VALUE CREATION
T H R O U G H
SUSTAINABLE GROWTH
2022 ANNUAL REPORT
MTY Group franchises and operates quick-service, fast casual and casual dining restaurants under more than 80 different banners in Canada,
the US and Internationally. Based in Montreal, MTY is a family whose heart beats to the rhythm of its brands, the very soul of its multi-branded
strategy. For over 40 years, it has been increasing its presence by delivering new concepts of restaurants, making acquisitions, and forging
strategic alliances, which have allowed it to reach new heights year after year. By combining new trends with operational know-how, the
brands forming the MTY Group now touch the lives of millions of people every year. With 6,788 locations, the many flavours of the MTY Group
hold the key to responding to the different tastes and needs of today’s consumers as well as those of tomorrow.
1
22
6,788
LOCATIONS(1)
332
ACQUIRED
245
OPENED
507
CLOSED
1
DISPOSED
$74.8M
NET INCOME
ATTRIBUTABLE TO OWNERS
$187.4M
NORMALIZED
ADJUSTED EBITDA(4)
$142.8M
CASH FLOWS FROM
OPERATIONS
REVENUE(2) BY PRODUCT
45%
$717M
2022 Revenue
23%
17%
15%
Franchise operation
Food processing, distribution & retail
Corporate stores
Promotional funds
SYSTEM SALES(3) BY GEOGRAPHY
16%
39%
$4,251M
2022 System Sales
11%
3%
31%
Canada
Central US
East Coast US
West Coast US
International
LOCATIONS BY TYPE
21%
66%
6,788
Locations
(as at Nov. 30, 2022)
13%
Street front
Non-traditional format
Shopping mall & office tower food court
(1) Locations as at November 30, 2022.
(2) In % of Fiscal 2022 Revenue, excluding intercos.
(3) This is a supplementary financial measure. Please refer to the Supplemental
Information section of the Management Discussion and Analysis for a definition.
(4) This is a non-GAAP measure. Please refer to the Supplemental Information section
of the Management Discussion and Analysis for a definition.
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44
FY 2022
HIGHLIGHTS
STRONG FINANCIAL RESULTS
• Unprecedented system sales(1) of $4.3 billion
• Record normalized adjusted EBITDA(2) of $187.4 million
• Healthy cash flows from operations of $142.8 million
OPERATIONAL CHALLENGES
• Uncertain market conditions
• Inflationary pressure
• Supply-chain constraints
• Labour shortages
• COVID-related restrictions
CAPITAL ALLOCATION
• Long-term debt repayments of $80.2 million
• Dividend payments of $20.5 million
• Share repurchases of $14.6 million
• Capital expenditures and intangible assets of $12.7 million
FINANCIAL POSITION
• Net debt to normalized adjusted EBITDA ratio(3) of 2.7X
• Cash on hand of $59.5 million
• Available credit of $349.9 million
RECENT ACQUISITIONS
• Küto Comptoir à Tartares for a total cash consideration of $9.0 million, plus a
deferred contingent consideration of $3.5 million (December 2021)
• BBQ Holdings for a total consideration of $264.4 million (September 2022)
• Wetzel’s Pretzels(4) for a cash consideration of approximately $282.0 million
(December 2022)
• Sauce Pizza and Wine(4) for a total consideration of $14.8 million, including a
holdback on acquisition of $1.1 million (December 2022)
(1) This is a supplementary financial measure. Please refer to the Supplemental Information section of the Management
Discussion and Analysis for a definition.
(2) This is a non-GAAP measure. Please refer to the Supplemental Information section of the Management Discussion and
Analysis for a definition.
(3) This is a non-GAAP ratio. Please refer to the Supplemental Information section of the Management Discussion and
Analysis for a definition.
(4) Transaction closed subsequent to fiscal 2022.
5
66
5-YEAR
HIGHLIGHTS
For the years ended November 30
(in thousands of Canadian $, except where indicated)
OPERATING RESULTS
Revenue
Normalized adjusted EBITDA (1)
Income (loss) before taxes
Net income (loss) attributable to owners
Total comprehensive income (loss) attributable to owners
Earnings per share – basic ($ per share)
Earnings per share – diluted ($ per share)
Weighted daily average number of common
shares (in 000s of shares)
Weighted average number of diluted common
shares (in 000s of shares)
Number of shares outstanding (in 000s of shares)
NETWORK METRICS
System sales (2)
Digital sales (2)
Number of locations (#)
CASH FLOW
2022
2021
2020
2019
2018
716,522
187,352
96,170
74,817
109,903
3.06
3.06
551,903
168,622
112,072
85,639
77,673
3.47
3.46
511,117
137,819
(51,949)
(37,108)
(49,726)
(1.50)
(1.50)
550,942
151,662
97,997
77,675
76,489
3.09
3.08
412,346
126,57 1
80,008
95,776
109,327
3.95
3.95
24,440
24,705
24,755
25,145
24,228
24,466
24,413
24,745
24,670
24,755
24,706
25,186
25,071
24,273
25,170
4,251,200
3,631,300
3,459,100
3,619,800
2,782,500
820,300
803,600
636,400
199,200
6,788
6,719
7,001
7,373
n/a
5,984
97,880
4.03
92,598
3.81
14,530
0.60
—
—
Cash flows from operations
142,797
139,299
133,652
Cash flows from operations per diluted share ($ per share) (2)
5.84
5.63
5.40
Free cash flows (1)
131,270
139,001
140,652
Free cash flows per diluted share ($ per share) (3)
Dividends paid on common stock
Dividends per common share ($ per share)
Shares repurchased and cancelled
5.37
20,518
0.84
14,618
5.62
9,141
0.37
2,184
Number of shares repurchased and cancelled (#)
256,400
36,600
5.68
4,633
0.185
18,866
364,774
112,951
4.48
116,938
4.64
16,713
0.66
5,227
98,543
BALANCE SHEET
Cash
Total assets
Long-term debt, including current portion
Shareholders’ equity
TRADING DATA ON COMMON SHARES
Close ($ per share)
52-week high ($ per share)
52-week low ($ per share)
Market capitalization (in millions $ per share)
59,479
61,231
44,302
50,737
32,304
2,325,303
1,904,594
2,013,697
1,648,801
1,239,520
560,959
724,626
360,728
648,898
460,542
582,514
540,650
665,480
275,616
610,895
61.25
63.96
45.20
1,495
55.19
72.10
47.15
1,362
51.65
62.82
14.23
1,276
55.92
71.86
51.61
1,402
65.58
73.19
44.97
1,651
(1) This is a non-GAAP measure. Please refer to section “Definition of non-GAAP measures” found in the Supplemental Information section of Management’s Discussion and Analysis.
(2) This is a supplementary financial measure. Please refer to section “Definition of supplementary financial measures” found in the Supplemental Information section of Management’s
Discussion and Analysis.
(3) This is a non-GAAP ratio. Please refer to section “Definition of non-GAAP ratios” found in the Supplemental Information section of Management’s Discussion and Analysis.
7
MESSAGE FROM
ÉRIC LEFEBVRE
Dear Fellow Shareholders,
The MTY team and I are incredibly proud of the milestones
reached during 2022. The last year marked the third year in a row
in which our results were impacted in one way or another by the
COVID-19 pandemic. As I write this letter, the uncertainty seems to
have finally subsided and our franchisees have the opportunity to
operate their businesses in a predictable environment.
Despite some government-imposed constraints at the beginning of
fiscal 2022, MTY realized record-high system sales of $4.3 billion for
the year. This amount should grow significantly in 2023 following
the acquisitions of BBQ Holdings Inc., Wetzel’s Pretzels, and Sauce
Pizza and Wine late in 2022 and early in 2023. System sales are the
best measure of MTY’s royalty-generation capabilities and the future
looks bright.
Another key metric for MTY is cash flows from operations. While
IFRS results tend to be volatile, unpredictable and difficult to
understand, cash flows are what they are. During 2022, our cash
flows from operations reached $142.8 million or $5.84 per diluted
share. Our operating cash flows have shown extraordinary strength,
growing every year since 2014 and compounding at a rate of 20.6%.
This was achieved despite market conditions fluctuating greatly,
demonstrating how strong and resilient our business model has
become.
During the past 10 years, MTY has invested in 28 acquisitions
totalling $1.5 billion and, subsequent to the year-end, we closed two
more transactions by investing a further $297 million in Wetzel’s
Pretzels and Sauce Pizza and Wine. These impressive brands have
further enhanced MTY’s portfolio of banners.
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8
During 2022, our cash flows from operations reached $142.8 million or $5.84 per diluted
share. Our operating cash flows have shown extraordinary strength, growing every year
since 2014 and compounding at a rate of 20.6%.
Mergers and acquisitions have been at the heart of MTY’s growth
Our operations have also diversified, creating shifts in our EBITDA
strategy since our first acquisition in 1999. Despite the cadence of
margins. Our normalized adjusted EBITDA margins for the years
transactions, MTY remains very disciplined when it comes to the
ended November 30, 2013 and November 30, 2022 were respectively
funds you are trusting us to manage. Our goal is to increase the
39% and 26% . However, broken down by segment, our franchising
long-term value of MTY and, as such, we wait for the right business
margins have remained relatively steady over that same period.
opportunities rather than acquire companies to please market
Consolidated margins have shifted because of the increased relative
participants in the short term. We have demonstrated over the last
weight of corporate locations and processing, distribution and retail
few years this patience as MTY waited for valuations to come back
segments. Our processing, distribution and retail business has
in line before becoming more active in the market. We are prudent
grown significantly in the last five years. Although margins are lower
investors; when transactions are not available under the right
for this segment, it represents a great complement to our overall
conditions, we are happy to replenish our treasure chest, so that we
business, leveraging the power of our brands and the advantages
are ready when the right opportunities arise.
of vertical integration. We are motivated to continue growing this
Despite this historical focus on acquisitive growth, our management
segment in the future.
team remains dedicated to creating organic growth and maximizing
Our margins will also be affected in the future by the addition of
the assets in our portfolio. As the dust settles on the pandemic,
multiple, highly profitable, corporate locations acquired in the BBQ
enabling a meaningful comparison of our results to the prior year
Holdings, Wetzel’s Pretzels and Sauce Pizza and Wine transactions.
free of restrictions, MTY generated organic growth in system sales
This impact was partially reflected in our fourth quarter results for
and normalized adjusted EBITDA in the fourth quarter of 2022.
BBQ Holdings’ corporate locations, while the effects of the latter two
These data points confirm our ability to deliver strong results despite
will be shown in our 2023 results.
some network erosion in the last three years. MTY has assembled
an incredible team and our job as leaders is to be enablers, ensuring
You can be assured the MTY team is committed to creating long-
our network has all the resources to render the best day-to-day
lasting, favourable economic attributes that will eventually be
decisions and make incremental progress towards our goals. We
recognized by the markets.
have ambitious goals for the future and delivering on them is what
our 1000-plus, head-office employees make possible.
To conclude, I once again want to thank all of you for your trust. I also
want to recognize the remarkable efforts of all our franchise partners
Over the last few years, MTY’s business has evolved greatly. Not
and colleagues, particularly those who come to work every day in
so long ago, many people referred to our founder and Chairman of
our restaurants, distributions centers and production facilities.
the Board, Stanley Ma, as the “King of Food Courts.” Although we
still operate a meaningful number of locations in food courts, their
weight has shifted significantly; going back 10 years, 45% of our
network’s sales were generated in food courts or office towers. In
2022, that number dropped to 11%.
Éric Lefebvre
President and Chief Executive Officer
(1) 2013 figures have not been restated to reflect new accounting standards applicable to 2022.
9
KEY ACQUISITION
BBQ HOLDINGS
RESTAURANT TYPE:
Casual and fast-casual dining
FLAGSHIP BANNERS:
Barrio Queen, Famous Dave’s, Granite City, and Village Inn
GEOGRAPHIC REACH:
Located across 37 states in the U.S., Canada and United Arab Emirates
NUMBER OF LOCATIONS:
198 franchised restaurants and 103 corporate-owned for a total of 301
TERMS OF THE DEAL:
Total consideration of $264.4 million
CLOSING DATE:
September 7, 2022
ACQUISITION OUTLOOK:
Expected to be immediately accretive to MTY’s free cash flow per share
MANAGEMENT COMMENT:
“This transaction represents another key acquisition for MTY as we further scale
and enhance our existing U.S. portfolio through the addition of nine unique brands,”
said CEO Eric Lefebvre. “BBQ Holdings’ restaurants are well established within
each of their respective markets with a strong network of franchise partners,
well-run corporate-owned locations, and a best-in-class management team.”
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10
KEY ACQUISITION
WETZEL’S PRETZELS
RESTAURANT TYPE:
Quick service restaurant in snack category
FLAGSHIP BANNERS:
Wetzel’s Pretzels and Twisted by Wetzel’s
GEOGRAPHIC REACH:
Located across 25 states in the U.S., as well as in Canada and Panama
NUMBER OF LOCATIONS:
329 franchised restaurants and 38 corporate-owned for a total of 367
TERMS OF THE DEAL:
Cash consideration of approximately $282.0 million
CLOSING DATE:
December 8, 2022
ACQUISITION OUTLOOK:
Expected to be immediately accretive to MTY’s earnings, EBITDA and free
cash flow per share
MANAGEMENT COMMENT:
“This acquisition adds another iconic brand to MTY’s U.S. portfolio,” said
CEO Eric Lefebvre. “Its products are extremely craveable and are recognized
everywhere in the U.S. by a broad range of customers.”
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11
SUSTAINABILITY REPORT
SUMMARY
FOOD
PLANET
PEOPLE
We are proud to present a snapshot of our first Sustainability Report that was published in
November 2022. As one of the largest franchisors and operators of multiple restaurant concepts
worldwide, it is important for us to have a positive impact on the communities in which MTY and
its suppliers operate.
Our report is centered on the pillars of food, planet and people. We have identified
objectives and milestones for each of these three pillars that will enable us to measure
our progress while keeping our eyes on long-term goals.
Although we have made significant strides in the past year, we acknowledge there is
still a lot of work to be done. Setting measurable goals and reviewing priorities as our
environment evolves will help us along our journey of continuous improvement over
the upcoming years.
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To view the complete MTY Sustainability Report,
please visit https://sustainability.mtygroup.com/
The report, based on the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative’s
(GRI) reporting standards, summarizes the progress made in fiscal 2021 and outlines commitments for
future years.
It covers material topics related to MTY including people and
A sampling of metrics for upcoming years include:
culture; governance; cybersecurity and data protection; food
security and supply-chain management; food safety and product
• Publish, or make accessible, nutritional information,
quality; and environmental impact.
ingredient lists and the allergen cards of core menu items
for the top 50 brands by 2023, and for all brands by 2024
A cross-functional team spanning all divisions was established
to report on achievements and establish consistent objectives
• Replace hard-to-recycle plastics with alternative packaging,
across all business units.
Canadian operations by the end of 2023
• Evaluate current diversity, equity and inclusion (DEI)
practices and efforts, identify and explore opportunities for
improvement, and engage with a third-party firm to set a
DEI strategy by 2023
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1414
Management’s Discussion and Analysis
For the year ended November 30, 2022
Key highlights
Normalized adjusted EBITDA(1) increased 25% to $53.5 million in the quarter, compared to $42.8
million in Q4-21.
Cash flows from operating activities of $35.5 million in the quarter, compared to $31.9 million
in Q4-21, representing a growth of 11%.
Free cash flows per diluted share(2) reached $1.34 in the quarter.
System sales(3) reached $1.2 billion in the quarter and exceeded $4.0 billion in the last twelve
months.
Net income attributable to owners of $7.1 million in the quarter, or $0.29 per diluted share,
compared to $24.9 million, or $1.00 per diluted share in Q4-21. Decline due to losses on foreign
exchange on intercompany loans, acquisition-related transaction costs in excess of $3.6
million and higher non-cash impairment charges on intangible assets.
Long-term debt repayments of $23.9 million for the quarter.
Quarterly dividend payment of $0.25 per share on February 15, 2023.
Acquisition of Wetzel’s Pretzels on December 8, 2022 for a cash consideration of
approximately $282.0 million (US$207.0 million).
Acquisition of Sauce Pizza and Wine on December 15, 2022 for a total consideration of $14.8
million (US$10.8 million).
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
(3) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
Management’s Discussion and Analysis
For the fiscal year ended November 30, 2022
General
This Management's Discussion and Analysis of the financial position and financial performance ("MD&A") of MTY Food
Group Inc. ("MTY") is supplementary information and should be read in conjunction with the Company’s consolidated
financial statements and accompanying notes for the fiscal year ended November 30, 2022.
In the MD&A, MTY Food Group Inc., MTY, or the Company, designates, as the case may be, MTY Food Group Inc. and
its Subsidiaries, or MTY Food Group Inc., or one of its subsidiaries.
The disclosures and values in this MD&A were prepared in accordance with International Financial Reporting Standards
(“IFRS”) and with current issued and adopted interpretations applied to fiscal years beginning on or after December 1,
2021.
This MD&A was prepared as at February 15, 2023. Supplementary information about MTY, including its latest annual
and quarterly reports, and press releases, is available on SEDAR’s website at www.sedar.com.
FORWARD-LOOKING STATEMENTS AND USE OF ESTIMATES
This MD&A and, in particular but without limitation, the sections of this MD&A entitled “Near-Term Outlook”, “Same-Store
Sales” and “Contingent Liabilities”, contain forward-looking statements. These forward-looking statements include, but
are not limited to, statements relating to certain aspects of the business outlook of the Company during the course of
2022. Forward-looking statements also include any other statements that do not refer to independently verifiable historical
facts. A statement made is forward-looking when it uses what is known and expected today to make a statement about
the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect,
goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target and will. All such
forward-looking statements are made pursuant to the ‘safe harbour’ provisions of applicable Canadian securities laws.
Unless otherwise indicated, forward-looking statements in this MD&A describe the Company’s expectations as at
February 15, 2023 and, accordingly, are subject to change after such date. Except as may be required by Canadian
securities laws, the Company does not undertake any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several
assumptions, which give rise to the possibility that actual results or events could differ materially from the expectations
expressed in or implied by such forward-looking statements and that the business outlook, objectives, plans and strategic
priorities may not be achieved. As a result, the Company cannot guarantee that any forward-looking statement will
materialize, and readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking
statements are provided in this MD&A for the purpose of giving information about management’s current strategic
priorities, expectations and plans and allowing investors and others to get a better understanding of the business outlook
and operating environment. Readers are cautioned, however, that such information may not be appropriate for other
purposes. In addition, the impact of COVID-19 on the operational cash flows and financial condition of the industry in
which the Company operates and on the Company itself continues to evolve and any forward-looking information set
forth herein with respect to such matters is subject to change and actual impact may differ from expectations in a material
way.
Forward-looking statements made in this MD&A are based on a number of assumptions that are believed to be
reasonable on February 15, 2023. Refer, in particular, to the section of this MD&A entitled “Risks and Uncertainties” for
a description of certain key economic, market and operational assumptions the Company has used in making forward-
Page 2
looking statements contained in this MD&A. If the assumptions turn out to be inaccurate, the actual results could be
materially different from what is expected.
In preparing the consolidated financial statements in accordance with IFRS and the MD&A, management must exercise
judgment when applying accounting policies and use assumptions and estimates that have an impact on the amounts of
assets, liabilities, sales and expenses reported and information on contingent liabilities and contingent assets provided.
Unless otherwise indicated in this MD&A, the strategic priorities, business outlooks and assumptions described in the
previous MD&A remain substantially unchanged.
Important risk factors that could cause actual results or events to differ materially from those expressed in or implied by
the above-mentioned forward-looking statements and other forward-looking statements included in this MD&A include,
but are not limited to: the intensity of competitive activity, and the resulting impact on the ability to attract customers’
disposable income; the Company’s ability to secure advantageous locations and renew existing leases at sustainable
rates; the arrival of foreign concepts, the ability to attract new franchisees; changes in customer tastes, demographic
trends and in the attractiveness of concepts, traffic patterns, occupancy cost and occupancy level of malls and office
towers; general economic and financial market conditions, the level of consumer confidence and spending, and the
demand for, and prices of, the products; the future impact of the COVID-19 pandemic and its evolving strains and its
macro-economic impact; the ability to implement strategies and plans in order to produce the expected benefits; events
affecting the ability of third-party suppliers to provide essential products and services; labour availability and cost; stock
market volatility; volatility in foreign exchange rates or borrowing rates; foodborne illness; operational constraints,
government orders and the event of the occurrence of epidemics, other pandemics and health risks.
These and other risk factors that could cause actual results or events to differ materially from the expectations expressed
in or implied by these forward-looking statements are discussed in this MD&A.
Readers are cautioned that the risks described above are not the only ones that could impact the Company. Additional
risks and uncertainties not currently known or that are currently deemed to be immaterial may also have a material
adverse effect on the business, financial condition or results of operations.
Except as otherwise indicated by the Company, forward-looking statements do not reflect the potential impact of any
non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business
combinations or other transactions that may be announced or that may occur after February 15, 2023. The financial
impact of these transactions and non-recurring and other special items can be complex and depend on the facts particular
to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way
that present known risks affecting the business.
CORE BUSINESS
MTY franchises and operates quick service, fast casual and casual dining restaurants. MTY aims to be the franchisor of
choice in North America and offers the market a range of offering through its many brands. MTY currently operates under
the following banners: Tiki-Ming, Sukiyaki, La Crémière, Panini Pizza Pasta, Villa Madina, Cultures, Thaï Express,
Vanellis, Kim Chi, “TCBY”, Sushi Shop, Koya Japan, Vie & Nam, O’Burger, Tutti Frutti, Taco Time, Country Style,
Valentine, Jugo Juice, Mr. Sub, Koryo Korean Barbeque, Mr. Souvlaki, Sushi Go, Mucho Burrito, Extreme Pita,
PurBlendz, ThaïZone, Madisons New York Grill & Bar, Café Dépôt, Muffin Plus, Sushi-Man, Van Houtte, Manchu Wok,
Wasabi Grill & Noodle, Tosto, Big Smoke Burger, Cold Stone Creamery, Blimpie, Surf City Squeeze, The Great Steak &
Potato Company, NrGize Lifestyle Café, Samurai Sam’s Teriyaki Grill, Frullati Café & Bakery, Rollerz, Johnnie’s New
York Pizzeria, Ranch One, America’s Taco Shop, Tasti D-Lite, Planet Smoothie, Maui Wowi, Pinkberry, Baja Fresh
Mexican Grill, La Salsa Fresh Mexican Grill, La Diperie, Steak Frites St-Paul, Giorgio Ristorante, The Works Gourmet
Burger Bistro, Dagwoods Sandwiches and Salads, The Counter Custom Burgers, Built Custom Burgers, Baton Rouge,
Pizza Delight, Scores, Toujours Mikes, Ben & Florentine, Grabbagreen, Timothy’s World Coffee, Mmmuffins, SweetFrog,
Casa Grecque, South Street Burger, Papa Murphy’s, Yuzu Sushi, Allô! Mon Coco, Turtle Jack’s Muskoka Grill, COOP
Wicked Chicken, Küto Comptoir à Tartares, Famous Dave’s, Village Inn, Barrio Queen, Granite City, Real Urban
Barbecue, Tahoe Joe’s Steakhouse, Bakers Square, Craft Republic, Fox & Hound and Champps.
As at November 30, 2022, MTY had 6,788 locations in operation, of which 6,589 were franchised or under operator
agreements and the remaining 199 locations were operated by MTY.
MTY’s locations can be found in: i) mall and office tower food courts and shopping malls; ii) street front; and, iii) non-
traditional format within airports, petroleum retailers, convenience stores, cinemas, amusement parks, in other venues
or retailers shared sites, hospitals, universities, grocery stores, and food trucks or carts. Certain locations also offer
catering services. Over the last 43 years, MTY has developed several restaurant concepts, including Tiki-Ming, which
was the first concept it franchised. Details on other banners added through acquisitions can be found in the supplemental
section of this MD&A.
Page 3
MTY has also launched multiple ghost kitchens in existing restaurant locations. These ghost kitchens and the pre-existing
MTY restaurant locations are benefiting from the synergies of shared costs, streamlined workflows as well as being able
to respond to the increase in delivery and takeout orders.
Revenues from franchise locations are generated from royalty fees, franchise fees, sales of turnkey projects, rent, sign
rental, supplier contributions, gift card breakage and program fees and sales of other goods and services. Operating
expenses related to franchising include salaries, general and administrative costs associated with existing and new
franchisees, expenses in the development of new markets, costs of setting up turnkey projects, rent, supplies, finished
products and equipment sold.
Revenues and expenses from corporate-owned locations include sales generated and cost incurred from their
operations.
Promotional funds contributions are based on a percentage of gross sales as reported by the franchisees. The Company
is not entitled to retain these promotional fund payments received and is obligated to transfer these funds to be used
solely in promotional and marketing-related costs for specific restaurant banners.
MTY generates revenues from the food processing businesses discussed herein. The two plants produce various
products that range from ingredients and ready to eat food sold to restaurants or other food processing plants to prepared
food sold in retail stores. The plants generate most of their revenues selling their products to distributors, retailers and
franchisees. The Company also generates revenue from its distribution centers that serve primarily the Valentine, Casa
Grecque and Küto Comptoir à Tartares franchisees. Furthermore, the Company generates revenues from the sale of
retail products under various brand names, which are sold at a variety of retailers.
COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
Unless otherwise indicated, the financial information presented below, including tabular amounts, is prepared in
accordance with IFRS. Definitions of all non-GAAP (“generally accepted accounting principles”) measures, non-GAAP
ratios and supplemental financial measures can be found in the supplemental information section of this MD&A. The
non-GAAP measures, non-GAAP ratios and supplemental financial measures used within the context of this MD&A do
not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures
presented by other issuers.
Non-GAAP measures include:
-
Adjusted EBITDA: the Company believes that Adjusted EBITDA is a useful metric because it is consistent with
the indicators management uses internally to measure the Company’s performance, to prepare operating
budgets and to determine components of executive compensation.
- Normalized adjusted EBITDA: the Company believes that Normalized adjusted EBITDA is a useful metric for
the same reasons as Adjusted EBITDA; additionally, the Company believes that Normalized adjusted EBITDA
provides a measure of the Company’s performance that does not include the impact of transaction costs related
to acquisitions, which may vary in occurrence and in amount.
-
-
Free cash flows: the Company believes that free cash flows are a useful metric because they provide the
Company with a measure related to decision-making about cash-intensive matters such as capital expenditures,
compensation, and potential acquisitions.
Income (loss) before taxes, excluding impairment charges and reversals: the Company believes that Income
(loss) before taxes, excluding impairment charges and reversals is a useful metric because it provides a
measure of the Company’s profitability that does not include the impact of impairment charges or reversals,
which may vary due to circumstances.
Non-GAAP ratios include:
-
Adjusted EBITDA as a % of revenue: the Company believes that Adjusted EBITDA as a % of revenue is a useful
metric because it is consistent with the indicators management uses internally to measure the Company’s
profitability from operations, including to gauge the effectiveness of cost management measures.
- Normalized adjusted EBITDA as a % of revenue: the Company believes that Normalized adjusted EBITDA as
a % of revenue is a useful metric for the same reasons as Adjusted EBITDA as a % of revenue; additionally,
the Company believes that Normalized adjusted EBITDA as a % of revenue provides a measure of the
Company’s performance that does not include the impact of transaction costs related to acquisitions, which may
vary in occurrence and in amount.
Page 4
-
Free cash flows per diluted share: the Company believes that free cash flows per diluted share are a useful
metric because they are used by securities analysts, investors and other interested parties as a measure of the
Company’s cash flows that are available to be distributed to debt and equity shareholders, including to pay debt,
to pay dividends, and to repurchase shares.
- Debt-to-EBITDA: the Company believes that debt-to-EBITDA is a useful metric because it represents a financial
covenant that the Company must be in compliance with and, accordingly, a determining factor in the Company’s
credit availability.
The Company also believes that these measures are used by securities analysts, investors and other interested parties
and that these measures allow them to compare the Company’s operations and financial performance from period to
period and provide them with a supplemental measure of the operating performance and financial position and thus
highlight trends in the core business that may not otherwise be apparent when relying solely on GAAP measures.
HIGHLIGHTS OF SIGNIFICANT EVENTS
COVID-19
During the year ended November 30, 2022, the COVID-19 pandemic continued to impact the markets in which MTY and
its franchise partners and suppliers operate. The first half of the year saw Canada continue to be impacted by the
continuation of government-imposed restrictions, such as restrictions on dine-in guests, reduced operating hours and/or
temporary closures. However, over the following months such restrictions were gradually eased, with most government-
imposed restrictions lifted in both Canada and the US by the end of the second quarter. The continuing vaccination
campaigns, including the administration of boosters and the gradual expansion of the coverage of the population, allowed
the Canadian and US markets to mostly remain open in the second half of the year, with small disruptions in certain
areas. Although there is uncertainty surrounding the effects that the lifting of restrictions will have on the number of
infections and the potential emergence of new variants, MTY’s network currently operates with no restrictions. Although
the network continues to encounter short-term closures in some restaurants due to COVID-19 outbreaks among staff,
these locations quickly reopen and currently do not pose material disruptions to the overall network.
Acquisition of Küto Comptoir à Tartares
On December 1, 2021, one of the Company’s wholly owned subsidiaries completed the acquisition of the assets of Küto
Comptoir à Tartares, a fast-growing chain of tartare restaurants operating in the province of Quebec, for a total cash
consideration of $9.0 million plus a deferred contingent consideration of $3.5 million. At closing, there were 31 franchised
Küto Comptoir à Tartares restaurants in operation.
Change in control
On December 3, 2021, the Company gained control of 11554891 Canada Inc., previously a joint venture, as a result of
a lapse of rights held by the minority shareholder that previously stopped the Company from controlling. Accordingly, the
Company now has control over 11554891 Canada Inc., which triggers its deemed acquisition and thus fully consolidates
11554891 Canada Inc. starting December 3, 2021. There is no cash consideration for the acquisition and there is no
change of participation of each partner in 11554891 Canada Inc. The change in control provides for the revaluation of
the previously held interest to its fair market value. The Company remeasured its pre-existing equity interest of 70% to
its fair value of $23.1 million. As a result, the Company recorded a loss of $2.8 million in its consolidated statement of
income for the year ended November 30, 2022.
