OUR VALUE PROPOSIT ION
N E V E R T A S T E D
B E T T E R
2023 ANNUAL REPORT
OUR VALUE PROPOSITION NEVER TASTED BETTER
MTY Group franchises and operates quick-service, fast casual and casual dining restaurants under more than 90 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 7,116 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
7,116
LOCATIONS BY TYPE(1)
63%
STREET FRONT
21%
NON-TRADITIONAL
FORMAT
16%
SHOPPING MALL & OFFICE
TOWER FOOD COURT
(1) Locations as at November 30, 2023.
2
$104.1M
$271.9M
$184.6M
NET INCOME
ATTRIBUTABLE TO OWNERS
NORMALIZED
ADJUSTED EBITDA(1)
CASH FLOWS FROM
OPERATIONS
SYSTEM SALES(2) BY GEOGRAPHY
REVENUE(3) BY PRODUCT
19%
$5,641M
2023 System Sales
12%
32%
3%
34%
West Coast US
International
Canada
Central US
East Coast US
42%
34%
$1,169M
2023 Revenue
14%
10%
Corporate stores
Franchise operation
Food processing, distribution & retail
Promotional funds
(1) This is a non-GAAP measure. Please refer to the Supplemental Information section of the Management Discussion and Analysis for a definition.
(2) This is a supplementary financial measure. Please refer to the Supplemental Information section of the Management Discussion and Analysis for a definition.
(3) In % of fiscal 2023 revenue, excluding intercos.
3
3
4
FY 2023
HIGHLIGHTS
RECORD FINANCIAL RESULTS
• System sales(1) of $5.6 billion
• Normalized adjusted EBITDA(2) of $271.9 million
• Cash flows from operations of $184.6 million
CAPITAL ALLOCATION
• Long-term debt payments of $110.4 million
• Dividend payments of $24.4 million
• Share repurchases of $4.2 million
• Capital expenditures and intangible assets of $32.2 million
FINANCIAL POSITION
• Net debt to normalized adjusted EBITDA ratio(3) of 2.8X
• Cash on hand of $58.9 million
• Available credit of $142.2 million
DIVIDEND PAYMENT
• Following the year-end, the Company announced a 12% hike to its quarterly
dividend payment, increasing from $0.25 to $0.28 per common share. The $0.28
per share dividend was paid on February 15, 2024, to shareholders of record.
(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.
5
6
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
2023
2022
2021
2020
2019
1,169,334
271,904
109,985
104,082
115,786
4.26
4.25
716,522
187,352
96,170
74,817
109,903
3.06
3.06
551,903
168,622
11 2,072
85,639
7 7,673
3.47
3.46
511,11 7
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
24,409
24,440
24,705
24,755
25,145
24,478
24,333
24,466
24,413
24,745
24,670
24,755
24,706
25,186
25,07 1
5,641,200
4,251,200
3,631,300
3,459,100
3,619,800
1,027,400
820,300
803,600
636,400
199,200
7,116
6,788
6,719
7,001
7,373
Cash flows from operations (4)
184,586
148,481
139,299
133,652
112,951
Cash flows from operations per diluted share ($ per share) (2,4)
Dividends paid on common stock
Dividends per common share ($ per share)
Shares repurchased and cancelled
7.54
24,407
1.00
4,167
6.07
20,518
0.84
14,618
Number of shares repurchased and cancelled (#)
80,800
256,400
5.63
9,141
0.37
2 ,184
36,600
5.40
4,633
0.185
18,866
364,774
4.48
16,713
0.66
5,22 7
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)
58,895
59,479
6 1,231
44,302
50,737
2,680,018
2,325,303
1,904,594
2,013,697
1,648,801
767,364
812,889
560,959
724,626
360,728
648,898
460,542
582,514
540,650
665,480
51.50
73.50
49.91
1,253
6 1.25
63.96
45.20
1,495
55.19
72.10
4 7.15
1,362
51.65
62.82
14.23
1,276
55.92
71.86
51.61
1,402
(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.
(4) Prior period amounts have been restated to reflect a reclassification between cash flows provided by operating activities and the effect of foreign exchange rate changes on cash.
7
Dear Fellow Shareholders,
During the last decade, MTY has made 27 acquisitions totaling over
$1.7 billion, bringing the number of locations over 7,000, spread over
91 brands. Over the years, we have become one of the largest franchisors
and operators of restaurant concepts in North America.
MESSAGE FROM
ÉRIC LEFEBVRE
In 2023, our recent acquisitions helped lift system sales(1) 33% to a record $5.6 billion.
Organic growth contributed to this performance with a 4% increase year-over-year,
reflecting the health of the network’s royalty-generating capacity. The overall effect resulted
in unprecedented normalized adjusted EBITDA(2) of $279.1 million in 2023. Cash flows from
operations followed suit with $184.6 million generated during the past year. As a result, our
dual growth strategy, leveraging strategic acquisitions and organic growth, largely enabled
us to overcome uncertain market conditions and inflationary pressure in 2023.
The industry we operate in faced numerous challenges during the last three years, ranging
from government-imposed restrictions on operations, construction and supply chain issues,
delays to secure building permits and schedule inspections, labour costs and availability,
increased cost of financing, etc. All these factors have applied considerable pressure on our
network. Nevertheless, I am proud to report that we opened 330 locations in 2023, including
successive record quarters for the number of openings in the third and fourth quarter. The
last nine months have been encouraging, as we ramped up the number of openings while
gradually reducing the number of closures. Equally important, the pipeline for future store
openings remains robust for 2024.
During the past year, we have witnessed heightened price sensitivity on the part of
consumers. They have become more demanding for their hard-earned dollars in a volatile
environment. Price increases have resulted in higher expectations, pushing our brands
to elevate their game to remain relevant in the marketplace. Creativity, innovation and
execution will be critical for MTY to continue enhancing its value proposition.
