9,800
13,906
21,678
38,012
53|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Consolidated Statements of Comprehensive Income
(in thousands of dollars)
The accompanying notes form an integral part of these consolidated financial statements.
Note
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Net income for the period
21,678
38,012
Other comprehensive loss
Actuarial loss on supplementary retirement benefit plan – net
of tax
16
(77)
(548)
Comprehensive income
21,601
37,464
Comprehensive income attributable to
Shareholder of A&W Food Services of Canada Inc.
11,801
23,558
Non-controlling interest
9,800
13,906
21,601
37,464
Basic and diluted weighted average number of shares
outstanding (thousands)
12,444
9,495
Basic and diluted net income per share
$ 0.95
$ 2.54
54|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Consolidated Statements of Changes in Shareholder’s Equity (Deficiency)
For the 52-week period ended December 29, 2024 and the 52-week period ended December 31, 2023
(in thousands of dollars)
The accompanying notes form an integral part of these consolidated financial statements.
Note
Share
capital
$
Accumulated
deficit
$
Total
$
Non-
controlling
interest
$
Total equity
(deficiency)
$
Balance – January 1, 2023
14,043
(230,627)
(216,584)
86,700
(129,884)
Net income for the period
-
24,106
24,106
13,906
38,012
Dividends on common shares
-
(18,901)
(18,901)
(11,131)
(30,032)
Actuarial loss on supplementary
retirement benefit plan – net of tax
16
-
(548)
(548)
-
(548)
Balance – December 31, 2023
14,043
(225,970)
(211,927)
89,475
(122,452)
Net income for the period
-
11,878
11,878
9,800
21,678
Dividends on common shares
-
(28,241)
(28,241)
(11,318)
(39,559)
Share reorganization
18
984
(48,066)
(47,082)
-
(47,082)
Share reorganization with non-
controlling outside parties
18
51,374
36,230
87,604
(87,604)
-
Common share redemption to preferred
shares
18
(12,522)
-
(12,522)
-
(12,522)
Share issuance from the Transaction
18
364,046
-
364,046
-
364,046
Actuarial loss on supplementary
retirement benefit plan – net of tax
16
-
(77)
(77)
-
(77)
Balance – December 29, 2024
417,925
(254,246)
163,679
353
164,032
55|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Consolidated Statements of Cash Flows
(in thousands of dollars)
The accompanying notes form an integral part of these consolidated financial statements.
Note
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Cash provided by (used in)
Operating activities
Net income for the period
21,678
38,012
Adjustments for
Depreciation of plant and equipment
11
1,670
1,731
Amortization of intangibles
12
1,950
763
Depreciation of right-of-use assets
10
2,605
2,516
Deferred income taxes
14,941
2,510
Net loss on disposal of plant and equipment
11
636
675
Increase (decrease) in deposits on franchise and equipment sales
19
3,280
(5,108)
(Increase) decrease in other receivables
(1,323)
29
Supplementary retirement benefit plan
16
(879)
(856)
Increase (decrease) in deferred revenue
19
1,441
(705)
Decrease in other long-term liabilities
(19)
(3)
Amortization of deferred gain
15
(3,039)
(3,703)
Impairment of leases receivable
7
192
43
Use of provision for impairment of leases receivable
7
(430)
-
Share of income from associates
8
(9,472)
(11,415)
Current income tax expense
13,332
6,561
Income tax paid
(4,793)
(7,808)
Finance income
21
(25,199)
(22,896)
Finance expense
21
30,103
24,283
Finance interest received
425
187
Finance expense paid
(1,111)
(355)
Changes in items of non-cash working capital
22
15,240
(5,508)
61,228
18,953
Investing activities
Purchase of plant and equipment
11
(979)
(2,992)
Purchase of intangible assets
12
(1,927)
(3,011)
Transaction costs capitalized
17
(18,784)
-
Cash Consideration for the acquisition of units of A&W Revenue Royalties
Income Fund for the intangible assets, net of cash and intercompany
receivables assumed
17
(157,348)
-
Dividends and distributions received from associates
26
9,536
11,130
Proceeds from disposal of plant and equipment
11
1,125
-
(168,377)
5,127
Financing activities
Repayment of principal on lease liabilities
(3,207)
(2,807)
Draw on the Credit Facility
17
265,509
18,921
Repayment of the Credit Facility
17
(5,000)
-
Repayment of the Former Credit Facility
17
(15,726)
(11,344)
Repayment of A&W Trade Marks Inc’s. term debt
17
(60,167)
-
Financing fees paid on operating loan facility
17
(3,500)
-
Repayment of interest bearing promissory notes
18
(12,522)
-
Dividends paid to shareholders
(28,241)
(18,901)
Dividends paid to non-controlling interest
(11,318)
(11,131)
125,828
(25,262)
Increase (decrease) in cash and cash equivalents during the period
18,679
(1,182)
Cash and cash equivalents – beginning of period
3,855
5,037
Cash and cash equivalents – end of period
22,534
3,855
56|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
1
General information
A & W Food Services of Canada Inc. (formerly “A&W of Canada Inc.”) (the “Company” or “Food Services”) is in
the business of developing and franchising quick service restaurants in Canada and owns the A&W trademarks
used in the A&W quick service restaurant business in Canada. During the period ended December 29, 2024, the
Company opened 28 A&W locations and closed 9 A&W locations, bringing the total number of A&W
restaurants as at December 29, 2024 to 1,073, of which 1,063 are franchised and 10 are owned and operated
corporately. Food Services also holds the master franchise rights in Canada for the UK-based restaurant chain
Pret A Manger (“Pret”) and opened its first stand-alone Pret location during the period ended December 29,
2024 which is currently owned and operated corporately. Food Services’ registered offices are located at
Suite 300 – 171 West Esplanade, North Vancouver, British Columbia, Canada.
To align its financial reporting with the business cycle of its operations, the Company uses a fiscal year
comprising a 52- or 53-week period ending the Sunday nearest December 31. The fiscal 2024 year was 52 weeks
and ended December 29, 2024 (fiscal 2023 – 52 weeks ended December 31, 2023). The subsidiaries of Food
Services as at December 29, 2024, being A&W Root Beer Beverages of Canada Inc. (“A&W Beverages”), A&W
Revenue Royalties Income Fund (“the Fund”), and A&W Trade Marks Inc. (“Trade Marks"), use a fiscal year
ending December 31.
Prior to the completion of the Transaction (as defined and disclosed below), A&W of Canada Inc. (“A&W
Canada”) held a 65.48% interest in AWFS Holdings Inc. (“AWFS Holdings”) and as a result, controlled AWFS
Holdings, and AWFS Holdings controlled a predecessor of the Company, also named A & W Food Services of
Canada Inc. (“predecessor A&W Food Services”). An equity interest of 34.52% in AWFS Holdings was owned by
outside parties and was recorded as a non-controlling interest in the consolidated financial statements of A&W
Canada.
Under the terms of the Amended and Restated License and Royalty Arrangement (as defined and disclosed in
note 3) predecessor A&W Food Services paid A&W Trade Marks Limited Partnership (“the Partnership”), a
subsidiary of Trade Marks, a royalty for use of the A&W trademarks in Canada. As a result of the Transaction,
Food Services indirectly acquired the A&W trademarks by acquiring all of the outstanding units of the Fund
(“Trust Units”) and since the Transaction, Food Services ceased recognizing the royalty expense in its
consolidated statement of income.
A combination agreement in respect of the Transaction was entered into on July 21, 2024, whereby predecessor
A&W Food Services agreed to amalgamate with certain of its direct and indirect holding companies to form a
new publicly-traded company and acquire all of the issued and outstanding Trust Units not already owned by
predecessor A&W Food Services (the “Transaction”).
Prior to the Transaction, predecessor A&W Food Services owned (i) 9.4% of the outstanding Trust Units on a
fully diluted basis through its ownership of limited voting units of the Fund, with the remaining Trust Units
being publicly traded, and (ii) owned 21.9% of the issued and outstanding common shares of Trade Marks,
which were exchangeable for Trust Units, with the remaining common shares being owned by the Fund.
57|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Under the terms of the Transaction, each of the Fund’s unitholders (the “Unitholders”) (other than predecessor
A&W Food Services) could elect to receive in exchange for each Trust Unit:
i)
$37.00 in cash (the “Cash Consideration”)
ii)
one common share in the capital of Food Services (the “Share Consideration”), or
iii)
a combination of 32.54277% of the Cash Consideration (being $12.040825) and 67.45723% of the
Share Consideration (being 0.6745723 of a common share in Food Services)
The elections of Unitholders to receive Cash Consideration or Share Consideration were subject to proration in
the event that Unitholders elected, in the aggregate, to receive more or less than $175,623,000 in Cash
Consideration, such that in all cases, a total of 4,746,582 Trust Units would be purchased for cash at $37.00 per
Trust Unit, representing approximately 32.5% of the outstanding Trust Units (not counting the limited voting
units of the Fund owned by predecessor A&W Food Services).