Acquisition of BBQ Holdings
On September 27, 2022, the Company completed the acquisition of all of the issued and outstanding common shares of
BBQ Holdings, Inc. (“BBQ Holdings”), a franchisor and operator of casual and fast casual dining restaurants across 37
states in the US, Canada, and United Arab Emirates, for a total consideration of $264.4 million (US$192.6 million), which
was financed from the Company’s cash on hand and existing credit facilities. The Company acquired ten concepts. At
closing, there were 198 franchised restaurants and 103 corporate-owned restaurants operating under BBQ Holdings
banners1.
1 The location count presented in the MD&A is different from the information disclosed in the press release dated September 27, 2022,
titled “MTY Food Group Inc. Successfully Completes Acquisition of BBQ Holdings, Inc.” due to MTY’s policy not to include ghost kitchens
operating from existing restaurants in the number of locations, which differs from BBQ Holdings’ policy.
Page 5
SUMMARY OF ANNUAL FINANCIAL METRICS
(In thousands $, except EPS, dividend per common share and
number of common shares)
Year ended
November 30, 2022
Year ended
November 30, 2021
Total assets
Total long-term financial liabilities
Revenue
Income before taxes
Net income attributable to owners
Total comprehensive income attributable to owners
Cash flows from operations
Net income per share – basic
Net income per share – diluted
Dividends paid on common stock
Dividends per common share
2,325,303
551,429
716,522
96,170
74,817
109,903
142,797
3.06
3.06
20,518
0.840
1,904,594
347,612
551,903
112,072
85,639
77,673
139,299
3.47
3.46
9,141
0.370
Weighted daily average number of common shares
Weighted average number of diluted common shares
24,439,892
24,465,738
24,704,866
24,745,131
SUMMARY OF ANNUAL OPERATING METRICS
(In thousands $, except per share amounts)
Adjusted EBITDA (1)
Normalized adjusted EBITDA (1)
Income before taxes, excluding impairment charges and reversals (1)
Cash flows from operations per diluted share (2)
Year ended
November 30, 2022
Year ended
November 30, 2021
182,082
187,352
111,055
5.84
168,622
168,622
119,525
5.63
Free cash flows (1)
131,270
139,001
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
Page 6
SUMMARY OF QUARTERLY FINANCIAL METRICS
Quarters ended
(In thousands $, except per
share information)
February
2021
May
2021
August November February
2021
2021
2022
May
2022
August November
2022
2022
Revenue
118,960
135,857
150,801
146,285
140,494
162,518
171,540
241,970
Net income attributable
to owners
Total comprehensive
(loss) income
attributable to owners
13,397
23,028
24,337
24,877
16,637
28,619
22,435
7,126
(953)
(7,588)
52,026
34,188
11,461
25,919
47,589
24,934
Net income per share
0.54
0.93
0.99
1.01
0.68
1.17
0.92
0.29
Net income per diluted
share
Cash flows provided by
operating activities
0.54
0.93
0.98
1.00
0.68
1.17
0.92
0.29
31,307
29,541
46,553
31,898
39,696
30,739
36,838
35,524
SUMMARY OF QUARTERLY OPERATING METRICS
(In thousands $, except
system sales, # of
locations and per share
information)
Quarters ended
February
May
August November February
May
August November
2021
2021
2021
2021
2022
2022
2022
2022
System sales (1 & 2)
761.1
891.5
1,016.2
962.5
885.7
1,054.3
1,104.7
1,206.5
# of locations
6,949
6,907
6,848
6,719
6,704
6,660
6,606
6,788
Adjusted EBITDA (3)
Normalized adjusted
EBITDA (3)
Free cash flows (3)
Free cash flows per
diluted share (4)
32,637
43,481
49,673
42,831
35,637
47,649
48,920
49,876
32,637
43,481
49,673
42,831
35,637
47,649
50,592
53,474
30,300
27,497
45,601
35,603
36,970
25,983
35,464
32,853
1.23
1.11
1.84
1.44
1.51
1.06
1.45
1.34
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
In millions $.
(2)
(3) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(4) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
Page 7
SEGMENT NOTE DISCLOSURE
Management monitors and evaluates the Company’s results based on geographical segments; these two segments
being Canada and US & International. The Company and its chief operating decision maker assess the performance of
each operating segment based on its segment profit and loss, which is equal to revenue less operating expenses. Within
those geographical segments, the Company’s chief operating decision maker also assesses the performance of
subdivisions based on the type of product or service provided. These subdivisions include franchising, corporate stores,
food processing, retail and distribution and promotional funds revenues and expenses.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2022
Revenue
During the 2022 fiscal year, the Company’s total revenue increased to $716.5 million, from $551.9 million a year earlier.
Revenues for the two segments of business are broken down as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total revenue
Canada revenue analysis:
November 30, 2022
($ millions)
November 30, 2021
($ millions)
141.1
29.4
163.1
42.4
(5.4)
370.6
182.3
89.8
6.0
68.9
(1.1)
345.9
716.5
107.3
19.4
125.0
32.2
(3.7)
280.2
167.2
40.2
5.0
61.2
(1.9)
271.7
551.9
Variation
32%
52%
30%
32%
N/A
32%
9%
123%
20%
13%
N/A
27%
30%
Revenue from franchise locations in Canada increased by 32%. Several factors contributed to the variation, as listed
below:
Revenue, 2021 fiscal year
(In millions $)
107.3
26.4
0.2
0.7
4.3
1.0
1.2
141.1
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase in recurring revenue streams (1)
Increase in initial franchise fees, renewal fees and transfer fees
Increase in turnkey, sales of material to franchisees and rent revenues
Increase due to 11554891 Canada Inc. previously recorded as a joint venture
Increase due to acquisition
Other non-material variations
Revenue, 2022 fiscal year
The Company’s pandemic recovery momentum continued in 2022, with system sales increasing by 30% compared to
the same period last year despite the impact of the Omicron variant at the beginning of the year, which led to additional
government-imposed restrictions on the network’s establishments in key territories for several months in early 2022. The
casual and quick service restaurant segments saw the biggest growth in revenues with sales increasing 42% and 29%,
respectively, compared to prior year. The number of temporarily closed locations fluctuated throughout 2022 and 2021.
As at November 30, 2021, there were 64 locations temporarily closed, which have for the most part reopened.
Page 8
Revenue from corporate-owned locations increased by 52% to $29.4 million during the year. The increase is mostly due
to pandemic recovery, which resulted in an increase in operational business days compared to the prior year and is also
attributable to an increase in corporate locations.
Food processing, distribution and retail revenues increased by 30% mainly due to new listings in retail and expansion to
new territories, as well as higher revenues generated by the processing and distribution centers, including the newly
acquired Küto Comptoir à Tartares franchisees, which represents $5.6 million. During the year ended November 30,
2022, 183 products were sold in the Canadian retail market (2021 – 181 products).
The promotional fund revenue increase of 32% is attributable to the increase in system sales as well as the impact of
the various contribution rates.
US & International revenue analysis:
Revenue from franchise locations in the US and International increased by 9%. Several factors contributed to the
variation, as listed below:
Revenue, 2021 fiscal year
(In millions $)
167.2
2.6
2.2
(0.3)
0.7
4.3
5.7
(0.1)
182.3
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase in recurring revenue streams (1)
Increase in initial franchise fees, renewal fees and transfer fees
Decrease in sales of material and services to franchisees
Increase in gift card breakage income
Increase due to acquisition
Impact of variation in foreign exchange rates
Other non-material variations
Revenue, 2022 fiscal year
The increase in franchising revenues is due to the acquisition of BBQ Holdings, which generated revenues of $4.3 million,
followed by higher recurring revenue streams compared to the same period last year. The increase in recurring revenue
streams was attributable to a system sales increase of 10%. The variation of foreign exchange rates also had a favourable
impact of $5.7 million.
The increase of $49.6 million in corporate-owned location revenues is due to the acquisition of 103 corporate locations
at BBQ Holdings, which generated $67.6 million in revenues since acquisition. This was partially offset by the sale in the
fourth quarter of 2021 of several Papa Murphy’s corporately-owned locations that were converted into franchises.
The promotional fund revenue increase of 13% is partly due to the increase in system sales as well as the favourable
impact of foreign exchange rates and the impact of the various contribution rates.
Operating expenses
During the 2022 fiscal year, operating expenses increased by 40% to $534.4 million, up from $382.6 million a year ago.
Operating expenses for the two business segments were incurred as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Promotional funds
Intercompany transactions
Total US & International
Total operating expenses
November 30, 2022
($ millions)
November 30, 2021
($ millions)
71.5
29.3
146.0
42.4
(1.8)
287.4
97.6
85.2
68.9
(4.7)
247.0
534.4
50.4
17.3
114.0
32.2
(1.8)
212.1
71.4
41.7
61.2
(3.8)
170.5
382.6
Variation
42%
69%
28%
32%
N/A
36%
37%
104%
13%
N/A
45%
40%
Page 9
Canada operating expenses analysis:
Operating expenses from franchise locations in Canada increased by $21.1 million, due to several factors listed below:
Operating expenses, 2021 fiscal year
Increase due to not qualifying for government wage subsidies
Increase in turnkey cost, cost of sale of material and services to franchisees and rent
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Increase in expected credit loss provision
Increase due to 11554891 Canada Inc. previously recorded as a joint venture
Increase due to acquisition
Increase due to impact of IFRS 16 on rent expense
Increase due to impact of IFRS 16 on impairment of lease receivables
Other non-material variations
Operating expenses, 2022 fiscal year
10.9
0.3
1.6
0.7
0.2
3.2
(0.1)
71.5
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
(In millions $)
50.4
3.2
1.1
Controllable expenses increased by $10.9 million, primarily due to higher wages and an increase in other office expenses
and consulting fees. This is attributable to vacant positions being filled over the course of 2021 and into 2022, leading to a
higher number of full-time employees, as well as an inflation impact on wages. Other office expenses increased as a result of
the recovery of the business and also included higher annual licensing and cybersecurity costs.
Operating expenses also increased by $3.2 million as a result of government wage subsidies received in the same period last
year, compared to nil in 2022, and $3.2 million in additional impairment on lease receivables due to a reassessment of the
expected loss rates used. An increase of $1.6 million was also recorded due to the consolidation of 11554891 Canada Inc.,
which was previously recorded as a joint venture in the prior year (refer to “Highlights of Significant Events” section). The
increase in turnkey costs, cost of sale of material and services to franchisees and rent is mostly attributable to an increase in
the number of turnkey projects, which fluctuated in line with the associated revenues.
Expenses from corporate stores increased by $12.0 million compared to the same period last year, partly correlated to the
related increase in revenues, and partially due to the impact of wage and rent subsidies received from the government in the
same period last year, compared to nil in 2022, and the repossession of underperforming locations in the process of being
turned around.
The increase in food processing, distribution and retail expenses was tightly correlated to the related revenues.
The variations of promotional funds expense were tightly correlated to the related revenues.
US & International operating expenses analysis:
Operating expenses from franchise locations in the US & International increased by 37%. Several factors contributed to
the variation, as listed below:
(In millions $)
71.4
0.3
0.3
0.5
Operating expenses, 2021 fiscal year
Increase due to not qualifying for government wage subsidies
Increase in non-controllable expenses (1)
Increase in cost of sale of material and services to franchisees and rent
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Increase in expected credit loss provision
Increase due to acquisition
Increase due to transaction costs related to acquisitions
Increase due to impact of IFRS 16 on rent expense
Increase due to impact of IFRS 16 on impairment of lease receivables
Impact of variation in foreign exchange rates
Other non-material variations
Operating expenses, 2022 fiscal year
9.1
1.2
4.1
5.3
0.7
0.4
2.4
1.9
97.6
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Page 10
Operating expenses for franchise locations increased by $26.2 million in 2022, due in part to the acquisition of BBQ Holdings,
which had expenses of $4.1 million, as well as acquisition costs of $5.3 million related to BBQ Holdings and Wetzel’s Pretzels
(as further defined in section “Subsequent Events”). Operating expenses also increased due to higher office expenses and
higher wages. The latter is attributable to vacant positions being filled over the course of 2021 and into 2022, leading to a
higher number of full-time employees, as well as an inflation impact on wages compared to the same period last year. Other
office expense increase is related to higher annual licensing and cybersecurity costs as well as increased travel and meals
expenses.
Corporate store expenses more than doubled, reaching $85.2 million. The increase of $43.5 million is due to the
acquisition of 103 new corporate locations with the purchase of BBQ Holdings. These locations generated corporate
store expenses of $62.8 million. This was partially offset by a decrease in corporate-owned location expenses due to the
sale in the fourth quarter of 2021 of several Papa Murphy’s corporately-owned locations that were converted into
franchises.
The variations of promotional funds expense were tightly correlated to the related revenues.
Segment profit, Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) (1)
and Normalized adjusted EBITDA (1)
Fiscal year ended November 30, 2022
(In millions $)
Revenue
Operating expenses
Segment profit and Adjusted EBITDA (1)
Segment profit and Adjusted EBITDA
as a % of Revenue (2)
Segment profit and Adjusted EBITDA (1)
Transaction costs related to acquisitions (3)
Normalized adjusted EBITDA (1)
Normalized adjusted EBITDA as a % of Revenue (2)
Canada
370.6
287.4
83.2
22%
83.2
—
83.2
22%
US & International
345.9
247.0
98.9
29%
98.9
5.3
104.2
30%
Fiscal year ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net loss in joint venture
Adjusted EBITDA and Normalized adjusted
EBITDA (1)
Adjusted EBITDA and Normalized adjusted
EBITDA as a % of Revenue (2)
Canada
280.2
212.1
68.1
24%
68.1
(0.7)
67.4
24%
US & International
271.7
170.5
101.2
37%
101.2
—
101.2
37%
Total
716.5
534.4
182.1
25%
182.1
5.3
187.4
26%
Total
551.9
382.6
169.3
31%
169.3
(0.7)
168.6
31%
Page 11
Below is a summary of performance segmented by product/service:
(In millions $)
Revenue
Operating expenses
Segment profit and Adjusted EBITDA (1)
Segment profit and Adjusted
EBITDA as a % of Revenue (2)
Segment profit and Adjusted EBITDA (1)
Transaction costs related to
acquisitions (3)
Normalized adjusted EBITDA (1)
Normalized adjusted EBITDA
as a % of Revenue (2)
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net loss in joint venture
Adjusted EBITDA and Normalized
adjusted EBITDA (1)
Adjusted EBITDA and Normalized
adjusted EBITDA as a % of
Revenue (2)
Fiscal year ended November 30, 2022
Franchise
323.4
169.1
154.3
Corporate
119.2
114.5
4.7
Processing,
distribution
and retail
169.1
146.0
23.1
Promotional
funds
111.3
111.3
—
Intercompany
transactions
(6.5)
(6.5)
—
Total
716.5
534.4
182.1
48%
4%
14%
N/A
N/A
25%
154.3
5.3
159.6
4.7
—
4.7
23.1
—
23.1
—
—
—
—
—
—
182.1
5.3
187.4
49%
4%
14%
N/A
N/A
26%
Fiscal year ended November 30, 2021
Franchise
274.5
121.8
152.7
56%
Corporate
59.6
59.0
0.6
1%
Processing,
distribution
and retail
130.0
114.0
16.0
12%
Promotional
funds
93.4
93.4
—
N/A
Intercompany
transactions
(5.6)
(5.6)
—
N/A
152.7
(0.7)
152.0
0.6
—
0.6
16.0
—
16.0
—
—
—
—
—
—
Total
551.9
382.6
169.3
31%
169.3
(0.7)
168.6
55%
1%
12%
N/A
N/A
31%
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
(3) Transaction costs are included in Consulting and professional fees and Other as part of Operating expenses in the
consolidated financial statements.
Page 12
Several factors contributed to the variation, as listed below:
(In millions $)
Segment profit, 2021 fiscal year
Variance in recurring revenues and expenses (1)
Variance in turnkey, sales of material and services
to franchisees and rent for franchising segment
Variance in initial franchise fees, renewal fees and
transfer fees
Variance due to government wage and rent
subsidies
Variance in expected credit loss provision
Variance due to 11554891 Canada Inc. previously
recorded as a joint venture
Variance due to acquisitions
Variance due to transaction costs related to
acquisitions
Variance due to impact of IFRS 16 on rent revenue
& expense
Variance due to impact of IFRS 16 on impairment
of lease receivables
Variance in gift card breakage
Impact of variation in foreign exchange rates
Other non-material variations
Segment profit, 2022 fiscal year
Normalized adjusted EBITDA (2), 2021 fiscal year
Variances in segment profit
Variance due to net impact of joint venture
Variances in transaction costs related to
acquisitions
Canada
68.1
13.2
US &
International
101.2
(9.2)
6.2
0.2
(5.5)
(0.3)
2.7
1.4
—
0.9
(3.2)
—
—
(0.5)
83.2
67.4
15.1
0.7
0.1
2.2
(0.3)
(1.2)
—
5.0
(5.3)
2.1
(0.4)
0.7
3.2
0.8
98.9
101.2
(2.3)
—
Total
169.3
4.0
6.3
2.4
(5.8)
(1.5)
2.7
6.4
(5.3)
3.0
(3.6)
0.7
3.2
0.3
182.1
168.6
12.8
0.7
Normalized adjusted EBITDA (2), 2022 fiscal year
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
—
83.2
5.3
104.2
5.3
187.4
definition.
(2) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Total segment profit and normalized adjusted EBITDA for the year ended November 30, 2022, were $182.1 million and
$187.4 million, respectively, up by 8% and 11%, respectively, compared to the prior year. Canada contributed 44% of
total normalized adjusted EBITDA and an increase of $15.8 million compared to the prior year, while the US &
International normalized adjusted EBITDA increased by 3% or $3.0 million. The pandemic recovery of the Canadian
market in 2022 was the main cause of the increase in Canadian normalized adjusted EBITDA as well as the increase in
the processing, distribution and retail segment which generated normalized adjusted EBITDA of $6.1 million. In the US
& International, the acquisition of BBQ Holdings was the main factor to the 3% increase, generating normalized adjusted
EBITDA of $5.0 million.
Net income
For the year ended November 30, 2022, a net income attributable to owners of $74.8 million was recorded, or $3.06 per
share ($3.06 per diluted share) compared to net income attributable to owners of $85.6 million or $3.47 per share ($3.46
per diluted share) last year. The decrease was mainly due to a higher non-cash impairment charge in the current year
mainly related to the usage of higher discount rates, which impacted primarily the Company’s intangible assets, as well
as an increase of $5.4 million in foreign exchange losses recorded on intercompany loans and acquisition-related
transaction costs incurred for the acquisitions of BBQ Holdings and Wetzel’s Pretzels in the amount of $5.3 million. The
Company also incurred a loss on remeasurement of a joint venture of $2.8 million, which is a non-recurring expense.
See section “Other income and expenses” below for further details.
Page 13
Calculation of Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
(In thousands $)
Year ended
November 30, 2022
Year ended
November 30, 2021
96,170
112,072
16,174
28,442
10,111
2,295
1,550
21,548
29,473
12,428
3,210
969
Income before taxes
Depreciation – property, plant and equipment and
right-of-use assets
Amortization – intangible assets
Interest on long-term debt
Net interest expense on leases
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment
and intangible assets
Unrealized and realized foreign exchange loss
Interest income
Gain on de-recognition/lease modification of lease
liabilities
Gain on disposal of property, plant and equipment
Revaluation of financial liabilities recorded at
fair value through profit and loss
Loss on remeasurement of joint venture interest
Other income
Adjusted EBITDA
Transaction costs related to acquisitions (2)
Normalized adjusted EBITDA
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) Transaction costs are included in Consulting and professional fees and Other as part of Operating expenses in the
(3,034)
—
(125)
168,622
(2,932)
2,769
—
182,082
13,916
5,690
(253)
5,903
300
(198)
5,270
187,352
(1,319)
(3,549)
168,622
(798)
(108)
—
consolidated financial statements.
Other income and expenses
Interest on long-term debt increased by $2.3 million due to higher drawings at the end of the year as well as an increase
in the Secured Overnight Financing Rate (“SOFR”) and Canadian Dollar Offered Rate (“CDOR”) rates over the course
of 2022.
During the year ended November 30, 2022, the Company recognized impairment charges of $13.9 million on its property,
plant and equipment and intangible assets, primarily related to franchise rights and trademarks for five of its brands. This
compares to a net impairment charge on its property, plant and equipment and intangible assets of $5.9 million in the
prior year, which included an impairment charge of $15.3 million partially offset by a reversal of impairment charge of
$9.4 million.
The weaker Canadian dollar relative to the US dollar, as well as an increase in intercompany loans, resulted in a $5.7
million unrealized foreign exchange loss on intercompany loans in 2022, compared to a loss of $0.3 million last year.
The Company recorded a gain on disposal of property, plant and equipment of $0.1 million in 2022, compared to a gain
of $3.5 million in the prior year. The latter was mostly related to the disposal of two portfolios of Papa Murphy’s
corporately-owned locations in the US that were converted into franchises upon completion of the sale.
During the year ended November 30, 2022, the Company gained control of 11554891 Canada Inc., previously a joint
venture, as a result of a lapse of rights held by the minority shareholder that previously stopped the Company from
controlling. As a result, the Company recorded a loss on remeasurement of joint venture interest of $2.8 million.
Page 14
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED NOVEMBER 30, 2022
Revenue
During the fourth quarter of 2022, the Company’s total revenue increased to $242.0 million, from $146.3 million a year
earlier. Revenues for the two segments of business are broken down as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total revenue
Canada revenue analysis:
November 30, 2022
($ millions)
November 30, 2021
($ millions)
42.0
8.0
42.1
11.0
(4.4)
98.7
47.8
74.1
1.7
20.1
(0.4)
143.3
242.0
33.7
5.9
34.6
9.6
(2.7)
81.1
39.7
9.4
1.3
15.2
(0.4)
65.2
146.3
Variation
25%
36%
22%
15%
N/A
22%
20%
688%
31%
32%
N/A
120%
65%
Revenue from franchise locations in Canada increased by 25%. Several factors contributed to the variation, as listed
below:
Revenue, fourth quarter of 2021
(In millions $)
33.7
5.6
(0.2)
1.4
0.3
1.2
42.0
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase in recurring revenue streams (1)
Decrease in turnkey, sales of material to franchisees and rent revenues
Increase due to 11554891 Canada Inc. previously recorded as a joint venture
Increase due to acquisition
Other non-material variations
Revenue, fourth quarter of 2022
During the fourth quarter of 2022, recurring revenue streams increased by $5.6 million mostly due to an increase of 16%
in system sales compared to the same period last year. The casual and quick service restaurant segments saw the
biggest growth in revenues with sales increasing 20% and 17%, respectively, compared to prior year. Street front and
mall and office tower locations had the largest impact on the year-over-year growth, with improvements of 11% and 29%,
respectively.
Revenue from corporate-owned locations increased by 36% to $8.0 million during the quarter due to an improvement to
the overall performance of the mix of corporate stores held in 2022.
Food processing, distribution and retail revenues increased by 22% mainly due to new listings in retail and expansion to
new territories, as well as higher revenues generated by the processing and distribution centers, including for the newly
acquired Küto Comptoir à Tartares franchisees, contributing $1.2 million to the increase for the quarter. In
fourth
quarter of 2022, 174 products were sold in the Canadian retail market (2021 – 171 products).
the
The promotional fund revenue increase of 15% is partly due to the increase in system sales as well as the impact of the
various contribution rates.
Page 15
US & International revenue analysis:
Revenue from franchise locations in the US and International increased by 20%. Several factors contributed to the
variation, as listed below:
Revenue, fourth quarter of 2021
(In millions $)
39.7
(0.3)
0.2
0.2
0.1
4.3
3.0
0.6
47.8
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Decrease in recurring revenue streams (1)
Increase in initial franchise fees, renewal fees and transfer fees
Increase in sales of material and services to franchisees
Increase in gift card breakage income
Increase due to acquisition
Impact of variation in foreign exchange rates
Other non-material variations
Revenue, fourth quarter of 2022
The increase in franchising revenues is mostly due to the acquisition of BBQ Holdings, which generated revenues of $4.3
million, followed by a variation of foreign exchange rates, which had a favourable impact of $3.0 million.
The increase of $64.7 million in corporate-owned location revenues is due to the acquisition of 103 corporate locations
at BBQ Holdings, which generated $67.6 million in revenues since acquisition. This was partially offset by the sale in the
fourth quarter of 2021 of several Papa Murphy’s corporately-owned locations that were converted into franchises.
The promotional fund revenue increase of 32% is partly due to the acquisition of BBQ Holdings, the favourable impact of
foreign exchange rates and the impact of the various contribution rates.
Operating expenses
During the fourth quarter of 2022, operating expenses increased by 86% to $192.1 million, up from $103.2 million a year
ago. Operating expenses for the two business segments were incurred as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Promotional funds
Intercompany transactions
Total US & International
Total operating expenses
November 30, 2022
($ millions)
November 30, 2021
($ millions)
18.9
8.0
36.8
11.0
(0.5)
74.2
35.4
66.7
20.1
(4.3)
117.9
192.1
13.8
5.8
32.0
9.6
(0.5)
60.7
19.2
10.7
15.2
(2.6)
42.5
103.2
Variation
37%
38%
15%
15%
N/A
22%
84%
523%
32%
N/A
177%
86%
Page 16
Canada operating expenses analysis:
Operating expenses from franchise locations in Canada increased by $5.1 million, due to several factors listed below:
Operating expenses, fourth quarter of 2021
Increase due to not qualifying for government wage subsidies
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Decrease in expected credit loss provision
Increase due to 11554891 Canada Inc. previously recorded as a joint venture
Increase due to acquisition
Increase due to impact of IFRS 16 on rent expense
Increase due to impact of IFRS 16 on impairment of lease receivables
Other non-material variations
3.2
(0.1)
0.5
0.2
0.4
2.3
(1.7)
18.9
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Operating expenses, fourth quarter of 2022
(In millions $)
13.8
0.3
Controllable expenses increased by $3.2 million, primarily due to higher wages. This is attributable to vacant positions being
filled over the course of 2021 and into 2022, leading to a higher number of full-time employees, as well as an inflation impact
on wages. Other office expenses increased as a result of the recovery of the business and also include higher annual licensing
and cybersecurity costs. During the quarter, an additional $2.3 million in lease receivable impairments was also taken due to
a reassessment of the expected loss rates used.
Expenses from corporate stores increased by $2.2 million compared to the same period last year, partly correlated to the
related revenues, and partially due to the repossession of underperforming locations in the process of being turned around.
Food processing, distribution and retail costs increased in line with revenue growth.
The variations of promotional funds expense were tightly correlated to the related revenues.
US & International operating expenses analysis:
Operating expenses from franchise locations in the US & International increased by 84%. Several factors contributed to
the variation, as listed below:
(In millions $)
19.2
1.2
Operating expenses, fourth quarter of 2021
Increase in cost of sale of material and services to franchisees and rent
Increase in recurring controllable expenses (1) including wages,
professional and consulting services and other office expenses
Increase in expected credit loss provision
Increase due to acquisition
Increase due to transaction costs related to acquisitions
Increase due to impact of IFRS 16 on rent expense
Increase due to impact of IFRS 16 on impairment of lease receivables
Impact of variation in foreign exchange rates
Other non-material variations
1.4
0.3
4.1
5.1
0.3
0.4
1.4
2.0
35.4
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Operating expenses, fourth quarter of 2022
Operating expenses for franchise locations increased by $16.2 million during the fourth quarter of 2022, due in part to
the acquisition of BBQ Holdings, which had expenses of $4.1 million, as well as acquisition costs of $5.1 million related
to BBQ Holdings and Wetzel’s Pretzels. Operating expenses also increased due to higher office expenses and higher
wages. The latter is attributable to vacant positions being filled over the course of 2021 and into 2022, leading to a higher
number of full-time employees, as well as an inflation impact on wages compared to the same period last year. Other
office expense increase is related to higher annual licensing and cybersecurity costs as well as increased travel and
meals expenses.
Corporate store expenses increased to $66.7 million, from $10.7 million in the same period last year, due to the
acquisition of 103 new corporate locations with the purchase of BBQ Holdings, which added additional corporate store
expenses of $62.8 million. This was partially offset by a decrease in corporate-owned location expenses due to the sale
in the fourth quarter of 2021 of several Papa Murphy’s corporately-owned locations that were converted into franchises.
Page 17
The variations of promotional funds expense were tightly correlated to the related revenues.
Segment profit (loss), Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
Three-month period ended November 30, 2022
(In millions $)
Revenue
Operating expenses
Segment profit and Adjusted EBITDA (1)
Segment profit and Adjusted EBITDA
as a % of Revenue (2)
Segment profit and Adjusted EBITDA (1)
Transaction costs related to acquisitions (3)
Normalized adjusted EBITDA (1)
Normalized adjusted EBITDA as a % of Revenue (2)
Canada
98.7
74.2
24.5
25%
24.5
(1.5)
23.0
23%
US & International
143.3
117.9
25.4
18%
25.4
5.1
30.5
21%
Three-month period ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit
Segment profit as a % of Revenue
Segment profit
Net loss in joint venture
Adjusted EBITDA and Normalized adjusted
EBITDA (1)
Adjusted EBITDA and Normalized adjusted
EBITDA as a % of Revenue (2)
Canada
81.1
60.7
20.4
25%
20.4
(0.3)
20.1
25%
US & International
65.2
42.5
22.7
35%
22.7
—
22.7
35%
Total
242.0
192.1
49.9
21%
49.9
3.6
53.5
22%
Total
146.3
103.2
43.1
29%
43.1
(0.3)
42.8
29%
Page 18
Below is a summary of performance segmented by product/service:
Three-month period ended November 30, 2022
(In millions $)
Revenue
Operating expenses
Segment profit and Adjusted EBITDA (1)
Segment profit and Adjusted
EBITDA as a % of Revenue (2)
Segment profit and Adjusted EBITDA (1)
Transaction costs related to
acquisitions (3)
Normalized adjusted EBITDA (1)
Normalized adjusted EBITDA
as a % of Revenue (2)
Franchise
89.8
54.3
35.5
Corporate
82.1
74.7
7.4
Processing,
distribution
and retail
43.8
36.8
7.0
Promotional
funds
31.1
31.1
—
Intercompany
transactions
(4.8)
(4.8)
—
Total
242.0
192.1
49.9
40%
9%
16%
N/A
N/A
21%
35.5
3.6
39.1
7.4
—
7.4
7.0
—
7.0
—
—
—
—
—
—
49.9
3.6
53.5
44%
9%
16%
N/A
N/A
22%
Three-month period ended November 30, 2021
(In millions $)
Revenue
Operating expenses
Segment profit (loss)
Segment profit (loss) as a % of
Revenue
Segment profit (loss)
Net loss in joint venture
Adjusted EBITDA and Normalized
adjusted EBITDA (1)
Adjusted EBITDA and Normalized
adjusted EBITDA as a % of
Revenue (2)
Franchise
73.4
33.0
40.4
Corporate
15.3
16.5
(1.2)
Processing,
distribution
and retail
35.9
32.0
3.9
Promotional
funds
24.8
24.8
—
Intercompany
transactions
(3.1)
(3.1)
—
55%
40.4
(0.3)
40.1
N/A
(1.2)
—
(1.2)
11%
N/A
N/A
3.9
—
3.9
—
—
—
—
—
—
Total
146.3
103.2
43.1
29%
43.1
(0.3)
42.8
55%
N/A
11%
N/A
N/A
29%
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
(3) Transaction costs are included in Consulting and professional fees and Other as part of Operating expenses in the
consolidated financial statements.