We will also continue our efforts to leverage digital marketing, online ordering, website
performance and data analytics. Digital sales grew 25% year-over-year to $1.0 billion in
2023, representing a 5% increase excluding acquisitions and foreign exchange impact.
(1) This is a supplementary financial measure. Please refer to the Supplementary 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.
8
There is still a lot of work to accomplish, but we are taking steps to make the customer
experience as seamless and engaging as possible, so that growth momentum continues in
the future.
We continue to believe in the significance of our food processing, distribution and retail
sales segment. Grocers and food retailers faced challenges in Canada during 2023, but
we managed to increase our presence with 190 products listed compared to 183 in 2022.
Although this segment has lower margins than our franchise segment, it provides customers
with another distribution channel to appreciate the value we offer and enables us to capture
a larger part of their food dollars. Sales were slightly down year-over-year for this segment,
but we believe in the new innovations we have lined up and hope to build long-term growth
both in Canada and the U.S.
In 2023, our recent
acquisitions helped lift
system sales 33% to
a record $5.6 billion.
Organic growth
contributed to this
performance with a 4%
increase year-over-year,
reflecting the health of
Looking ahead to fiscal 2024, we believe MTY is on a solid foundation to address challenges
it might have to face. The macro environment demands a focus on immediate execution,
but we are not losing sight of our long-term goals. We have plans to work on business
the network’s royalty-
generating capacity.
efficiency improvements which will take many forms. From consolidation of business units
to deploying a new ERP system across the organization, we will systematically review every
part of our business to make sure we optimize all the resources available to us. MTY has
prospered over the last four decades because of its strong entrepreneurial culture, its agility,
and its result-driven approach. This heritage is critical to us, and although the business
environment in which we operate is ever evolving, we continue to put significant efforts
towards maintaining the same attributes so we prosper for many more decades to come.
It should be noted that our Board of Directors recently approved a 12% increase in our
quarterly dividend to $0.28 per common share, reflecting its confidence in MTY’s ability to
generate strong cash flows from operations in the future.
Following a period of high growth, marked by large-scale acquisitions, we remain fully
committed to creating shareholder value. Rest assured that we will continue seeking the
most accretive acquisitions and investing in organic growth, while protecting our financial
position.
In closing, I want to thank all our stakeholders including our guests, and the communities
in which we operate, as well as our employees, franchise partners, shareholders, and
dedicated Board members for their continued support.
Éric Lefebvre
President and Chief Executive Officer
9
SUSTAINABILITY REPORT
UPDATE
We are pleased to provide a glimpse of our Sustainability Report Update
that was published in July 2023. The report, which has been approved
by MTY’s Board of Directors, summarizes the progress we made in fiscal
2022 against commitments outlined in our inaugural report.
FOOD
PLANET
PEOPLE
This progress report presents data about our actions to source responsibly, improve the
quality of our food, reduce our impact on the environment, and make a positive impact on
communities.
We are proud of our achievements in these areas and excited to share our developments.
We recognize that we have more work to do and are committed towards taking the next
steps to improve the well-being of our food, our planet and our people.
The information presented in the report is aligned with the United Nations' Sustainable
Development Goals (SDGs). These SDGs are a global call to action to end poverty,
protect the planet and improve the lives and prospects for all. This agenda for sustainable
development was developed in 2015 by the UN and contains 17 goals.
We selected the SDGs towards which we have the largest impact, and which complement
the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI)
standards that we reported on in our previous report.
The following pages feature a sampling of achievements according to our pillars of Food,
Planet and People.
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To view the complete MTY Sustainability Report,
please visit https://mtygroup.com/en/sustainability/
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Management’s Discussion and Analysis
For the year ended November 30, 2023
Key highlights
• Annual revenue exceeded $1 billion for the first time in MTY's history.
• Normalized adjusted EBITDA(1) increased 13% to $60.4 million in the quarter, compared to $53.5
million in Q4-22.
• Free cash flows(1) increased 27% to $44.3 million in the quarter, compared to $34.8 million in
Q4-22 while annual free cash flows improved 13% to $154.1 million, compared to $137.0 million
in the prior year. Free cash flows per diluted share(2) reached $1.81 for the quarter and $6.30 for
the year.
• Net income attributable to owners in the quarter reached $16.4 million, or $0.67 per diluted
share, an increase of 131%, and for the year totaled $104.1 million, or $4.25 per diluted share,
surpassing all previous years with a 39% increase over prior year.
• System sales(3) for the year reached an all-time high of $5.6 billion, compared to $4.3 billion in
2022, a 33% increase year-over-year, while system sales for the quarter increased 11% to $1.3
billion in Q4-23.
• Ended the quarter with 7,116 locations compared to 6,788 locations in Q4-22. The Company
realized the highest number of openings in any quarter with 94 openings in Q4-23.
• Repurchased and cancelled 80,800 shares for a total consideration of $4.2 million in Q4-23.
• Long-term debt repayments of $27.6 million for the quarter.
• Announced increase in dividend payment of 12%. Quarterly dividend payment of $0.28 per
share paid on February 15, 2024.
(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, 2023
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, 2023.
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”) as issued by the International Accounting Standards Board ("IASB") and with current issued and
adopted interpretations applied to fiscal years beginning on or after December 1, 2022.
This MD&A was prepared as at February 14, 2024. 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 2023. 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 14, 2024 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.
Forward-looking statements made in this MD&A are based on a number of assumptions that are believed to be
reasonable on February 14, 2024. 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-
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.
Page 2
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 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 14, 2024. 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, Champps, Wetzel's Pretzels,
Twisted by Wetzel's, Sauce Pizza and Wine, Spice Bros1 and Cakes N Shakes.
As at November 30, 2023, MTY had 7,116 locations in operation, of which 6,897 were franchised or under operator
agreements and the remaining 219 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 44 years, MTY has developed several restaurant concepts, including Tiki-Ming, which
1 The Company entered into a sub-franchisor agreement with Spice Bros and opened its first location in March 2023.
Page 3
was the first concept it franchised. Details on other banners added through acquisitions can be found in the
supplemental section of this MD&A.