On October 8, 2024, the Unitholders voted in favour of the Transaction and on October 11, 2024 the Ontario
Superior Court of Justice (Commercial List) issued a final order approving the Transaction.
In preparation for the Transaction, a number of reorganization steps, including those set forth below, were
undertaken:
a shareholder of A&W Canada exchanged all of its shares of A&W Canada for (i) Class B Preferred Shares
(the “Preferred Shares”) and (ii) Class E Common Shares of A&W Canada. Through a series of steps, the
Preferred Shares were, directly or indirectly, later exchanged for non-interest bearing promissory notes of
Buddy Holdings Inc., payable on demand with an aggregate principal amount of $12,522,000; and
in order to simplify the existing organizational structure of A&W Food Services of Canada Inc and its, direct
and indirect, corporate shareholders, Buddy Holdings Inc., A&W Trademarks Holdings Inc. and AWFS
Fund Holdings Canada Ltd. were incorporated.
The Transaction closed on October 17, 2024 and on that day, Buddy Holdings Inc., A&W Canada, AWFS
Holdings, A&W Holdings I Inc., A&W Holdings II Inc. (collectively, the “Holding Companies”) and predecessor
A&W Food Services amalgamated. The amalgamated entity retained the legal name A & W Food Services of
Canada Inc.
On October 18, 2024, Food Services acquired all of the Trust Units that it did not already own in exchange for
consideration of $175,623,000 in cash and 9,839,091 common shares of Food Services less $18,275,000 in cash
and intercompany receivables assumed upon Trade Marks and the Fund becoming wholly owned subsidiaries
of Food Services. This was accounted for as an asset acquisition in these consolidated financial statements. This
was funded by way of a $265,000,000 drawn down on a revolving credit facility (the “Credit Facility”) with a
syndicate of banks that was entered into in conjunction with the completion of the Transaction. The Credit
Facility has maximum borrowing capacity of $325,000,000. Proceeds from the Credit Facility were also used
to repay Trade Marks’ outstanding borrowings balance, totaling $60,167,000. Food Services incurred
$3,500,000 of borrowing costs which were capitalized against the operating loan facility. Additional
information is disclosed in note 17.
58|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
In connection with the Transaction, the Trust Units were de-listed from the Toronto Stock Exchange (“TSX”)
and the common shares of Food Services were listed on the TSX under the symbol AW.TO.
On October 18, 2024, Food Services repaid the non-interest bearing promissory notes payable on demand with
an aggregate principal amount of $12,522,000.
2
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting
Standards”). These financial statements present the results of Food Services following the amalgamation
transactions described in note 1. These are the first consolidated financial statements that have been prepared
for Food Services under IFRS Accounting Standards and as such, IFRS 1 - First-time Adoption of International
Reporting Standards (“IFRS 1”), has been applied.
The material accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been applied retrospectively and consistently applied except where specific
exemptions permitted an alternative treatment upon transition to IFRS Accounting Standards in accordance
with IFRS 1. Food Services has applied the following permitted exemptions:
IFRS 16 - Leases (“IFRS 16”); Lease liabilities and Right-of-use assets are measured in accordance with
IFRS 16 in their respective subsidiaries.
Deemed cost: Plant and equipment has been measured at amortized cost at the date of transition to
IFRS Accounting Standards.
As consolidated financial statements have not historically been prepared for Food Services a reconciliation of
the Company’s opening balances including equity and total comprehensive income has not been presented.
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires
the use of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the accounting policies. Those areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in
note 3.
The Board of Directors approved these consolidated financial statements on March 5, 2025.
3
Material accounting policy information
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the
supplementary retirement benefit plan, as disclosed in the accounting policies set out further in note 3.
59|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Consolidation
The consolidated financial statements include the accounts of Food Services and its 100% interest in the Fund
and Trade Marks and its 60% controlling interest in A&W Beverages.
Investment in associates
Investments over which Food Services exercises significant influence, and that are neither subsidiaries nor
interests in joint ventures, are associates. Investments in associates are accounted for using the equity method,
except when classified as held for sale. The equity method involves the recording of the initial investment at
cost and the subsequent adjusting of the carrying value of the investment for the proportionate share of the
income or loss and any other changes in the associate’s net assets such as dividends.
Food Services’ proportionate share of the associate’s income or loss is based on the associate’s net income/loss
for the reporting period. Adjustments are made to account for any impairment losses recognized by the
associate. If Food Services’ share of the associate’s losses equals or exceeds its investment in the associate,
recognition of further losses is discontinued. After Food Services’ interest is reduced to zero, additional losses
will be provided for and a liability recognized, only to the extent that Food Services has incurred legal or
constructive obligations or made payments on behalf of the associate. If the associate subsequently reports
income, Food Services resumes recognizing its share of that income only after Food Services’ share of the
income equals the share of losses not recognized. At each consolidated balance sheet date, Food Services
assesses its investments in associates from indicators of impairment. On obtaining control of an existing
associate by way of asset acquisition, equity accounting ceases and the interest in the associate is derecognized.
The assets and liabilities acquired are initially recognized by Food Services based on applying a cost
accumulation approach.
Non-controlling interest
The non-controlling interest as at December 29, 2024 represents an equity interest in A&W Beverages owned
by an outside party. The non-controlling interest as at December 31, 2023 and January 2, 2023 represents the
equity interest in A&W Beverages and AWFS Holdings that was owned by outside parties. The share of net
assets of Food Services’ subsidiary attributable to non-controlling interest is presented as a component of
equity.
Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the functional currency of
Food Services and its subsidiaries.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, balances with banks and short-term investments with an
original maturity date of three months or less.
60|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Accounts receivable
Accounts receivable are amounts due from franchisees and distributors for the sale of goods and services
performed in the ordinary course of business. These amounts are classified as current because collection is
expected in one year or less. Accounts receivable are recognized initially at fair value and subsequently
measured at amortized cost using the effective interest method, less a provision for impairment.
The Company uses the simplified expected credit loss (“ECL”) model for its accounts receivable, as permitted by
IFRS 9 - Financial Instruments (“IFRS 9”). The simplified approach under IFRS 9 permits the use of the
lifetime expected loss provision for all accounts receivable and also incorporates forward looking information.
Lifetime ECL presents the ECL that will result from all probable default events over the expected life of a
financial instrument.
Leases receivable
Where the Company acts as an intermediate lessor, the Company assesses each sublease based on the right-of-
use asset and expected term of the headlease and where a sublease is for a substantial part of the expected life of
the lease, the Company classifies a sublease as a finance lease. The Company derecognizes the right-of-use asset
relating to the head lease that it transfers to the sublessee and recognizes a corresponding lease receivable, and
the lease liability relating to the head lease is retained. Additionally, the lease receivable is periodically reduced
by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
Inventories
Inventories consist of finished goods, assets available for resale to franchisees and work-in-progress relating to
new franchisee restaurant openings and advertising. They are valued at the lower of cost and estimated net
realizable value. The cost of finished goods includes all direct costs relating to the purchase of these items. Net
realizable value is the estimated selling price in the ordinary course of business.
Intangible assets
Intangible assets are recorded at cost and include the A&W trademarks and internally developed application
software. Costs incurred to acquire the A&W trademarks were capitalized and are included in the intangible
asset balance on the consolidated balance sheet. Costs include all expenditures that are directly attributable to
the acquisition of the asset. Costs incurred during the development stages of developing application software
for internal use are capitalized. All costs incurred during the preliminary research stage, including project
scoping, identification and testing of alternatives, are expensed as incurred and recorded in the consolidated
statements of income in operating costs.
The A&W trademarks have an indefinite useful life because they are expected to generate cashflows indefinitely
and as such are not amortized.
The cost for application software is amortized on a straight-line basis over its estimated useful life, ranging from
three to seven years. Estimates of useful lives, residual values and methods of amortization are reviewed
61|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
annually. Any changes are accounted for prospectively as a change in accounting estimate. Amortization
expense is recorded in the consolidated statements of income in operating costs.
Indefinite life intangible assets are subject to an impairment test annually or earlier if events and circumstances
dictate as required by International Accounting Standards (IAS) 36, Impairment of Assets. An impairment loss
is recognized whenever the carrying amount of the intangible asset exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Impairment losses are
recognized in the consolidated statements of income and comprehensive income.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities are obligations to pay for goods and services that have been acquired in
the normal course of business. These amounts are classified as current because payment is expected in one year
or less. Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured
at amortized cost using the effective interest method.