Page 19
Several factors contributed to the variation, as listed below:
(In millions $)
Segment profit, fourth quarter of 2021
Variance in recurring revenues and expenses (1)
Variance in turnkey, sales of material and services
to franchisees and rent for franchising segment
Variance in initial franchise fees, renewal fees and
transfer fees
Variance due to government wage and rent
subsidies
Variance in expected credit loss provision
Variance due to 11554891 Canada Inc. previously
recorded as a joint venture
Variance due to acquisitions
Variance due to transaction costs related to
acquisitions
Variance due to impact of IFRS 16 on rent revenue
& expense
Variance due to impact of IFRS 16 on impairment
of lease receivables
Variance in gift card breakage
Impact of variation in foreign exchange rates
Other non-material variations
Segment profit, fourth quarter of 2022
Normalized adjusted EBITDA (2), fourth quarter of 2021
Variances in segment profit
Variance due to net impact of joint venture
Variances in transaction costs related to
acquisitions
Canada
20.4
2.2
US &
International
22.7
(1.7)
2.5
—
(0.4)
0.1
0.9
0.3
1.5
(0.2)
(2.3)
—
—
(0.5)
24.5
20.1
4.1
0.3
(0.7)
0.2
—
(0.3)
—
5.0
(5.1)
3.5
(0.4)
0.1
1.5
0.6
25.4
22.7
2.7
—
Total
43.1
0.5
1.8
0.2
(0.4)
(0.2)
0.9
5.3
(3.6)
3.3
(2.7)
0.1
1.5
0.1
49.9
42.8
6.8
0.3
Normalized adjusted EBITDA (2), fourth quarter of 2022
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
(1.5)
23.0
5.1
30.5
3.6
53.5
definition.
(2) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Total segment profit for the three-month period ended November 30, 2022 was $49.9 million, up by 16% compared to
the same period last year, while normalized adjusted EBITDA was $53.5 million, up by 25% compared to the same period
last year. Canada contributed 43% of total normalized adjusted EBITDA and an increase of $2.9 million compared to the
same period last year, while the US & International normalized adjusted EBITDA increased by 34% or $7.8 million. In the
US & International, the acquisition of BBQ Holdings was the main factor to the 34% increase, generating normalized
adjusted EBITDA of $5.0 million.
Net income
For the three months ended November 30, 2022, a net income attributable to owners of $7.1 million was recorded, or
$0.29 per share ($0.29 per diluted share) compared to a net income attributable to owners of $24.9 million or $1.01 per
share ($1.00 per diluted share) last year. The decrease was mainly due to a higher non-cash impairment charge in the
current period mainly related to the usage of higher discount rates, which impacted primarily the Company’s intangible
assets, an increase of $4.8 million in interest on long-term debt, a decrease of $2.5 million in the gain on revaluation of
financial liabilities recorded at fair value, a decrease of $2.4 million in the gain on disposal of property, plant and
equipment, as well as acquisition-related transaction costs incurred for the acquisitions of BBQ Holdings and Wetzel’s
Pretzels in the amount of $3.6 million. See section “Other income and expenses” below for further details.
Page 20
Calculation of Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
(In thousands $)
Quarter ended
November 30, 2022
Quarter ended
November 30, 2021
Income before taxes
Depreciation – property, plant and equipment and
right-of-use assets
Amortization – intangible assets
Interest on long-term debt
Net interest expense on leases
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment
and intangible assets
Unrealized and realized foreign exchange loss
Interest expense
Gain on de-recognition/lease modification of lease
liabilities
Gain on disposal of property, plant and equipment
Revaluation of financial liabilities recorded at
fair value through profit and loss
Other income
Adjusted EBITDA
Transaction costs related to acquisitions (2)
Normalized adjusted EBITDA
10,062
10,061
7,988
6,475
1,738
307
13,381
1,803
(31)
(120)
(88)
(1,700)
—
49,876
3,598
53,474
33,831
4,073
6,962
1,724
561
628
549
1,758
(40)
(465)
(2,487)
(4,153)
(110)
42,831
—
42,831
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) Transaction costs are included in Consulting and professional fees and Other as part of Operating expenses in the
consolidated financial statements.
Other income and expenses
Depreciation of property, plant and equipment and right-of-use assets increased by $6.0 million during the quarter as a
result of the acquisition of BBQ Holdings. Depreciation is now being taken on an additional 103 corporate stores as well
as the right-of-use assets associated with those locations.
Interest on long-term debt increased by $4.8 million as a result of higher drawings in the quarter as well as an increase
in the SOFR and CDOR rates over the course of 2022.
During the fourth quarter of 2022, the Company recognized impairment charges of $13.4 million on its intangible assets,
related to franchise rights and trademarks for five of its brands. This compares to a net impairment charge on its property,
plant and equipment and intangible assets of $0.5 million in the same period last year.
The Company recorded a gain on disposal of property, plant and equipment of $0.1 million in the fourth quarter of 2022,
compared to a gain of $2.5 million in the same period last year. The latter was mostly related to the disposal of two
portfolios of Papa Murphy’s corporately-owned locations in the US that were converted into franchises upon completion
of the sale.
The Company also recognized a gain on revaluation of financial liabilities recorded at fair value of $1.7 million in the
fourth quarter of 2022, compared to a gain of $4.2 million in the same period last year, which was primarily attributable
to its contingent consideration on investment in a joint venture and its obligation to repurchase its joint venture partner.
Page 21
CONTRACTUAL OBLIGATIONS
The obligations pertaining to the long-term debt and the minimum net rentals for the leases are as follows:
(In millions $)
0 – 6
Months
$
6 – 12
Months
$
12 – 24
Months
$
24 – 36
Months
$
36 – 48
Months
$
48 – 60
Months Thereafter
$
$
Accounts payable and accrued
liabilities
Long-term debt (1)
Interest on long-term debt (2)
Net lease liabilities (3)
Total contractual obligations
—
—
18.2
18.2
36.4
(1) Amounts shown represent the total amount payable at maturity and are therefore undiscounted. Long-term debt includes
interest-bearing loans related to acquisitions, contingent considerations on acquisitions, minority put options, non-
interest-bearing holdbacks on acquisitions and non-interest-bearing contract cancellation fees.
155.0
10.7
18.2
18.2
202.1
—
550.1
33.3
28.1
611.5
—
—
—
21.6
21.6
—
—
—
25.2
25.2
—
2.7
36.4
31.7
70.8
—
—
—
57.6
57.6
(2) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of the
reporting period.
(3) Net lease liabilities include the total undiscounted lease payments of leases, offset by finance lease receivables and
operating subleases.
LIQUIDITY AND CAPITAL RESOURCES
As at November 30, 2022, the amount held in cash totaled $59.5 million, a decrease of $1.8 million since the end of the
2021 fiscal period.
During the year ended November 30, 2022, MTY paid $20.5 million (2021 – $9.1 million) in dividends to its shareholders
and repurchased and cancelled 256,400 of its shares (2021 – 36,600) for $14.6 million (2021 – $2.2 million) through its
normal course issuer bid (“NCIB”).
During the year ended November 30, 2022, cash flows generated by operating activities were $142.8 million, compared
to $139.3 million in the prior year.
During the year ended November 30, 2022, the Company modified its existing credit facility payable to a syndicate of
lenders. The modification resulted in an increase to the revolving credit facility, which now has an authorized amount of
$900.0 million (2021 – $600.0 million), and an extension of its maturity by 18 months, until October 28, 2025. The
accordion feature amounting to $300.0 million (2021 – $300.0 million) remained unchanged. As at November 30, 2022,
US$408.9 million was drawn from the revolving credit facility (November 30, 2021 – US$271.5 million).
Under this facility, the Company is required to comply with certain financial covenants, including:
a debt to EBITDA ratio (1) that must be less than or equal to 3.50:1.00;
a debt to EBITDA ratio (1) that must be less than or equal to 4.00:1.00 in the twelve months following acquisitions
with a consideration exceeding $150.0 million; and
an interest and rent coverage ratio that must be at least 2.00:1.00 at all times.
(1) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
The revolving credit facility is repayable without penalty with the balance due on the date of maturity October 28, 2025.
As at November 30, 2022, the Company was in compliance with the covenants of the credit agreement.
Page 22
LOCATION INFORMATION
MTY’s locations can be found in: i) food courts and shopping malls; ii) street front; and iii) non-traditional format within
petroleum retailers, convenience stores, grocery stores, cinemas, amusement parks, in other venues or retailers shared
sites, hospitals, universities and airports. The non-traditional locations are typically smaller in size, require lower
investment and generate lower revenue than the shopping malls, food courts and street front locations.
Number of locations
Franchises, beginning of the period
Corporate-owned, beginning of the period
Canada
US
Joint venture (1)
Total, beginning of the period
Opened during the period
Closed during the period
Three months
ended November 30,
2021
2022
Twelve months
ended November 30,
2021
2022
6,516
6,701
6,603
6,867
41
49
—
6,606
42
82
23
6,848
42
51
23
6,719
37
76
21
7,001
60
60
245
218
(178)
(189)
(507)
(489)
Acquired during the period
Joint venture opened or acquired during the period (1)
Joint venture closed during the period (1)
Disposed of during the period (2)
Total, end of the period
301
—
—
—
—
—
(1)
6,788
—
6,719
Franchises, end of the period
Corporate-owned, end of the period
Canada
US
332
—
—
—
3
(1)
(1)
6,788
(13)
6,719
6,589
6,603
41
158
42
51
Joint venture (1)
Total, end of the period
23
6,719
(1) On December 3, 2021, the Company gained control over its 70% interest in 11554891 Canada Inc. – see Note 7 to the
—
6,788
consolidated financial statements.
(2) Sale of Buns master trademark.
Page 23
Openings / Acquisitions
During the fourth quarter of 2022, the Company’s network acquired 301 locations (2021 – nil) and opened 60 locations
(2021 – 60 locations). The breakdown by geographical location and by location type is as follows:
Openings / Acquisitions
Q4-22 vs Q4-21
Openings / Acquisitions by Location Type
Q4-22
12
328
21
Q4-22
9
24
27
Q4-21
Street front 86%
Shopping mall & office
tower food courts 3%
Non-traditional format 11%
Canada
US
International
During the year ended November 30, 2022, the Company’s network acquired 332 locations (2021 – nil) and opened 245
locations (2021 – 218 locations and three locations through the joint venture). The breakdown by geographical location
and by location type is as follows:
Openings / Acquisitions
2022 vs 2021
Openings / Acquisitions by Location Type
2022
56
388
133
46
73
102
YTD 2022
YTD 2021
Canada
US
International
Street front 75%
Shopping mall & office
tower food courts 6%
Non-traditional format 19%
Page 24
Closures
During the fourth quarter of 2022, the Company’s network closed 178 locations (2021 – 189 locations). The breakdown
by geographical location and by location type is as follows:
Closures
Q4-22 vs Q4-21
Closures by Location Type
Q4-22
23
86
69
26
95
68
Q4-22
Q4-21
Canada
US
International
Street front 46%
Shopping mall & office
tower food courts 25%
Non-traditional format 29%
During the year ended November 30, 2022, the Company’s network closed 507 locations (2021 – 489 locations and one
location through the joint venture). The breakdown by geographical location and by location type is as follows:
Closures
2022 vs 2021
Closures by Location Type
2022
61
239
207
56
229
205
YTD 2022
YTD 2021
Canada
US
International
Street front 48%
Shopping mall & office
tower food courts 23%
Non-traditional format 29%
Of the 61 international closures during the year ended November 30, 2022, 23 were attributable to one franchisee who
no longer operates any location. In Canada, 22 TCBY locations closed as a result of the termination of the franchising
agreement with Cineplex.
Page 25
The chart below provides the breakdown of MTY’s locations and system sales by type:
Location type
Shopping mall & office tower food courts
Street front
Non-traditional format
% of location count
November 30,
2022
13%
66%
21%
2021
14%
64%
22%
The geographical breakdown of MTY’s locations and system sales is as follows:
Geographical location
Canada
US
International
% of location count
November 30,
2022
37%
56%
7%
2021
39%
54%
7%
% of system sales
Twelve months ended
November 30,
2022
11%
80%
9%
2021
9%
82%
9%
% of system sales
Twelve months ended
November 30,
2022
39%
58%
3%
2021
35%
62%
3%
The territories that had the largest portions of total system sales were Quebec (Canada) with 21%, California (US) with
10%, Ontario (Canada) with 10%, Washington (US) with 5%, and Oregon (US) with 4%.
The geographical distribution of system sales is as follows:
% of total system sales
% of total US system sales
Canada 39%
Central US 16%
East Coast US 11%
West Coast US 31%
International 3%
Central 27%
East Coast 19%
West Coast 54%
The breakdown by the types of concepts for MTY’s locations and system sales is as follows:
Concept type
Quick service restaurant
Fast casual
Casual dining
% of location count
November 30,
% of system sales
Twelve months ended
November 30,
2022
78%
11%
11%
2021
83%
10%
7%
2022
68%
12%
20%
2021
73%
13%
14%
Page 26
System sales
During the three and twelve-month periods ended November 30, 2022, MTY’s network generated $1,206.5 million and
$4,251.2 million in sales, respectively. The breakdown of system sales is as follows:
(millions of $)
Canada
US
International
TOTAL
First quarter of 2022
First quarter of 2021
Variance
Second quarter of 2022
Second quarter of 2021
Variance
Third quarter of 2022
Third quarter of 2021
Variance
Fourth quarter of 2022
Fourth quarter of 2021
Variance
Year-to-date 2022
Year-to-date 2021
Variance
320.3
219.4
46%
420.8
270.9
55%
454.8
391.3
16%
438.1
378.9
16%
532.0
511.8
4%
599.9
592.3
1%
614.0
594.2
3%
734.7
551.3
33%
1,634.0
1,260.5
30%
2,480.6
2,249.6
10%
33.4
29.9
12%
33.6
28.3
19%
35.9
30.7
17%
33.7
32.3
4%
136.6
121.2
13%
885.7
761.1
16%
1,054.3
891.5
18%
1,104.7
1,016.2
9%
1,206.5
962.5
25%
4,251.2
3,631.3
17%
The overall movement in sales is distributed as follows:
Three month sales
ended November 30
Twelve month sales
ended November 30
(millions of $) Canada
US
International TOTAL
Canada
US
International TOTAL
Reported sales – 2021
Net increase in sales generated
by concepts acquired
during the last 24 months
Net variance in system sales
Cumulative impact of foreign
exchange variation
378.9
551.3
32.3
962.5
1,260.5
2,249.6
121.2
3,631.3
5.2
54.0
160.5
(17.9)
1.3
(2.3)
167.0
33.8
22.0
351.5
160.5
(5.1)
1.3
10.0
183.8
356.4
—
40.8
2.4
43.2
—
75.6
4.1
79.7
Reported sales – 2022
438.1
734.7
33.7
1,206.5
1,634.0
2,480.6
136.6
4,251.2
System sales for the three-month period ended November 30, 2022 increased by 25% compared to the same period last
year. US contributed to most of the increase, with an improvement of $183.4 million, or 33%, attributable mostly to the
acquisition of BBQ Holdings in September 2022. Excluding the acquisitions of BBQ Holdings and Küto Comptoir à
Tartares, the QSR and casual concepts contributed to an increase of $50.1 million and $28.0 million, respectively, or an
overall increase of 7% and 18%, respectively.
For the twelve-month period ended November 30, 2022, system sales were up by 17% compared to 2021. Excluding the
acquisitions, systems sales for the network increased by 12%, with Canada contributing to 81% of that increase. The
casual and QSR restaurant concepts in Canada drove the increase, representing 31% and 23% of the total year-over-
year growth, respectively, and sales increases of 42% and 29%, respectively. Major brands in Canada such as Allô! Mon
Coco, Baton Rouge, Ben & Florentine, Manchu Wok, and Thaï Express, to name a few, greatly outperformed prior year
as customer returned to in-person dining and due to the gradual return to office for many employees, as well as the
resumption of travel.
Page 27
Papa Murphy’s and Cold Stone Creamery continue to be the only concepts that currently represent more than 10% of
system sales, generating approximately 23% and 19% respectively of the total sales of MTY’s network for the twelve-
month period ended November 30, 2022. Thaï Express, Taco Time and SweetFrog are the third, fourth and fifth largest
concepts in terms of systems sales, generating less than 10% each of the network’s sales.
System wide sales include sales for corporate and franchise locations and excludes sales realized by the distribution
centers, by the food processing plants and by the retail division. System sales are converted from the currency in which
they are generated into Canadian dollars for presentation purposes; they are therefore subject to variations in foreign
exchange rates.
Digital sales
System sales versus digital sales breakdown is as follows for the years ended November 30, 2022 and 2021:
For the year ended November 30, 2022, digital sales increased to $820.3 million, from $803.6 million in prior year, and
represented 19.9% of sales. The digital sales pertained mostly to take-out orders, as well as delivery sales, which have
benefited from the Company’s increased investments in online ordering and third-party delivery options. Excluding the
acquisition of BBQ Holdings, digital sales increased by $5.3 million. The increase was mostly driven by an increase of
12% in both the QSR and fast casual dining segments in Canada.
System sales versus digital sales breakdown is as follows for the three months ended November 30, 2022 and 2021:
Digital sales for the fourth quarter of 2022 increased by 8% compared to the same period last year, including the impact
of foreign exchange rates, from $193.7 million to $208.5 million, and represented 18% of total sales, compared to 21%
in the same period last year. Excluding the impact of foreign exchange, digital sales grew by 8% in the quarter. The lower
proportion of digital sales as a % of total sales in the fourth quarter compared to the same period last year is partially
attributable to the re-opening of more traditional sales channels, which were affected by pandemic-related restrictions in
Page 28
the prior year, and to the acquisition of BBQ Holdings, whose digital sales represent approximately 7% of their system
sales. Canadian digital sales saw an increase of $4.3 million in the fourth quarter of 2022 mainly as a result of an increase
of $1.7 million and $1.5 million in casual and fast casual digital sales, respectively, while US digital sales saw a growth
of $10.5 million following the acquisition of BBQ Holdings. The Company continues to endeavor to grow digital sales in
parallel with the resumption of in store sales in a post-pandemic environment.
Same-Store Sales
Due to the impacts of COVID-19 and the number of locations that have closed temporarily, providing same-store sales
information could be misleading as what would be presented would not be a fair representation of the Company’s royalty
earning potential and would also not be a fair indication of the health of the network. Management directs investors to
system sales as a better indication. The Company expects to release same-store sales data again in the second quarter
of 2023.
CAPITAL STOCK INFORMATION
Stock options
As at November 30, 2022, there were 440,000 options outstanding and 102,221 that are exercisable.
Share trading
MTY’s stock is traded on the Toronto Stock Exchange (“TSX”) under the ticker symbol “MTY”. From December 1, 2021
to November 30, 2022, MTY’s share price fluctuated between $45.20 and $63.96. On November 30, 2022, MTY’s shares
closed at $61.25.
Capital stock
The Company’s outstanding share capital is comprised of common shares. An unlimited number of common shares are
authorized.
As at February 15, 2023, the Company’s issued and outstanding capital stock consisted of 24,413,461 shares (November
30, 2021 – 24,669,861) and 440,000 granted and outstanding stock options (November 30, 2021 – 440,000). During the
year ended November 30, 2022, MTY repurchased 256,400 shares (2021 – 36,600) for cancellation through its NCIB.
Normal Course Issuer Bid Program
On June 28, 2022, the Company announced the renewal of the NCIB. The NCIB began on July 3, 2022 and will end on
July 2, 2023 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. The
renewed period allows the Company to purchase 1,220,673 of its common shares. These purchases will be made on the
open market plus brokerage fees through the facilities of the TSX and/or alternative trading systems at the prevailing
market price at the time of the transaction, in accordance with the TSX’s applicable policies. All common shares
purchased pursuant to the NCIB will be cancelled.
During the three and twelve-month periods ended November 30, 2022, the Company repurchased and cancelled a total
of nil and 256,400 common shares, respectively (2021 – 36,600 common shares for both periods) under the current
NCIB, at a weighted average price of nil and $57.01 per common share, respectively (2021 – $59.68 per common share
for both periods), for a total consideration of nil and $14.6 million, respectively (2021 – $2.2 million for both periods). An
excess of nil and $11.4 million, respectively (2021 – $1.7 million for both periods) of the shares’ repurchase value over
their carrying amount was charged to retained earnings as share repurchase premiums.
Page 29
SUBSEQUENT EVENTS
Acquisition of Wetzel’s Pretzels
On December 8, 2022, one of the Company’s wholly owned subsidiaries completed the acquisition of all of the issued
and outstanding shares of COP WP Parent, Inc. (“Wetzel’s Pretzels”), a franchisor and operator of quick service
restaurants operating in the snack category across 25 states in the US, as well as in Canada and Panama, for a cash
consideration of approximately $282.0 million (US$207.0 million), on a cash-free, debt-free basis. At closing, there were
329 franchised restaurants and 38 corporate-owned restaurants in operation.
Acquisition of Sauce Pizza and Wine
On December 15, 2022, one of the Company’s wholly owned subsidiaries completed the acquisition of the assets of
Sauce Pizza and Wine, an operator of fast casual restaurants operating in the state of Arizona in the US, for a total
consideration of $14.8 million (US$10.8 million), including a holdback on acquisition of $1.1 million (US$0.8 million). At
closing, there were 13 corporate-owned restaurants in operation.
Dividends
On January 18, 2023, the Company announced an increase to its quarterly dividend payment, from $0.210 per common
share to $0.250 per common share. The dividend of $0.250 per common share was paid on February 15, 2023.
SEASONALITY
Results of operations for any interim period are not necessarily indicative of the results of operations for the full year. The
Company expects that seasonality will continue to be a factor in the quarterly variation of its results. For example, the
Frozen treat category, which is a significant category in the US market, varies significantly during the winter season as a
result of weather conditions. This risk is offset by other brands that have better performance during winter seasons such
as Papa Murphy’s, which typically does better during winter months. Sales for shopping mall locations are also higher
than average in December during the holiday shopping period.
OFF-BALANCE SHEET ARRANGEMENTS
MTY has no off-balance sheet arrangements.
CONTINGENT LIABILITIES
The Company is involved in legal claims associated with its current business activities. The timing of the outflows, if any,
is out of the control of the Company and is as a result undetermined at the moment. Contingent liabilities are disclosed
as provisions on the consolidated statement of financial position.
Included in provisions are the following amounts:
(In thousands $)
Litigations, disputes and other contingencies
Closed stores
2022
$
1,490
—
1,490
2021
$
1,636
56
1,692
The provision for litigation, disputes and other contingencies represents management’s best estimate of the outcome of
litigations and disputes that are ongoing at the date of the statement of financial position. This provision is made of
multiple items; the timing of the settlement of this provision is unknown given its nature, as the Company does not control
the litigation timelines.
The payables related to closed stores mainly represent amounts that are expected to be disbursed to exit leases of
underperforming or closed stores. The negotiations with the various stakeholders are typically short in duration and are
expected to be settled within a few months following the recognition of the provision.
The provisions also varied in part due to foreign exchange fluctuations related to the US subsidiaries.
GUARANTEE
The Company has guaranteed leases on certain franchise stores in the event the franchisees are unable to meet their
remaining lease commitments. The maximum amount the Company may be required to pay under these agreements is
$18.6 million as at November 30, 2022 (November 30, 2021 - $19.3 million). In addition, the Company could be required
Page 30
to make payments for percentage rents, realty taxes and common area costs. As at November 30, 2022, the Company
has accrued $1.6 million (November 30, 2021 - $1.8 million), included in Accounts payable and accrued liabilities in the
consolidated financial statements, with respect to these guarantees.
RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation. Details of transactions between the Company and other related parties are disclosed
below.
Remuneration of key management personnel and directors
The remuneration of key management personnel and directors, presented in Wages and benefits and Other as part of
Operating expenses in the consolidated financial statements, was as follows:
Short-term benefits (1)
Share-based compensation
Consulting fees
Board member fees
Total remuneration of key management personnel and directors
(In thousands $)
2022
$
2021
$
4,811
1,120
282
78
6,291
3,231
924
57
78
4,290
(1) Prior year amount has been restated to reflect a prior period adjustment.
Key management personnel is composed of the Company’s CEO, COOs and CFO. The remuneration of directors and
key executives is determined by the Board of Directors having regard to the performance of individuals and market
conditions.
Given its widely held share base, the Company does not have an ultimate controlling party; one of its most important
shareholders is its Chair of the Board of Directors, who controls 16.4% of the outstanding shares.
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
In the application of the Company’s accounting policies, which are described in Note 3 of the consolidated financial
statements, management is required to make judgments and to make estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
The following are the critical judgments, apart from those involving estimations, that management has made in the
process of applying the Company’s accounting policies and that have the most significant effect on the amounts
recognized in the financial statements.
Impairment of long-lived assets
The Company assesses whether there are any indicators of impairment for all long-lived assets at each reporting
period date. In addition, management is required to use judgment in determining the grouping of assets to identify a
cash-generating unit (“CGU”); the determination is done based on management’s best estimation of what constitutes
the lowest level at which an asset or group of assets has the possibility of generating cash inflows.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end
of the year ended November 30, 2022, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
Page 31
Business combinations
For business combinations, the Company must make assumptions and estimates to determine the purchase price
accounting of the business being acquired. To do so, the Company must determine, as of the acquisition date, the
fair value of the identifiable assets acquired, including such intangible assets as franchise rights and master franchise
rights, trademarks, step-in rights and liabilities assumed. Among other things, the determination of these fair market
values involves the use of key assumptions such as projected system sales and operating cash flows, discount rates
and royalty rates. Goodwill is measured as the excess of the fair value of the consideration transferred including the
recognized amount of any non-controlling interest in the acquiree over the net recognized amount of the identifiable
assets acquired and liabilities assumed, all measured at the acquisition date. These assumptions and estimates have
an impact on the asset and liability amounts recorded in the statement of financial position on the acquisition date. In
addition, the estimated useful lives of the acquired amortizable assets, the identification of intangible assets and the
determination of the indefinite or finite useful lives of intangible assets acquired will have an impact on the Company’s
future profit or loss.
Impairment
The Company uses judgment in determining the grouping of assets to identify its CGUs for purposes of testing for
impairment of property, plant and equipment, right-of-use assets, goodwill, trademarks and franchise rights.
In testing for impairment of property, plant and equipment and right-of-use assets, the Company determined that its
CGUs mostly comprise of individual stores or groups of stores and the assets are thereby allocated to each CGU.
In testing for impairment, goodwill acquired in a business combination is allocated to the CGUs that are expected to
benefit from the synergies of the business combination. In testing for impairment, trademarks and franchise rights are
allocated to the CGUs to which they relate. Furthermore, at each reporting period, judgment is used in determining
whether there has been an indication of impairment, which would require the completion of a quarterly impairment
test, in addition to the annual requirement.
Impairment of property, plant and equipment and right-of-use assets
The Company performs an impairment test of its property, plant and equipment and right-of-use assets when
there is an indicator of impairment. The recoverable amounts of the Company’s corporate store assets are
generally estimated based on fair value less cost of disposal as this was determined to be higher than their value
in use. The fair value less cost of disposal of corporate stores is generally determined by estimating the liquidation
value of the restaurant equipment and any costs associated with exiting the lease.
During the years ended November 30, 2022 and 2021, the Company recognized impairment charges on its
property, plant and equipment (Note 16 of the consolidated financial statements). The total impairment on
property, plant and equipment of $0.5 million (2021 – $0.1 million) represents a write-down of the carrying value
of the leasehold improvements and equipment to their fair value less cost of disposal, which was higher than their
value in use.
During the years ended November 30, 2022 and 2021, the Company also recognized impairment charges on its
right-of-use assets (Note 12 of the consolidated financial statements) of $1.0 million (2021 – $1.6 million).
Impairment of franchise rights and trademarks
The Company performs at least annually an impairment test of its trademarks. The recoverable amounts of the
Company’s assets are generally estimated based on value in use calculations using a discounted cash flow model
as this was determined to be higher than fair value less cost of disposal.
Discount rates are based on pre-tax rates that reflect the current market assessments, taking the time value of
money and the risks specific to the CGU into account.
During the year ended November 30, 2022, the Company recognized impairment charges of $13.4 million (2021
– net impairment charge of $5.8 million comprised of an impairment charge of $15.1 million partially offset by a
reversal of impairment charge of $9.3 million) on its franchise rights and trademarks (Note 16 of the consolidated
financial statements) representing a write-down of the carrying value to the recoverable amount. The fair value
was determined using key assumptions such as discount rates and projected operating cash flows. The fair value
is classified as level 3 in the fair value hierarchy. During the year ended November 30, 2021, the Company also
carried out a review of the recoverable amount allocated to the intangible assets associated with the “Houston
Avenue Bar & Grill” and “Industria Pizza + Bar” brands, where the recoverable amount was measured at fair value
less costs of disposal.