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 as issued by the IASB. 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 earnings before interest, taxes, depreciation and
amortization ("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
Page 4
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 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
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 total
consideration of $285.5 million (US$210.2 million), on a cash-free, debt-free basis. At closing, there were 328
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 $14.7 million (US$10.7 million), including a holdback on acquisition of $1.1 million (US$0.8 million). At
closing, there were 13 corporate-owned restaurants in operation.
Normal Course Issuer Bid Program
On June 29, 2023, the Company announced the renewal of the normal course issuer bid ("NCIB"). The NCIB began on
July 3, 2023 and will end on July 2, 2024 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 Toronto Stock Exchange
("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 months ended November 30, 2023, the Company repurchased and cancelled a total of
80,800 common shares (2022 – nil and 256,400 common shares, respectively) under the current NCIB, at a weighted
average price of $51.58 per common share (2022 – nil and $57.01 per common share, respectively), for a total
consideration of $4.2 million (2022 – nil and $14.6 million, respectively). An excess of $3.2 million (2022 – nil and $11.4
million, respectively) of the shares’ repurchase value over their carrying amount was charged to retained earnings as
share repurchase premiums.
Page 5
SUMMARY OF ANNUAL FINANCIAL METRICS
(In thousands $, except EPS, dividend per common share and
number of common shares)
Year ended
November 30, 2023
Year ended
November 30, 2022
Restated (1)
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 (2)
Net income per share – basic
Net income per share – diluted
Dividends paid on common stock
Dividends per common share
2,680,018
756,936
1,169,334
2,330,365
551,429
716,522
109,985
104,082
115,786
184,586
4.26
4.25
24,407
1.000
96,170
74,817
109,903
148,481
3.06
3.06
20,518
0.840
Weighted daily average number of common shares – basic
Weighted daily average number of common shares – diluted
24,409,176
24,478,163
24,439,892
24,465,738
(1) See Note 7 to the consolidated financial statements.
(2) Prior period amounts have been adjusted to reflect a reclassification of $5.7 million between cash flows provided by
operating activities and the effect of foreign exchange rate changes on cash.
SUMMARY OF ANNUAL OPERATING METRICS
(In thousands $, except per share amounts)
Year ended
November 30, 2023
Year ended
November 30, 2022
Adjusted EBITDA (1)
Normalized adjusted EBITDA (1)
270,746
182,082
271,904
187,352
Income before taxes, excluding impairment charges and
reversals (1)
119,845
111,055
Cash flows from operations per diluted share (2 & 3)
7.54
6.07
Free cash flows (1 & 3)
154,106
136,954
(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.
(3) Prior period amounts have been adjusted to reflect a reclassification of $5.7 million between cash flows provided by
operating activities and the effect of foreign exchange rate changes on cash.
Page 6
SUMMARY OF QUARTERLY FINANCIAL METRICS
Quarters ended
(In thousands $, except per
share information)
February May
2022
2022
August November February May
2023
2022
2023
2022
August November
2023
2023
Revenue
140,494 162,518 171,540 241,970 286,003 305,219 298,080 280,032
Net income attributable
to owners
Total comprehensive
income attributable to
owners
16,637 28,619 22,435
7,126 18,387 30,359 38,892
16,444
11,461 25,919 47,589
24,934 27,453 32,867 34,906
20,560
Net income per share
0.68
1.17
0.92
0.29
0.75
1.24
1.59
0.67
Net income per diluted
share
Cash flows provided by
0.68
1.17
0.92
0.29
0.75
1.24
1.59
0.67
operating activities (1 &
2)
38,783 30,040 42,228
47,764
(1) Prior period amounts have been adjusted to reflect a reclassification amounting to $5.7 million for the year ended
November 30, 2022 between cash flows provided by operating activities and the effect of foreign exchange rate
changes on cash.
37,430 33,467 51,860 51,495
(2) The Company has reassessed the presentation of certain acquisition accounts, leading to the reclassification of
accounts that were previously reported as Accounts payable and accrued liabilities to Cash. Accordingly, adjustments
amounting to $2.1 million for the first quarter of 2023 and $3.9 million for the second quarter of 2023 were made to
prior period amounts.
Page 7
SUMMARY OF QUARTERLY OPERATING METRICS
(In thousands $, except
system sales, # of
locations and per share
information)
February May
August November February May
August November
Quarters ended
2022
2022
2022
2022
2023
2023
2023
2023
System sales (1 & 2)
885.7 1,054.3
1,104.7
1,206.5
1,362.5 1,470.0
1,467.1
1,341.6
# of locations
6,704
6,660
6,606
6,788
7,128
7,124
7,119
7,116
Adjusted EBITDA (3)
35,637 47,649 48,920
49,876 62,863 74,648 72,870
60,365
Normalized adjusted
EBITDA (3)
35,637 47,649 50,592
53,474 63,959 74,648 72,932
60,365
Free cash flows (3, 4 & 6)
36,057 25,284 40,854
34,759 25,931 40,683 43,212
44,280
Free cash flows per
diluted share (4, 5 & 6)
1.81
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
1.67
1.76
1.42
1.04
1.66
1.47
1.06
definition.
In millions $.
(2)
(3) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(4) Prior period amounts have been adjusted to reflect a reclassification amounting to $5.7 million for the year ended
November 30, 2022 between cash flows provided by operating activities and the effect of foreign exchange rate
changes on cash.
(5) See section “Definition of non-GAAP ratios” found in the Supplemental Information section for definition.
(6) The Company has reassessed the presentation of certain acquisition accounts, leading to the reclassification of
accounts that were previously reported as Accounts payable and accrued liabilities to Cash. Accordingly, adjustments
amounting to $2.1 million for the first quarter of 2023 and $3.9 million for the second quarter of 2023 were made to
prior period amounts.
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,
retail, food processing and distribution and promotional funds revenues and expenses.