Deposits on franchise and equipment sales
Deposits are received from franchisees when a franchise or franchise opportunity agreement is signed for a new
restaurant and for those new restaurants constructed by the Company and then sold to franchisees. Deposits
related to initial fees are deferred when received and recognized as revenue over the term of the related
franchise agreement because franchisees consume franchising services as they are provided. Deposits are also
received from franchisees at the time they purchase equipment from the Company. The amounts for equipment
and turnkey fees are recorded as revenue when the restaurant is opened and commences operations.
Provisions
A provision is recognized if, as a result of a past event, Food Services has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required
to settle the obligation. Provisions are measured at management’s best estimate of the expenditure required to
settle the obligation at the end of the reporting period and are discounted to present value where the effect is
material. The rate used to discount provisions reflects current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the discount, if any, is recognized in finance expense.
Income taxes
Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statements of
income except to the extent that it relates to items recognized directly in equity, in which case the income tax is
recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the consolidated balance sheets date, and any adjustment to tax payable in respect of
previous years.
In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of assets
62|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is
determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted
at the consolidated balance sheets date and are expected to apply when the deferred tax asset or liability is
settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,
except, in the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled by
Food Services and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are presented as non-current.
Right-of-use assets
Right-of-use assets comprise the Company’s leases for corporate restaurant premises, head office space and
automobiles. The Company recognizes a right-of-use asset and a lease liability at the lease commencement date,
which is the possession date of the asset. The right-of-use asset is initially measured based on the initial
measurement of the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred, less any lease incentives received, and excludes all sales taxes. Right-of-use
assets are depreciated to the earlier of the end of the useful life of the asset or the lease term using the straight-
line method. The lease term includes periods associated with options to extend or excludes periods associated
with options to terminate the lease when it is reasonably certain that management will exercise these options.
Additionally, right-of-use assets are periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
Food Services has elected not to recognize a right-of-use asset and lease liability for short-term leases that have
a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
Plant and equipment
Plant and equipment comprise mainly leasehold improvements, equipment used in restaurants, office furniture
and fixtures and employee computers. Plant and equipment are stated at historical cost less depreciation.
Historical cost includes expenditures that are directly attributable to the acquisition of the assets. Subsequent
costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to the consolidated statements of
income during the financial period in which they are incurred.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount and are recognized within operating costs and general and
administrative expenses in the consolidated statements of income.
Depreciation is provided using the straight-line method. Machinery and equipment are amortized at rates from
7% to 50% per annum. Depreciation of leasehold improvements is charged over the term of the lease plus the
first renewal term.
63|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
The Company reviews its plant and equipment and tests for recoverability when events or changes in
circumstances indicate that their carrying value may not be recoverable. If the carrying value of an asset
exceeds the undiscounted estimated future cash flows related to the asset, an impairment loss is recognized to
the extent that the carrying value exceeds the fair value of the asset.
Other receivables
Other receivables are amounts due from franchisees with extended payment terms. Other receivables are
recognized initially at fair value and subsequently measured at amortized cost using the effective interest
method, less a provision for impairment and are presented as non-current as payment is due in more than one
year.
Lease liabilities
Lease liabilities are initially measured at the present value of the lease payments over the lease term. The lease
term includes periods associated with options to extend or excludes periods associated with options to
terminate the lease when it is reasonably certain that management will exercise these options. The lease
payments are discounted using the interest rate implicit in the leases; if that cannot be readily determined, the
Company uses its incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as
the discount rate.
The lease liabilities are measured at amortized cost using the effective interest method. Lease liabilities are
remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is
a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or
if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
Share capital
Common shares are classified as equity. Incremental costs directly relating to the issuance of new common
shares are shown as a deduction net of tax from the proceeds.
Net income per share
Net income per share is calculated by dividing the net income attributable to Food Services shareholders by the
weighted average number of common shares outstanding during the period. In order to ensure comparability of
net income per share, the number of shares used to calculate the net income per share up to October 17, 2024
(the date of the Transaction), has been adjusted to reflect the equivalent number of common shares of Food
Services that were outstanding after the reorganization steps described in note 1 were undertaken, excluding the
common shares issued to the outside party holding a non-controlling interest in Food Services prior to the
completion of the Transaction and those issued to Unitholders as consideration for the Transaction which were
incorporated into the weighted average number of shares from the date of the Transaction onwards.
64|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Revenue recognition
The Company’s revenue consists of fees from franchised restaurants, revenue from the sale of food and supplies
to franchisees and distributors, revenue from the opening of new franchised restaurants, revenue from
Company-owned restaurants and revenue from the sale of A&W Root Beer concentrate.
Fees from franchised restaurants include initial and renewal fees, distribution and service fees, advertising
contributions, equipment, turnkey, technology and other fees. Revenues related to initial and renewal fees are
recognized over the term of the related franchise agreement because franchisees consume franchising services
as they are provided. Service fees, in the amount of 2.5% to 3.5% of net sales of franchise operations, are
recognized at a point in time. Distribution fees are recognized at a point in time when control has transferred to
the distributors and are recorded net of related costs.
Equipment and turnkey fees are recognized at a point in time when control transfers to the franchisee. For new
restaurants, control transfers when the restaurant commences operations.
Advertising contributions and technology fees are recognized at a point in time. Revenue from corporate
restaurants, representing sales of food and beverages, is recognized at a point in time when food and beverages
are sold. Other revenues, including revenue from the sale of A&W Root Beer concentrate, are recognized at a
point in time, when control transfers, which is generally when it is shipped to bottlers.
Deferred gain
In 2002, Food Services sold the A&W trademarks used in the A&W quick service restaurant business in Canada
to Trade Marks, which subsequently transferred them to the Partnership. Food Services was granted a licence to
use the A&W trademarks in Canada for a term expiring December 30, 2100 pursuant to the terms of an
amended and restated license and royalty agreement (the “Amended and Restated Licence and Royalty
Agreement”), for which Food Services paid a royalty of 3% of sales reported to Food Services by specific A&W
restaurants in Canada (the “Royalty Pool”). The gain realized on the sale of the A&W trademarks was deferred
and amortized over the term of the Amended and Restated Licence and Royalty Agreement. Amortization of the
gain was recognized on the consolidated statements of income. The annual adjustments to the Royalty Pool
increased the deferred gain and the additions were amortized over the remaining term of the Amended and
Restated Licence and Royalty Agreement from the date of addition.
On October 18, 2024, upon completion of the Transaction, Food Services indirectly reacquired the A&W
trademarks through its acquisition of the remaining outstanding Trust Units. The fair value of the Fund’s
assets, which Food Services acquired, was largely concentrated in the A&W trademark intangible asset. The
acquisition was accounted for as an asset acquisition. Additional information on the Transaction is disclosed in
notes 1 and 18.
Concurrent with the asset acquisition on October 18, 2024, the deferred gain was derecognized from Food
Services’ consolidated balance sheet and the corresponding amortization of the deferred gain from that date
onwards was eliminated from Food Services’ consolidated statement of income as Trade Marks became a wholly
owned subsidiary of Food Services.
65|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Royalty expense
Royalty expense under the Amended and Restated Licence and Royalty Agreement is recognized on an accrual
basis.
Finance expense
Finance expense includes interest expense associated with the operating loan, the supplementary retirement
benefit plan, and lease liabilities and amortization of deferred financing fees.
Finance income
Finance income includes interest income associated with cash and cash equivalents and leases receivable.
Employee benefits
a)
Supplementary retirement benefit plan
In 1995, the Company entered into agreements with certain senior executives to provide an unfunded
supplementary retirement benefit plan. The actuarial determination of the accrued benefit obligation for
the plan uses the projected benefit method pro-rated on service and management’s best estimate of salary
escalation and retirement ages of officers. The discount rate used to determine the accrued benefit
obligation and related expense is determined by reference to market interest rates on the measurement
date on high-quality debt instruments with cash flows, which match the timing and amount of the
expected benefit payments. Actuarial gains (losses), which can arise from changes in actuarial assumptions
used to determine the accrued benefit obligation, are recognized immediately through other
comprehensive income (loss) and directly to accumulated deficit and will never subsequently be
reclassified to the consolidated statements of income.
b)
Defined contribution pension plan
The cost of providing benefits through the defined contribution pension plan is charged to the consolidated
statements of income as the obligation to contribute is incurred.
c)
Equity incentive plan
Food Services adopted an Omnibus Long-Term Incentive Plan (the “Equity Incentive Plan”) in 2024 to
allow for a variety of equity-based awards that provide different types of incentives to be granted to certain
directors, officers, employees and/or consultants providing ongoing services to Food Services and its
subsidiaries, being options (“Options”), performance share units (“PSUs”), restricted share units (“RSUs”)
and deferred share units (“DSUs”). Options, PSUs, RSUs and DSUs are collectively referred to herein as
“Awards”. Each Award represents the right to receive Food Services’ shares or, in the case of PSUs, RSUs
and DSUs, shares or cash, or a combination of shares and cash. The maximum number of Food Services
shares reserved for issuance under the Equity Incentive Plan and under all other equity compensation
arrangements of Food Services is 10% of the aggregate number of Food Services shares issued and
66|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
outstanding from time to time, which represents approximately 2,400,000 Food Services shares as of
December 29, 2024. In addition, the total annual grant to any one non-employee director under all
security-based compensation arrangements may not exceed an aggregate grant value of $100,000 in
Options and $150,000 in equity.