Page 32
These calculations take into account the Company’s best estimate of projected operating cash flows. Projected
operating cash flows are estimated based on a multiyear extrapolation of the most recent historical actual results
or budgets and a terminal value calculated by discounting the final year in perpetuity.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount in use of the goodwill
unit to which goodwill has been allocated. The value in use calculation requires management to estimate the
projected operating cash flows expected to arise from the goodwill unit and a suitable discount rate in order to
calculate present value.
During the years ended November 30, 2022 and 2021, no impairment charge on goodwill was required.
Impact of COVID-19
During the year ended November 30, 2022, the COVID-19 pandemic continued to impact the markets in which MTY and
its franchise partners and suppliers operate. The beginning of the year saw Canada continue to be impacted by the
continuation of government-imposed restrictions, as well as additional government-mandated restrictions in the first
quarter in response to the spread of the Omicron variant, such as restrictions on dine-in guests, reduced operating hours
and/or temporary closures. However, over the following months such restrictions were gradually eased, with most
government-imposed restrictions lifted in both Canada and the US in the second quarter. The continuing vaccination
campaigns, including the administration of boosters and the gradual expansion of the coverage of the population, allowed
the Canadian and US markets to mostly remain open in the second half of the year, with small disruptions in certain
areas. Although there is uncertainty surrounding the effects that the lifting of restrictions will have on the number of
infections and the potential emergence of new variants, the current situation appears to highlight a familiar sense of back-
to-normal with the longer-term impact on the economy and the rules and restrictions that will apply to MTY’s restaurants
expected to fluctuate and impact the network for the foreseeable future.
As a result of the continued and uncertain economic and business impacts of the COVID-19 pandemic, the Company
continues to monitor the estimates, judgments and assumptions used in the financial statements. For the year ended
November 30, 2022, the Company determined that there were no specific triggers for impairment assessments
attributable to COVID-19. Accordingly, the Company did not record or reverse impairment charges on its property, plant
and equipment, intangible assets, and goodwill in the period attributable to COVID-19. These estimates, judgments and
assumptions are subject to change.
FUTURE ACCOUNTING CHANGES
A number of new standards, interpretations and amendments to existing standards were issued by the International
Accounting Standards Board (“IASB”) that are not yet effective for the year ended November 30, 2022 and have not been
applied in preparing the consolidated financial statements.
The following amendments may have a material impact on the consolidated financial statements of the Company:
Standard
IAS 37, Provisions, Contingent Liabilities and
Contingent Assets
IAS 1, Presentation of Financial Statements
IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors
IAS 12, Income Taxes
IFRS 16, Leases
Issue date
Effective date for
the Company
December 1, 2022
May 2020
January 2020,
July 2020,
February 2021 &
October 2022 December 1, 2024
February 2021 December 1, 2023
December 1, 2023
May 2021
September 2022 December 1, 2024
Impact
In assessment
In assessment
In assessment
In assessment
In assessment
IAS 37, Provisions, Contingent Liabilities and Contingent Assets
In May 2020, the IASB published Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) amending
the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a
contract is onerous. The changes in Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) specify
that the “cost of fulfilling” a contract comprises the “costs that relate directly to the contract”. Costs that relate directly to
a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to
Page 33
fulfilling contracts. The amendments to IAS 37 are effective for annual reporting periods beginning on or after January 1,
2022. Earlier application is permitted. The Company will adopt the amendments on December 1, 2022.
IAS 1, Presentation of Financial Statements
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1) providing
a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at
the reporting date. The amendments in Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
affect only the presentation of liabilities in the statement of financial position, not the amount or timing of recognition of
any asset, liability income or expenses, or the information that entities disclose about those items.
In July 2020, the IASB published Classification of Liabilities as Current or Non-current – Deferral of Effective Date
(Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year.
In February 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement
2) with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial
statements. An entity is now required to disclose its material accounting policy information instead of its significant
accounting policies and several paragraphs are added to IAS 1 to explain how an entity can identify material accounting
policy information and to give examples of when accounting policy information is likely to be material. The amendments
also clarify that: accounting policy information may be material because of its nature, even if the related amounts are
immaterial; accounting policy information is material if users of an entity’s financial statements would need it to
understand other material information in the financial statements; and if an entity discloses immaterial accounting policy
information, such information shall not obscure material accounting policy information.
In October 2022, the IASB published Non-current Liabilities with Covenants (Amendments to IAS 1) to clarify how
conditions with which an entity must comply within twelve months after the reporting period affect the classification of a
liability. The amendments modify the requirements introduced by Classification of Liabilities as Current or Non-current
on how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances: only
covenants with which an entity is required to comply on or before the reporting date affect the classification of a liability
as current or non-current. In addition, an entity has to disclose information in the notes that enables users of financial
statements to understand the risk that non-current liabilities with covenants could become repayable within twelve
months. The amendments also defer the effective date of the 2020 amendments to January 1, 2024.
The amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2024. Earlier
application is permitted. The Company will adopt the amendments on December 1, 2024.
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8) with amendments that are
intended to help entities to distinguish between accounting policies and accounting estimates. The changes to IAS 8
focus entirely on accounting estimates and clarify that: the definition of a change in accounting estimates is replaced with
a definition of accounting estimates; entities develop accounting estimates if accounting policies require items in financial
statements to be measured in a way that involves measurement uncertainty; a change in accounting estimate that results
from new information or new developments is not the correction of an error; and a change in an accounting estimate may
affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. The
amendments to IAS 8 are effective for annual reporting periods beginning on or after January 1, 2023. Earlier application
is permitted. The Company will adopt the amendments on December 1, 2023.
IAS 12, Income Taxes
In May 2021, the IASB published Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
(Amendments to IAS 12) that clarifies how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The main change is an exemption from the initial recognition exemption, which does not
apply to transactions in which both deductible and taxable temporary differences arise on initial recognition that result in
the recognition of equal deferred tax assets and liabilities. The amendments to IAS 12 are effective for annual reporting
periods beginning on or after January 1, 2023. Earlier application is permitted. The Company will adopt the amendments
on December 1, 2023.
IFRS 16, Leases
In September 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) with amendments
that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in
IFRS 15, Revenue from Contracts with Customers, to be accounted for as a sale. The amendments require a seller-
lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognise any amount
of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from
recognising in profit or loss any gain or loss relating to the partial or full termination of a lease. The amendments to IFRS
Page 34
16 are effective for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted. The
Company will adopt the amendments on December 1, 2024.
RISKS AND UNCERTAINTIES
Despite the fact that the Company has various numbers of concepts, diversified in type of locations and geographies
across Canada and the US, the performance of the Company is also influenced by changes in demographic trends, traffic
patterns, occupancy level of malls and office towers and the type, number, and location of competing restaurants. In
addition, factors such as innovation, increased food costs, labour and benefits costs, occupancy costs and the availability
of experienced management and hourly employees may adversely affect the Company. Changing consumer preferences
and discretionary spending patterns could oblige the Company to modify or discontinue concepts and/or menus and
could result in a reduction of revenue and operating income. Even if the Company was able to compete successfully with
other restaurant companies with similar concepts, it may be forced to make changes in one or more of its concepts in
order to respond to changes in consumer tastes or dining patterns. If the Company changes a concept, it may lose
additional customers who do not prefer the new concept and menu, and it may not be able to attract a sufficient new
customer base to produce the revenue needed to make the concept profitable. Similarly, the Company may have different
or additional competitors for its intended customers as a result of such a concept change and may not be able to
successfully compete against such competitors. The Company's success also depends on numerous factors affecting
discretionary consumer spending, including economic conditions, disposable consumer income and consumer
confidence. Adverse changes in these factors could reduce customer traffic or impose practical limits on pricing, either
of which could reduce revenue and operating income.
The growth of MTY is dependent on maintaining the current franchise system, which is subject to many factors including
but not limited to the renewal of existing leases at sustainable rates, MTY’s ability to continue to expand by obtaining
acceptable store sites and lease terms, obtaining qualified franchisees, increasing comparable store sales and
completing acquisitions. The time, energy and resources involved in the integration of the acquired businesses into the
MTY system and culture could also have an impact on MTY’s results.
The impacts of a widespread health epidemic or pandemic, including various strains of avian flu or swine flu, such as
H1N1, or COVID-19, particularly if located in regions from which the Company derives a significant amount of revenue
or profit could continue to impact the Company in the future. The occurrence of such an outbreak or other adverse public
health developments can and could continue to materially disrupt the business and operations. Such events could also
significantly impact the industry and cause a temporary closure of restaurants, which could severely disrupt MTY’s or the
Company’s franchisees' operations and have a material adverse effect on the business, financial condition and results
of operations.
At this time, the Company is unable to accurately predict the future impact that a pandemic, including that of COVID-19,
will have on the results of operations due to uncertainties including the severity of the disease, the duration of the
outbreak, and further actions that may be taken by governmental authorities to contain the virus or to treat its impact.
While it is premature to accurately predict whether COVID-19 or another form of epidemic or strain of the virus will
ultimately impact MTY, the Company expects the results for the 2023 fiscal year to continue to be impacted with potential
continuing adverse impacts beyond this.
In addition, the operations can and could continue to be disrupted if any of MTY’s employees or employees of MTY’s
business partners were suspected of having COVID-19, the avian flu or swine flu, or other illnesses such as hepatitis A,
and other variants of the norovirus or coronavirus, since this could require the Company or business partners to
quarantine some or all of these employees or disinfect the restaurant facilities. Outbreaks of avian flu occur from time to
time around the world, and such outbreaks have resulted in confirmed human cases. Public concern over avian flu
generally may cause fear about the consumption of chicken, eggs and other products derived from poultry, which could
cause customers to consume less poultry and related products. Because poultry is a menu offering for many of the
Company’s Concepts, this would likely result in lower revenues and profits to both MTY and franchisee partners. Avian
flu outbreaks could also adversely affect the price and availability of poultry, which could negatively impact profit margins
and revenues.
Furthermore, other viruses may be transmitted through human contact, and the risk of contracting viruses could cause
employees or guests to avoid gathering in public places, which could adversely affect restaurant guest traffic or the ability
to adequately staff restaurants. MTY could also be adversely affected if government authorities impose mandatory
closures, seek voluntary closures, impose restrictions on operations of restaurants, impose restrictions on customers via
a vaccine passport to dine-in, or restrict the import or export of products, or if suppliers issue mass recalls of products.
Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk
of infection or health risk may adversely affect the business and operating results.
Labour is a key factor in the success of the Company. If the Company was unable to attract, motivate and retain a
sufficient number of qualified individuals, this could materially disrupt the Company’s business and operations and
Page 35
adversely impact its operating results, including the delay of planned restaurant openings, the Company’s ability to grow
sales at existing restaurants and expand its concepts effectively. 2021 and 2022 saw a shortage of qualified workers, as
well as an increase in labour costs due to competition and increased wages. Many individuals have left the restaurant
industry altogether due to difficult pandemic-related operating demands and, in some cases, the availability of
government subsidies and thus creating high employee turnover. These conditions have resulted in aggressive
competition for talent, wage inflation and pressure to improve benefits and workplace conditions to remain competitive
and attract talent affecting the Company and its franchisees. Restaurants in the Company’s network could be short
staffed, the ability to meet customer demand could be limited and operational efficiency could also be adversely impacted.
The Company’s operating results substantially depend upon its ability to obtain frequent deliveries of sufficient quantities
of products such as beef, chicken, and other products used in the production of items served and sold to customers.
Geopolitical events, such as public health or pandemic outbreaks, war or hostilities in countries in which suppliers or
operations are located, terrorist or military activities, or natural disasters such as hurricanes, tornadoes, floods,
earthquakes and others, could lead to interruptions in the supply chain. Disruptions in supply chain could impact delivery
of food or other supplies to the Company’s restaurants. Delays or restrictions on shipping or manufacturing, closures of
supplier or distributor facilities or financial distress or insolvency of suppliers or distributors could disrupt operations or
the operations of one or more suppliers or could severely damage or destroy one of more of the stores or distribution
centers located in the affected area. These delays or interruptions could impact the availability of certain food and
packaging items at the Company’s restaurants, including beef, chicken, pork and other core menu products and could
require the Company’s restaurants to serve a limited menu. The Company’s results of operations and those of its
franchisees could be adversely affected if its key suppliers or distributors are unable to fulfill their responsibilities and the
Company were unable to identify alternative suppliers or distributors in a timely manner or effectively transition the
impacted business to new suppliers or distributors. If a disruption of service from any of its key suppliers or distributors
were to occur, the Company could experience short-term increases in costs while supply and distribution channels were
adjusted and may be unable to identify or negotiate with new suppliers or distributors on terms that are commercially
reasonable.
Rising interest rates, as seen in the US and Canada in 2022, could also impact MTY’s borrowing capacity, thereby
affecting its ability to make accretive acquisitions. Rising interest rates would also negatively impact franchisees’
borrowing capacity as well as their available cash flows, thereby slowing down the build of new locations and causing
cash flow strains on existing franchisees.
Geopolitical events such as the occurrence of war or hostilities between countries, or threat of terrorist activities and the
responses to and results of these activities could also adversely impact the operations of the Company or its franchisee
network. These events could lead to supply chain interruptions, closures or destruction of restaurants, increases in
inflation and labour shortages.
Please refer to the November 30, 2022 Annual Information Form for further discussion on all risks and uncertainties.
ECONOMIC ENVIRONMENT RISK
The business of the Company is dependent upon numerous aspects of a healthy general economic environment, from
strong consumer spending to provide sales revenue, to available credit to finance the franchisees and the Company. In
case of turmoil in economic, credit and capital markets, the Company’s performance and market price may be adversely
affected. The Company’s current planning assumptions forecast that the restaurant industry will be impacted by the
current economic uncertainty in certain regions in which it operates. Exposure to health epidemics and pandemics, as
well as other geopolitical events, such as war or hostilities between countries, and rising interest rates are risks to the
Company and its franchise partners. Within a normal economic cycle, management is of the opinion that these risks will
not have a major impact on the Company due to the following reasons: 1) the Company generates strong cash flows and
has a healthy balance sheet; and 2) the Company has several concepts offering affordable dining out options for
consumers in an economic slowdown. During extreme economic turmoil, management believes that the Company has
the ability to overcome these risks until the economy re-establishes itself.
FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses various financial instruments, 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 as well as monitoring procedures.
The Company has determined that the fair values of its financial assets and financial liabilities with short-term and long-
term maturities approximate their carrying value. These financial instruments include cash, accounts receivable, accounts
payable and accrued liabilities, deposits and other liabilities. The table below shows the fair value and the carrying amount
of other financial instruments as at November 30, 2022 and 2021. Since estimates are used to determine fair value, they
must not be interpreted as being realizable in the event of a settlement of the instruments.
Page 36
The classification, carrying value and fair value of financial instruments are as follows:
Financial assets
Loans and other receivables
Finance lease receivables
Financial liabilities
Long-term debt (1)
(In thousands $)
Carrying
amount
$
4,442
338,776
2022
Fair
value
$
4,442
338,776
Carrying
amount
$
4,238
399,269
2021
Fair
value
$
4,238
399,269
550,197
550,197
357,171
357,189
(1) Excludes contingent considerations on Küto Comptoir à Tartares acquisition and 11554891 Canada Inc., cross
currency interest rate swaps, credit facility financing costs, non-controlling interest option in 9974644 Canada
Inc. and obligation to repurchase 11554891 Canada Inc. partner.
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. It is established based on market
information available at the date of the consolidated statement of financial position. In the absence of an active market
for a financial instrument, the Company uses the valuation methods described below to determine the fair value of the
instrument. To make the assumptions required by certain valuation models, the Company relies mainly on external,
readily observable market inputs. Assumptions or inputs that are not based on observable market data are used in the
absence of external data. These assumptions or factors represent management’s best estimates of the assumptions or
factors that would be used by market participants for these instruments. The credit risk of the counterparty and the
Company’s own credit risk have been taken into account in estimating the fair value of all financial assets and financial
liabilities, including derivatives.
The following methods and assumptions were used to estimate the fair values of each class of financial instrument:
Loans and other receivables and Finance lease receivables – The carrying amount for these financial
instruments approximates fair value due to the short-term maturity of these instruments and/or the use of
market interest rates.
Long-term debt – The fair value of long-term debt is determined using the present value of future cash flows
under current financing agreements based on the Company’s current estimated borrowing rate for similar
debt.
Contingent considerations on acquisitions
The Company issued as part of its consideration for the acquisition of Küto Comptoir à Tartares and 70% interest in
11554891 Canada Inc., contingent considerations to the vendors. These contingent considerations are subject to earn-
out provisions, which are based on future earnings; the contingent considerations for Küto Comptoir à Tartares and
11554891 Canada Inc. are repayable in June 2024 and December 2022, respectively. These contingent considerations
have been recorded at fair value and are remeasured on a recurring basis.
A fair value remeasurement gain of $1.8 million was recorded for the contingent considerations for the year ended
November 30, 2022 (2021 – gain of $1.7 million).
Obligation to repurchase non-controlling interest
The Company has entered into an agreement to purchase the shares of a minority interest shareholder of 9974644
Canada Inc. at the option of the holder at any time after December 9, 2017. The consideration is based on a multiplier of
EBITDA, as prescribed by the terms of the shareholder agreement. The Company records a liability at fair value (Note
21 of the consolidated financial statements) which is remeasured at each reporting period.
A fair value remeasurement loss of $0.3 million (2021 – loss of $0.4 million) was recorded for this non-controlling interest
obligation.
Obligation to repurchase 11554891 Canada Inc. partner
The Company, in conjunction with the acquisition of its 70% interest in 11554891 Canada Inc., entered into an agreement
to acquire the remaining 30% interest by December 2024. The consideration to be paid for this acquisition will be based
on future earnings. The Company recorded a liability at fair value (Note 21 of the consolidated financial statements) which
is remeasured at each reporting period. An increase or decrease by 1% in the discount rates used would have an impact
of nil on the carrying amount as at November 30, 2022 (2021 – less than $0.1 million).
Page 37
A fair value remeasurement gain of $1.4 million (2021 – gain of $1.9 million) was recorded for this obligation to repurchase
the 11554891 Canada Inc. partner.
Cross currency interest rate swaps
On November 26, 2022 and November 29, 2022, the Company entered into one floating to floating 3-month cross
currency interest rate swap and one floating to floating 2-month cross currency interest rate swap (November 30, 2021
– one floating to floating 3-month cross currency interest rate swap, one floating to floating 2-month cross currency
interest rate swap and one floating to floating 1-month cross currency interest rate swap). A fair value of nil was recorded
as at November 30, 2022 (November 30, 2021 – nil). The Company has classified this as level 2 in the fair value hierarchy.
3-month
2022
2-month
US$64.9 million US$150.0 million
6.18%
CA$87.0 million CA$201.0 million
5.80%
5.95%
6.18%
3-month
US$78.9 million
1.29%
CA$100.0 million
1.23%
2-month
US$180.8 million
1.29%
CA$230.0 million
1.09%
2021
1-month
US$11.8 million
1.29%
CA$15.0 million
1.38%
Receive – Notional
Receive – Rate
Pay – Notional
Pay – Rate
Fair value hierarchy
Contingent considerations on Küto Comptoir à Tartares acquisition and
11554891 Canada Inc.
Non-controlling interest buyback option
Obligation to repurchase 11554891 Canada Inc. partner
Financial liabilities
FINANCIAL RISK EXPOSURE
(In thousands $)
Level 3
2022
$
3,626
1,853
7,867
13,346
2021
$
1,961
1,575
1,416
4,952
The Company, through its financial assets and financial liabilities, is exposed to various risks. The following analysis
provides a measurement of risks as at November 30, 2022.
Credit risk
The Company’s credit risk is primarily attributable to its trade receivables. The amounts disclosed in the consolidated
statement of financial position represent the maximum exposure to credit risk for each respective financial asset as at
the relevant dates. The Company believes that the credit risk of accounts receivable is limited as other than receivables
from international locations, the Company’s broad client base is spread mostly across Canada and the US, which limits
the concentration of credit risk.
The credit risk on the Company’s loans and other receivables is similar to that of its accounts receivable.
Interest rate risk
Interest rate risk is the Company’s exposure to increases and decreases in financial instrument values caused by the
fluctuation in interest rates. The Company is exposed to cash flow risk due to the interest rate fluctuation in its floating-
rate interest-bearing financial obligations.
Furthermore, upon refinancing of a borrowing, depending on the availability of funds in the market and lender perception
of the Company’s risk, the margin that is added to the reference rate, such as the SOFR or prime rates, could vary and
thereby directly influence the interest rate payable by the Company.
Long-term debt stems mainly from acquisitions of long-term assets and business combinations. The Company is exposed
to interest rate risk with its revolving credit facility which is used to finance the Company’s acquisitions. The facility bears
interest at a variable rate and as such the interest burden could change materially. $550.1 million (November 30, 2021 –
$345.0 million) of the credit facility was used as at November 30, 2022. A 100 basis points increase in the bank’s prime
rate would result in additional interest of $5.5 million per annum (November 30, 2021 – $3.5 million) on the outstanding
credit facility.
Page 38
Foreign exchange risk
Foreign exchange risk is the Company’s exposure to decreases or increases in financial instrument values caused by
fluctuations in exchange rates. The Company’s exposure to foreign exchange risk mainly comes from sales denominated
in foreign currencies. The Company’s US and foreign operations use the US dollar (“USD”) as functional currency. The
Company’s exposure to foreign exchange risk stems mainly from cash, accounts receivable, long-term debt denominated
in USD, other working capital items and financial obligations from its US operations. As at November 30, 2022, US$408.9
million (2021 – US$271.5 million) was drawn from the revolving credit facility. Of that amount, US$214.9 million (2021 –
US$271.5 million) was not exposed to foreign exchange risk as a result of two (2021 – three) cross currency interest rate
swaps, and US$194.0 million (2021 – nil) was exposed to foreign exchange risk.
Fluctuations in USD exchange rates are deemed to have minimal risk as they are mostly offset by the stand-alone
operations of the Company’s US entities.
As at November 30, 2022 and 2021, the Company has the following financial instruments denominated in foreign
currencies:
Financial assets
Cash
Accounts receivable
Financial liabilities
Accounts payable and deposits
Long-term debt
Net financial (liabilities) assets
(In thousands $)
USD
$
5,424
463
2022
CAD
$
7,327
625
(212)
(194,000)
(188,325)
(286)
(262,055)
(254,389)
USD
$
3,744
378
(82)
—
4,040
2021
CAD
$
4,789
484
(105)
—
5,168
All other factors being equal, a reasonable possible 5% rise in foreign currency exchange rates per Canadian dollar
would result in a loss of $9.4 million (2021 – profit of $0.2 million) on the consolidated statements of income and
comprehensive income.
Liquidity risk
Liquidity risk refers to the possibility of the Company not being able to meet its financial obligations when they become
due. The Company has contractual and fiscal obligations as well as financial liabilities and is therefore exposed to liquidity
risk. Such risk can result, for example, from a market disruption or a lack of liquidity. The Company actively maintains its
credit facility to ensure it has sufficient available funds to meet current and foreseeable financial requirements at a
reasonable cost.
As at November 30, 2022, the Company had an authorized revolving credit facility for which the available amount may
not exceed $900.0 million (November 30, 2021 – $600.0 million) and including an accordion feature amounting to $300.0
million (November 30, 2021 – $300.0 million) to ensure that sufficient funds are available to meet its financial
requirements.
The following are the contractual maturities of financial liabilities as at November 30, 2022:
(In millions $)
Carrying Contractual
amount cash flows
$
$
0 – 6
Months
$
6 – 12
Months
$
12 – 24
Months Thereafter
$
$
Accounts payable and accrued liabilities
Long-term debt (1)
Interest on long-term debt (1)
Lease liabilities
Total contractual obligations
155.0
561.0
n/a
514.8
1,230.8
155.0
563.5
106.1
580.9
1,405.5
155.0
10.7
18.2
65.3
249.2
—
—
18.2
65.3
83.5
—
2.7
36.4
111.6
150.7
—
550.1
33.3
338.7
922.1
(1) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of the
reporting period.
Page 39
NEAR-TERM OUTLOOK
The actions taken by MTY to strengthen the Company and its network during the COVID-19 pandemic have allowed
MTY to be in a good position to tackle future challenges the industry will face. The restaurant industry is extremely
competitive, and the pace of changes, innovations and shifts in customer preferences is accelerating every day. MTY’s
entrepreneurial roots give it an advantage in the current environment and the team is prepared to face any situation.
At the date of this report, MTY and its franchisees are still feeling the impact of various supply chain challenges, which
come from inflation and from disruptions and shortages in the supply of certain products. This comes in addition to rising
interest rates and increased construction costs. While some aspects of the business are gradually stabilizing, there
remains some uncertainty as to what the new baseline is going to be once this period of high volatility fades away.
The Company’s franchisees and suppliers also face significant labour shortages that, in certain cases, affect their ability
to conduct business optimally. These labour shortages, combined with increases in minimum wage rates in many
jurisdictions in which the network operates, are expected to lead to increased overtime and labour costs, as well as to an
inability to generate 100% of the potential sales of some of the restaurants.
Despite the above-mentioned challenges, sales are for the most part back to pre-pandemic levels or better, and for the
locations that are lagging because of geography or type of restaurants, trends are encouraging. With the brands’ focus
on innovation, product quality, consistency and superior store design combined with the adjustments made during the
pandemic to adapt to new customer expectations, management believes the network is positioned well to thrive in the
future, even if a recession were to happen.
In the short term, management’s primary focus will continue to be the success of existing locations. More specifically, the
teams will assist franchisees to generate sales growth, open new locations of existing concepts and ultimately achieve
their profitability objectives. Management will also focus on the integration of the recently acquired brands.
Management will maintain its focus on maximizing shareholder value by adding new locations of its existing concepts
and remains committed to seek potential acquisitions to increase the Company’s market share.
CONTROLS & PROCEDURES
Disclosure controls and procedures
Disclosure controls and procedures should be designed to provide reasonable assurance that information required to be
disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities
legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation.
It should include controls and procedures designed to ensure that information required to be disclosed by the Company
in its annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated and
communicated to the Company’s management, including its certifying officers, namely the Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO"), as appropriate to allow timely decisions regarding required disclosure.
The CEO and the CFO, along with Management, after evaluating the effectiveness of the Company’s disclosure controls
and procedures as at November 30, 2022, have concluded that the Company’s disclosure controls and procedures were
effective.
Internal controls over financial reporting
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with IFRS. Management is responsible for
establishing adequate internal control over financial reporting for the Company.
An evaluation of the effectiveness of the design and operation of the Company's internal control over financial reporting
was conducted as of November 30, 2022. Based on the evaluation, the CEO and the CFO concluded that the internal
control over financial reporting, as defined by National Instrument 52-109, was appropriately designed and was operating
effectively. The evaluations were conducted in accordance with the framework and criteria established in Internal Control
- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"), a recognized control model, and the requirements of National Instrument 52-109 - Certification of Disclosure
in Issuers' Annual and Interim Filings.
Limitations of controls and procedures
There are inherent limitations in the effectiveness of any control system, including the potential for human error and the
possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty
and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable,
not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of
the Company, including its CEO and CFO, does not expect that the control system can prevent or detect all error or
Page 40
fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are
subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating
environment or deterioration in the degree of compliance with policies or procedures.
Limitation on scope of design
The Company’s management, with the participation of its CEO and CFO, has limited the scope of the design of the
Company’s DC&P and internal controls over financial reporting to exclude controls, policies and procedures and internal
controls over financial reporting of the recently acquired operations:
Percentage of MTY
Food Group Inc.
Company’s
assets
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities
Revenue
Net
income
Küto Comptoir à
Tartares
BBQ Holdings
1%
15%
0%
1%
0%
14%
15%
17%
0%
0%
1%
10%
2%
3%
The Company’s management, with the participation of its CEO and CFO, has limited the scope of the design of
the Company’s DC&P and internal controls over financial reporting to exclude controls, policies and procedures and
internal controls over financial reporting of certain special purpose entities (“SPEs”) on which the Company
has the ability to exercise de facto control and which have as a result been consolidated in the Company’s
consolidated financial statements. For the year ended November 30, 2022, these SPEs represent less than 0.1% of
the Company’s current assets, less than 0.1% of its non-current assets, less than 0.1% of the Company’s current
liabilities, less than 0.1% of non-current liabilities, 0.3% of the Company’s revenue and less than 0.1% of the
Company’s net income.
__________________________
Eric Lefebvre, CPA, MBA Chief Executive Officer
__________________________
Renee St-Onge, CPA Chief Financial Officer
Page 41
SUPPLEMENTAL INFORMATION
List of acquisitions
Other banners added through acquisitions include:
Acquisition
year
1999
2001
2002
2003
May 2004
June 2004
September 2005
September 2006
October 2006
September 2007
September 2008
October 2008
May 2009
September 2010
August 2011
November 2011
November 2011
September 2012
June 2013
September 2013
September 2013
March 2015
July 2014
September 2018
October 2014
%
ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80% +
20%
90% +
10%
100%
November 2014
100%
December 2014
100%
September 2015
September 2016
July 2016
60% +
40%
100%
# of franchised
locations
18
71
18
24
6
103
91
42
24
—
29
117
475
86
134
338
19
14
3
300 - 34 of which
in the US
25 and 3 mobile
restaurants
14
88
51
115
13
2,839
Brand
Fontaine Santé/Veggirama
La Crémière
Croissant Plus
Cultures
Thaï Express
Mrs. Vanelli’s
TCBY – Canadian master franchise right
Sushi Shop
Koya Japan
Sushi Shop – existing franchise locations
Tutti Frutti
Taco Time – Canadian master franchise
rights
Country Style Food Services Holdings Inc.
Groupe Valentine inc.