Page 8
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2023
Revenue
During the 2023 fiscal year, the Company’s total revenue increased to $1,169.3 million, from $716.5 million a year
earlier. Revenues for the two segments of business are broken down as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total revenue
Canada revenue analysis:
November 30, 2023 November 30, 2022
($ millions)
($ millions)
154.5
32.0
161.2
45.0
(4.8)
387.9
242.4
462.0
1.8
76.5
(1.3)
781.4
1,169.3
141.1
29.4
163.1
42.4
(5.4)
370.6
182.1
90.0
6.0
68.9
(1.1)
345.9
716.5
Variation
9%
9%
(1%)
6%
N/A
5%
33%
413%
(70%)
11%
N/A
126%
63%
Revenue from franchise locations in Canada increased by 9%. Several factors contributed to the variation, as listed
below:
Revenue, 2022 fiscal year
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 acquisition
Other non-material variations
Revenue, 2023 fiscal year
(In millions $)
141.1
11.8
0.4
1.4
0.1
(0.3)
154.5
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
During the 2023 fiscal year, recurring revenue streams increased by $11.8 million and was tightly correlated with the
9% increase of 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 13% and 11%, respectively, compared to prior year. Street
front locations had the largest impact on the year-over-year growth, contributing to 56% of the Canadian network
increase in system sales with an improvement of 7%, while mall and office tower location growth of 16% contributed to
37% of the year-over-year network increase.
Revenue from corporate-owned locations increased by 9% to $32.0 million during the year due to the increase in
system sales mentioned above, to a net increase in corporate-owned locations year-over-year as well as a shift in the
mix of restaurant concepts in the segment with an increase in casual dining restaurants over prior year.
Food processing, distribution and retail revenues decreased by 1% mainly due to lower sales in the food processing
and distribution divisions, partially offset by an increase in sales in the retail division. During the year ended November
30, 2023, 190 products were sold in the Canadian retail market (2022 – 183 products).
The promotional fund revenue increase of 6% is attributable to the increase in system sales as well as the impact of the
various contribution rates.
Page 9
US & International revenue analysis:
Revenue from franchise locations in the US and International increased by 33%. Several factors contributed to the
variation, as listed below:
Revenue, 2022 fiscal year
Increase in recurring revenue streams (1)
Decrease 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, 2023 fiscal year
(In millions $)
182.1
4.1
(0.4)
(1.5)
0.6
49.4
7.6
0.5
242.4
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
The increase in franchising revenues is mostly due to the acquisitions of Wetzel’s Pretzels in the first quarter of 2023
and BBQ Holdings, Inc. (“BBQ Holdings”) in the fourth quarter of 2022, which generated revenues of $27.9 million and
$21.5 million, respectively, followed by a variation of foreign exchange rates, which had a favourable impact of $7.6
million. Recurring revenue streams also increased by $4.1 million due to an increase in organic system sales of 1%
compared to the prior year.
The increase of $372.0 million in corporate-owned location revenues is primarily due to the acquisitions of BBQ
Holdings in the fourth quarter of 2022 and Wetzel’s Pretzels and Sauce Pizza and Wine in the first quarter of 2023. The
revenues from those acquired corporate locations contributed $302.8 million, $48.0 million, and $32.9 million,
respectively, to the increase in revenues in corporate-owned locations. This was partially offset by the sale in 2023 of
several Papa Murphy's corporately-owned locations that were converted into franchises, as well as lower sales in BBQ
Holdings compared to the two months of operations in the prior year, due in part to fewer corporate-owned locations.
The decrease in food processing, distribution and retail is mostly due to the termination of a retail licensing contract.
The promotional fund revenue increase of 11% is partly due to the acquisitions of BBQ Holdings in the fourth quarter of
2022 and Wetzel’s Pretzels in the first quarter of 2023, the favourable impact of foreign exchange rates and the impact
of the various contribution rates.
Operating expenses
During the 2023 fiscal year, operating expenses increased by 68% to $898.6 million, from $534.4 million a year ago.
Operating expenses for the two business segments were incurred as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total operating expenses
November 30, 2023 November 30, 2022
($ millions)
($ millions)
79.3
32.9
144.4
45.0
(2.1)
299.5
117.4
408.9
0.3
76.5
(4.0)
599.1
898.6
71.5
29.3
146.0
42.4
(1.8)
287.4
95.5
87.3
—
68.9
(4.7)
247.0
534.4
Variation
11%
12%
(1%)
6%
N/A
4%
23%
368%
N/A
11%
N/A
143%
68%
Page 10
Canada operating expenses analysis:
Operating expenses from franchise locations in Canada increased by $7.8 million, due to several factors listed below:
Operating expenses, 2022 fiscal year
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
Decrease due to impact of IFRS 16 on rent expense
Other non-material variations
Operating expenses, 2023 fiscal year
(In millions $)
71.5
0.4
8.4
1.3
(1.4)
(0.9)
79.3
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Controllable expenses increased by $8.4 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 2022 and into
2023, leading to a higher number of full-time employees, as well as an inflation impact on wages. The rise in
controllable expenses also included the impact of newly implemented software licenses and higher annual licensing
cost and cybersecurity costs related to additional security measures and the improvement of the efficiency of the
Company’s existing technology resources, higher provision for lease buyouts, as well as the impact of inflation.
Expenses from corporate stores increased by $3.6 million compared to the same period last year, partly correlated to
the related increase in revenues, and partially due to an increase in wages and supply chain costs due to inflation.