The expense related to Options is initially recognized based on the fair value of the option at the grant date
using the Black-Scholes option-pricing model, with a corresponding increase in contributed surplus. When
Options are exercised, the exercise price proceeds together with the amount initially recorded in
contributed surplus are reclassified to share capital. Compensation expense related to other equity-settled
awards is measured based on an estimated fair value at the grant date, with a corresponding increase in
contributed surplus. Upon settlement, the amount initially recognized in contributed surplus is reclassified
to share capital. The compensation expense is recognized in general and administration expenses in the
statement of income.
Segment information
Operating segments are components of the Company that engages in business activities from which they earn
revenues and incur expenses, the operations of which can be clearly distinguished, and the operating results of
which are regularly reviewed by the chief operating decision maker (“CODM”) for the purposes of resource
allocation and assessing its performance. The Company’s CODM has been identified as the Chief Executive
Officer (“CEO”). Management has determined that the Company operates in a single reportable segment, being
the business of developing and franchising quick service restaurants. The Company also has one geographic
segment as all assets and operations are in Canada.
Financial instruments
Financial assets and liabilities are recognized when Food Services becomes a party to the contractual provisions
of the instrument. Financial assets and liabilities are derecognized when the rights to receive or pay cash flows
from the assets or liabilities have expired or have been transferred and, in the case of financial assets, Food
Services has transferred substantially all risks and rewards of ownership.
At initial recognition, Food Services classifies its financial instruments in the following categories:
a)
Financial assets and liabilities at amortized cost. Food Services classifies its financial assets at amortized
cost only if both of the following criteria are met:
i)
the asset is held within a business model the objective of which is to collect the contractual cash flows,
and
ii)
the contractual terms give rise to cash flows that are solely payments of principal and interest.
Food Services’ financial assets at amortized cost comprise cash and cash equivalents, accounts receivable
and distributions receivable, which are included in current assets due to their short-term nature, other
receivables and leases receivable. Accounts receivable are initially recognized at the amount expected to be
received less, when material, a discount to reduce the loans and receivables to fair value. Subsequently,
67|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
financial assets at amortized cost are measured at amortized cost using the effective interest method less a
provision for impairment. Financial liabilities at amortized cost include accounts payable and accrued
liabilities, operating loan facility, royalties payable and lease liabilities. Accounts payable and accrued
liabilities, operating loan facility, royalties payable and lease liabilities are initially recognized at the
amount required to be paid less, when material, a discount to reduce the payables to fair value.
Subsequently, accounts payable and accrued liabilities, operating loan facility, royalties payable and lease
liabilities are measured at amortized cost using the effective interest method.
Financial liabilities are classified as current liabilities if payment is due in one year or less. Otherwise, they
are presented as non-current liabilities.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent
that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until
the drawdown occurs at which point it is netted against proceeds as a transaction cost. To the extent there
is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as
a pre-payment for liquidity services and amortized over the period of the facility to which it relates.
b)
Financial assets at fair value through other comprehensive income (FVOCI): Financial assets at
FVOCI comprise:
i)
Equity securities that are not held for trading and that Food Services has irrevocably elected at initial
recognition to recognize in this category, and
ii)
Debt securities where the contractual cash flows are solely principal and interest and the objective of
Food Services’ business model is achieved both by collecting contractual cash flows and selling
financial assets.
Food Services currently has not classified any of its financial instruments as FVOCI.
c)
Financial assets at fair value through profit or loss (FVPL): Food Services classifies the following financial
assets at FVPL:
i)
Debt instruments that do not qualify for measurement at either amortized cost or FVOCI,
ii)
Equity instruments that are held for trading, and
iii) Equity instruments for which Food Services has not elected to recognize fair value gains and losses
through other comprehensive income.
Food Services currently has not classified any of its financial instruments as FVPL.
4
Accounting policy developments
In 2020 the International Accounting Standards Board published amendments to IAS 1, Presentation of
Financial Statements that clarify the criteria for classifying liabilities with covenants as current or non-current.
68|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
The amendments also require companies to provide additional note disclosure on non-current liabilities with
covenants. The effective date is for annual periods beginning on or after January 1, 2024. As these are the first
consolidated financial statements that have been prepared for Food Services under IFRS Accounting Standards,
Food Services applied this amendment for all periods presented in these consolidated financial statements. The
amendment had no impact to the classification of its liabilities or its note disclosures.
The International Accounting Standards Board issued IFRS 18 - Presentation and Disclosure in the Financial
Statements (“IFRS 18”), in April 2024 which is effective for annual reporting periods beginning on or after
January 1, 2027. Management is currently assessing the impact of future adoption of IFRS 18 to these
consolidated financial statements.
5
Critical accounting estimates and judgments
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. It is reasonably possible that circumstances may arise that would cause
actual results to differ from management estimates; however, management does not believe it is likely that such
differences will materially affect Food Services’ financial position.
Judgments
-
In respect of the Transaction, the Company determined, by taking into account the consolidation provisions
within IFRS 10 - Consolidated Financial Statements, that the consolidating entity prior to the closing of the
Transaction is A&W Canada. The Company also determined that the reorganization steps undertaken
involving the Holding Companies in preparation of the acquisition of the Trust Units, represent a capital
reorganization accounted for at carrying values on the basis that the reorganization steps were performed at
no consideration and ensured equal ownership value for each ownership party - before and after the
reorganization. The Company also determined that the acquisition of the Trust Units meets the definition of
an asset purchase as opposed to a business combination as per IFRS 3 - Business Combinations.
-
Lease terms: whether the Company is reasonably certain, at the lease commencement date, it will exercise
available renewal or termination options and include such options in the lease term.
Estimates
-
Impairment of intangible assets: estimates in the impairment testing model, which include estimates of
future cash flows, growth rates and discounts rates.
69|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
6
Accounts receivable
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Trade receivables
29,477
28,006
28,511
Other receivables – current
13,658
13,484
12,162
Provision for impairment
(1,201)
(1,368)
(960)
41,934
40,122
39,713
As at December 29, 2024, trade receivables of $20,193,000 (December 31, 2023 – $17,873,000; January 2,
2023 – $17,385,000) were not past due.
As at December 29, 2024, trade receivables of $7,848,000 (December 31, 2023 – $6,274,000; January 1, 2023
– $8,273,000) were past due but not impaired. These relate to franchisees and distributors for whom there is
no recent history of default. The aging analysis of these trade receivables is as follows:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
1 – 30 days past due
5,016
5,004
4,854
31 – 60 days past due
2,832
1,270
3,419
7,848
6,274
8,273
The movement in the provision for impairment is as follows:
$
Balance – January 2, 2023
960
Provision for impairment
505
Amounts written off
(97)
Balance – December 31, 2023
1,368
Recovery of provision for impairment
(81)
Amounts written off
(86)
Balance – December 29, 2024
1,201
The provision for impairment is recorded in operating costs on the consolidated statements of income.
70|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
7
Leases receivable
Food Services is considered an intermediate lessor on certain franchise locations. The following table presents
the leases receivable for the Company:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Current leases receivable
32,457
31,608
25,825
Non-current leases receivable
600,616
589,023
576,152
633,073
620,631
601,977
The following table outlines the annual contractual undiscounted payments for leases receivable as at
December 29, 2024:
$
Year 1
57,743
Year 2
61,582
Year 3
55,863
Year 4
49,663
Year 5
52,556
Thereafter
648,470
Total undiscounted leases receivable
925,877
Unearned interest income
(291,263)
Provision for impairment
(1,541)
633,073
Leases receivable are reviewed for impairment based on expected losses at each consolidated balance sheet date
in accordance with IFRS 9. An impairment loss is recorded using the simplified expected credit loss method.