Jugo Juice
Mr. Submarine
Koryo Korean BBQ
Mr. Souvlaki
SushiGo
Extreme Pita, PurBlendz and Mucho
Burrito ("Extreme Brandz")
ThaïZone
Madisons
Café Dépôt, Muffin Plus, Sushi-Man and
Fabrika
Van Houtte Café Bistros – perpetual
franchising license
Manchu Wok, Wasabi Grill & Noodle and
SenseAsian
Big Smoke Burger
- Cold Stone
Kahala Brands Ltd
Creamery, Blimpie, Taco Time, Surf City
Squeeze, The Great Steak & Potato
Company, NrGize
Lifestyle Café,
Samurai Sam’s Teriyaki Grill, Frullati
Café & Bakery, Rollerz, Johnnie`s New
York Pizzeria, Ranch One, America’s
Taco Shop, Cereality, Tasti D-Lite,
Planet Smoothie, Maui Wowi and
Pinkberry
# of corporate
locations
—
3
2
—
—
—
—
5
—
15
—
—
5
9
2
—
1
—
2
5
—
—
13
1
17
4
40
Page 42
Acquisition
year
October 2016
%
ownership
100%
# of franchised
locations
167
# of corporate
locations
16
December 2016
March 2019
May 2017
September 2018
June 2017
September 2017
December 2017
December 2017
March 2018
March 2018
April 2018
September 2018
December 2018
March 2019
May 2019
July 2019
July 2019
December 2019
December 2021
September 2022
60%+
5%
83.25% +
9.25%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
100%
100%
5
15
23
20
36
5
253
26
32
331
31
24
1,301
129
40
20
31
198
—
—
4
2
3
—
8
1
7
—
—
13
103
—
—
3
—
103
Brand
BF Acquisition Holdings, LLC – Baja
Fresh Mexican Grill and La Salsa Fresh
Mexican Grill
La Diperie
Steak Frites St-Paul and Giorgio
Ristorante
The Works Gourmet Burger Bistro
Dagwoods Sandwiches and Salads
The Counter Custom Burgers
Built Custom Burgers
Imvescor Restaurant Group - Baton
Rouge, Pizza Delight, Scores, Toujours
Mikes, and Ben & Florentine
Grabbagreen
Timothy’s World Coffee and Mmmuffins -
perpetual franchising license
SweetFrog Premium Frozen Yogurt
Casa Grecque
South Street Burger
Papa Murphy’s
Yuzu Sushi
Allô! Mon Coco
Turtle Jack’s Muskoka Grill, COOP
Wicked Chicken and Frat’s Cucina
Küto Comptoir à Tartares
BBQ Holdings – Famous Dave’s, Village
Inn, Barrio Queen, Granite City, Real
Joe’s
Urban
Steakhouse, Bakers Square, Craft
Republic, Fox & Hound and Champps
Barbecue,
Tahoe
Definition of non-GAAP measures
The following non-GAAP measures can be found in the analysis of the MD&A:
Adjusted EBITDA
Normalized adjusted
EBITDA
Income (loss) before
taxes, excluding
impairment charges
and reversals
Free cash flows
Represents revenue less operating expenses plus share of net profit (loss) of a joint
venture accounted for using the equity method. See reconciliation of adjusted EBITDA to
Income (loss) before taxes on pages 14 and 21.
Represents revenue less operating expenses (excluding transaction costs related to
acquisitions) plus share of net profit (loss) of a joint venture accounted for using the equity
method. See reconciliation of normalized adjusted EBITDA to Income (loss) before taxes
on pages 14 and 21.
Represents net income (loss) before taxes, excluding impairment charges and reversals
on right-of-use assets, property, plant and equipment, intangible assets and goodwill.
Represents the net cash flows: provided by operating activities; used in additions to
property, plant and equipment and intangible assets; and provided by proceeds on
disposal of property, plant and equipment.
Page 43
Definition of non-GAAP ratios
The following non-GAAP ratios can be found in the analysis of the MD&A:
Adjusted EBITDA as
a % of revenue
Normalized adjusted
EBITDA as a % of
revenue
Free cash flows per
diluted share
Represents adjusted EBITDA divided by revenue.
Represents normalized adjusted EBITDA divided by revenue.
Represents free cash flows divided by diluted shares.
Debt-to-EBITDA
Defined as current and long-term debt divided by EBITDA as defined in the credit
agreement.
Definition of supplementary financial measures
Management discloses the following supplementary financial measures as they have been identified as relevant metrics
to evaluate the performance of the Company.
The following supplementary financial measures can be found in the analysis of the MD&A:
Cash flows from
operations per diluted
share
Represents cash flows provided by operating activities divided by diluted shares.
Recurring revenue
streams
Comprised of royalties and other franchising revenues that are earned on a regular basis
in accordance with franchise agreements in place.
Non-controllable
expenses
Comprised of government subsidies that are not directly in control of management and
royalties paid to third parties.
Controllable expenses
Comprised of wages, professional and consulting services and other office expenses,
that are directly in the control of management.
Variance in recurring
revenue and expenses
Nonrecurring non-
controllable expenses
Comprised of recurring revenue streams, controllable expenses, royalties paid to third
parties, rent (excluding impact of IFRS 16), corporate store revenue and expenses, food
processing, distribution and retail revenue and expenses, promotional fund revenue and
expenses.
Comprised of government subsidies that are not directly in control of management.
Same-store sales
Comparative sales generated by stores that have been open for at least thirteen months
or that have been acquired more than thirteen months ago.
System sales
System sales are sales of all existing restaurants including those that have closed or
have opened during the period, as well as the sales of new concepts acquired from the
closing date of the transaction and forward.
Digital sales
Digital sales are sales made by customers through online ordering platforms.
Page 44
Free cash flows (1) loop to cash flows provided by operating activities
(In thousands $)
February
2021
May
2021
Three months ended
August November February
2022
2021
2021
May
2022
August November
2022
2022
Cash flows provided
by operating activities
Additions to property,
plant and equipment
Additions to intangible
assets
Proceeds on disposal of
property, plant and
equipment
Free cash flows (1)
31,307
29,541
46,553
31,898
39,696
30,739
36,838
35,524
(1,213)
(2,301)
(1,248)
(1,677)
(1,149)
(3,494)
(1,327)
(2,700)
(47)
(156)
(65)
(56)
(1,672)
(1,346)
(713)
(257)
253
30,300
413
27,497
361
45,601
5,438
35,603
95
36,970
84
25,983
666
35,464
286
32,853
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Income before taxes, excluding impairment charges and reversals (1)
(in thousands $)
Year ended
November 30, 2022
Year ended
November 30, 2021
Income before taxes
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment and
intangible assets
Income before taxes, excluding impairment charges and reversals (1)
96,170
969
13,916
111,055
112,072
1,550
5,903
119,525
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
Page 45
System sales (1) to royalties
Sales for the twelve months ended
November 30, 2022
Canada
US & International
(millions of $)
Corporate Franchised
Total
Corporate Franchised
Total
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
29.4
1,604.6
1,634.0
89.8
2,527.4
2,617.2
—
—
5.23%
83.9
—
—
—
—
5.10%
129.0
—
—
Sales for the twelve months ended
November 30, 2021
Canada
US & International
(millions of $)
Corporate Franchised
Total
Corporate Franchised
Total
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
19.4
1,241.1
1,260.5
40.2
2,330.6
2,370.8
—
—
5.00%
62.1
—
—
—
—
5.09%
118.6
—
—
Sales for the three months ended
November 30, 2022
Canada
US & International
(millions of $)
Corporate Franchised
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
8.0
—
—
430.1
5.28%
22.7
Total
438.1
Corporate Franchised
74.1
694.3
Total
768.4
—
—
—
—
4.94%
34.3
—
—
TOTAL
4,251.2
N/A
212.9
TOTAL
3,631.3
N/A
180.7
TOTAL
1,206.5
N/A
57.0
(millions of $)
Corporate Franchised
Canada
System sales (1)
Franchise royalty income
as a % of franchise sales
Royalties
5.9
—
—
373.0
5.12%
19.1
Sales for the three months ended
November 30, 2021
Total
378.9
—
—
US & International
Corporate Franchised
9.4
—
—
574.2
5.03%
28.9
Total
583.6
—
—
TOTAL
962.5
N/A
48.0
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Page 46
Consolidated financial statements of
MTY Food Group Inc.
November 30, 2022 and 2021
Independent auditor’s report
To the Shareholders of MTY Food Group Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of MTY Food Group Inc. and its subsidiaries (together, the Company) as at
November 30, 2022 and 2021, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of income for the years ended November 30, 2022 and 2021;
the consolidated statements of comprehensive income for the years ended November 30, 2022
and 2021;
the consolidated statements of changes in shareholders’ equity for the years ended November 30,
2022 and 2021;
the consolidated statements of financial position as at November 30, 2022 and 2021;
the consolidated statements of cash flows for the years ended November 30, 2022 and 2021; and
the notes to the consolidated financial statements, which include significant accounting policies 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.
PricewaterhouseCoopers LLP
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
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 year ended November 30, 2022. 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 goodwill, trademarks
and franchise and master franchise rights
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 3 – Accounting policies, note 4 –
Critical accounting judgments and key sources of
estimation uncertainty, note 14 – Intangible assets,
note 15 – Goodwill and note 16 – Net impairment
charge - property, plant and equipment, intangible
assets and goodwill to the consolidated financial
statements.
As at November 30, 2022, the Company had
goodwill, trademarks (intangible assets with
indefinite useful lives) and franchise and master
franchise rights (intangible assets with definite
useful lives) balances totalling $529.5 million,
$805.8 million and $191.2 million, respectively. For
the purposes of impairment testing, goodwill is
allocated to the cash generating unit (CGU) or a
group of CGUs (“goodwill unit”) that are considered
to represent the lowest level within the group at
which the goodwill is monitored for internal
management purposes. For the purpose of the
franchise and master franchise rights and
trademarks, the smallest group of CGUs for which a
reasonable and consistent allocation basis can be
identified is the brand level and constitutes the
lowest level at which an asset or group of assets
has the possibility of generating cash inflows.
Evaluated how management determined the
recoverable amounts of the goodwill units and
certain CGUs:
Tested the mathematical accuracy of the
discounted cash flow models.
Tested the reasonableness of the projected
operating cash flows applied by
management in the discounted cash flow
models by comparing them to the budget
approved by the Board of Directors and by
considering the past and current
performance of the CGUs.
Professionals with specialized skill and
knowledge in the field of valuation assisted
in testing the appropriateness of the models
used and the reasonableness of the
discount rates applied by management
based on available data of comparable
companies.
Tested the underlying data used in the
discounted cash flow models.
Key audit matter
How our audit addressed the key audit matter
Goodwill and trademarks are tested for impairment
annually as at August 31, or more frequently when
there is an indicator of impairment. Franchise and
master franchise rights are tested annually in
connection with goodwill and trademarks annual
testing, or whenever there is an indication that the
asset may be impaired.
If the recoverable amount of a CGU or a goodwill
unit is estimated to be less than its carrying amount,
the carrying amount of the CGU or goodwill unit is
reduced to its recoverable amount. An impairment
loss is recognized immediately in profit or loss.
The recoverable amounts of the CGUs or goodwill
unit are estimated based on value in use
calculations using a discounted cash flow model.
The key assumptions used were the projected
operating cash flows and the discount rates.
The annual impairment test resulted in an
impairment charge of $13.4 million related to
franchise rights and trademarks.
We considered this a key audit matter due to (i) the
significance of the goodwill, trademarks and
franchise and master franchise rights balances and
(ii) the significant judgment made by management
in determining the recoverable amount of the
goodwill units and CGUs, including the use of key
assumptions. This has resulted in a high degree of
subjectivity and audit effort in performing audit
procedures relating to the key assumptions.
Professionals with specialized skill and knowledge
in the field of valuation assisted us in performing our
procedures.
Key audit matter
How our audit addressed the key audit matter
Preliminary valuation of certain trademarks
acquired in the BBQ Holdings Inc. (BBQ
Holdings) business combination
Refer to note 3 – Accounting policies and note 6 –
Business acquisitions to the consolidated financial
statements.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management estimated the
preliminary fair values of certain trademarks,
which included the following:
Read the purchase agreement.
On September 27, 2022, the Company completed
the acquisition of all of the issued and outstanding
common shares of BBQ Holdings for a total cash
consideration paid of $250.4 million.
Tested the underlying data used by
management in the discounted royalty cash
flow models and the mathematical
accuracy thereof.
Evaluated the reasonableness of significant
assumptions used by management related
to projected system sales by considering the
current and past performance of BBQ
Holdings and considering economic and
industry data.
Professionals with specialized skill and
knowledge in the field of valuation assisted
in evaluating the appropriateness of
management’s royalty relief method as well
as in evaluating the reasonableness of
certain key assumptions such as the royalty
rates and discount rates.
The preliminary fair value of identifiable assets
acquired included $166.7 million of intangible
assets related to nine trademarks, certain of which
represent a significant portion of this amount.
The fair values of the trademarks were estimated,
based on the relief from royalty method using
discounted cash flow models. In determining the fair
values of the trademarks, the Company developed
key assumptions such as projected system sales,
discount rates and royalty rates.
As of November 30, 2022, the purchase price
allocation and valuation of intangible assets,
including trademarks, are preliminary.
We considered this a key audit matter due to the
judgment by management in estimating the
preliminary fair values of certain trademarks,
including the development of key assumptions. This
in turn led to a high degree of auditor judgment,
subjectivity and effort in performing procedures and
evaluating audit evidence relating to the key
assumptions developed by management. The audit
effort involved the use of professionals with
specialized skill and knowledge in the field of
valuation.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information, and we do not
and will 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 on the other information that we obtained prior to the date of this
auditor’s report, 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. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
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, 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
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.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance 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
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 Sonia Boisvert.
/s/PricewaterhouseCoopers LLP1
Montréal, Quebec
February 15, 2023
1 FCPA auditor, public accountancy permit No. A116853
MTY Food Group Inc.
Consolidated statements of income
Years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts)
Revenue
Expenses
Operating expenses
Depreciation – property, plant and equipment and right-of-use assets
Amortization – intangible assets
Interest on long-term debt
Net interest expense on leases
Impairment charge – right-of-use assets
Net impairment charge – property, plant and equipment and intangible
assets
Share of net loss of a joint venture accounted for using the equity method
Other (expenses) income
Unrealized and realized foreign exchange loss
Interest income
Gain on de-recognition/lease modification of lease liabilities
Gain on disposal of property, plant and equipment
Revaluation of financial liabilities recorded at fair value
Loss on remeasurement of joint venture interest
Other income
Income before taxes
Income tax expense
Current
Deferred
Net income
Net income attributable to:
Owners
Non-controlling interests
Net income per share
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2022
$
2021
$
27 & 32
716,522
551,903
28 & 32
12 & 13
14
12
12
16
7
25
7
31
24
534,440
21,548
29,473
12,428
3,210
969
13,916
615,984
382,572
16,174
28,442
10,111
2,295
1,550
5,903
447,047
—
(709)
(5,690)
253
798
108
2,932
(2,769)
—
(4,368)
(300)
198
1,319
3,549
3,034
—
125
7,925
96,170
112,072
24,669
(3,678)
20,991
75,179
74,817
362
75,179
3.06
3.06
21,036
5,093
26,129
85,943
85,639
304
85,943
3.47
3.46
Page 6
MTY Food Group Inc.
Consolidated statements of comprehensive income
Years ended November 30, 2022 and 2021
(In thousands of Canadian dollars)
Net income
Items that may be reclassified subsequently to net income
Unrealized gain (loss) on translation of foreign operations
Deferred tax expense on foreign currency translation adjustments
Other comprehensive income (loss)
Total comprehensive income
Total comprehensive income attributable to:
Owners
Non-controlling interests
The accompanying notes are an integral part of the consolidated financial statements.
2022
$
2021
$
75,179
85,943
35,577
(491)
35,086
110,265
109,903
362
110,265
(7,966)
—
(7,966)
77,977
77,673
304
77,977
Page 7
MTY Food Group Inc.
Consolidated statements of changes in shareholders’ equity
Years ended November 30, 2022 and 2021
(In thousands of Canadian dollars)
Reserves
Contributed
surplus
$
Other
$
Foreign
currency
translation
$
Total
reserves
$
Retained
earnings
$
Equity
attributable
to owners
$
Equity
attributable
to non-
controlling
interests
$
(850)
—
—
—
—
—
—
(850)
—
—
—
—
—
(850)
3,019
—
—
—
—
—
836
3,855
—
—
—
—
1,002
4,857
(13,354)
—
(7,966)
(11,185)
—
(7,966)
286,525
85,639
—
—
—
—
—
(21,320)
—
35,086
—
—
—
13,766
—
—
—
836
(18,315)
—
35,086
—
—
1,002
17,773
(1,300)
(1,730)
(9,141)
—
359,993
74,817
—
(11,438)
(20,518)
—
402,854
581,755
85,639
(7,966)
77,673
(1,300)
(2,184)
(9,141)
836
647,639
74,817
35,086
109,903
(14,618)
(20,518)
1,002
723,408
759
304
—
304
196
—
—
—
1,259
362
—
362
—
(403)
—
1,218
Total
$
582,514
85,943
(7,966)
77,977
(1,104)
(2,184)
(9,141)
836
648,898
75,179
35,086
110,265
(14,618)
(20,921)
1,002
724,626
Capital
stock
$
306,415
—
—
—
(454)
—
—
305,961
—
—
(3,180)
—
—
302,781
Balance as at November 30, 2020
Net income for the year ended November 30, 2021
Other comprehensive loss
Total comprehensive income
Disposal of interest in 10220396 Canada Inc. (Note 17)
Shares repurchased and cancelled (Note 22)
Dividends
Share-based compensation (Note 23)
Balance as at November 30, 2021
Net income for the year ended November 30, 2022
Other comprehensive income
Total comprehensive income
Shares repurchased and cancelled (Note 22)
Dividends
Share-based compensation (Note 23)
Balance as at November 30, 2022
The following dividends were declared and paid by the Company:
$0.840 per common share (2021 – $0.370 per common share)
The accompanying notes are an integral part of the consolidated financial statements.
2022
$
2021
$
20,518
9,141
Page 8
MTY Food Group Inc.
Consolidated statements of financial position
As at November 30, 2022 and 2021
(In thousands of Canadian dollars)
Notes
2022
$
2021
$
Assets
Current assets
Cash
Accounts receivable
Inventories
Assets held for sale
Current portion of loans and other receivables
Current portion of finance lease receivables
Income taxes receivable
Other assets
Prepaid expenses and deposits
Loans and other receivables
Finance lease receivables
Contract cost asset
Deferred income taxes
Investment in a joint venture
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Liabilities and Shareholders' equity
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Gift card and loyalty program liabilities
Income taxes payable
Current portion of deferred revenue and deposits
Current portion of long-term debt
Current portion of lease liabilities
Long-term debt
Lease liabilities
Deferred revenue and deposits
Deferred income taxes
Other liabilities
8
9
10
11
12
11
12
31
7
13
12
14
15
19
20
21
12
21
12
20
31
The accompanying notes are an integral part of the consolidated financial statements.
59,479
78,099
18,517
2,111
1,153
83,500
3,982
3,275
14,540
264,656
3,289
255,276
6,455
224
—
90,878
159,706
1,015,271
529,548
2,325,303
154,988
1,490
127,458
9,813
17,776
9,530
114,437
435,492
551,429
400,377
48,405
164,417
557
1,600,677
61,231
57,459
10,707
—
1,189
89,046
3,712
2,403
7,721
233,468
3,049
310,223
5,631
185
25,911
17,526
59,937
820,274
428,390
1,904,594
119,462
1,692
101,889
4,256
16,100
13,116
101,973
358,488
347,612
371,575
44,339
132,653
1,029
1,255,696
Page 9
MTY Food Group Inc.
Consolidated statements of financial position (continued)
As at November 30, 2022 and 2021
(In thousands of Canadian dollars)
Shareholders' equity
Equity attributable to owners
Capital stock
Reserves
Retained earnings
Equity attributable to non-controlling interests
Notes
22
2022
$
2021
$
302,781
17,773
402,854
723,408
1,218
724,626
2,325,303
305,961
(18,315)
359,993
647,639
1,259
648,898
1,904,594
Approved by the Board on February 15, 2023
_________________________________________________ , Director
_________________________________________________ , Director
The accompanying notes are an integral part of the consolidated financial statements.
Page 10
MTY Food Group Inc.
Consolidated statements of cash flows
Years ended November 30, 2022 and 2021
(In thousands of Canadian dollars)
Operating activities
Net income
Adjusting items:
Interest on long-term debt
Net interest expense on leases
Depreciation – property, plant and equipment and
right-of-use assets
Amortization – intangible assets
Impairment charge – property, plant and equipment
Impairment charge – right-of-use assets
Net impairment charge – intangible assets
Share of net loss of a joint venture accounted for using the
equity method
Gain on de-recognition/lease modification of lease liabilities
Gain on disposal of property, plant and equipment
Revaluation of financial liabilities recorded at fair value through
profit or loss
Loss on remeasurement of joint venture interest
Other income
Income tax expense
Share-based expense
Income taxes paid
Interest paid
Other
Changes in non-cash working capital items
Cash flows provided by operating activities
Notes
2022
$
2021
$
75,179
85,943
12
12 & 13
14
16
12
16
7
25
7
33
12,428
3,210
21,548
29,473
535
969
13,381
—
(798)
(108)
(2,932)
2,769
—
20,991
1,002
177,647
(17,570)
(11,781)
1,411
(6,910)
142,797
10,111
2,295
16,174
28,442
131
1,550
5,772
709
(1,319)
(3,549)
(3,034)
—
(125)
26,129
836
170,065
(27,448)
(10,079)
(3,797)
10,558
139,299
Investing activities
Net cash outflow on acquisitions
Cash acquired through acquisition and change in control (disposed of
through disposal)
Proceeds on disposal of interest in 10220396 Canada Inc.
Additions to property, plant and equipment
Additions to intangible assets
Proceeds on disposal of property, plant and equipment
Cash flows (used in) provided by investing activities
6
(261,713)
—
6 & 7
17
13
14
14,820
—
(8,670)
(3,988)
1,131
(258,420)
(131)
7,500
(6,439)
(324)
6,465
7,071
Page 11
MTY Food Group Inc.
Consolidated statements of cash flows (continued)
Years ended November 30, 2022 and 2021
(In thousands of Canadian dollars)
Financing activities
Issuance of long-term debt
Repayment of long-term debt
Net lease payments
Shares repurchased and cancelled
Capitalized financing costs
Dividends paid to non-controlling shareholders of subsidiaries
Repayment of long-term debt in business acquisition
Dividends paid
Cash flows provided by (used in) financing activities
Net (decrease) increase in cash
Effect of foreign exchange rate changes on cash
Cash, beginning of year
Cash, end of year
Notes
2022
$
2021
$
33
33
12
22
33
6
275,626
(80,214)
(18,960)
(14,618)
(1,817)
(403)
(33,800)
(20,518)
105,296
(10,327)
8,575
61,231
59,479
—
(102,238)
(15,354)
(2,184)
(665)
—
—
(9,141)
(129,582)
16,788
141
44,302
61,231
The accompanying notes are an integral part of the consolidated financial statements.
Page 12
MTY Food Group Inc.
Table of contents
Independent Auditor’s Report
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
Description of the business
Basis of preparation
Accounting policies
Critical accounting judgments and key sources of estimation uncertainty
Future accounting changes
Business acquisitions
Change in control
Accounts receivable
Inventories
Assets held for sale
Loans and other receivables
Leases
Property, plant and equipment
Intangible assets
Goodwill
Net impairment charge – property, plant and equipment and intangible assets
Disposal of interest in 10220396 Canada Inc.
Credit facility
Provisions
Deferred revenue and deposits
Long-term debt
Capital stock
Stock options
Net income per share
Financial instruments
Capital disclosures
Revenue
Operating expenses
Guarantee
Contingent liabilities
Income taxes
Segmented information
Statement of cash flows
Related party transactions
Subsequent events
2
14
14
15
27
30
31
35
37
37
38
38
38
42
43
44
44
46
47
47
48
49
49
50
51
51
55
56
57
57
57
58
59
61
62
63
Page 13
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
1. Description of the business
MTY Food Group Inc. (the “Company”) is a franchisor in the quick service and casual dining food industry. Its activities
consist of franchising and operating corporate-owned locations as well as the sale of retail products under a multitude
of banners. The Company also operates a distribution center and a food processing plant, both of which are located
in the province of Quebec.
The Company is incorporated under the Canada Business Corporations Act and is listed on the Toronto Stock
Exchange (“TSX”). The Company’s head office is located at 8210, Trans-Canada Highway, Ville Saint-Laurent,
Quebec.
2. Basis of preparation
The consolidated financial statements (“financial statements”) have been prepared on the historical cost basis except
for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting
period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these financial statements is determined on such a basis, except for:
share-based payment transactions, that are within the scope of International Financial Reporting Standards
(“IFRS”) 2, Share-based Payment;
leasing transactions, that are within the scope of IFRS 16, Leases; and
measurements that have some similarities to fair value but are not fair value, such as net realizable value in
International Accounting Standards (“IAS”) 2, Inventories, or value in use in IAS 36, Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the
fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
The financial statements are presented in Canadian dollars, which is the functional currency of the Company, and
tabular amounts are rounded to the nearest thousand ($000) except when otherwise indicated.
Statement of compliance
The Company’s financial statements have been prepared in accordance with IFRS as issued by the International
Accounting Standard Board (“IASB”).
These financial statements were authorized for issue by the Board of Directors on February 15, 2023.
The accounting policies set out below have been applied consistently to all periods presented in the consolidated
financial statements.
Page 14
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3. Accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including
special purpose entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
Principal subsidiaries are as follows:
Principal subsidiaries
MTY Franchising Inc.
MTY Franchising USA, Inc.
Kahala Brands Inc.
BF Acquisition Holdings, LLC
Built Franchise Systems, LLC
CB Franchise Systems, LLC
Papa Murphy’s Holdings Inc.
BBQ Holdings, Inc. (Note 6)
11554891 Canada Inc. (1)
9974644 Canada Inc.
Percentage of equity interest
2022
2021
%
100
100
100
100
100
100
100
100
70
65
%
100
100
100
100
100
100
100
–
70
65
(1) On December 3, 2021, the Company gained control over its 70% interest
in 11554891 Canada Inc. – see Note 7.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights
in an investee are sufficient to give it power, including:
•
the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote-
holders;
• potential voting rights held by the Company, other vote-holders or other parties;
•
rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to
direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the statements of income and other comprehensive income from the date the Company
gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Company's accounting policies.
All intercompany transactions, balances, revenue and expenses are eliminated in full on consolidation.
Page 15
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Changes in the Company's ownership interests in existing subsidiaries
Changes in the Company's ownership interests in subsidiaries that do not result in the Company losing control over
the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company's interests and the
non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognized directly in equity and attributed to owners of the Company.
When the Company loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and
any non-controlling interests. All amounts previously recognized in other comprehensive income (loss) in relation to
that subsidiary are accounted for as if the Company had directly disposed of the related assets or liabilities of the
subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by
applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost
is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9, Financial Instruments:
Recognition and Measurement when applicable, or the cost on initial recognition of an investment in an associate or
a joint venture.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value. This is calculated as the sum, as of the acquisition date, of the fair values of
the assets transferred by the Company and liabilities incurred by the Company to the former owners of the acquiree
in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value,
except for deferred tax assets or liabilities, which are recognized and measured in accordance with IAS 12, Income
Taxes.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over
the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in
profit or loss as a bargain purchase gain.
Non-controlling interest are present ownership interests and entitle their holders to a proportionate share of the
Company’s net assets in the event of liquidation. These may be initially measured either at fair value or at the non-
controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The
choice of measurement basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Company in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair
value and included as part of the consideration transferred in a business combination. Changes in the fair value of the
contingent consideration that qualify as “measurement period” adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date.
Page 16
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Business combinations (continued)
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent
reporting dates in accordance with IFRS 9 or IAS 37, Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss being recognized in profit or loss.
When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is
remeasured at fair value at the acquisition date (i.e. the date when the Company obtains control) and the resulting
gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognized in other comprehensive income (loss) are reclassified to profit or loss where
such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted retrospectively during the measurement period (see above), or additional
assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at
the acquisition date that, if known, would have affected the amounts recognized at that date.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Where goodwill forms part of a cash-generating unit (“CGU”) and part of the operation within the unit is disposed of,
the goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based
on the relative values of the operation and the portion of the CGU retained.
Revenue recognition
The Company’s accounting policies are summarized below:
Revenue from franchise locations
i)
ii)
iii)
iv)
v)
vi)
vii)
Royalties are based either on a percentage of gross sales as reported by the franchisees or on a fixed
monthly fee. They are recognized on an accrual basis in accordance with the substance of the relevant
agreement, as they are earned.
Initial franchise fees are recognized on a straight-line basis over the term of the franchise agreement as
the performance obligation relating to franchise rights is fulfilled. Amortization begins once the restaurant
has opened.
Upfront fees related to master license agreements are recognized over the term of the master license
agreements on a straight-line basis.
Renewal fees and transfer fees are recognized on a straight-line basis over the term of the related
franchise agreement.
Restaurant construction and renovation revenue is recognized when the construction and renovation are
completed.
The Company earns rent revenue on certain leases it holds and sign rental revenue. Rental income that
is not included in the measurement of the finance lease receivable under IFRS 16 is recognized on a
straight-line basis over the term of the relevant lease.
The Company recognizes breakage income proportionately as each gift card is redeemed, based on the
historical redemption pattern of the gift cards. The Company also charges various program fees to its
franchisees as gift cards are redeemed. Notably, this does not apply to gift card liabilities assumed in a
business acquisition, which are accounted for at fair value at the acquisition date.
Page 17
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Revenue recognition (continued)
Revenue from franchise locations (continued)
viii)
The Company receives considerations from certain suppliers. Fees are generally earned based on the
value of purchases during the year. Agreements that contain an initial upfront fee, in addition to ongoing
fees, are recognized on a straight-line basis over the term of the respective agreement. Supplier
contributions are recognized as revenue as they are earned and are recorded in other franchising
revenue.
Revenue from food processing, distribution and retail
Food processing, distribution and retail revenue is recognized when the customer takes control of the product,
which usually occurs upon shipment or receipt of the goods by the customer, depending on the specific terms of
the agreement.
Revenue from promotional fund contributions
Promotional fund contributions are based on a percentage of gross sales as reported by the franchisees.
Corresponding promotional fund transfers to the promotional funds are reported separately and included in
accounts payable and accrued liabilities. The Company is not entitled to retain these promotional fund payments
received and is obligated to transfer these funds to be used solely for use in promotional and marketing-related
costs for specific restaurant banners. The Company sometimes charges a fee for the administration of the
promotional funds. The combined amount payable resulting from the promotional fund reserves amounts to a
surplus of $33,819 (2021 – surplus of $30,481). These amounts are included in Accounts payable and accrued
liabilities.