The decrease in food processing, distribution and retail expenses as well as the variation in 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 23%. Several factors contributed to
the variation, as listed below:
Operating expenses, 2022 fiscal year
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
Decrease due to transaction costs related to acquisitions
Decrease due to impact of IFRS 16 on rent expense
Impact of variation in foreign exchange rates
Other non-material variations
Operating expenses, 2023 fiscal year
(In millions $)
95.5
0.3
0.4
2.1
0.7
18.4
(4.1)
(0.6)
3.2
1.5
117.4
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Operating expenses for franchise locations increased by $21.9 million during the year, due in part to the acquisitions of
Wetzel's Pretzels and BBQ Holdings, which had expenses of $9.3 million and $9.1 million, respectively, as well as the
variation of foreign exchange rates, which contributed $3.2 million to the increase in operating expenses. Similarly to
Canada, controllable expenses also increased by $2.1 million due in part to higher wages, which were driven by the
same reasons as the Canadian market, partly offset by lower professional and consulting services mostly due to the
termination of contracts and more work being done internally. These increases were partially offset by lower acquisition
costs, incurred in the amount of $1.2 million in the current year for the acquisitions of Wetzel's Pretzels and Sauce
Pizza and Wine, compared to $5.3 million in the prior year for the acquisitions of BBQ Holdings and Wetzel's Pretzels.
Page 11
Corporate store expenses increased to $408.9 million, from $87.3 million in the prior year, primarily due to the
acquisitions of BBQ Holdings in the fourth quarter of 2022 and Wetzel’s Pretzels and Sauce Pizza and Wine in the first
quarter of 2023, which added corporate store expenses of $287.4 million, $39.8 million and $30.8 million, respectively.
The variation of promotional funds expenses was tightly correlated to the related revenues.
Segment profit, Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
Fiscal year ended November 30, 2023
Canada US & International
387.9
781.4
(In millions $)
Revenue
Operating expenses
Segment profit and Adjusted EBITDA (1)
Segment profit and Adjusted EBITDA as a % of Revenue (2)
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 and Adjusted EBITDA (1)
Segment profit and Adjusted EBITDA as a % of Revenue (2)
Transaction costs related to acquisitions (3)
Normalized adjusted EBITDA (1)
Normalized adjusted EBITDA as a % of Revenue (2)
Total
1,169.3
898.6
270.7
599.1
182.3
23%
23%
1.2
183.5
1.2
271.9
23%
23%
Total
716.5
534.4
182.1
247.0
98.9
29%
25%
5.3
104.2
5.3
187.4
30%
26%
299.5
88.4
23%
—
88.4
23%
287.4
83.2
22%
—
83.2
22%
Fiscal year ended November 30, 2022
Canada US & International
370.6
345.9
Below is a summary of performance segmented by product/service:
Fiscal year ended November 30, 2023
(In millions $) Franchise Corporate
396.9
494.0
196.7
441.8
144.7
Processing,
distribution
and retail
163.0
Intercompany
transactions
Promotional
funds
121.5
121.5
Revenue
Operating expenses
Segment profit and Adjusted
EBITDA (1)
200.2
52.2
18.3
Segment profit and Adjusted EBITDA
as a % of Revenue (2)
50%
11%
11%
Transaction costs related to
acquisitions (3)
1.2
Normalized adjusted EBITDA (1)
201.4
—
52.2
—
18.3
Normalized adjusted EBITDA as a %
of Revenue (2)
51%
11%
11%
—
N/A
—
—
N/A
Total
(6.1) 1,169.3
(6.1)
898.6
—
270.7
N/A
23%
—
—
1.2
271.9
N/A
23%
Page 12
Fiscal year ended November 30, 2022
(In millions $) Franchise Corporate
323.2
119.4
167.0
116.6
146.0
Processing,
distribution
and retail
169.1
Revenue
Operating expenses
Segment profit and Adjusted
EBITDA (1)
156.2
2.8
23.1
Segment profit and Adjusted EBITDA
as a % of Revenue (2)
48%
2%
14%
Transaction costs related to
acquisitions (3)
5.3
Normalized adjusted EBITDA (1)
161.5
—
2.8
—
23.1
Promotional
funds
111.3
111.3
Intercompany
transactions
(6.5)
(6.5)
Total
716.5
534.4
—
N/A
—
—
—
182.1
N/A
25%
—
—
5.3
187.4
Normalized adjusted EBITDA as a %
N/A
of Revenue (2)
(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
14%
26%
50%
2%
N/A
consolidated financial statements.
Several factors contributed to the variation, as listed below:
(In millions $)
Segment profit, 2022 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 in expected credit loss provision
Variance due to acquisitions
Variance due to transaction costs related to acquisitions
Variance due to impact of IFRS 16 on rent revenue &
expense
Variance in gift card breakage
Impact of variation in foreign exchange rates
Other non-material variations
Segment profit, 2023 fiscal year
Canada
83.2
0.2
3.7
0.4
(1.3)
0.1
—
0.8
—
—
1.3
88.4
US &
International
98.9
0.2
(6.4)
(0.4)
(0.7)
56.7
4.1
25.2
0.6
4.3
(0.2)
182.3
Total
182.1
0.4
(2.7)
—
(2.0)
56.8
4.1
26.0
0.6
4.3
1.1
270.7
Normalized adjusted EBITDA (2), 2022 fiscal year
Variances in segment profit
Variances in transaction costs related to acquisitions
187.4
88.6
(4.1)
271.9
Normalized adjusted EBITDA (2), 2023 fiscal year
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
104.2
83.4
(4.1)
183.5
83.2
5.2
—
88.4
Total segment profit for the year ended November 30, 2023 was $270.7 million, up by 49% compared to the prior year,
while normalized adjusted EBITDA was $271.9 million, up by 45% compared to the prior year. Canada contributed 33%
of total normalized adjusted EBITDA and an increase of $5.2 million compared to the prior year, while the US &
International normalized adjusted EBITDA rose by 76% to reach $183.5 million. In the US & International, the
acquisitions of BBQ Holdings in the fourth quarter of 2022 and Wetzel’s Pretzels and Sauce Pizza and Wine in the first
quarter of 2023 were the main contributors to the increase, generating normalized adjusted EBITDA of $56.7 million.