Food Services has developed a risk matrix used to assess the credit risk of leases receivable where Food Services
are guarantors for head leases and has included the ongoing uncertainty in its credit risk assumptions. Factors
taken into consideration include restaurant concept, payment performance and future expectations for the
restaurant operations. Food Services recorded an ECL provision on leases receivable of $1,541,000 as at
December 29, 2024 (December 31, 2023 – $1,779,000; January 2, 2023 – $1,736,000). The provision for
impairment on leases receivable of $192,000 for the period ended December 29, 2024 (December 31, 2023 –
$43,000) is recorded as a loss in the consolidated statement of income. The current portion of the provision for
impairment of $661,000 as at December 29, 2024 (December 31, 2023 – $23,000; January 2, 2023 – $46,000)
represents expected losses in the following fiscal period. The non-current portion of the provision for
impairment of $880,000 as at December 29, 2024 (December 31, 2023 – $1,756,000; January 2, 2023 –
$1,690,000) relates to expected losses over the remaining term of the leases.
71|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
The movement in the ECL on lease receivables is as follows:
$
Balance – January 2, 2023
1,736
Provision for impairment
43
Balance – December 31, 2023
1,779
Provision for impairment
192
Amounts written off
(430)
Balance – December 29, 2024
1,541
8
Investments in associates
As a result of the annual adjustment to the Royalty Pool and the exchange rights granted under the Amended
and Restated Declaration of Trust of the Fund and the Amended and Restated Exchange Agreement dated
December 22, 2010, among predecessor A&W Food Services, the Partnership and Trade Marks, predecessor
A&W Food Services owned common shares of Trade Marks and as a result of predecessor A&W Food Services
exchanging common shares of Trade Marks for Trust Units, Food Services also had direct ownership in the
Fund. Prior to the completion of the Transaction these investments were accounted for as investments in
associates and were recorded using the equity method. As at December 29, 2024, Food Services owned 100.0%
of the shares of Trade Marks (December 31, 2023 – 21.0%; January 2, 2023 – 19.1%) and 100.0% of the Trust
Units (December 31, 2023 – 9.4%; January 2, 2023 – 9.4%) and as such Trade Marks and the Fund were
accounted for as subsidiaries of Food Services upon completion of the Transaction.
As at December 29, 2024, Food Services’ investments in associates was $nil (December 31, 2023–
$169,828,000 January 2, 2023 – $152,944,000). Food Services’ share of income from associates for the period
ending December 29, 2024 totalled $9,472,000 (2023 – $11,415,000) which represents Food Services’ share of
income prior to completion of the Transaction on October 17, 2024.
72|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Food Services’ investment in Trade Marks is as follows:
Common
shares
$
Cumulative
equity in
earnings
$
Cumulative
dividends
$
Investment
becoming a
subsidiary
$
Total
$
Balance – January 2, 2023
105,750
67,867
(68,357)
-
105,260
January 5, 2023 adjustment to
Royalty Pool
16,600
-
-
-
16,600
Equity in earnings
-
8,380
-
-
8,380
Dividends
-
-
(8,237)
-
(8,237)
Balance – December 31, 2023
122,350
76,247
(76,594)
-
122,003
January 5, 2024 adjustment to
Royalty Pool
6,646
-
-
-
6,646
Equity in earnings
-
7,091
-
-
7,091
Dividends
-
-
(6,966)
-
(6,966)
Derecognition upon completion
of Transaction (note 1)
-
-
-
(128,774)
(128,774)
Balance – December 29, 2024
128,996
83,338
(83,560)
(128,774)
-
Food Services’ investment in the Fund is as follows:
Limited
Voting
Units
$
Cumulative
equity in
earnings
$
Cumulative
distributions
$
Investment
becoming a
subsidiary
$
Total
$
Balance – January 2, 2023
47,162
5,413
(4,891)
-
47,684
Equity in earnings
-
3,035
-
-
3,035
Distributions
-
-
(2,893)
-
(2,893)
Balance – December 31, 2023
47,162
8,448
(7,784)
-
47,826
Equity in earnings
-
2,381
-
-
2,381
Distributions
-
-
(2,329)
-
(2,329)
Derecognition upon completion
of Transaction (note 1)
-
-
-
(47,878)
(47,878)
Balance – December 29, 2024
47,162
10,829
(10,113)
(47,878)
-
73|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
9
Income taxes
a)
The provision for income taxes shown in the consolidated statements of income differs from the amounts
obtained by applying statutory tax rates to income before income taxes for the following reasons:
52-week
period ended
December 29,
2024
52-week
period ended
December 31,
2023
Statutory combined federal and provincial income
tax rates
26.90%
26.85%
$
$
Expected provision for income taxes based on statutory
income tax rates
13,436
12,640
Non-taxable portion and rate difference on capital gains
-
(627)
Deferred tax on investment in associates
(522)
(1,784)
Deferred tax on increase to deferred gain
659
(1,279)
Derecognition of deferred taxes upon completion of
Transaction (note 1)
16,943
-
Permanent differences
(3,055)
79
Capitalized Transaction costs
545
-
Other
267
42
Provision for income taxes
28,273
9,071
b)
Deferred income tax assets and liabilities comprise the following:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Current tax reserves
843
642
769
Deferred gain
-
28,301
27,022
Deferred revenue
8,702
8,315
8,504
Long-term liabilities
2,947
3,019
2,948
Lease liabilities
6,331
5,631
5,146
Impairment of leases receivable
413
477
466
Intangible assets
(32)
13
14
Plant and equipment
(2,603)
(2,401)
(584)
Right-of-use assets
(6,034)
(5,389)
(5,014)
Investment in associates
-
(11,222)
(9,576)
10,567
27,386
29,695
The deferred tax expense of $14,941,000 for the period ended December 29, 2024 includes $16,943,000 in
deferred tax expense that was recognized upon completion of the Transaction. The $16,943,000 in
deferred tax expense attributable to the Transaction is a non-cash, non-recurring expense and corresponds
to the deferred tax assets and liabilities associated with the investment in associates and deferred gain
balances that were derecognized from Food Services’ consolidated balance sheet upon completion of the
Transaction. Refer to note 1 for additional details on the Transaction.
74|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
10 Right-of-use assets
The following table represents right-of-use assets for the Company:
Real estate
$
Automobiles
$
Total
$
Balance – January 2, 2023
16,926
1,763
18,689
Additions
2,664
1,342
4,006
Disposals
-
(91)
(91)
Remeasurement of lease liabilities
(1)
(2)
(3)
Depreciation
(1,583)
(933)
(2,516)
Balance – December 31, 2023
18,006
2,079
20,085
Additions
4,249
884
5,133
Disposals
-
(139)
(139)
Remeasurement of lease liabilities
(11)
27
16
Depreciation
(1,579)
(1,026)
(2,605)
Balance – December 29, 2024
20,665
1,825
22,490
11 Plant and equipment
Leasehold
improvements
$
Machinery
and
equipment
$
Total
$
Balance – January 2, 2023
Cost
11,916
11,861
23,777
Accumulated depreciation
(5,017)
(7,941)
(12,958)
Net book value
6,899
3,920
10,819
Opening net book value
6,899
3,920
10,819
Additions
1,130
1,862
2,992
Disposals
(672)
(3)
(675)
Depreciation
(776)
(955)
(1,731)
Net book value
6,581
4,824
11,405
Balance – December 31, 2023
Cost
11,851
13,700
25,551
Accumulated depreciation
(5,270)
(8,876)
(14,146)
Net book value
6,581
4,824
11,405
Opening net book value
6,581
4,824
11,405
Additions
124
855
979
Disposals
(1,761)
-
(1,761)
Depreciation
(631)
(1,039)
(1,670)
Net book value
4,313
4,640
8,953
75|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Leasehold
improvements
$
Machinery
and
equipment
$
Total
$
Balance – December 29, 2024
Cost
9,428
14,555
23,983
Accumulated depreciation
(5,115)
(9,915)
(15,030)
Net book value
4,313
4,640
8,953
12 Intangible assets
Internally
generated
application
software
$
A&W
trademarks
$
Total
$
Balance – January 2, 2023
Cost
4,074
-
4,074
Accumulated amortization
-
-
-
Net book value
4,074
-
4,074
Opening net book value
4,074
-
4,074
Additions
3,011
-
3,011
Amortization
(763)
-
(763)
Net book value
6,322
-
6,322
Balance – December 31, 2023
Cost
7,085
-
7,085
Accumulated amortization
(763)
-
(763)
Net book value
6,322
-
6,322
Opening net book value
6,322
-
6,322
Additions
1,927
440,893
442,820
Amortization
(1,950)
-
(1,950)
Net book value
6,299
440,893
447,192
Balance – December 29, 2024
Cost
9,012
440,893
449,905
Accumulated amortization
(2,713)
-
(2,713)
Net book value
6,299
440,893
447,192
On October 18, 2024 Food Services indirectly reacquired the A&W trademarks by acquiring all of the
outstanding Trust Units not already owned by predecessor A&W Food Services. As part of the asset acquisition
the Company derecognized the deferred gain (see note 15) and the investment in associates (see note 8), and
76|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
recognized the deferred amount of the original sales consideration on repurchase, together with the cash and
share consideration, as the identifiable cost of the intangible asset.