Revenue from corporate-owned locations
Revenue from corporate-owned locations is recorded when goods are delivered to customers.
Contract cost asset
The Company recognizes incremental costs of obtaining a contract as an asset if they are expected to be recoverable,
unless their amortization period would be less than one year, in which case a practical expedient is used to expense
them as incurred. The costs are amortized to operating expenses over the term of the related franchise agreement.
Assets held for sale
Judgment is required in determining whether an asset meets the criteria for classification as “assets held for sale” in
the consolidated statements of financial position. Criteria considered by management include the existence of and
commitment to a plan to dispose of the assets, the expected selling price of the assets, the expected timeframe of the
completion of the anticipated sale and the period of time any amounts have been classified within assets held for sale.
The Company reviews the criteria for assets held for sale each period and reclassifies such assets to or from this
category as appropriate. In addition, there is a requirement to evaluate and record assets held for sale at the lower of
their carrying value and fair value less costs to sell.
Leasing
The Company enters into leases for franchised and corporately-owned locations, offices, and equipment in the normal
course of business.
The Company as lessee
The Company recognizes lease liabilities with corresponding right-of-use assets, except for short-term leases and
leases of low value assets, which are expensed on a straight-line basis over the lease term. The Company
recognizes depreciation of right-of-use assets and interest on lease liabilities. Under IFRS 16, right-of-use assets
are tested for impairment in accordance with IAS 36.
Page 18
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Leasing (continued)
The Company as lessor
When the Company enters into a sublease arrangement as an intermediate lessor, the Company accounts for the
head lease and the sublease as two separate contracts. The Company is required to classify the sublease as a
finance or operating lease by reference to the right-of-use asset arising from the head lease. For finance subleases,
the Company derecognizes the right-of-use asset relating to the head lease that is transferred to the sublessee
and recognizes a finance lease receivable in the sublease. As the intermediate lessor, the Company retains the
lease liability on the head lease in its consolidated statement of financial position. During the term of the sublease,
the Company recognizes both finance income on the sublease and interest expense on the head lease.
Government grants
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company
recognises expenses for the related costs for which the grants are intended to compensate.
Functional and presentation currency
These financial statements are presented using the Company’s functional currency, which is the Canadian dollar.
Each entity of the Company determines its own functional currency, and the financial statement items of each entity
are measured using that functional currency. Functional currency is the currency of the primary economic environment
in which the entity operates.
The assets and liabilities of a foreign operation with a functional currency different from that of the Company are
translated into the presentation currency using the exchange rate in effect on the reporting date. Revenue and
expenses are translated into the presentation currency using the average exchange rate for the period. Exchange
differences arising from the translation of a foreign operation are recognized in reserves. Upon complete or partial
disposal of the investment in the foreign operation, the foreign currency translation reserve or a portion of it will be
recognized in the statement of income (loss) in other income (charges).
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year and adjustments to prior year provisions. Taxable
profit differs from profit as reported in the consolidated statement of income (loss) because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible. The
Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally
recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such deferred tax assets and
liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only recognized to the extent that it is
probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
Page 19
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Taxation (continued)
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in
other comprehensive income (loss) or directly in equity, in which case, the current and deferred tax are also
recognized in other comprehensive income (loss) or directly in equity respectively. Where current tax or deferred
tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the
business combination.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are
stated in the consolidated statement of financial position at their historical costs less accumulated depreciation
(buildings) and accumulated impairment losses. Cost includes expenditures that are directly attributable to the
acquisition of the asset, including any costs directly attributable to bringing the asset to a working condition for its
intended use.
Equipment, leasehold improvements, rolling stock and computer hardware are stated at cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is recognized so as to write off the cost or valuation of assets (other than land) less their residual values
over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation
methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a
prospective basis.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognized in profit or loss.
Depreciation is based on the following terms:
Straight-line
Buildings
Equipment
Straight-line
Leasehold improvements Straight-line
Straight-line
Rolling stock
Straight-line
Computer hardware
25 to 50 years
Three to 10 years
Lesser of the term of the lease or useful life
Five to seven years
Three to seven years
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses, if applicable. Amortization is recognized on a straight-line basis
over their estimated useful lives. The estimated useful lives and amortization methods are reviewed at the end of
each year, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets
with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if
applicable.
Page 20
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Intangible assets (continued)
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are initially
recognized at their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets having a finite life acquired in a business combination are
reported at cost less accumulated amortization and accumulated impairment losses, if applicable, on the same
basis as intangible assets that are acquired separately. Intangible assets having an indefinite life are not amortized
and are therefore carried at cost less accumulated impairment losses, if applicable.
Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is
derecognized.
The Company reviews each reporting period the amortization periods of its intangible assets with finite useful lives.
The Company also reviews each reporting period the useful lives of its intangible assets with indefinite useful lives to
determine whether events and circumstances continue to support an indefinite useful life assessment for those assets.
The Company currently carries the following intangible assets on its books:
Franchise rights and master franchise rights
The franchise rights and master franchise rights acquired through business combinations were recognized at fair
value, based on the excess earnings method using discounted cash flow models. In determining the fair value of
franchise rights and master franchise rights, the Company uses key assumptions such as projected operating cash
flows and pre-tax discount rates. The franchise rights and master franchise rights are generally amortized on a straight-
line basis over the terms of the agreements, which typically range between 10 to 20 years.
Step-in rights
Step-in rights are the rights of the Company to take over the premises and associated lease of a franchised location
in the event the franchise is in default of payments. These are acquired through business combinations and are
recognized at their fair value at the time of the acquisition. They are amortized over the term of the franchise
agreement.
Trademarks
Trademarks acquired through business combinations were recognized at their fair value at the time of the acquisition,
based on the relief from royalty method using discounted cash flow models, and are not amortized. In determining the
fair value of trademarks, the Company uses key assumptions such as projected system sales, discount rates and
royalty rates. Trademarks were determined to have an indefinite useful life based on their strong brand recognition
and their ability to generate revenue through changing economic conditions with no foreseeable time limit.
Other
Included in other intangible assets is primarily purchased software and liquor licences, which are being amortized over
their expected useful life on a straight-line basis.
Page 21
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Impairment and reversal of impairment of long-lived assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU
to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets
are also allocated to individual CGU, or otherwise they are allocated to the smallest group of CGUs for which a
reasonable and consistent allocation basis can be identified. A majority of the Company’s intangible assets do not
have cash inflows independent of those from other assets and as such are tested within their respective CGU. For the
purpose of the franchise and master franchise rights and trademarks, the smallest group of CGUs for which a
reasonable and consistent allocation basis can be identified is the brand level and constitutes the lowest level at which
an asset or group of assets has the possibility of generating cash inflows.
Intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an
indication that the asset may be impaired. Franchise rights and master franchise rights are tested annually as part of
the CGU annual testing or whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated projected operating cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of projected operating cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount
of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or
loss. The Company does not reduce the carrying value of an asset below the highest of its fair value less cost of
disposal and its value in use.
At the end of each reporting period, the Company reviews whether there is any indication that the events and
circumstances which led to prior years’ impairment losses for its franchise rights, master franchise rights and
trademarks may no longer exist. If any such indication exists, the Company shall estimate the recoverable amount of
that asset.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior
years. A reversal of an impairment loss is recognized immediately in profit or loss.
Impairment of goodwill
For the purposes of impairment testing, goodwill is allocated to the CGU or a group of CGUs (“goodwill unit”) that are
considered to represent the lowest level within the group at which the goodwill is monitored for internal management
purposes. As at November 30, 2022, goodwill is allocated as follows:
Canada Goodwill Unit
US Goodwill Unit A
US Goodwill Unit B
US Goodwill Unit C
Goodwill unit description
A group of CGUs comprised of acquired brands in
Canada’s operating segment
A group of CGUs comprised of acquired brands in the
US & International operating segment, excluding the
Papa Murphy’s (“Papa Murphy’s”) and BBQ Holdings,
Inc. (“BBQ Holdings”) brands
One CGU comprised of Papa Murphy’s brand in the US
& International operating segment
A group of CGUs comprised of the BBQ Holdings brands
in the US & International operating segment
Page 22
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Impairment of goodwill (continued)
Goodwill and trademarks are tested for impairment annually as at August 31, or more frequently when there is an
indicator of impairment. If the recoverable amount of the goodwill unit is less than its carrying amount, the impairment
loss reduces the carrying amount of any goodwill allocated to the goodwill unit. Any impairment loss for goodwill is
recognized directly in profit or loss in the consolidated statement of income (loss). An impairment loss recognized for
goodwill is not reversed in subsequent periods. The Company performed its annual impairment test for US Goodwill
Unit C as at November 30, 2022 due to the timing of the acquisition.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated projected operating cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of projected operating cash flows have not been adjusted.
Cash and restricted cash
Cash and restricted cash includes cash on hand and short-term investments, if any, with maturities upon acquisition
of generally three months or less or that are redeemable at any time at full value and for which the risk of a change in
value is not significant. As at November 30, 2022, cash and restricted cash included $680 of restricted cash (2021 –
$462) that is required as part of guarantees on certain lease commitments.
Inventories
Inventories are measured at the lower of cost and net realizable value. Costs of inventories are determined on a first-
in-first-out basis and include acquisition costs, conversion costs and other costs incurred to bring inventories to their
present location and condition. The cost of finished goods includes a pro-rata share of production overhead based on
normal production capacity.
In the normal course of business, the Company enters into contracts for the construction and sale of franchise
locations. The related work in progress inventory includes all direct costs relating to the construction of these locations
and is recorded at the lower of cost and net realizable value.
Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Financial instruments
Classification of financial assets
Financial assets are recognized when the Company becomes a party to the contractual provisions of the instrument.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets (other than financial assets at fair value through profit or loss, or “FVTPL”) are added to or
deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets at FVTPL are recognized immediately in profit or loss.
On initial recognition, the Company classifies its financial assets as subsequently measured at either amortized cost,
fair value through other comprehensive income (“FVOCI”) or FVTPL, depending on its business model for managing
the financial assets and the contractual cash flow characteristics of the financial assets.
A financial asset is subsequently measured at amortized cost if the asset is held within a business model whose
objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial asset
give rise, on specified dates, to cash flows that are solely payments of principal and interest. Unless a financial asset
is designated at FVTPL, a financial asset is subsequently measured at FVOCI if the asset is held within a business
model in order to collect contractual cash flows and sell financial assets and the contractual terms of the instrument
give rise, on specified dates, to cash flows that are solely payments of principal and interest. Financial assets that do
not meet either the contractual cash flow characteristics of solely payments of principal and interest or the business
model of held to collect or held to collect and sell are measured at FVTPL. Financial assets measured at FVTPL and
any subsequent changes therein are recognized in net income.
Page 23
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Financial instruments (continued)
Classification of financial assets (continued)
The Company currently classifies its cash, accounts receivable and loans receivable as assets measured at amortized
cost.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as
at FVTPL.
Impairment of financial assets
The Company uses the simplified expected credit-loss (“ECL”) model for its trade receivables, as permitted by IFRS
9. The simplified approach under IFRS 9 permits the use of the lifetime expected loss provision for all trade receivables
and also incorporates forward-looking information. Lifetime ECL represents the ECL that will result from all probable
default events over the expected life of a financial instrument.
For its loans receivable balance carried at amortized cost, the Company has applied the general ECL model. Unlike
the simplified approach, the general ECL model depends on whether there has been a significant increase in credit
risk. The Company considers the probability of default upon initial recognition of the financial asset and whether there
has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether
there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at
the reporting date with the risk of default as at the date of initial recognition of the financial asset.
A significant increase in credit risk is assessed based on changes in the probability of default since initial recognition
along with borrower-specific qualitative information, or when loans are more than 30 days past due. Loans are
considered impaired and in default when they are 90 days past due or there is sufficient doubt regarding the ultimate
collectability of principal and/or interest. Loans that are 180 days past due are written down to the present value of the
expected future cash flows. Impairment under the IFRS 9 general ECL model is assessed on an individual basis. In
assessing the risk of default, the Company also incorporates available reasonable and supportive forward-looking
information.
When credit risk is assessed as being low or when there has not been a significant increase in credit risk since initial
recognition, the ECL is based on a 12-month ECL which represents the portion of lifetime ECL expected to occur from
default events that are possible within 12 months after the reporting date. If a significant increase in credit risk has
occurred throughout a reporting period, impairment is based on lifetime ECL.
Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the
sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other
comprehensive income (loss) and accumulated in equity is recognized in profit or loss.
Deferred consideration receivable
The Company’s deferred consideration receivable consists of a deferred consideration in conjunction with the sale of
its interest in 10220396 Canada Inc. The deferred consideration is a financial instrument measured at amortized cost
and is included in Loans and other receivables.
Page 24
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Financial instruments (continued)
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged,
cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the
consideration paid and payable is recognized in profit or loss.
Classification of financial liabilities
Financial liabilities are initially recorded at fair value and subsequently measured at amortized cost using the effective
interest rate method with gains and losses recognized in net income in the period that the liability is derecognized,
except for financial liabilities classified as FVTPL. These financial liabilities, including derivative liabilities and certain
obligations, are subsequently measured at fair value with changes in fair value recorded in net income in the period
in which they arise. Financial liabilities designated as FVTPL are recorded at fair value with changes in fair value
attributable to changes in the Company’s own credit risk recorded in net income.
Financial liabilities classification:
Accounts payable and accrued liabilities
Revolving credit facility
Non-interest-bearing contract cancellation fees
and holdbacks
Contingent consideration related to the acquisition
of Küto Comptoir à Tartares
Contingent consideration related to the 70%
interest in 11554891 Canada Inc.
Non-controlling interest buyback obligation
Obligation to repurchase 11554891 Canada Inc.
partner
Provisions
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTPL
FVTPL
FVTPL
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The Company makes assumptions and estimations based on its current knowledge of future disbursements it will
have to make in connection with various events that have occurred in the past and for which the amount to be
disbursed and the timing of such disbursement are uncertain at the date of producing its financial statements. This
includes provisions for onerous contracts, litigations and disputes and contingencies. The amount recognized as a
provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting
period, taking into account the risks and uncertainties surrounding 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 when the effect is material. This is recorded in Cost of goods sold and rent (Note 28)
on the consolidated statement of income.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount
of the receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous
contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic benefits expected to be received from the contract.
Page 25
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Provisions (continued)
Litigation, disputes and closed stores
Provisions for the expected cost of litigation, disputes and the cost of settling leases for closed stores, with the
exception of lease liabilities already recorded pursuant to IFRS 16, are recognized when it becomes probable the
Company will be required to settle the obligation, at management’s best estimate of the expenditure required to
settle the Company’s obligation.
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date.
At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount
that would be recognized in accordance with IAS 37 and the amount initially recognized less cumulative
amortization recognized, if any.
Gift card and loyalty program liabilities
Gift card liability represents liabilities related to unused balances on reloadable payment cards. Loyalty program
liabilities represent the dollar value of the loyalty points earned and unused by customers.
The Company’s various franchised and corporate-owned locations, in addition to third-party companies, sell gift cards
to be redeemed at the Company’s corporate and franchised locations for food and beverages only. Proceeds from the
sale of gift cards are included in gift card liability until redeemed by the gift cardholder as a method of payment for
food and beverage purchases.
Due to the inherent nature of gift cards, it is not possible for the Company to determine what portion of the gift card
liability will be redeemed in the next 12 months and, therefore, the entire unredeemed gift card liability is considered
to be a current liability.
Management is required to make certain assumptions in both the prorated recognition based on redemption pattern
and remoteness recognition of gift card breakage. The significant estimates are breakage rate and the redemption
patterns.
Deferred revenue and deposits
The Company has deferred revenue and deposits for amounts received for which the service or sale of goods
associated with these revenues have not yet been rendered. These are comprised mainly of franchise fee deposits,
unearned rent, and supplier contributions. Revenues on these are recorded once the service or contract terms have
been met and the services or goods have been delivered. The Company recognizes certain supplier contribution
revenues based on estimated considerations to be received from suppliers. These estimates are based on historical
patterns of purchase and earned revenues.
Share-based payment arrangements
The Company measures stock options granted to employees that vest in specified installments over the service period
based on the fair value of each tranche on the grant date by using the Black-Scholes option-pricing model. Based on
the Company’s estimate of equity instruments that will eventually vest, a compensation expense is recognized over
the vesting period applicable to the tranche with a corresponding increase to contributed surplus. Details regarding
the determination of the fair value of equity-settled share-based transactions are set out in Note 23.
At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative
expense reflects the revised estimate, with a corresponding adjustment in contributed surplus. When the stock options
are exercised, share capital is credited by the sum of the consideration paid and the related portion previously recorded
in contributed surplus.
Page 26
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Operating segments
An operating segment is a distinguishable component of the Company that engages in business activities from which
it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the
Company’s other components, and for which separate financial information is available. Segment disclosures are
provided for the Company’s operating segments (Note 32). The operating segments are determined based on the
Company’s management and internal reporting structure. All operating segments’ operating results are regularly
reviewed by the Chief Operating Officers (“COOs”) to make decisions on resources to be allocated to the segment
and to assess its performance.
Joint arrangements
Joint arrangements are arrangements in which the Company exercises joint control as established by contracts
requiring unanimous consent for decisions about the activities that significantly affect the arrangement’s returns. When
the Company has the rights to the net assets of the arrangement, the arrangement is classified as a joint venture and
is accounted for using the equity method. When the Company has rights to the assets and obligations for the liabilities
relating to an arrangement, the arrangement is classified as a joint operation and the Company accounts for each of
its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint
operation.
Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted
thereafter to recognize the Company’s share of the profits or losses and movements in other comprehensive income
of the investee. When the Company’s share of losses in a joint venture equals or exceeds its interests in the joint
ventures, the Company does not recognize further losses unless it will incur obligations or make payments on behalf
of the joint ventures.
Unrealized gains resulting from transactions with joint ventures are eliminated, to the extent of the Company’s share
in the joint venture. For sales of products or services from the Company to its joint ventures, the elimination of
unrealized profits is considered in the carrying value of the investment in equity-accounted investees in the
consolidated statements of financial position and in the share in profit or loss of equity-accounted investees in the
consolidated statements of income.
4. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in Note 3, management is required to
make judgments and to make estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
The following are the critical judgments, apart from those involving estimations, that management has made in the
process of applying the Company’s accounting policies and that have the most significant effect on the amounts
recognized in the financial statements.
Impairment of long-lived assets
The Company assesses whether there are any indicators of impairment for all long-lived assets at each reporting
period date. In addition, management is required to use judgment in determining the grouping of assets to identify
a CGU; the determination is done based on management’s best estimation of what constitutes the lowest level at
which an asset or group of assets has the possibility of generating cash inflows.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
end of the year ended November 30, 2022, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
Page 27
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
4. Critical accounting judgments and key sources of estimation uncertainty (continued)
Key sources of estimation uncertainty (continued)
Business combinations
For business combinations, the Company must make assumptions and estimates to determine the purchase price
accounting of the business being acquired. To do so, the Company must determine, as of the acquisition date, the
fair value of the identifiable assets acquired, including such intangible assets as franchise rights and master
franchise rights, trademarks, step-in rights and liabilities assumed. Among other things, the determination of these
fair market values involves the use of key assumptions such as projected system sales and operating cash flows,
discount rates and royalty rates. Goodwill is measured as the excess of the fair value of the consideration
transferred including the recognized amount of any non-controlling interest in the acquiree over the net recognized
amount of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date. These
assumptions and estimates have an impact on the asset and liability amounts recorded in the statement of financial
position on the acquisition date. In addition, the estimated useful lives of the acquired amortizable assets, the
identification of intangible assets and the determination of the indefinite or finite useful lives of intangible assets
acquired will have an impact on the Company’s future profit or loss.
Impairment
The Company uses judgment in determining the grouping of assets to identify its CGUs for purposes of testing for
impairment of property, plant and equipment, right-of-use assets, goodwill, trademarks and franchise rights.
In testing for impairment of property, plant and equipment and right-of-use assets, the Company determined that
its CGUs mostly comprise of individual stores or groups of stores and the assets are thereby allocated to each
CGU.
In testing for impairment, goodwill acquired in a business combination is allocated to the CGUs that are expected
to benefit from the synergies of the business combination. In testing for impairment, trademarks and franchise
rights are allocated to the CGUs to which they relate. Furthermore, at each reporting period, judgment is used in
determining whether there has been an indication of impairment, which would require the completion of a quarterly
impairment test, in addition to the annual requirement.
Impairment of property, plant and equipment and right-of-use assets
The Company performs an impairment test of its property, plant and equipment and right-of-use assets when
there is an indicator of impairment. The recoverable amounts of the Company’s corporate store assets are
generally estimated based on fair value less cost of disposal as this was determined to be higher than their
value in use. The fair value less cost of disposal of corporate stores is generally determined by estimating the
liquidation value of the restaurant equipment and any costs associated with exiting the lease.
During the years ended November 30, 2022 and 2021, the Company recognized impairment charges on its
property, plant and equipment (Note 16). The total impairment on property, plant and equipment of $535 (2021
– $131) represents a write-down of the carrying value of the leasehold improvements and equipment to their
fair value less cost of disposal, which was higher than their value in use.
During the years ended November 30, 2022 and 2021, the Company also recognized impairment charges on
its right-of-use assets (Note 12) of $969 (2021 – $1,550).
Impairment of franchise rights and trademarks
The Company performs at least annually an impairment test of its trademarks. The recoverable amounts of the
Company’s assets are generally estimated based on value in use calculations using a discounted cash flow
model as this was determined to be higher than fair value less cost of disposal.
Discount rates are based on pre-tax rates that reflect the current market assessments, taking the time value of
money and the risks specific to the CGU into account.
Page 28
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
4. Critical accounting judgments and key sources of estimation uncertainty (continued)
Key sources of estimation uncertainty (continued)
Impairment (continued)
Impairment of franchise rights and trademarks (continued)
During the year ended November 30, 2022, the Company recognized impairment charges of $13,381 (2021 –
net impairment charge of $5,772 comprised of an impairment charge of $15,135 partially offset by a reversal
of impairment charge of $9,363) on its franchise rights and trademarks (Note 16) representing a write-down of
the carrying value to the recoverable amount. The fair value was determined using key assumptions such as
discount rates and projected operating cash flows. The fair value is classified as level 3 in the fair value
hierarchy. During the year ended November 30, 2021, the Company also carried out a review of the
recoverable amount allocated to the intangible assets associated with the “Houston Avenue Bar & Grill” and
“Industria Pizza + Bar” brands, where the recoverable amount was measured at fair value less costs of
disposal.
These calculations take into account the Company’s best estimate of projected operating cash flows. Projected
operating cash flows are estimated based on a multiyear extrapolation of the most recent historical actual
results or budgets and a terminal value calculated by discounting the final year in perpetuity.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount in use of the
goodwill unit to which goodwill has been allocated. The value in use calculation requires management to
estimate the projected operating cash flows expected to arise from the goodwill unit and a suitable discount
rate in order to calculate present value.
During the years ended November 30, 2022 and 2021, no impairment charge on goodwill was required.
Impact of COVID-19
During the year ended November 30, 2022, the COVID-19 pandemic continued to impact the markets in which MTY
and its franchise partners and suppliers operate. The first half of the year saw Canada continue to be impacted by the
continuation of government-imposed restrictions, such as restrictions on dine-in guests, reduced operating hours
and/or temporary closures. However, over the following months such restrictions were gradually eased, with most
government-imposed restrictions lifted in both Canada and the US by the end of the second quarter. The continuing
vaccination campaigns, including the administration of boosters and the gradual expansion of the coverage of the
population, allowed the Canadian and US markets to mostly remain open in the second half of the year, with small
disruptions in certain areas. Although there is uncertainty surrounding the effects that the lifting of restrictions will have
on the number of infections and the potential emergence of new variants, MTY’s network currently operates with no
restrictions.
As a result of the continued and uncertain economic and business impacts of the COVID-19 pandemic, the Company
continues to monitor the estimates, judgments and assumptions used in the financial statements. For the year ended
November 30, 2022, the Company determined that there were no specific triggers for impairment assessments
attributable to COVID-19. Accordingly, the Company did not record or reverse impairment charges on its property,
plant and equipment, intangible assets, and goodwill in the period attributable to COVID-19. These estimates,
judgments and assumptions are subject to change.
Page 29
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
5.
Future accounting changes
A number of new standards, interpretations and amendments to existing standards were issued by the IASB that are
not yet effective for the year ended November 30, 2022 and have not been applied in preparing these consolidated
financial statements.
The following amendments may have a material impact on the consolidated financial statements of the Company:
Standard
IAS 37, Provisions, Contingent Liabilities and
Contingent Assets
IAS 1, Presentation of Financial Statements
IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors
IAS 12, Income Taxes
IFRS 16, Leases
Issue date
Effective date for
the Company
May 2020
January 2020,
July 2020, February
2021 & October
2022
December 1, 2022
December 1, 2024
December 1, 2023
February 2021
May 2021
December 1, 2023
September 2022 December 1, 2024
Impact
In assessment
In assessment
In assessment
In assessment
In assessment
IAS 37, Provisions, Contingent Liabilities and Contingent Assets
In May 2020, the IASB published Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) amending
the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a
contract is onerous. The changes in Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) specify
that the “cost of fulfilling” a contract comprises the “costs that relate directly to the contract”. Costs that relate directly
to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly
to fulfilling contracts. The amendments to IAS 37 are effective for annual reporting periods beginning on or after
January 1, 2022. Earlier application is permitted. The Company will adopt the amendments on December 1, 2022.
IAS 1, Presentation of Financial Statements
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
providing a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements
in place at the reporting date. The amendments in Classification of Liabilities as Current or Non-current (Amendments
to IAS 1) affect only the presentation of liabilities in the statement of financial position, not the amount or timing of
recognition of any asset, liability income or expenses, or the information that entities disclose about those items.
In July 2020, the IASB published Classification of Liabilities as Current or Non-current – Deferral of Effective Date
(Amendment to IAS 1) deferring the effective date of the January 2020 amendments to IAS 1 by one year.
In February 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2) with amendments that are intended to help preparers in deciding which accounting policies to disclose
in their financial statements. An entity is now required to disclose its material accounting policy information instead of
its significant accounting policies and several paragraphs are added to IAS 1 to explain how an entity can identify
material accounting policy information and to give examples of when accounting policy information is likely to be
material. The amendments also clarify that: accounting policy information may be material because of its nature, even
if the related amounts are immaterial; accounting policy information is material if users of an entity’s financial
statements would need it to understand other material information in the financial statements; and if an entity discloses
immaterial accounting policy information, such information shall not obscure material accounting policy information.
In October 2022, the IASB published Non-current Liabilities with Covenants (Amendments to IAS 1) to clarify how
conditions with which an entity must comply within twelve months after the reporting period affect the classification of
a liability. The amendments modify the requirements introduced by Classification of Liabilities as Current or Non-
current on how an entity classifies debt and other financial liabilities as current or non-current in particular
circumstances: only covenants with which an entity is required to comply on or before the reporting date affect the
classification of a liability as current or non-current. In addition, an entity has to disclose information in the notes that
enables users of financial statements to understand the risk that non-current liabilities with covenants could become
repayable within twelve months. The amendments also defer the effective date of the 2020 amendments to January
1, 2024.
Page 30
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
5.
Future accounting changes (continued)
IAS 1, Presentation of Financial Statements (continued)
The amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2024. Earlier
application is permitted. The Company will adopt the amendments on December 1, 2024.
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8) with amendments that
are intended to help entities to distinguish between accounting policies and accounting estimates. The changes to IAS
8 focus entirely on accounting estimates and clarify that: the definition of a change in accounting estimates is replaced
with a definition of accounting estimates; entities develop accounting estimates if accounting policies require items in
financial statements to be measured in a way that involves measurement uncertainty; a change in accounting estimate
that results from new information or new developments is not the correction of an error; and a change in an accounting
estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future
periods. The amendments to IAS 8 are effective for annual reporting periods beginning on or after January 1, 2023.
Earlier application is permitted. The Company will adopt the amendments on December 1, 2023.
IAS 12, Income Taxes
In May 2021, the IASB published Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
(Amendments to IAS 12) that clarifies how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The main change is an exemption from the initial recognition exemption, which does
not apply to transactions in which both deductible and taxable temporary differences arise on initial recognition that
result in the recognition of equal deferred tax assets and liabilities. The amendments to IAS 12 are effective for annual
reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The Company will adopt the
amendments on December 1, 2023.
IFRS 16, Leases
In September 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) with
amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the
requirements in IFRS 15, Revenue from Contracts with Customers, to be accounted for as a sale. The amendments
require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not
recognise any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent
a seller-lessee from recognising in profit or loss any gain or loss relating to the partial or full termination of a lease.
The amendments to IFRS 16 are effective for annual reporting periods beginning on or after January 1, 2024. Earlier
application is permitted. The Company will adopt the amendments on December 1, 2024.
6. Business acquisitions
I) BBQ Holdings (2022)
On September 27, 2022, the Company completed the acquisition of all of the issued and outstanding common shares
of BBQ Holdings. BBQ Holdings is a franchisor and operator of casual and fast casual dining restaurants across 37
states in the US, Canada, and the United Arab Emirates. As of the date of the acquisition, BBQ Holdings was operating
198 franchised and 103 corporate-owned restaurants under nine different brands. The purpose of the transaction was
to diversify the Company’s range of offerings in the US as well as to bring proficiency in operating corporate-owned
restaurants.
The transaction included a purchase consideration totaling $250,443 (US$182,458), repayment of long-term debt of
$33,800 (US$24,625) and early cash settlement of stock options and restricted stock units of $13,951 (US$10,164),
as detailed below. The resulting aggregate cash outflow in connection with the BBQ Holdings acquisition was $284,243
(US$207,083).
The Company has not yet completed its fair value assessment of all assets acquired and liabilities assumed in
connection with the BBQ Holdings acquisition. The most significant aspects remaining to be finalized relate to the
valuation of property, plant and equipment, franchise rights, trademarks, gift card liability and deferred income taxes.
Consequently, the table below presents management's preliminary assessment of the fair values of the assets
acquired and the liabilities assumed. The final determination of the fair values will be made within 12 months of the
acquisition date. Accordingly, the following values, including goodwill, are subject to change and such changes may
be material.