Page 13
Calculation of Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
(In thousands $)
Year ended
November 30, 2023
Year ended
November 30, 2022
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
Impairment charge – property, plant and equipment and
intangible assets
Unrealized and realized foreign exchange loss
Interest income
Loss (gain) on de-recognition/lease modification of lease
liabilities
Loss (gain) on disposal of property, plant and equipment and
intangible assets
Revaluation of financial liabilities and derivatives recorded at
fair value
109,985
54,934
34,559
52,142
11,402
428
9,432
2,632
(1,048)
702
1,448
96,170
21,548
29,473
12,428
3,210
969
13,916
5,690
(253)
(798)
(108)
(2,932)
2,769
—
182,082
5,270
187,352
(3,676)
—
(2,194)
270,746
1,158
271,904
Loss on remeasurement of joint venture interest
Gain on contingent consideration from a business acquisition
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
consolidated financial statements.
Other income and expenses
Depreciation of property, plant and equipment and right-of-use assets increased by $33.4 million during the year ended
November 30, 2023, primarily as a result of the acquisitions of BBQ Holdings in the fourth quarter of 2022 and Wetzel’s
Pretzels and Sauce Pizza and Wine in the first quarter of 2023. Depreciation is now being taken on approximately 150
additional corporate stores as well as the right-of-use assets associated with those locations.
Amortization of intangible assets increased by $5.1 million, mostly as a result of the franchise rights and other
intangible assets associated with the acquisition of BBQ Holdings as well as the franchise rights associated with the
acquisition of Wetzel’s Pretzels.
Interest on long-term debt increased by $39.7 million as a result of higher drawings compared to the same period last
year, related to the acquisitions of BBQ Holdings and Wetzel’s Pretzels, as well as an increase in the Secured
Overnight Financing Rate (“SOFR”) and Canadian Dollar Offered Rate (“CDOR”) over the course of 2022 and 2023. In
order to reduce the exposure risk of changes to the SOFR, the Company entered into a three-year and two-year SOFR
fixed interest rate swap, which resulted in accumulated year-to-date cash savings of $3.2 million in interest expense.
Net interest expense on leases increased by $8.2 million, primarily as a result of approximately 150 additional
corporate stores with the acquisitions of BBQ Holdings, Wetzel’s Pretzels and Sauce Pizza and Wine.
During the year ended November 30, 2023, the Company recognized impairment charges of $9.4 million on its
property, plant and equipment and intangible assets, primarily related to franchise rights and trademarks for six of its
brands. This compares to $13.9 million in the prior year, which was related to franchise rights and trademarks for five of
its brands.
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
Page 14
controlling. As a result, the Company recorded a loss on remeasurement of joint venture interest of $2.8 million in the
prior year.
During the year ended November 30, 2023, the Company recorded a gain on contingent consideration from a recent
acquisition of $2.2 million.
Net income
For the year ended November 30, 2023, a net income attributable to owners of $104.1 million was recorded, or $4.26
per share ($4.25 per diluted share) compared to a net income attributable to owners of $74.8 million or $3.06 per share
($3.06 per diluted share) last year. The increase is mostly attributable to higher normalized adjusted EBITDA as
described previously and lower income taxes, partially offset by an increase in several factors as described above in
section “Other income and expenses”.
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED NOVEMBER 30,
2023
Revenue
During the fourth quarter of 2023, the Company’s total revenue increased to $280.0 million, from $242.0 million a year
earlier. Revenues for the two segments of business are broken down as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total revenue
Canada revenue analysis:
November 30, 2023 November 30, 2022
($ millions)
($ millions)
41.5
7.6
38.0
11.0
(3.7)
94.4
56.3
111.4
0.3
17.9
(0.3)
185.6
280.0
42.0
8.0
42.1
11.0
(4.4)
98.7
47.6
74.3
1.7
20.1
(0.4)
143.3
242.0
Variation
(1%)
(5%)
(10%)
—
N/A
(4%)
18%
50%
(82%)
(11%)
N/A
30%
16%
Revenue from franchise locations in Canada decreased by 1%. Several factors contributed to the variation, as listed
below:
Revenue, fourth quarter of 2022
Decrease in recurring revenue streams (1)
(In millions $)
42.0
(1.0)
0.1
0.4
41.5
Revenue, fourth quarter of 2023
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase in turnkey, sales of material to franchisees and rent revenues
Increase in initial franchise fees, renewal fees and transfer fees
During the fourth quarter of 2023, recurring revenue streams decreased by $1.0 million mostly due to lower supplier
contributions that were partially offset by higher royalties.
Revenue from corporate-owned locations decreased by 5% to $7.6 million during the quarter due to a decline to the
overall performance of the mix of corporate stores held in 2023.
Food processing, distribution and retail revenues decreased by 10% due to lower sales in the retail segment, which are
the result of market conditions and grocers' increased focus on promoting house labels. In the fourth quarter of 2023,
Page 15
however, the Company managed to list and sell 182 products in the Canadian retail market (2022 – 174 products)
irrespective of these constraints.
US & International revenue analysis:
Revenue from franchise locations in the US and International increased by 18%. Several factors contributed to the
variation, as listed below:
Revenue, fourth quarter of 2022
Decrease in recurring revenue streams (1)
Decrease in sales of material and services to franchisees
Increase in initial franchise fees, renewal fees and transfer fees
(In millions $)
47.6
(0.3)
0.1
(0.3)
8.9
Increase due to acquisition
0.6
Impact of variation in foreign exchange rates
(0.3)
Other non-material variations
56.3
Revenue, fourth quarter of 2023
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
The increase in franchising revenues is mostly due to the acquisitions of Wetzel’s Pretzels in the first quarter of 2023
and BBQ Holdings in the fourth quarter of 2022, which each generated revenues of $6.9 million and $1.9 million,
respectively.
The increase of $37.1 million in corporate-owned location revenues is primarily due to the acquisitions of BBQ Holdings
in the fourth quarter of 2022 and Wetzel’s Pretzels and Sauce Pizza and Wine in the first quarter of 2023. The
revenues from those acquired corporate locations contributed $28.6 million, $11.1 million and $8.5 million, respectively,
to the increase in revenues in corporate-owned locations. This was partially offset by the sale in 2023 of several Papa
Murphy's corporately-owned locations that were converted into franchises, as well as lower sales in BBQ Holdings
compared to the two months of operations in the same period last year, due in part to fewer corporate-owned locations.