Costs incurred to complete Food Services’ acquisition of the A&W trademarks totaling $18,784,00 have been
capitalized and are included in the intangible assets balance as at December 29, 2024. Additional costs related
to the Transaction, totaling $280,000, were recognized in the consolidated statement of income for the period
ended December 29, 2024. See notes 1 and 16 for further details on the Transaction.
Food Services performed its annual impairment test on the indefinite life intangible asset as at December 29,
2024, using a value-in-use model to determine the recoverable amount of the indefinite life intangible asset.
The calculations were based on Food Services’ internal forecasts and represent management’s best estimates at
a specific point in time, and, as a result, are subject to estimation uncertainty. In arriving at its estimated future
cash flows, Food Services considered past experience, economic trends and forecasted industry trends. Cash
flows are projected for a period of five years and then cash flows beyond that are extrapolated using an
estimated terminal growth rate of 2%. Food Services assumed a pre-tax discount rate of 12.0% in order to
calculate the present value of its projected cash flows. As a result of this test, it was concluded that no
impairment was required.
Food Services performed a sensitivity analysis on the most sensitive assumptions, which were revenue growth
rates (2%) and the discount rate. A 1% increase in the pre-tax discount rate would have decreased the amount
by which the recoverable amount exceeded the carrying amount by approximately $70,000,000, and would not
have resulted in impairment. A 1% decrease in the estimated revenue growth rate would have decreased the
amount by which the recoverable amount exceeded the carrying amount by approximately $35,000,000 and
would not have resulted in impairment.
As at January 2, 2023, internally generated application software was still under development, not yet available
for use and as a result was not yet being amortized.
13 Accounts payable and accrued liabilities
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Trade payables
35,202
18,833
16,571
Employee benefits payable
4,822
4,819
5,196
Accrued liabilities and other payables
27,102
20,899
28,291
67,126
44,551
50,058
14 Lease liabilities
The Company’s leases include base rent for restaurant premises and office space and automobiles. The
Company is the head lessee for the majority of its franchised locations and enters into agreements whereby the
Company licences the premises to the franchisee, for which the Company receives a premises licence fee. Under
the licence agreement, the franchisee is responsible for the obligations under the lease. IFRS 16 requires Food
Services, where it acts as the intermediate lessor, to recognize a lease receivable (note 5). The Company has
77|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
included renewal options in the measurement of lease liability when it is reasonably certain to exercise the
renewal option.
The following table presents the lease liabilities for the Company:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Current lease liabilities
35,610
33,923
27,836
Non-current lease liabilities
622,602
609,476
595,056
658,212
643,399
622,892
Costs not included in the measurement of the lease liabilities are as follows:
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
52-week
period ended
January 1,
2023
$
Low-value lease costs
34
49
34
Variable lease costs
1,091
1,048
960
1,125
1,097
994
78|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
15 Deferred gain
The movement in the deferred gain is as follows:
Number of
restaurants in
Royalty Pool
Deferred
gain
$
Accumulated
amortization
$
Net
deferred
gain
$
Balance – January 2, 2023
1,015
305,045
(32,508)
272,537
January 5, 2023 adjustment to
the Royalty Pool
22
16,600
-
16,600
Amortization of deferred gain
-
-
(3,703)
(3,703)
Balance – December 31, 2023
1,037
321,645
(36,211)
285,434
January 5, 2024 adjustment to
the Royalty Pool
10
8,307
-
8,307
Amortization of deferred gain
-
-
(3,039)
(3,039)
Derecognition upon completion
of Transaction
-
(329,952)
39,250
(290,702)
Balance – December 29, 2024
1,047
-
-
-
Under the Amended and Restated License and Royalty Agreement, the Royalty Pool was adjusted annually to
reflect sales from new A&W restaurants added to the Royalty Pool, net of the sales of any A&W restaurants that
have permanently closed. Food Services was paid for the additional royalty stream related to the sales of the net
new restaurants, based on a formula set out in the Amended and Restated Licence and Royalty Agreement. The
formula provided for a payment to Food Services based on 92.5% of the amount of estimated sales from the net
new restaurants and the current yield on the Trust Units, adjusted for income taxes payable by Trade Marks.
The consideration was paid to Food Services in the form of additional partnership units (“LP units”). The
additional LP units were, at the option of Food Services, exchangeable for additional common shares of Trade
Marks, which were in turn exchangeable for Trust Units on the basis of two common shares for one Trust Unit.
The consideration paid for the annual adjustment to the Royalty Pool was recorded by Food Services as an
increase in its investment in Trade Marks and an increase in the deferred gain.
The 2024 annual adjustment to the Royalty Pool took place on January 5, 2024. The number of A&W
restaurants in the Royalty Pool was increased by 19 new restaurants less 10 restaurants that permanently
closed. The Partnership paid Food Services 80% of the initial consideration or $6,646,000, by issuance of
218,029 LP units which were subsequently exchanged for 436,058 non-voting common shares of Trade Marks.
Upon completion of the Transaction, the deferred gain was derecognized from Food Services’ consolidated
balance sheet and the corresponding amortization of the deferred gain was derecognized from Food Services’
consolidated statement of income as Trade Marks became a fully owned subsidiary of Food Services.
79|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
16 Employee benefits
a)
Supplementary retirement benefit plan
The most recent actuarial valuation of the unfunded liability was as at December 29, 2024 and the next
required valuation will be as at December 28, 2025.
The significant actuarial assumptions adopted in determining the accrued benefit obligation are as follows:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Discount rate
4.60
4.65
5.05
Inflation
2.00
2.00
2.00
The supplementary retirement benefit plan is as follows:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Unfunded liabilities under supplementary
retirement benefit plan
11,863
12,103
11,720
Less: Current portion included in accrued
liabilities
(889)
(871)
(871)
Liabilities on the consolidated balance
sheets
10,974
11,232
10,849
The sensitivity of the accrued benefit obligation to a change in the discount rate is as follows:
Discount rate
%
Liability
$
- 50 basis points
5.10
12,408
+ 50 basis points
4.10
11,313
80|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
The consolidated statements of income charge for the supplementary retirement benefit plan is as follows:
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Actuarial loss recognized in other comprehensive loss,
net of income tax recovery of $28,000 (December
31, 2023 – $201,000)
(77)
(548)
Total cumulative actuarial losses recognized in other
comprehensive income, net of tax of $1,599,000
(December 31, 2023 – $1,627,000)
2,287
2,210
The movement in the supplementary retirement benefit plan is as follows:
$
Balance – January 2, 2023
11,720
Interest cost (note 19)
490
Actuarial loss
749
Benefits paid
(856)
Balance – December 31, 2023
12,103
Interest cost (note 19)
534
Actuarial loss
105
Benefits paid
(879)
Balance – December 29, 2024
11,863
b)
Defined contribution pension plan
Pension expense for the period was $1,137,000 (December 31, 2023 – $1,090,000). Total cash payments
during the period were $879,000 (December 31, 2023 – $856,000).
c)
Equity incentive plan
As at December 29, 2024, December 31, 2023 and January 2, 2023 no Awards had been granted under the
Equity Incentive Plan. Subsequent to the period ended December 29, 2024, certain directors of Food
Services elected to receive a portion of their director’s fees for fiscal 2025 in the form of DSU’s in
accordance with the Equity Incentive Plan.
81|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
17 Operating loan facility
Prior to October 17, 2024 predecessor A&W Food Services had a $40,000,000 demand operating loan facility
(“Former Credit Facility”) with a Canadian chartered bank (the “Bank”). The facility was used to fund working
capital requirements and for general corporate purposes. On May 15, 2024, predecessor A&W Food Services
extended the maturity date on the Former Credit Facility by one year to May 31, 2025. Under the Former Credit
Facility account overdrafts bear interest at the Bank’s prime rate plus 0.75% (at the Bank’s prime rate plus 1%
prior to the amendment). As part of the amendment, and in response to the cessation of Canadian Dollar
Offered Rate which is the benchmark interest rate on bankers acceptances (“BAs”), the Former Credit Facility
was also amended to transition from BAs to CORRA (as defined below) loans, in which the interest rate
benchmark is Canadian Overnight Repo Rate Average (“CORRA”). The remaining terms and conditions were
consistent with those of the Former Credit Facility that was in place prior to the May 15, 2024 amendment.
Amounts under the Former Credit Facility could be advanced in the form of an account overdraft or in the form
of CORRA loans and were repayable on demand. The Former Credit Facility contained covenants including the
requirement to meet certain debt to earnings before interest, taxes, depreciation, amortization and non-cash
charges/income (“EBITDA”) ratios and debt to Food Services’ investment in Trade Marks ratios during each
trailing four quarter period. Food Services was also required to pledge 5,000,000 Trade Marks common shares.