Page 31
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
6. Business acquisitions (continued)
I) BBQ Holdings (2022) (continued)
Consideration paid:
Cash
Amount paid for early settlement of options
Total consideration
Cash consideration paid
Repayment of long-term debt
Net consideration paid/cash outflow
The preliminary purchase price allocation is as follows:
Net assets acquired:
Current assets
Cash
Accounts receivable
Inventories
Income taxes receivable
Other assets
Prepaid expenses
Loans receivable
Property, plant and equipment
Right-of-use assets
Intangible assets – Franchise rights
Intangible assets – Trademarks
Intangible assets – Other
Goodwill (1)
Current liabilities
Accounts payable and accrued liabilities
Gift card liability
Current portion of deferred revenue
Current portion of lease liabilities
Long-term debt
Lease liabilities
Deferred income taxes
Other liabilities
Net purchase price
2022
$
250,443
13,951
264,394
250,443
33,800
284,243
2022
$
28,269
8,026
5,289
1,228
247
1,849
44,908
196
74,448
109,260
11,159
166,689
1,382
72,039
480,081
31,769
10,444
583
17,241
60,037
33,800
92,019
29,000
831
215,687
264,394
Page 32
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
6. Business acquisitions (continued)
I) BBQ Holdings (2022) (continued)
(1) Goodwill is deductible for tax purposes.
Total expenses incurred related to acquisition costs amounted to $4,781.
From September 27, 2022 to November 30, 2022, the Company’s consolidated statement of income included revenue
of $71,914 and net income of $2,149 attributable to BBQ Holdings.
The following unaudited pro forma information for the year ended November 30, 2022 represents the Company’s
results of operations as if the acquisition of BBQ Holdings had occurred on December 1, 2021. This pro forma
information does not purport to be indicative of the results that would have occurred for the period presented or that
may be expected in the future.
Revenue
Net income
II) Küto Comptoir à Tartares (2022)
2022
$
1,022,785
85,467
On December 1, 2021, the Company’s Canadian operations completed the acquisition of the assets of Küto Comptoir
à Tartares for a total consideration of $12,688. The purpose of the transaction was to diversify the Company’s range
of offering as well as to complement existing Company brands.
Consideration paid:
Purchase price
Contingent consideration
Working capital
Net purchase price
Contingent consideration
Holdback
Net consideration paid/cash outflow
2022
$
9,033
3,459
196
12,688
(3,459)
(250)
8,979
Page 33
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
6. Business acquisitions (continued)
II) Küto Comptoir à Tartares (2022) (continued)
The final purchase price allocation is as follows:
Net assets acquired:
Current assets
Inventories
Property, plant and equipment
Right-of-use assets
Intangible assets – Franchise rights
Intangible assets – Trademark
Intangible assets – Customer list
Goodwill (1)
Current liabilities
Accounts payable and accrued liabilities
Gift card liability
Current portion of lease liabilities
Lease liabilities
Net purchase price
2022
$
302
302
145
46
1,090
4,970
3,380
2,908
12,841
40
67
35
142
11
153
12,688
(1) Goodwill is deductible for tax purposes.
Total expenses incurred related to acquisition costs amounted to nil.
The purchase price allocation is final.
From December 1, 2021 to November 30, 2022, the Company’s consolidated statement of income included revenue
of $6,602 and net income of $1,730 attributable to Küto Comptoir à Tartares.
III) Other acquisition (2022)
On February 14, 2022, the Company’s Canadian operations completed the acquisition of the assets of a restaurant
located in the province of Quebec, for a total consideration of $2,450 (net cash outflow of $2,291). The amount
allocated to goodwill was $1,930. The purpose of the transaction was to operate the restaurant as a corporately-owned
restaurant until it can be converted into a franchise.
Page 34
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
7. Change in control
On December 3, 2021, the Company gained control of 11554891 Canada Inc., previously a joint venture, as a result
of a lapse of rights held by the minority shareholder that previously stopped the Company from controlling. Accordingly,
the Company now has control over 11554891 Canada Inc., which triggers its deemed acquisition and thus fully
consolidates 11554891 Canada Inc. starting December 3, 2021. There is no cash consideration for the acquisition
and there is no change of participation of each partner in 11554891 Canada Inc.
The Company has an obligation to repurchase the interest of the minority shareholder of 11554891 Canada Inc. Under
IFRS, this option gives the equity participation of this minority shareholder the characteristics of liability more than
equity. As such, this minority shareholder’s participation is classified in the current portion of long-term debt (Note 21).
The change in control provides for the revaluation of the previously held interest to its fair market value. The Company
remeasured its pre-existing equity interest of 70% to its fair value of $23,142. As a result, the Company recorded a
loss of $2,769 in its consolidated statement of income for the year ended November 30, 2022.
Enterprise value of 11554891 Canada Inc.
Liabilities assumed and settlement of pre-existing relationships
Fair value of net assets acquired
2022
$
37,093
(13,896)
23,197
Page 35
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
7. Change in control (continued)
The final purchase price allocation is as follows:
Net assets transferred:
Current assets
Cash
Accounts receivable
Inventories
Current portion of finance lease receivables
Income taxes receivable
Other assets
Prepaid expenses and deposits
Finance lease receivables
Property, plant and equipment
Right-of-use assets
Intangible assets – Franchise rights
Intangible assets – Trademarks
Goodwill (1)
Current liabilities
Accounts payable and accrued liabilities
Gift card liability
Current portion of lease liabilities
Long-term debt
Lease liabilties
Deferred income taxes
Deferred revenue
(1) Goodwill is deductible for tax purposes.
The purchase price allocation is final.
2022
$
502
1,110
87
459
70
115
71
2,414
2,399
406
1,007
2,700
16,200
11,946
37,072
920
268
678
1,866
7,867
3,238
815
89
13,875
23,197
Page 36
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
8. Accounts receivable
The following table provides details on trade accounts receivable not past due, past due and the related credit loss
allowance.
Total accounts receivable
Less: Allowance for credit losses
Total accounts receivable, net
Of which:
Not past due
Past due for more than one day but no more than 30 days
Past due for more than 31 days but no more than 60 days
Past due for more than 61 days
Total accounts receivable, net
Allowance for credit losses, beginning of year
Increase (decrease) to current year provision
Addition through business acquisition
Change in control over interest in 11554891 Canada Inc.
Reversal of amounts previously written off
Write-offs
Impact of foreign exchange
Allowance for credit losses, end of year
9.
Inventories
Raw materials (1)
Work in progress
Finished goods and supplies (1)
Food and beverage (1)
Total inventories
2022
$
85,193
7,094
78,099
65,059
2,513
1,841
8,686
78,099
2022
$
8,456
1,017
506
44
22
(3,072)
121
7,094
2021
$
65,915
8,456
57,459
42,257
2,549
2,131
10,522
57,459
2021
$
12,531
(1,324)
—
—
41
(2,697)
(95)
8,456
2022
$
2,386
1,011
7,326
7,794
18,517
2021
$
2,204
513
4,293
3,697
10,707
(1) Prior year amounts have been restated to reflect a reclassification between raw materials, finished goods and
supplies and food and beverage.
Inventories are presented net of a $26 allowance for obsolescence (2021 – $27). All of the inventories are expected
to be sold within the next 12 months.
Inventories expensed during the year ended November 30, 2022 were $178,768 (2021 – $127,657).
Page 37
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
10. Assets held for sale
Assets held for sale as at November 30, 2022 are stated at fair value less costs to sell and are comprised of one
location’s leasehold improvements, land and building in the US & International segment that were acquired with BBQ
Holdings and that were transferred from property, plant and equipment (Note 13). They did not meet the definition of
assets held for sale as at the acquisition date of BBQ Holdings.
11.
Loans and other receivables
Loans and other receivables generally result from: the sales of franchises and of various advances to certain
franchisees; and a deferred consideration receivable from the disposal of the Company’s 80% interest in 10220396
Canada Inc. Loans and other receivables consist of the following:
2022
$
2021
$
3,918
1,299
2,619
(1,153)
1,466
1,823
3,289
4,057
1,569
2,488
(1,189)
1,299
1,750
3,049
Loans receivable bearing interest between 0% and 8% per annum,
receivable in monthly installments of $163 in aggregate, including
principal and interest, ending in 2032
Less: Allowance for credit losses on loans receivable
Current portion of loans receivable
Loans receivable
Deferred consideration receivable
Loans and other receivables
The capital repayments of loans receivable in subsequent years will be:
2023
2024
2025
2026
2027
Thereafter
$
1,153
488
346
144
36
452
2,619
12.
Leases
Leases as a lessee relate primarily to leases of premises in relation to the Company’s operations and its corporate
store locations. For many of the leases related to its franchised locations, the Company is on the head lease of the
premises and a corresponding sublease contract was entered into between the Company and its unrelated franchisee.
The sublease contract is substantially based on the same terms and conditions as the head lease.
Leases and subleases typically have terms ranging between five and 10 years at inception. The Company has options
to purchase the premises on some of its leases.
Page 38
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
12.
Leases (continued)
Right-of-use assets
The following table provides the net carrying amounts of the right-of-use assets by class of underlying asset and the
changes in the years ended November 30, 2022 and 2021:
Balance as at November 30, 2020
Additions
Depreciation expense
Impairment charge
De-recognition/lease modification of lease liabilities
Foreign exchange
Balance as at November 30, 2021
Additions
Additions through business acquisitions
(Note 6)
Change in control over interest in 11554891
Canada Inc. (Note 7)
Depreciation expense
Impairment charge
De-recognition/lease modification of lease liabilities
Foreign exchange
Balance as at November 30, 2022
Offices,
corporate and
dark stores
$
Store locations
subject to
operating
subleases
$
58,336
14,658
(10,615)
(1,550)
(14,493)
(538)
45,798
17,304
10,278
—
(1,428)
—
4,211
6
13,067
—
Other
$
609
834
(460)
—
93
(4)
1,072
150
Total
$
69,223
15,492
(12,503)
(1,550)
(10,189)
(536)
59,937
17,454
108,775
—
531
109,306
999
(13,795)
(969)
(10,749)
(655)
146,708
—
(1,373)
—
(193)
176
11,677
8
(405)
—
(41)
6
1,321
1,007
(15,573)
(969)
(10,983)
(473)
159,706
Page 39
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
12.
Leases (continued)
Finance lease receivables and lease liabilities
The following table provides the net carrying amounts of the finance lease receivables and lease liabilities, and the
changes in the years ended November 30, 2022 and 2021:
Balance as at November 30, 2020
Additions
Lease renewals and modifications
Lease terminations
Other adjustments
Interest income (expense)
(Receipts) payments
Foreign exchange
Balance as at November 30, 2021
Additions
Additions through business acquisitions (Note 6)
Change in control over interest in 11554891 Canada Inc. (Note 7)
Lease renewals and modifications
Lease terminations
Other adjustments
Interest income (expense)
(Receipts) payments
Foreign exchange
Balance as at November 30, 2022
Recorded in the consolidated statements of financial position as follows:
Current portion
Long-term portion
November 30, 2021
Current portion
Long-term portion
November 30, 2022
Finance lease
receivables
$
468,127
8,379
35,622
(16,082)
1,722
11,553
(108,142)
(1,910)
399,269
17,001
—
2,858
21,456
(15,483)
(800)
10,210
(101,051)
5,316
338,776
Finance lease
receivables
$
89,046
310,223
399,269
83,500
255,276
338,776
Lease
liabilities
$
(558,749)
(14,649)
(35,110)
18,717
4,037
(13,848)
123,496
2,558
(473,548)
(16,631)
(109,306)
(3,916)
(21,869)
9,226
(334)
(13,420)
120,011
(5,027)
(514,814)
Lease
liabilities
$
(101,973)
(371,575)
(473,548)
(114,437)
(400,377)
(514,814)
Page 40
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
12.
Leases (continued)
Maturity analysis
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be
paid or received after November 30, 2022:
2023
2024
2025
2026
2027
Thereafter
Total undiscounted lease payments
Unguaranteed residual values
Gross investment in the lease
Less: Unearned finance income
Present value of minimum lease payment receivables
Allowance for credit losses
Current portion of finance lease receivables
Finance lease receivables
Lease
liabilities
$
Finance lease
receivables
$
Operating
subleases
$
130,554
111,553
94,035
76,396
57,203
111,125
580,866
—
—
—
—
—
—
—
92,671
78,482
64,594
50,519
35,210
53,022
374,498
2,240
376,738
(33,071)
343,667
(4,891)
(83,500)
255,276
1,551
1,410
1,317
636
402
492
5,808
—
—
—
—
—
—
—
The Company has recognized net rent expense of $4,985 (2021 – $2,914) related to its short-term leases, leases of
low-value assets, and variable lease payments.
Page 41
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
13. Property, plant and equipment
Cost
Balance as at November 30, 2020
Additions
Disposals (1)
Impairment (Note 16)
Foreign exchange
Balance as at November 30, 2021
Additions
Transfer to assets held for sale
(Note 10)
Disposals
Impairment (Note 16)
Foreign exchange
Change in control (Note 7)
Additions through business
acquisitions (Note 6)
Balance as at November 30, 2022
Accumulated depreciation
Balance as at November 30, 2020
Eliminated on disposal of assets (1)
Foreign exchange
Depreciation expense
Balance as at November 30, 2021
Eliminated on disposal of assets
Foreign exchange
Depreciation expense
Balance as at November 30, 2022
Carrying amounts
November 30, 2021
November 30, 2022
Leasehold
improve-
Land
$
Buildings
$
ments Equipment
$
$
Computer
hardware
$
Rolling
stock
$
1,236
—
—
—
—
1,236
1,900
(1,055)
—
—
(174)
—
5,416
7,323
5,253
12
(131)
—
—
5,134
30
(993)
—
—
(65)
—
9,697
1,336
(2,703)
(20)
(75)
8,235
2,020
(63)
(737)
(282)
(490)
307
12,372
3,811
(693)
(111)
(16)
15,363
2,949
—
(1,392)
(253)
(212)
99
5,778
9,884
35,420
44,410
25,183
41,737
3,246
1,170
(2)
—
8
4,422
1,721
—
(122)
—
60
—
3,304
9,385
552
110
(65)
—
(1)
596
50
—
(20)
—
1
—
12
639
Leasehold
improve-
Land
$
Buildings
$
ments Equipment
$
$
Computer
hardware
$
Rolling
stock
$
—
—
—
—
—
—
—
—
—
1,624
(32)
—
221
1,813
—
—
279
2,092
5,335
(1,819)
(10)
1,219
4,725
(253)
53
2,438
6,963
Leasehold
improve-
6,717
(89)
(15)
1,616
8,229
(692)
51
1,811
9,399
1,890
(14)
1
528
2,405
(119)
45
1,343
3,674
239
(38)
—
87
288
(20)
—
104
372
Land
$
Buildings
$
ments Equipment
$
$
Computer
hardware
$
Rolling
stock
$
Total
$
1,236
7,323
3,321
7,792
3,510
37,447
7,134
32,338
2,017
5,711
308
267
17,526
90,878
Total
$
32,356
6,439
(3,594)
(131)
(84)
34,986
8,670
(2,111)
(2,271)
(535)
(880)
406
75,113
113,378
Total
$
15,805
(1,992)
(24)
3,671
17,460
(1,084)
149
5,975
22,500
(1) During the year ended November 30, 2021, the Company disposed of two portfolios comprised of seven and 24
corporately-owned locations in the US segment that were converted into franchises upon completion of the sale.
The Company received a total consideration of $4,201 for both portfolios and recognized a gain on disposal of
$1,374, presented in Gain on disposal of property, plant and equipment in its consolidated statements of income.
Page 42
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
14.
Intangible assets
Cost
Balance as at November 30, 2020
Additions
Disposals
Foreign exchange
Net impairment (Note 16)
Balance as at November 30, 2021
Additions
Additions through business
acquisitions (Note 6)
Change in control (Note 7)
Foreign exchange
Impairment (Note 16)
Balance as at November 30, 2022
Accumulated amortization
Balance as at November 30, 2020
Disposals
Foreign exchange
Amortization
Balance as at November 30, 2021
Foreign exchange
Amortization
Balance as at November 30, 2022
Carrying amounts
November 30, 2021
November 30, 2022
Franchise
and master
franchise
rights Trademarks Step-in rights
$
$
$
Customer
lists
$
Other (1)
$
Total
$
619,613
—
(1,270)
(5,202)
(4,788)
608,353
—
171,659
16,200
19,107
(9,539)
805,780
1,199
—
—
—
—
1,199
—
—
—
—
—
1,199
10,318
—
—
—
—
10,318
—
3,380
—
—
—
13,698
7,847
324
—
(33)
(232)
7,906
3,988
1,382
—
326
—
13,602
1,009,699
324
(3,450)
(8,232)
(5,772)
992,569
3,988
188,670
18,900
31,847
(13,381)
1,222,593
rights Trademarks Step-in rights
$
$
$
Customer
lists
$
Other (1)
$
—
—
—
—
—
—
—
—
859
—
—
119
978
—
120
1,098
1,638
—
—
818
2,456
—
966
3,422
2,554
—
(5)
1,369
3,918
94
1,663
5,675
Total
$
145,670
(1,259)
(558)
28,442
172,295
5,554
29,473
207,322
rights Trademarks Step-in rights
$
$
$
Customer
lists
$
Other (1)
$
Total
$
199,850
191,187
608,353
805,780
221
101
7,862
10,276
3,988
7,927
820,274
1,015,271
370,722
—
(2,180)
(2,997)
(752)
364,793
—
12,249
2,700
12,414
(3,842)
388,314
Franchise
and master
franchise
140,619
(1,259)
(553)
26,136
164,943
5,460
26,724
197,127
Franchise
and master
franchise
(1) Other items include $1,663 (2021 – $347) of licenses with an indefinite term that are not amortized.
Page 43
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
14.
Intangible assets (continued)
Indefinite life intangible assets consist of trademarks and perpetual licenses, where each brand represents a separate
CGU for impairment testing, for 65 CGUs (2021 – 55 CGUs) totalling $807,443 (2021 – $608,700).
15. Goodwill
The changes in the carrying amount of goodwill are as follows:
Goodwill, beginning of year
Business acquisitions (Note 6)
Change in control (Note 7)
Disposal (Note 17)
Foreign exchange
Goodwill, end of year
Accumulated impairment, beginning of year
Foreign exchange
Accumulated impairment, end of year
2022
$
490,627
76,877
11,946
—
15,819
595,269
62,237
3,484
65,721
2021
$
502,531
—
—
(7,807)
(4,097)
490,627
63,079
(842)
62,237
Carrying amount
529,548
428,390
As at November 30, 2022, goodwill was allocated to four (2021 – three) goodwill units as follows:
Canada Goodwill Unit (1)
US Goodwill Unit A (2)
US Goodwill Unit B (2)
US Goodwill Unit C (3)
2022
$
2021
$
204,327
126,066
128,260
70,895
529,548
187,543
119,385
121,462
—
428,390
(1) Variance from prior year due to acquisition of the assets of Küto Comptoir à Tartares and a corporate store located
in the province of Quebec (Note 6), and change in control over the Company’s 70% interest in 11554891 Canada
Inc. (Note 7).
(2) Variance from prior year due to foreign exchange conversion.
(3) Variance from prior year due to acquisition of BBQ Holdings (Note 6) and foreign exchange conversion.
16. Net impairment charge – property, plant and equipment and intangible assets
The Company performed its annual impairment test as at August 31, 2022. For five of its brands (two and three brands
in the Canada and US & International geographical segments, respectively), an impairment charge on intangible
assets was required in the amount of $13,381. Additionally, the Company recorded $535 of impairment losses on its
property, plant and equipment, for a total of $13,916 of impairment charges on its property, plant and equipment and
intangible assets for the year ended November 30, 2022, which have been recognized in the consolidated statements
of comprehensive income.
Page 44
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
16.
Net impairment charge – property, plant and equipment and intangible assets (continued)
Impairment charges were based on the amount by which the carrying values of the assets exceeded the recoverable
amounts, determined using expected discounted projected operating cash flows for trademarks and franchise rights.
Impairment by geographical segment for the year ended November 30, 2022:
Total
$
5,892
8,024
13,916
Total
$
11,634
3,632
15,266
(2,323)
(7,040)
(9,363)
Canada
US & International
Impairment charge
Property,
plant and
equipment
$
Intangible assets
Franchise
rights
$
Trademarks
$
100
435
535
1,454
2,388
3,842
4,338
5,201
9,539
Impairment (reversal of impairment) by geographical segment for the year ended November 30, 2021:
Intangible assets
Property,
plant and
equipment
$
Franchise
rights
$
Trademarks
$
Other
$
Canada
US & International
Impairment charge
Canada
US & International
Reversal of impairment charge
Net impairment charge
97
34
131
—
—
—
131
2,809
667
3,476
(531)
(2,193)
(2,724)
8,496
2,931
11,427
(1,792)
(4,847)
(6,639)
232
—
232
—
—
—
752
4,788
232
5,903
The key assumptions used, where the recoverable amount was measured as a goodwill unit’s value in use, are those
related to projected operating cash flows, as well as the discount rates. The sales forecasts for cash flows were based
on the subsequent fiscal year’s budgeted operating results, which were prepared by management and approved by
the Board, and internal forecasts for subsequent years, which were prepared by management and developed from
the budgeted operating results.
Page 45
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
16.
Net impairment charge – property, plant and equipment and intangible assets (continued)
The following table presents the key assumptions used in the Company’s impairment tests, as well as the recoverable
amounts measured at value in use as at August 31, 2022 and 2021:
($, except percentage data)
2022
2021
Canada
Goodwill
Unit
US Goodwill
Unit A
US Goodwill
Unit B
Canada
Goodwill Unit
US Goodwill
Unit A
US Goodwill
Unit B
Discount rates after tax
9.8%
10.3%
10.3%
8.1%
8.0%
8.0%
Discount rates pre-tax
12.7%
13.1%
13.2%
10.4%
10.1%
10.2%
Recoverable amounts
1,137,633
675,843
328,712
1,109,172
877,544
384,986
Long-term growth rates ranging from 0% to 2% (2021 – 0% to 2%) were used in the impairment test for the Canada
Goodwill Unit. A change of 100 basis points in discount rates in the Canada Goodwill Unit would result in additional
impairment charges on intangible assets of four brands (2021 – four brands) representing 1.8% (2021 – 0.1%) of the
total carrying value of the franchise rights and trademarks in that goodwill unit. A change of 100 basis points in discount
rates in the Canada Goodwill Unit would not result in additional impairment charges on goodwill for the years ended
November 30, 2022 and 2021. For the Canada Goodwill Unit, an increase of 950 basis points (2021 – 860 basis
points) in the discount rate would have resulted in its recoverable amount being equal to its carrying value.
Long-term growth rates ranging from 0% to 2% (2021 – 0% to 2%) were used in the impairment test for US Goodwill
Unit A. A change of 100 basis points in discount rates in US Goodwill Unit A would result in additional impairment
charges on intangible assets of four brands (2021 – three brands) representing 0.5% (2021 – 0.1%) of the total carrying
value of the franchise rights and trademarks in that goodwill unit. A change of 100 basis points in discount rates in US
Goodwill Unit A would not result in additional impairment charges on goodwill for the years ended November 30, 2022
and 2021. For US Goodwill Unit A, an increase of 320 basis points (2021 – 500 basis points) in the discount rate would
have resulted in its recoverable amount being equal to its carrying value.
A long-term growth rate of 1.5% (2021 – 1.5%) was used in the impairment test for US Goodwill Unit B. A change of
100 basis points in discount rates in US Goodwill Unit B would not result in additional impairment charges on intangible
assets or goodwill for the years ended November 30, 2022 and 2021. For US Goodwill Unit B, an increase of 110
basis points (2021 – 230 basis points) in the discount rate would have resulted in its recoverable amount being equal
to its carrying value.
The Company performed its annual impairment test for US Goodwill Unit C, using the fair value less costs to sell
method, as at November 30, 2022 due to the timing of the acquisition. A long-term growth rate of 2.0%, a discount
rate after tax of 10.6% and a pre-tax discount rate of 12.1% were used in the impairment test for US Goodwill Unit C,
which was acquired on September 27, 2022.
17. Disposal of interest in 10220396 Canada Inc.
During the year ended November 30, 2021, the Company sold its 80% interest in 10220396 Canada Inc., whose
activities consist of franchising for the banners “Houston Avenue Bar & Grill” and “Industria Pizza + Bar”, for a cash
consideration of $7,500 and a deferred consideration of $1,693. The deferred consideration has a contractual amount
of up to $3,000, to be repaid in two tranches: the first tranche of $1,500 will be repaid in variable instalments based
on royalties collected, beginning in July 2022; the second tranche will also be repaid in variable instalments based on
royalties collected, which will begin once the first tranche is fully repaid, and will end on the earlier of such time $1,500
is repaid, or a period of 10 years has elapsed. The Company recorded a gain on the disposal of its shares of 10220396
Canada Inc. of $141, presented in Other income in the consolidated statement of income.
Page 46
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
18. Credit facility
During the year ended November 30, 2022, the Company modified its existing credit facility payable to a syndicate of
lenders. The modification resulted in an increase to the revolving credit facility, which now has an authorized amount
of $900,000 (2021 – $600,000), and an extension of its maturity by 18 months, until October 28, 2025. The accordion
feature amounting to $300,000 (2021 – $300,000) remained unchanged. Transaction costs of $1,817 were incurred
and will be deferred and amortized over the remaining three years of the life of the revolving credit facility. As at
November 30, 2022, US$408,850 was drawn from the revolving credit facility (2021 – US$271,470).
Under this facility, the Company is required to comply with certain financial covenants, including:
a debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio that must be less
than or equal to 3.50:1.00;
a debt to EBITDA ratio that must be less than or equal to 4.00:1.00 in the twelve months following acquisitions
with a consideration exceeding $150,000; and
an interest and rent coverage ratio that must be at least 2.00:1.00 at all times.
As at November 30, 2022, the Company was in compliance with its financial covenants.
19. Provisions
Included in provisions are the following amounts:
Litigations, disputes and other contingencies
Closed stores
2022
$
1,490
—
1,490
2021
$
1,636
56
1,692
The provision for litigation, disputes and other contingencies represents management’s best estimate of the outcome
of litigations and disputes that are ongoing at the date of the statement of financial position. This provision is made of
multiple items; the timing of the settlement of this provision is unknown given its nature, as the Company does not
control the litigation timelines.
The payables related to closed stores mainly represent amounts that are expected to be disbursed to exit leases of
underperforming or closed stores. The negotiations with the various stakeholders are typically short in duration and
are expected to be settled within a few months following the recognition of the provision. The Company has recognized
a liability of nil (2021 – $56) for the leases of premises in which it no longer has operations but retains the obligations
contained in the lease agreement, with the exception of leases for which the lease liabilities are already recorded
pursuant to IFRS 16.
The provisions also varied in part due to foreign exchange fluctuations related to the US subsidiaries.
Provision for litigations, disputes and closed stores, beginning balance
Reversals
Amounts used
Additions
Impact of foreign exchange
Provision for litigations, disputes and closed stores, ending balance
2022
$
1,692
(517)
(404)
680
39
1,490
2021
$
3,065
(541)
(1,116)
305
(21)
1,692
Page 47
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
20. Deferred revenue and deposits
Franchise fee deposits
Unearned rent, advances for restaurant construction and renovation
Supplier contributions and other allowances
Less: Current portion
2022
$
55,646
2,854
7,681
66,181
(17,776)
48,405
2021
$
49,266
2,364
8,809
60,439
(16,100)
44,339
Deferred revenues consist mostly of initial, transfer and renewal franchise fees paid by franchisees, as well as upfront
fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the related
agreement. Deferred revenues also include amounts paid in advance for royalties, restaurant construction and
renovation, as well as upfront fees received from agreements with suppliers, which are amortized over the term of the
related agreement.
There were no significant changes to contract liabilities during the year.
$15,391 (2021 – $12,853) of revenue recognized in the current year was included in the deferred revenue balance at
the beginning of the year.
The following table provides estimated revenues expected to be recognized in future years related to performance
obligations that are unsatisfied as at November 30, 2022:
Estimate for fiscal year:
2023
2024
2025
2026
2027
Thereafter
$
17,776
8,806
6,808
5,468
4,216
23,107
66,181
Page 48
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
21.
Long-term debt
Non-interest-bearing contract cancellation fees and holdbacks on acquisitions
Contingent considerations on Küto Comptoir à Tartares acquisition (Note 6)
and 11554891 Canada Inc. (Note 7) (1)
Fair value of non-controlling interest option in 9974644 Canada Inc. (2)
Fair value of obligation to repurchase 11554891 Canada Inc. partner (Note 7) (3)
Revolving credit facility payable to a syndicate of lenders (4)
Credit facility financing costs
Less: Current portion
2022
$
2021
$
142
12,171
3,626
1,853
7,867
550,055
(2,584)
560,959
(9,530)
551,429
1,961
1,575
1,416
345,000
(1,395)
360,728
(13,116)
347,612
(1) Küto Comptoir à Tartares (payable June 2024) and 11554891 Canada Inc. (payable December 2022).
(2) Payable on demand.
(3) Payable on demand, with a maximum maturity date of December 2024.
(4) Under the revolving credit facility, the Company has the option to draw funds in Canadian or in US dollars, at its
discretion. The facility’s maturity is October 28, 2025 and must be repaid in full at that time. The revolving credit
facility has an authorized amount of $900,000 (2021 – $600,000). As at November 30, 2022, the Company had
drawn US$408,850 (2021 – US$271,470) and has elected to pay interest based on the Secured Overnight
Financing Rate (“SOFR”) plus applicable margins. The credit facility bears interest at Canadian prime rate, US
prime rate rate, Bankers’ acceptances rate and eventually the Canadian Overnight Repo Rate Average, and
SOFR plus an applicable margin that will vary depending on the type of advances. The Company pays a
commitment fee on the available unused credit facility.