The decrease in food processing, distribution and retail is mostly due to the termination of a retail licensing contract.
The promotional fund revenue decreased by 11%, partly due to a decrease from the Papa Murphy's contribution rates.
Operating expenses
During the fourth quarter of 2023, operating expenses increased by 14% to $219.6 million, from $192.1 million a year
ago. Operating expenses for the two business segments were incurred as follows:
Segment
Canada
Total Canada
US &
International
Subdivision
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Franchise operation
Corporate stores
Food processing, distribution and retail
Promotional funds
Intercompany transactions
Total US & International
Total operating expenses
November 30, 2023 November 30, 2022
($ millions)
($ millions)
22.8
8.3
34.1
11.0
(0.7)
75.5
29.3
100.2
—
17.9
(3.3)
144.1
219.6
18.9
8.0
36.8
11.0
(0.5)
74.2
33.3
68.8
—
20.1
(4.3)
117.9
192.1
Variation
21%
4%
(7%)
—
N/A
2%
(12%)
46%
N/A
(11%)
N/A
22%
14%
Page 16
Canada operating expenses analysis:
Operating expenses from franchise locations in Canada increased by $3.9 million, due to several factors listed below:
Operating expenses, fourth quarter of 2022
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
Increase in expected credit loss provision
consulting services and other office expenses
Increase due to transaction costs related to acquisitions
2.3
0.5
1.5
(1.5)
(0.3)
22.8
Operating expenses, fourth quarter of 2023
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Decrease due to impact of IFRS 16 on rent expense
Other non-material variations
(In millions $)
18.9
1.4
Controllable expenses increased by $2.3 million, primarily due to higher wages. This is attributable to vacant positions
being filled over the course of 2022 and into 2023, 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. Higher provision for lease buyouts also resulted in an increase
compared to the same quarter last year. Transaction costs related to the acquisition of BBQ Holdings, Inc. were moved
to the US & International segment in the prior year, which caused a favorable impact of $1.5 million for the Canadian
segment.
Expenses from corporate stores increased by $0.3 million compared to the same period last year, primarily due to
higher wages and supply chain costs due to inflation.
The decrease in food processing, distribution and retail costs is tightly correlated to the related revenues decrease.
US & International operating expenses analysis:
Operating expenses from franchise locations in the US & International decreased by 12%. Several factors contributed
to the variation, as listed below:
(In millions $)
33.3
0.2
0.4
Operating expenses, fourth quarter of 2022
Increase in non-controllable expenses (1)
Increase in cost of sale of material and services to franchisees and rent
Decrease in recurring controllable expenses (1) including wages, professional and
Increase due to acquisition
consulting services and other office expenses
Decrease due to transaction costs related to acquisitions
(3.0)
2.6
(5.1)
0.2
0.7
29.3
Operating expenses, fourth quarter of 2023
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Increase due to impact of IFRS 16 on rent expense
Other non-material variations
Operating expenses for franchise locations decreased by $4.0 million during the fourth quarter of 2023, mostly due to
the $5.1 million acquisition costs incurred in the prior year for the acquisitions of BBQ Holdings and Wetzel's Pretzels,
as well as a decrease in recurring controllable expenses of $3.0 million, due in part to lower advertising and insurance
costs. These decreases were partially offset by the operating expenses contributed by the acquisitions of Wetzel’s
Pretzels and BBQ Holdings, which had expenses of $1.6 million and $1.0 million, respectively.
Corporate store expenses increased to $100.2 million, from $68.8 million in the same period last year, primarily due to
the acquisitions of BBQ Holdings, Wetzel’s Pretzels and Sauce Pizza and Wine, which added corporate store expenses
of $27.2 million, $9.5 million and $7.9 million, respectively.
The variations of promotional funds expense were tightly correlated to the related revenues.
Page 17
Segment profit, Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
Three-month period ended November 30, 2023
(In millions $)
Revenue
Operating expenses
Segment profit, Adjusted EBITDA and Normalized adjusted
EBITDA (1)
Segment profit, Adjusted EBITDA and Normalized adjusted
EBITDA as a % of Revenue (2)
Canada US & International
94.4
185.6
144.1
Total
280.0
219.6
41.5
60.4
20%
22%
22%
Three-month period ended November 30, 2022
Canada US & International
98.7
143.3
(In millions $)
Revenue
Operating expenses
Segment profit and Adjusted EBITDA (1)
Segment profit and Adjusted EBITDA as a % of Revenue (2)
Transaction costs related to acquisitions (3)
Normalized adjusted EBITDA (1)
Normalized adjusted EBITDA as a % of Revenue (2)
Below is a summary of performance segmented by product/service:
Total
242.0
192.1
49.9
117.9
25.4
18%
21%
5.1
30.5
21%
3.6
53.5
22%
75.5
18.9
74.2
24.5
25%
(1.5)
23.0
23%
Three-month period ended November 30, 2023
(In millions $) Franchise Corporate
97.8
52.1
119.0
108.5
Processing,
distribution
and retail
38.3
34.1
Promotional
funds
28.9
28.9
Intercompany
transactions
(4.0)
(4.0)
Total
280.0
219.6
Revenue
Operating expenses
Segment profit, Adjusted EBITDA
and Normalized adjusted
EBITDA (1)
Segment profit, Adjusted EBITDA
and Normalized adjusted EBITDA
as a % of Revenue (2)
45.7
10.5
4.2
—
—
60.4
47%
9%
11%
N/A
N/A
22%
Page 18
Three-month period ended November 30, 2022
Processing,
distribution
and retail
43.8
36.8
Promotional
funds
31.1
31.1
Intercompany
transactions
(4.8)
(4.8)
Total
242.0
192.1
82.3
76.8
(In millions $) Franchise Corporate
Revenue
Operating expenses
Segment profit and Adjusted
EBITDA (1)
89.6
52.2
37.4
5.5
7.0
Segment profit and Adjusted EBITDA
as a % of Revenue (2)
42%
7%
16%
Transaction costs related to
acquisitions (3)
Normalized adjusted EBITDA (1)
3.6
41.0
—
5.5
—
7.0
—
N/A
—
—
—
49.9
N/A
21%
—
—
3.6
53.5
Normalized adjusted EBITDA as a %
N/A
of Revenue (2)
(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
46%
22%
16%
7%
N/A
consolidated financial statements.