On October, 17, 2024, Food Services replaced the Former Credit Facility with a new credit facility (the “Credit
Facility”). The Credit Facility is revolving and allows for Food Services to borrow up to $325,000,000
Canadian dollar equivalent, with a $10,000,000 sublimit for letters of credit and letters of guarantee and a
$20,000,000 sublimit for a swingline.
The Credit Facility matures on October 17, 2029 and is available on a revolving basis by way of prime rate loans,
term CORRA loans and daily compounded CORRA Loans in Canadian dollars, and U.S. base rate and term
Secured Overnight Financing Rate (“SOFR”) loans in U.S. dollars, and letters of credit in Canadian and U.S.
dollars. The marginal rate payable on the prime rate loans and U.S. base rate loans ranges from 0.75% to 2.0%,
based on Food Services’ ratio of Total Debt to EBITDA, as defined in the credit agreement. The marginal rate
payable on the term CORRA loans, daily compounded CORRA loans, term SOFR loans and letters of credit
ranges from 1.75% to 3.0%, based on Food Services’ ratio of Total Debt to EBITDA. The Credit Facility is
secured by a first priority lien over all of the present and future undertakings and property of Food Services.
On October 17, 2024 Food Services drew down $265,000,000 on the Credit Facility and used the proceeds to
pay off Trade Marks’ $60,000,000 term loan and the accrued interest, which totaled $60,167,000, finance the
$175,623,000 purchase of 4,746,582 of the Trust Units and pay $3,500,000 in financing fees associated with
the Credit Facility. The Credit Facility will be used to fund working capital requirements and for general
corporate purposes on an ongoing basis. Additional information on the Transaction is disclosed in notes 1 and
18.
The Credit Facility contains covenants including the requirement to meet certain debt to EBITDA and interest
coverage ratios during each trailing four quarter period. Food Services was in compliance with all of its financial
covenants as at December 29, 2024, December 31, 2023 and January 2, 2023.
82|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Financing fees of $3,500,000 related to the Credit Facility entered into on October 17, 2024 are presented as a
reduction to the carrying amount of the operating loan facility. The financing fees will be amortized over the
remainder of the five-year term of the Credit Facility.
The following table presents the operating loan facility for the Company:
December 29,
2024
$
December 31,
2023
$
January 2,
2023
$
Amount of Former Facility
-
40,000,000
40,000,000
Amount of Credit Facility
325,000,000
-
-
Amounts drawn on Former Facility
-
15,726,000
8,149,000
Amounts drawn on Credit Facility
260,509,000
-
-
Less: Unamortized balance on financing
fees
(3,360,000)
-
-
257,149,000
15,726,000
8,149,000
Letters of guarantee issued under Former
Facility
-
198,000
198,000
Letters of guarantee issued under Credit
Facility
198,000
-
-
198,000
198,000
198,000
Amount available on Former Facility
-
24,076,000
31,653,000
Amount available on Credit Facility
64,293,000
-
-
Subsequent to the period ended December 29, 2024 $10,157,000 was repaid on the Credit Facility.
18 Share capital
Authorized
Unlimited number of common shares
Issued
Number of
Common
Shares
Share
Capital
$
Balance as at December 29, 2024
23,997,781
417,925
Balance as at December 31, 2023
620,169
14,043
Balance as at January 2, 2023
620,169
14,043
83|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Upon completion of the Transaction Food Services issued 9,839,091 common shares to Unitholders in
exchange for their Trust Units and 14,158,701 common shares of Food Services were issued to indirect
shareholders of predecessor A&W Food Services as of immediately prior to closing.
Prior to the completion of the Transaction, the preferred shareholders of A&W Canada exchanged their
preferred shares for non-interest bearing promissory notes payable on demand with an aggregate principal
amount of $12,522,000. On October 18, 2024, Food Services repaid the non-interest bearing promissory notes
in full.
Prior to completion of the Transaction, an equity interest of 34.52% in AWFS Holdings was owned by outside
parties and was recorded as a non-controlling interest in the consolidated financial statements of A&W Canada.
Subsequent to the Transaction, the outside parties became direct shareholders of Food Services and as such
their respective ownership is presented within share capital and retained earnings on the consolidated balance
sheet as at December 29, 2024.
19 Franchising revenue
Franchising revenues disaggregated by revenue source are outlined below. The table also shows the basis on
which franchising revenues are recognized.
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
At a point in time
Advertising fund contributions
59,934
55,864
Distribution revenue and service fees
134,517
130,401
Equipment and turnkey fees
56,647
76,611
Other revenue
12,932
10,041
Over time
Initial franchise fees and renewal fees
3,589
3,204
267,619
276,121
The Company has recorded $32,432,000 (December 31 - 2023 – $30,991,000; January 2, 2023 - $31,696,000)
of deferred revenue related to initial franchise fees and renewal fees. The Company expects to recognize as
revenue $2,584,000 (December 31 - 2023 – $2,535,000; January 2, 2023 - $2,557,000) in the following fiscal
period, which represents the current portion of deferred revenue. The non-current portion of deferred revenue
of $29,848,000 (December 31 - 2023 – $28,456,000; January 2, 2023 - $29,139,000) is expected to be
recognized over the remaining term of the franchise agreement.
The Company has recorded $14,861,000 (December 31 - 2023 – $11,581,000; January 2, 2023 - $16,689,000)
of deposits on franchise and equipment sales of which $13,962,000 is expected to be recognized as revenue in
the following fiscal period when control transfers, which is when the related restaurants commence operations.
84|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
During the period, $10,019,000 (2023 – $14,367,000) of revenue was recognized related to deposits deferred at
the end of the prior period.
20 Expenses by nature
Included in operating costs and general and administrative expenses are the following expenses by nature:
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Depreciation of plant and equipment
1,670
1,731
Amortization of intangible assets
1,950
763
Depreciation of right-of-use assets
2,605
2,516
Employee benefit costs
Wages, salaries, bonuses and other termination benefits
38,494
36,948
Pension costs – defined contribution plan
1,137
1,090
Total employee benefit costs
39,631
38,038
21 Finance income and expense
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Interest on cash and cash equivalents
425
187
Interest on leases receivable
24,774
22,709
Finance income
25,199
22,896
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Interest on operating loan facility
3,761
262
Standby fees
89
93
Interest on supplementary retirement benefit plan
534
490
Interest on lease liabilities
25,579
23,414
Amortization of deferred financing fees
140
24
Finance expense
30,103
24,283
85|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Finance income
(25,199)
(22,896)
Finance expense
30,103
24,283
Net finance expense
4,904
1,387
22 Working capital
Changes in items of non-cash working capital are as follows:
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Accounts receivable
(1,812)
(409)
Inventories
2,269
1,957
Prepaid expenses
(1,100)
(990)
Accounts payable and accrued liabilities
19,977
(6,269)
Royalties payable
(4,094)
203
15,240
(5,508)
23 Commitments and contingencies
Purchase obligations
The Company has purchase obligations for supply to franchisees for food supplies, packaging and equipment of
$113,172,000 (December 31, 2023 – $100,761,000; January 2, 2023 – $123,619,000).
24 Financial instruments and financial risk management
Food Services’ financial instruments consist of cash and cash equivalents, accounts receivable, leases receivable,
other receivables, accounts payable and accrued liabilities and operating loan facility.
Fair values
Management estimates that the fair values of cash and cash equivalents, accounts receivable, other receivables,
and accounts payable and accrued liabilities and operating loan facility approximate their carrying values given
the short term maturity of these instruments. The fair value of leases receivable approximates their carrying
value as the implicit interest used to discount the base value is considered to be based on an appropriate credit
and risk rate pertaining to Food Services. The Credit Facility is based on the floating CORRA and Prime rates
86|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
which reprice regularly. There has not been a significant change in the Company's credit standing in the period
between October 17 2024 and December 29, 2024. Accordingly, it is estimated there is not a material change in
fair value of the drawn portion of the Credit Facility.
Credit risk
The Company’s exposure to credit risk is as indicated by the carrying amount of its accounts receivable, other
receivables and leases receivable. Receivables are due from franchisees, distributors and bottlers. The Company
does not believe it has a significant exposure to any individual franchisee. As at December 29, 2024,
$11,419,000 (December 31, 2023 – $7,775,000 ; January 2, 2023 – $7,285,000) is receivable from one
distributor of which $11,177,000 was less than 30 days past due as at December 29, 2024 all of which was paid
subsequent to the period end.