22. Capital stock
Authorized, unlimited number of common shares without nominal or par value:
Number
2022
Amount
$
Number
Balance, beginning of year
Shares repurchased and cancelled
Balance, end of year
24,669,861
(256,400)
24,413,461
305,961
(3,180)
302,781
24,706,461
(36,600)
24,669,861
2021
Amount
$
306,415
(454)
305,961
On June 28, 2022, the Company announced the renewal of the normal course issuer bid (“NCIB”). The NCIB began
on July 3, 2022 and will end on July 2, 2023 or on such earlier date when the Company completes its purchases or
elects to terminate the NCIB. The renewed period allows the Company to purchase 1,220,673 of its common shares.
These purchases will be made on the open market plus brokerage fees through the facilities of the TSX and/or
alternative trading systems at the prevailing market price at the time of the transaction, in accordance with the TSX’s
applicable policies. All common shares purchased pursuant to the NCIB will be cancelled.
During the year ended November 30, 2022, the Company repurchased and cancelled a total of 256,400 common
shares (2021 – 36,600 common shares) under the current NCIB, at a weighted average price of $57.01 per common
share (2021 – $59.68 per common share), for a total consideration of $14,618 (2021 – $2,184). An excess of $11,438
(2021 – $1,730) of the shares’ repurchase value over their carrying amount was charged to retained earnings as share
repurchase premiums.
Page 49
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
23. Stock options
The Company offered for the benefit of certain key members of management and directors a stock option plan. In
accordance with the terms of the plan the Company may grant stock options on the common shares at the discretion
of the Board of Directors. 60,000 shares are available for issuance under the stock option plan as at November 30,
2022 (2021 – 60,000).
Under the stock option plan of the Company, the following options were granted and are outstanding as at November
30, 2022 and 2021:
Number of
options
2022
Weighted
average
exercise price
$
2021
Weighted
average
exercise price
Number of
options
$
50.19
58.78
50.97
48.36
Outstanding, beginning of year
Granted
Outstanding, end of year
Vested, end of year
440,000
—
440,000
102,221
50.97
—
50.97
49.72
400,000
40,000
440,000
66,666
As at November 30, 2022, the range of exercise prices and the weighted average remaining contractual life of options
are as follows:
Range of
exercise prices
$
Number
outstanding
Weighted average
remaining contractual life
(years)
48.36
52.01
58.78
200,000
200,000
40,000
440,000
4.3
6.8
2.1
5.3
As at November 30, 2021, the range of exercise prices and the weighted average remaining contractual life of options
were as follows:
Range of
exercise prices
$
Number
outstanding
Weighted average
remaining contractual life
(years)
48.36
52.01
58.78
200,000
200,000
40,000
440,000
5.3
7.8
3.1
6.3
No options were granted during the year ended November 30, 2022.
Options granted during the year ended November 30, 2021 have a service condition in order to vest. One third of the
granted options vested and were exercisable on July 1, 2022. The remaining options will vest and be exercisable as
to one third of the grant on each of July 1, 2023 and July 1, 2024. The options will expire on December 31, 2024.
The weighted average fair value of the stock options granted for the year ended November 30, 2021 was $9.23 per
option. The fair value of the options granted was estimated at the grant date for purposes of determining share-based
payment expense using the Black-Scholes option pricing model.
Page 50
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
23.
Stock options (continued)
The following weighted average assumptions were used:
Acquisition date share price
Exercise price
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life (in years)
2021
$
$
58.78
58.78
1.26%
26.1%
1.15%
2.5 years
A compensation expense of $1,002 was recorded for the year ended November 30, 2022 (2021 – $836). The expense
is presented in Wages and benefits in Operating expenses in the consolidated statements of income.
24. Net income per share
The following table provides the weighted average number of common shares used in the calculation of basic income
per share and that used for the purpose of diluted income per share:
Weighted daily average number of common shares – basic
Assumed exercise of stock options (1)
Weighted daily average number of common shares – diluted
2022
2021
24,439,892
24,704,866
25,846
24,465,738
40,265
24,745,131
(1) The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future
compensation cost of dilutive options. The number of excluded options for the year ended November 30, 2022
was 240,000 (2021 – 200,000).
25.
Financial instruments
In the normal course of business, the Company uses various financial instruments 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.
Fair value of recognized financial instruments
Contingent considerations on acquisitions
The Company issued as part of its consideration for the acquisition of Küto Comptoir à Tartares and 70% interest in
11554891 Canada Inc., contingent considerations to the vendors. These contingent considerations are subject to
earn-out provisions, which are based on future earnings; the contingent considerations for Küto Comptoir à Tartares
and 11554891 Canada Inc. are repayable in June 2024 and December 2022, respectively. These contingent
considerations have been recorded at fair value and are remeasured on a recurring basis.
A fair value remeasurement gain of $1,794 was recorded for the contingent considerations for the year ended
November 30, 2022 (2021 – gain of $1,656).
Page 51
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
25.
Financial instruments (continued)
Fair value of recognized financial instruments (continued)
Obligation to repurchase non-controlling interest
The Company has entered into an agreement to purchase the shares of a minority interest shareholder of 9974644
Canada Inc. at the option of the holder at any time after December 9, 2017. The consideration is based on a multiplier
of EBITDA, as prescribed by the terms of the shareholder agreement. The Company records a liability at fair value
(Note 21) which is remeasured at each reporting period.
A fair value remeasurement loss of $278 (2021 – loss of $404) was recorded for this non-controlling interest obligation.
Obligation to repurchase 11554891 Canada Inc. partner
The Company, in conjunction with the acquisition of its 70% interest in 11554891 Canada Inc., entered into an
agreement to acquire the remaining 30% interest by December 2024. The consideration to be paid for this acquisition
will be based on future earnings. The Company recorded a liability at fair value (Note 21) which is remeasured at each
reporting period. An increase or decrease by 1% in the discount rates used would have an impact of nil on the carrying
amount as at November 30, 2022 (2021 – $14).
A fair value remeasurement gain of $1,416 (2021 – gain of $1,948) was recorded for this obligation to repurchase the
11554891 Canada Inc. partner.
Cross currency interest rate swaps
On November 26, 2022 and November 29, 2022, the Company entered into one floating to floating 3-month cross
currency interest rate swap and one floating to floating 2-month cross currency interest rate swap (November 30, 2021
– one floating to floating 3-month cross currency interest rate swap, one floating to floating 2-month cross currency
interest rate swap and one floating to floating 1-month cross currency interest rate swap). A fair value of nil was
recorded as at November 30, 2022 (November 30, 2021 – nil). The Company has classified this as level 2 in the fair
value hierarchy.
3-month
US$64,850
6.18%
CA$87,000
5.95%
2022
2-month
US$150,000
6.18%
CA$201,000
5.80%
3-month
US$78,920
1.29%
CA$100,000
1.23%
2-month
US$180,761
1.29%
CA$230,000
1.09%
2021
1-month
US$11,789
1.29%
CA$15,000
1.38%
Receive – Notional
Receive – Rate
Pay – Notional
Pay – Rate
Fair value hierarchy
Contingent considerations on Küto Comptoir à Tartares acquisition and
11554891 Canada Inc.
Non-controlling interest buyback option
Obligation to repurchase 11554891 Canada Inc. partner
Financial liabilities
Level 3
2022
$
3,626
1,853
7,867
13,346
2021
$
1,961
1,575
1,416
4,952
Page 52
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
25.
Financial instruments (continued)
Fair value of recognized financial instruments (continued)
The Company has determined that the fair values of its financial assets and financial liabilities with short-term and
long-term maturities approximate their carrying value. These financial instruments include cash, accounts receivables,
accounts payable and accrued liabilities, deposits and other liabilities. The table below shows the fair value and the
carrying amount of other financial instruments as at November 30, 2022 and 2021. Since estimates are used to
determine fair value, they must not be interpreted as being realizable in the event of a settlement of the instruments.
Financial assets
Loans and other receivables
Finance lease receivables
Financial liabilities
Long-term debt (1)
Carrying
amount
$
4,442
338,776
2022
Fair
value
$
4,442
338,776
Carrying
amount
$
4,238
399,269
2021
Fair
value
$
4,238
399,269
550,197
550,197
357,171
357,189
(1) Excludes contingent considerations on Küto Comptoir à Tartares acquisition and 11554891 Canada Inc., cross
currency interest rate swaps, credit facility financing costs, non-controlling interest option in 9974644 Canada Inc.
and obligation to repurchase 11554891 Canada Inc. partner.
Determination of fair value
The following methods and assumptions were used to estimate the fair values of each class of financial instruments:
Loans and other receivables and Finance lease receivables – The carrying amount for these financial
instruments approximates fair value due to the short-term maturity of these instruments and/or the use of market
interest rates.
Long-term debt – The fair value of long-term debt is determined using the present value of future cash flows
under current financing agreements based on the Company’s current estimated borrowing rate for similar debt.
The Company, through its financial assets and financial liabilities, is exposed to various risks. The following analysis
provides a measurement of risks as at November 30, 2022.
Credit risk
The Company’s credit risk is primarily attributable to its trade receivables. The amounts disclosed in the consolidated
statement of financial position represent the maximum exposure to credit risk for each respective financial asset as at
the relevant dates. The Company believes that the credit risk of accounts receivable is limited as other than receivables
from international locations, the Company’s broad client base is spread mostly across Canada and the US, which
limits the concentration of credit risk.
The credit risk on the Company’s loans and other receivables is similar to that of its accounts receivable.
Foreign exchange risk
Foreign exchange risk is the Company’s exposure to decreases or increases in financial instrument values caused by
fluctuations in exchange rates. The Company’s exposure to foreign exchange risk mainly comes from sales
denominated in foreign currencies. The Company’s US and foreign operations use the US dollar (“USD”) as functional
currency. The Company’s exposure to foreign exchange risk stems mainly from cash, accounts receivable, long-term
debt denominated in USD, other working capital items and financial obligations from its US operations. As at
November 30, 2022, US$408,850 (2021 – US$271,470) was drawn from the revolving credit facility. Of that amount,
US$214,850 (2021 – US$271,470) was not exposed to foreign exchange risk as a result of two (2021 – three) cross
currency interest rate swaps, and US$194,000 (2021 – nil) was exposed to foreign exchange risk.
Page 53
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
25.
Financial instruments (continued)
Foreign exchange risk (continued)
Fluctuations in USD exchange rates are deemed to have minimal risk as they are mostly offset by the stand-alone
operations of the Company’s US entities.
As at November 30, 2022 and 2021, the Company has the following financial instruments denominated in foreign
currencies:
Financial assets
Cash
Accounts receivable
Financial liabilities
Accounts payable and deposits
Long-term debt
Net financial (liabilities) assets
USD
$
5,424
463
2022
CAD
$
7,327
625
(212)
(194,000)
(188,325)
(286)
(262,055)
(254,389)
USD
$
3,744
378
(82)
—
4,040
2021
CAD
$
4,789
484
(105)
—
5,168
All other factors being equal, a reasonable possible 5% rise in foreign currency exchange rates per Canadian dollar
would result in a loss of $9,416 (2021 – profit of $202) on the consolidated statements of income and comprehensive
income.
Interest rate risk
Interest rate risk is the Company’s exposure to increases and decreases in financial instrument values caused by the
fluctuation in interest rates. The Company is exposed to cash flow risk due to the interest rate fluctuation in its floating-
rate interest-bearing financial obligations.
Furthermore, upon refinancing of a borrowing, depending on the availability of funds in the market and lender
perception of the Company’s risk, the margin that is added to the reference rate, such as SOFR or prime rates, could
vary and thereby directly influence the interest rate payable by the Company.
Long-term debt stems mainly from acquisitions of long-term assets and business combinations. The Company is
exposed to interest rate risk with its revolving credit facility which is used to finance the Company’s acquisitions. The
facility bears interest at a variable rate and as such the interest burden could change materially. $550,055 (2021 –
$345,000) of the credit facility was used as at November 30, 2022. A 100 basis points increase in the bank’s prime
rate would result in additional interest of $5,501 per annum (2021 – $3,450) on the outstanding credit facility.
Liquidity risk
Liquidity risk refers to the possibility of the Company not being able to meet its financial obligations when they become
due. The Company has contractual and fiscal obligations as well as financial liabilities and is therefore exposed to
liquidity risk. Such risk can result, for example, from a market disruption or a lack of liquidity. The Company actively
maintains its credit facility to ensure it has sufficient available funds to meet current and foreseeable financial
requirements at a reasonable cost.
As at November 30, 2022, the Company had an authorized revolving credit facility for which the available amount may
not exceed $900,000 (2021 – $600,000) and including an accordion feature amounting to $300,000 (2021 – $300,000)
to ensure that sufficient funds are available to meet its financial requirements. The terms and conditions related to this
revolving credit facility are described in Note 18 and Note 21.
Page 54
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
25.
Financial instruments (continued)
Liquidity risk (continued)
The following are the contractual maturities of financial liabilities as at November 30, 2022:
Accounts payable and accrued liabilities
Long-term debt (Note 21) (1)
Interest on long-term debt (1)
Lease liabilities
Carrying Contractual
amount cash flows
$
$
0 to 6
months
$
154,988
560,959
n/a
514,814
1,230,761
154,988
563,543
106,053
580,866
1,405,450
154,988
10,709
18,180
65,277
249,154
6 to 12
months
$
—
4
18,181
65,277
83,462
12 to 24
months Thereafter
$
$
—
2,727
36,361
111,553
150,641
—
550,103
33,331
338,759
922,193
(1) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of
the reporting period.
26. Capital disclosures
The Company’s objectives when managing capital are:
(a) To safeguard its ability to obtain financing should the need arise;
(b) To provide an adequate return to its shareholders; and
(c) To maintain financial flexibility in order to have access to capital in the event of future acquisitions.
The Company defines its capital as follows:
(a) Shareholders’ equity;
(b) Long-term debt including the current portion;
(c) Deferred revenue including the current portion; and
(d) Cash
The Company’s financial strategy is designed and formulated to maintain a flexible capital structure consistent with
the objectives stated above and to respond to changes in economic conditions and the risk characteristics of the
underlying assets. The Company may invest in longer or shorter-term investments depending on eventual liquidity
requirements.
The Company monitors capital on the basis of the debt-to-equity ratio. The debt-to-equity ratios at November 30, 2022
and 2021 were as follows:
Debt
Equity
Debt-to-equity ratio
2022
$
560,959
724,626
0.77
2021
$
360,728
648,898
0.56
Page 55
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
26.
Capital disclosures (continued)
Maintaining a low debt-to-equity ratio is a priority in order to preserve the Company’s ability to secure financing at a
reasonable cost for future acquisitions. The Company expects to maintain a low ratio by continuously using the
expected cash flows from the newly acquired business in both the US and Canada to reduce the level of long-term
debt.
The Company’s credit facility imposes a maximum debt-to-proforma EBITDA ratio of 4.00:1.00 after an acquisition in
excess of $150,000 for a period of twelve months after acquisition; 3.50:1.00 anytime thereafter and until the maturity
date of October 28, 2025.
27. Revenue
Royalties
Franchise and transfer fees
Retail, food processing and
distribution revenues
Sale of goods, including
construction revenue
Gift card breakage income
Promotional funds
Other franchising revenue
Other
For the year ended
November 30, 2022
November 30, 2021
US &
Canada International
$
$
TOTAL
$
83,860
5,141
128,968
6,729
212,828
11,870
Canada
$
62,084
5,019
US &
International
$
TOTAL
$
118,631
4,353
180,715
9,372
162,467
5,996
168,463
124,280
4,972
129,252
35,410
450
42,394
37,901
3,000
370,623
94,821
5,427
68,890
26,443
8,625
345,899
130,231
5,877
111,284
64,344
11,625
716,522
24,650
228
32,151
28,598
3,175
280,185
44,862
4,518
61,207
25,648
7,527
271,718
69,512
4,746
93,358
54,246
10,702
551,903
Page 56
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
28. Operating expenses
Cost of goods sold and rent
Retail, food processing and
distribution costs
Wages and benefits (1)
Wage and rent subsidies
Consulting and
professional fees
Insurance and taxes
Utilities, repairs and
maintenance
Advertising, travel, meals and
entertainment
Gift cards – related costs
Royalties
Promotional funds (2)
Impairment (reversal of
impairment) for expected
credit losses
Other (3)
For the year ended
November 30, 2022
November 30, 2021
US &
Canada International
$
$
TOTAL
$
Canada
$
US &
International
$
TOTAL
$
15,800
36,355
52,155
12,044
19,829
31,873
145,995
55,910
—
7,750
1,360
—
79,602
—
12,897
3,723
145,995
135,512
—
20,647
5,083
113,992
42,477
(5,458)
6,760
1,242
—
113,992
55,004
(291)
7,018
2,814
97,481
(5,749)
13,778
4,056
2,003
5,077
7,080
1,387
2,041
3,428
3,635
—
49
6,535
8,153
7,972
10,170
8,153
8,021
2,256
—
44
4,759
6,245
7,401
7,015
6,245
7,445
42,394
68,890
111,284
32,151
61,207
93,358
2,320
10,227
287,443
(216)
18,009
246,997
2,104
28,236
534,440
(1,219)
(1,975)
(3,194)
6,437
212,113
6,407
170,459
12,844
382,572
(1) Wages and benefits are presented net of investment tax credit of $459 (2021 – nil).
(2) Promotional fund expenses include wages and benefits.
(3) Other operating expenses are comprised mainly of other office administration expenses.
29. Guarantee
The Company has guaranteed leases on certain franchise stores in the event the franchisees are unable to meet their
remaining lease commitments. The maximum amount the Company may be required to pay under these agreements
was $18,648 as at November 30, 2022 (2021 – $19,260). In addition, the Company could be required to make
payments for percentage rents, realty taxes and common area costs. As at November 30, 2022, the Company has
accrued $1,570 (2021 – $1,796), included in Accounts payable and accrued liabilities, with respect to these
guarantees.
30. Contingent liabilities
The Company is involved in legal claims associated with its current business activities. The Company’s estimate of
the outcome of these claims is disclosed in Note 19. The timing of the outflows, if any, is out of the control of the
Company and is as a result undetermined at the moment.
Page 57
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
31.
Income taxes
Variations of income tax expense from the basic Canadian federal and provincial combined tax rates applicable to
income from operations before income taxes are as follows:
Combined income tax rate in Canada
Add effect of:
Difference between Canadian and foreign
statutory rate
Non-taxable portion of capital gains
Permanent differences
Recognition of previously unrecognized
deferred tax assets
Losses in subsidiaries for which no deferred
income tax assets is recognized
Rate variation on deferred income tax
Adjustment to prior year provisions
Revision of estimates for tax exposures
Other – net
Provision for income taxes
$
25,486
(6,126)
505
3,601
—
2
(754)
(768)
(875)
(80)
20,991
2022
%
26.5
(6.4)
0.5
3.7
—
—
(0.8)
(0.8)
(0.9)
(0.1)
21.7
$
29,699
(6,195)
16
(238)
(20)
1,645
1,851
428
—
(1,057)
26,129
2021
%
26.5
(5.5)
—
(0.2)
—
1.5
2.4
(0.4)
—
(1.0)
23.3
The variation in deferred income taxes during the years ended November 30, 2022 and 2021 were as follows:
November 30,
2021
$
Recognized
in profit or
loss
$
Recognized
in other
comprehen-
sive loss Acquisition
$
$
Foreign
exchange
$
November 30,
2022
$
Net deferred tax assets (liabilities)
in relation to:
Property, plant and equipment
Finance lease receivables
Right-of-use assets
Accounts receivable
Deferred costs
Inventory
Provisions and gift cards
Long-term debt
Non-capital losses
Capital losses
Intangible assets
Accrued expenses
Deferred revenue
Lease liabilities
Other
(4,437)
(103,487)
(15,267)
363
(1,298)
58
19,965
(1,255)
78
—
(169,309)
10,002
9,857
122,262
—
(132,468)
(1,527)
15,726
(25,633)
(67)
(26)
(5)
569
1,095
438
228
3,867
(1,389)
576
10,159
(333)
3,678
—
—
—
—
—
—
—
(491)
—
—
—
—
—
—
—
(491)
(10,430)
1,045
200
—
—
—
2,221
(1,561)
18,552
—
(38,337)
—
—
(1,257)
—
(29,567)
(339)
(1,443)
(580)
12
(35)
3
1,173
(2)
(1,138)
—
(5,998)
381
359
2,074
188
(5,345)
(16,733)
(88,159)
(41,280)
308
(1,359)
56
23,928
(2,214)
17,930
228
(209,777)
8,994
10,792
133,238
(145)
(164,193)
Page 58
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
31.
Income taxes (continued)
Net deferred tax assets (liabilities) in relation to:
Property, plant and equipment
Finance lease receivables
Right-of-use assets
Accounts receivable
Deferred costs
Inventory
Provisions and gift cards
Long-term debt
Non-capital losses
Intangible assets
Accrued expenses
Deferred revenue
Lease liabilities
November 30,
2020
$
Recognized
in profit or
loss
$
Foreign
exchange
$
November 30,
2021
$
(1,600)
(121,412)
(17,560)
455
(1,252)
100
18,665
282
828
(168,598)
8,562
9,377
143,587
(128,566)
(2,845)
17,408
2,144
(84)
(46)
(42)
1,487
(1,539)
(720)
(2,249)
1,502
491
(20,600)
(5,093)
8
517
149
(8)
—
—
(187)
2
(30)
1,538
(62)
(11)
(725)
1,191
(4,437)
(103,487)
(15,267)
363
(1,298)
58
19,965
(1,255)
78
(169,309)
10,002
9,857
122,262
(132,468)
As at November 30, 2022, there were nil (2021 – $857) capital losses which may be applied against capital gains for
future years and be carried forward indefinitely. The deferred income tax benefit of these capital losses has not been
recognized.
As at November 30, 2022, there were approximately $2,170 (2021 – $1,805) in non-capital losses accumulated in one
of the Company’s subsidiaries for which no deferred income tax asset was recognized. These non-capital losses will
expire between 2037 and 2042.
The deductible temporary difference in relation to foreign exchange on intercompany loans for which a deferred tax
asset has not been recognized amounts to $987 (2021 – $7,609).
No deferred income tax liability is recognized on unremitted earnings of $80,931 (2021 – $39,846) related to the
investments in subsidiaries. Such unremitted earnings are reinvested in the subsidiaries and will not be repatriated in
the foreseeable future.
The Company has an uncertain tax risk related to pre-acquisition periods whereby tax returns were filed by previous
owners.
32. Segmented information
Management monitors and evaluates results of the Company based on geographical segments, these two segments
being Canada and US & International. The Company and its chief operating decision maker assess the performance
of each operating segment based on its segment profit and loss, which is equal to revenue less operating expenses.
Within those geographical segments, the Company’s chief operating decision maker also assesses the performance
of subdivisions based on the type of product or service provided. These subdivisions include: franchising; corporate
stores; processing, distribution and retail; and promotional fund revenues and expenses. This information is disclosed
below.
Page 59
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
32.
Segmented information (continued)
Below is a summary of each geographical and operating segment’s performance during the years ended November 30, 2022 and 2021.
November 30, 2022
Franchising
$
Corporate
$
CANADA
Processing,
distribution
and retail
$
Promotional
funds
$
Interco Total Canada
$
$
Franchising
$
Corporate
$
US & INTERNATIONAL
Processing,
distribution
and retail
$
Promotional
funds
$
Revenue
Operating expenses
Segment profit (loss)
Total assets
Total liabilities
141,127
71,548
69,579
1,299,304
957,112
29,353
29,266
87
22,253
21,575
163,141
145,992
17,149
51,612
10,718
42,394
42,394
—
11,761
11,761
(5,392)
(1,757)
(3,635)
370,623
287,443
83,180
—
—
1,384,930
1,001,166
182,250
97,579
84,671
734,775
296,761
89,803
85,203
4,600
183,539
280,691
5,996
—
5,996
—
—
68,890
68,890
—
22,059
22,059
November 30, 2021
Franchising
$
Corporate
$
CANADA
Processing,
distribution
and retail
$
Promotional
funds
$
Interco Total Canada
$
$
Franchising
$
Corporate
$
US & INTERNATIONAL
Processing,
distribution
and retail
$
Promotional
funds
$
Revenue
Operating expenses
Segment profit (loss)
Total assets
Total liabilities
107,308
50,413
56,895
1,120,006
796,589
19,388
17,297
2,091
17,583
18,351
124,989
114,034
10,955
36,052
10,810
32,151
32,151
—
9,472
9,472
(3,651)
(1,782)
(1,869)
280,185
212,113
68,072
—
—
1,183,113
835,222
167,250
71,363
95,887
667,186
388,934
40,180
41,649
(1,469)
33,286
10,531
4,972
—
4,972
—
—
61,207
61,207
—
21,009
21,009
Total US &
International
$
Total
consolidated
$
345,899
246,997
98,902
940,373
599,511
716,522
534,440
182,082
2,325,303
1,600,677
Total US &
International
$
Total
consolidated
$
271,718
170,459
101,259
721,481
420,474
551,903
382,572
169,331
1,904,594
1,255,696
Interco
$
(1,040)
(4,675)
3,635
—
—
Interco
$
(1,891)
(3,760)
1,869
—
—
Page 60
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
33. Statement of cash flows
Changes in liabilities and assets arising from financing and investing activities:
Revolving
credit facility
$
Long-term debt
in business
acquisition
$
Loan financing
costs
$
Non-interest-
bearing
contracts and
holdbacks
$
Non-controlling
interest option
$
Contingent
considerations
$
Obligation to
repurchase
11554891
Canada Inc.
partner
Total
$
(1,395)
12,171
1,575
1,961
1,416
360,728
Balance as at November 30, 2021
Changes from financing activities:
Increase in term revolving credit facility
Repayments of term revolving credit facility and
holdbacks
Repayment of long-term debt in business
acquisition (Note 6)
Payment of transaction costs
Changes from non-cash transactions:
Amortization of transaction costs directly
attributable to a financing arrangement
Accretion of interest on non-interest-bearing
holdbacks
Revaluation of financial liabilities recorded at
fair value through profit and loss (Note 25)
Foreign exchange
Changes from investing activities:
Change in control over interest in 11554891
Canada Inc. (Note 7)
Business acquisition (Note 6)
Issuance of holdback (Note 6)
Issuance of contingent consideration (Note 6)
Balance as at November 30, 2022
345,000
275,626
(67,807)
—
—
—
—
—
(2,764)
—
—
—
—
550,055
—
—
—
—
—
—
(12,407)
(33,800)
—
—
(1,817)
—
—
—
—
—
33,800
—
—
—
628
—
—
—
—
—
—
—
(2,584)
—
—
—
19
—
109
—
—
250
—
142
—
—
—
—
—
—
278
—
—
—
—
—
1,853
—
—
—
—
—
—
—
—
—
—
—
—
275,626
(80,214)
(33,800)
(1,817)
628
19
(1,794)
—
(1,416)
—
(2,932)
(2,655)
—
—
—
3,459
3,626
7,867
—
—
—
7,867
7,867
33,800
250
3,459
560,959
Page 61
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
33.
Statement of cash flows (continued)
Changes in non-cash operating activities are as follows:
Accounts receivable
Inventories
Loans receivable
Other assets
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Provisions
Gift card and loyalty program liabilities
Deferred revenue and deposits
2022
$
(10,187)
(2,049)
36
(345)
(5,027)
(1,376)
(251)
9,368
2,921
(6,910)
2021
$
(3,746)
(1,366)
338
389
(1,512)
4,128
(1,348)
7,749
5,926
10,558
Non-cash items are included in proceeds from dispositions of capital assets amounting to $164 (2021 – $1,314).
The variation of accounts receivables includes non-cash transfers from long-term debt amounting to nil (2021 –
$2,465).
34. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties of the
Company, have been eliminated on consolidation. Details of transactions between the Company and other
related parties are disclosed below.
Remuneration of key management personnel and directors
The remuneration of key management personnel and directors, presented in Wages and benefits and Other in
Note 28 of these consolidated financial statements, during the years ended November 30, 2022 and 2021 was
as follows:
Short-term benefits (1)
Share-based compensation
Consulting fees
Board member fees
Total remuneration of key management personnel and directors
2022
$
4,811
1,120
282
78
6,291
2021
$
3,231
924
57
78
4,290
(1) Prior year amount has been restated to reflect a prior period adjustment.
Key management personnel is composed of the Company’s CEO, COOs and CFO. The remuneration of
directors and key executives is determined by the Board of Directors having regard to the performance of
individuals and market conditions.
Given its widely held share base, the Company does not have an ultimate controlling party; one of its most
important shareholders is its Chair of the Board of Directors, who controls 16.4% of the outstanding shares.
Page 62
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2022 and 2021
(In thousands of Canadian dollars, except per share amounts and stock options)
35. Subsequent events
Acquisition of Wetzel’s Pretzels
On December 8, 2022, one of the Company’s wholly owned subsidiaries completed the acquisition of all of the
issued and outstanding shares of COP WP Parent, Inc. (“Wetzel’s Pretzels”), a franchisor and operator of quick
service restaurants operating in the snack category across 25 states in the US, as well as in Canada and
Panama, for a cash consideration of approximately $282,000 (US$207,000), on a cash-free, debt-free basis. At
closing, there were 329 franchised restaurants and 38 corporate-owned restaurants in operation.
Acquisition of Sauce Pizza and Wine
On December 15, 2022, one of the Company’s wholly owned subsidiaries completed the acquisition of the
assets of Sauce Pizza and Wine, an operator of fast casual restaurants operating in the state of Arizona in the
US, for a total consideration of $14,789 (US$10,842), including a holdback on acquisition of $1,142 (US$837).
At closing, there were 13 corporate-owned restaurants in operation.
Dividends
On January 18, 2023, the Company announced an increase to its quarterly dividend payment, from $0.210 per
common share to $0.250 per common share. The dividend of $0.250 per common share was paid on February
15, 2023.
Page 63
CORPORATE
INFORMATION
HEAD OFFICE
8210 Transcanada Highway
Saint-Laurent, Québec
H4S 1M5 Canada
T. : 514 336-8885
F. : 514 336-9222
www.mtygroup.com
AUDITORS
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
TRANSFER AGENT & REGISTRAR
Computershare Trust
Company of Canada
SOLICITORS
Fasken Martineau DuMoulin LLP
DIRECTORS
Stanley Ma
Claude St-Pierre
Eric Lefebvre
Dickie Orr*
Victor Mandel*
Murat Armutlu*
Suzan Zalter
*Audit Committee
INVESTOR RELATIONS
Eric Lefebvre
T. : 514 336-8885
F. : 514 336-9222
ir@mtygroup.com
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