Liquidity risk
Liquidity risk refers to the risk that the Company is unable to fund obligations and dividend payments. The
primary sources of funds are the fees received from franchised restaurants and revenues from the development
of franchised restaurants, the sale of food and supplies to franchisees and distributors, revenue from Company-
owned restaurants and the sale of A&W Root Beer concentrate. The liquidity risk is assessed as low due to the
nature of the income Food Services receives from the franchisees, the Credit Facility that the Company has in
place to manage liquidity and the Company’s ability to reduce future dividends if necessary.
The following table summarizes the undiscounted contractual payments of the Company’s financial liabilities as
at the dates indicated:
As at December 29, 2024
Total
Less than
1 year
1 – 3
years
4 – 5
years
After 5
years
Accounts payable and accrued
liabilities
67,126
67,126
-
-
-
Lease liabilities
956,378
60,714
174,156
105,129
616,379
Operating loan facility
333,907
15,881
47,643
270,383
-
1,357,411
143,721
221,799
375,512
616,379
As at December 31, 2023
Total
Less than
1 year
1 – 3
years
4 – 5
years
After 5
years
Accounts payable and accrued
liabilities
44,551
44,551
-
-
-
Royalties payable
4,094
4,094
-
-
-
Lease liabilities
937,217
58,335
170,091
96,852
611,939
Operating loan facility
16,296
16,296
-
-
-
1,002,158
123,276
170,091
96,852
611,939
87|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
As at January 2, 2023
Total
Less than
1 year
1 – 3
years
4 – 5
years
After 5
years
Accounts payable and accrued
liabilities
50,058
50,058
-
-
-
Royalties payable
3,891
3,891
-
-
-
Lease liabilities
908,757
50,775
162,497
92,828
602,657
Operating loan facility
8,419
8,419
-
-
-
971,125
113,143
162,497
92,828
602,657
Interest rate risk
The Credit Facility bears a floating rate of interest as disclosed in note 17 and therefore Food Services is exposed
to market risks relating to changes in interest rates on outstanding balances. Cash and cash equivalents earn
interest at market rates. All of the Company’s other financial instruments are non-interest bearing.
25 Capital disclosures
Food Services’ capital currently consists of shareholder’s equity and the operating loan facility. Food Services’
capital management objectives have not changed, which are to have sufficient cash and cash equivalents to
ensure the growth of the business, fund its investing activities, repay debt and pay dividends to its shareholders
after satisfaction of its debt service and income tax obligations, provisions for operating costs and general and
administrative expenses, and retention of reasonable working capital reserves. Food Services manages its
capital structure and makes adjustments to it in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, Food Services may
adjust the amount of dividends paid to its shareholders.
26 Related party transactions and balances
Royalty expense for the period was $44,036,000 (December 31, 2023 – $54,863,000). As of December 29,
2024 $nil (December 31, 2023 $4,094,000; January 2, 2023 – $3,891,000) was payable to the Partnership by
Food Services. Following the completion of the Transaction the royalty expense was eliminated upon
consolidation with Trade Marks.
During the period, Trade Marks declared and paid dividends of $6,966,000 (December 31, 2023 – $8,237,000)
to Food Services. Trade Marks did not declare any dividends subsequent to the completion of the Transaction.
During the period, the Fund declared distributions of $2,329,000 (December 31, 2023 – $2,893,000) payable
to Food Services as a result of Food Services’ ownership of Limited Voting Units. As at December 31, 2023 Food
Services had recorded a $241,000 distribution that was declared by the Fund on December 7, 2023 but payable
to Food Services subsequent to the period end on January 31, 2024 as a current asset (January 2, 2023 –
$241,000). There were no distributions receivable as at December 29, 2024 as the Fund did not declare any
distributions subsequent to the completion of the Transaction on October 17, 2024.
During the period, Food Services recognized $152,000 (December 31, 2023 – $190,000) as an offset to general
and administrative expenses as a result of administrative services provided to Trade Marks and the Fund.
88|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
Following the completion of the Transaction, Food Services did not receive any further payments from Trade
Marks for administrative services.
During the period, the directors of the Company earned director’s fees totaling $165,000 (December 31, 2023 -
$nil), all of which was in accounts payable and accrued liabilities as at December 29, 2024 (December 31, 2023
$nil; January 2, 2023 – $nil).
Prior to completion of the Transaction there was an expense sharing agreement (the “Expense Agreement’) in
place that outlined an arrangement amongst Food Services, the Fund and Trade Marks in respect of the
payment of certain costs, fees, expenses and disbursements incurred or to be incurred by the Fund and Trade
Marks in connection with their consideration, evaluation and negotiation of the Transaction incurred at or prior
to the public announcement of the Transaction. Pursuant to the Expense Agreement, Food Services agreed to
(a) reimburse the Fund and Trade Marks for certain expenses paid by the Fund or Trade Marks, (b) advance
funds to the Fund and/or Trade Marks to permit the Fund and/or Trade Marks, as applicable, to pay such
expenses or (c) pay such expenses directly, in each case, subject to certain caps as set forth therein. During the
period ended December 29, 2024, Food Services paid a total of $3,998,000 (December 31, 2023 – $nil) in costs
incurred by the Fund related to the Transaction under the terms of the Expense Agreement.
During the period ended December 31, 2023, Food Services paid $90,000 to a professional baseball club, of
which a former director of Food Services was a part owner, in exchange for advertising the A&W brand at the
ballpark and tickets to the baseball games. The former director disposed of his investment in the baseball club
in 2023.
Key management compensation
Key management includes the Company’s directors and executive team. Compensation awarded to key
management includes:
52-week
period ended
December 29,
2024
$
52-week
period ended
December 31,
2023
$
Salaries, bonuses and other short-term employee benefits
4,108
3,613
Pension costs – defined contribution plan
172
175
Pension costs – supplementary retirement benefit plan
534
490
4,814
4,278
Other related party transactions are disclosed elsewhere within these consolidated financial statements.
89|A&W Food Services of Canada Inc.
A&W Food Services of Canada Inc.
Notes to Consolidated Financial Statements
December 29, 2024 and December 31, 2023
(figures in tables expressed in thousands of dollars)
27 Subsequent events
On January 3, 2025, the Fund and Trade Marks were dissolved and Food Services directly acquired the A&W
trademarks.
Subsequent to the period ended December 29, 2024, on February 1, 2025, the U.S. President issued three
executive orders directing the U.S. to impose new tariffs on goods imported from Canada, Mexico and China.
On March 4, 2025 the tariffs came into effect, adding an additional 25% duty on Canadian and Mexican imports
into the U.S. (with the exception of certain imports which are subject to a lower duty or the duty has been
temporarily paused) and a 20% duty on Chinese imports into the U.S. In response, the Canadian Prime
Minister announced retaliatory tariffs of 25% on certain U.S. imports into Canada. We are assessing the direct
and indirect impacts that the tariffs imposed by both the U.S. and Canada may have on our business, and such
impacts could be material.
On March 5, 2025, Food Services declared a dividend of $0.480 per share. The dividend is payable in cash on
March 28, 2025 to holders of common shares of record on March 14, 2025. The dividend will be taxed as an
eligible dividend.
Other subsequent events are disclosed in notes 16 and 17 within these consolidated financial statements.
90|A&W Food Services of Canada Inc.
Kelly Blankstein, CFO
Lisa Marzocco, Director of Finance
Email: investorrelations@aw.ca
Phone: (604) 988-2141
PricewaterhouseCoopers LLP
A&W’s common shares are
traded on the Toronto Stock
Exchange under the symbol
AW.TO
A&W’s financial reports,
regulatory filings and news
releases are available at
sedarplus.ca and on our website
at: awinvestors.ca
Computershare Investor Services Inc.
Tel: 514 982 7555 or 1 800 564 6253
Email: service@computershare.com
Paul Hollands | Director and Chair of the Board
Eric Berke | Director
Andrew W. Dunn | Director and Chair of the Audit, Finance and Risk
Committee
Fern Glowinsky| Director
Michael Hollend | Director
Kevin Mahoney | Director and Chair of the Governance and
Compensation Committee
Andrew Mindell | Director
Susan Senecal | Director and Chief Executive Officer
Susan Senecal | Director and Chief Executive Officer
Kelly Blankstein | Chief Financial Officer
Patricia Parente | Vice President, Development
Neil Farmer | Vice President, Restaurants
Brent Todd | Vice President, Purchasing and Distribution
Nancy Wuttunee | Vice President, People Potential
Robert Fussey | Vice President, Innovation
Tom Newitt | Vice President, Marketing
Angela Griffiths | Vice President, Food Safety and Brand Integrity
Mike Atkinson | Executive Vice President
Catherine Anderson | General Counsel and Corporate Secretary
A&W Food Services of Canada Inc.
#300, 171 W Esplanade
North Vancouver, BC
V7M 3K9
91|A&W Food Services of Canada Inc.