Several factors contributed to the variation, as listed below:
(In millions $)
Segment profit, fourth quarter of 2022
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 in expected credit loss provision
Variance due to acquisitions
Variance due to transaction costs related to acquisitions
Variance due to impact of IFRS 16 on rent revenue &
expense
Impact of variation in foreign exchange rates
Other non-material variations
Segment profit, fourth quarter of 2023
Canada
24.5
(4.9)
(1.1)
US &
International
25.4
(0.1)
(2.2)
0.1
(0.5)
—
(1.5)
1.4
—
0.9
18.9
0.1
—
9.8
5.1
3.3
0.4
(0.3)
41.5
Total
49.9
(5.0)
(3.3)
0.2
(0.5)
9.8
3.6
4.7
0.4
0.6
60.4
Normalized adjusted EBITDA (2), fourth quarter of 2022
53.5
10.5
Variances in segment profit
(3.6)
Variances in transaction costs related to acquisitions
60.4
Normalized adjusted EBITDA (2), fourth quarter of 2023
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
(2) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
23.0
(5.6)
1.5
18.9
30.5
16.1
(5.1)
41.5
Total segment profit and normalized adjusted EBITDA for the three-month period ended November 2023 were $60.4
million, up by 21% and 13%, respectively, compared to the same period last year. Canada contributed 31% of total
normalized adjusted EBITDA and a decrease of $4.1 million compared to the same period last year, while the US &
International normalized adjusted EBITDA increased by $11.0 million. In the US & International, the acquisitions of BBQ
Holdings and Wetzel’s Pretzels and Sauce Pizza and Wine were the main contributors to the increase, generating
normalized adjusted EBITDA of $9.8 million.
Page 19
Calculation of Adjusted EBITDA (1) and Normalized adjusted EBITDA (1)
(In thousands $)
Quarter ended
November 30, 2023
Quarter ended
November 30, 2022
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
Impairment charge – property, plant and equipment and
intangible assets
Unrealized and realized foreign exchange loss
Interest income
Loss (gain) on de-recognition/lease modification of lease
liabilities
Loss (gain) on disposal of property, plant and equipment and
intangible assets
Revaluation of financial liabilities and derivatives recorded at
fair value
Gain on contingent consideration from a business acquisition
Adjusted EBITDA
Transaction costs related to acquisitions (2)
Normalized adjusted EBITDA
14,865
11,746
8,054
12,450
2,938
154
9,432
2,652
(233)
20
1,063
(582)
(2,194)
60,365
—
60,365
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
(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 $1.7 million during the quarter
primarily as a result of the acquisitions of BBQ Holdings in the fourth quarter of 2022 and Wetzel’s Pretzels and Sauce
Pizza and Wine in the first quarter of 2023. Depreciation is now being taken on approximately 150 additional corporate
stores as well as the right-of-use assets associated with those locations, for three full months in the fourth quarter of
2023 compared to two full months in the same period last year for BBQ Holdings and none for Wetzel's Pretzels and
Sauce Pizza and Wine.
Interest on long-term debt increased by $6.0 million as a result of higher drawings compared to the same period last
year, related to the acquisitions of BBQ Holdings and Wetzel’s Pretzels, as well as an increase in the SOFR and CDOR
over the course of 2022 and 2023. In order to reduce the exposure risk of changes to the SOFR, the Company entered
into a three-year and two-year SOFR fixed interest rate swap in the second quarter of 2023, which resulted in a $1.4
million interest expense cash saving.
During the fourth quarter of 2023, the Company recognized impairment charges of $9.4 million on its property, plant
and equipment and intangible assets, primarily related to franchise rights and trademarks for six of its brands. This
compares to $13.4 million in the same period last year, which was related to franchise rights and trademarks for five of
its brands.
During the fourth quarter of 2023, the Company recorded a gain on contingent consideration from a recent acquisition
of $2.2 million.
Page 20
Net income
For the three months ended November 30, 2023, a net income attributable to owners of $16.4 million was recorded, or
$0.67 per share ($0.67 per diluted share) compared to $7.1 million or $0.29 per share ($0.29 per diluted share) last
year. The increase is primarily attributable to higher normalized adjusted EBITDA as described previously and lower
income taxes, partially offset by an increase in several factors as described above in section “Other income and
expenses”.
CONTRACTUAL OBLIGATIONS
The obligations pertaining to the long-term debt and the minimum net rentals for the leases are as follows:
0 – 6
6 – 12
12 – 24
24 – 36
36 – 48
48 – 60
(In millions $) Months Months Months Months Months Months Thereafter
$
$
$
$
$
$
$
Accounts payable and accrued
liabilities
Long-term debt (1)
Interest on long-term debt (2 & 3)
Net lease liabilities (4)
Total contractual obligations
—
—
—
70.8
70.8
(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.
—
757.8
49.6
37.6
845.0
147.6
11.2
26.9
20.2
205.9
—
—
—
25.2
25.2
—
—
—
29.8
29.8
—
0.2
26.9
20.2
47.3
—
—
(0.8)
33.1
32.3
(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 of swap arrangement interest revenue.
(4) 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, 2023, the amount held in cash totaled $58.9 million, a decrease of $0.6 million since the end of the
2022 fiscal period.
During the year ended November 30, 2023, MTY paid $24.4 million (2022 – $20.5 million) in dividends to its
shareholders and repurchased and cancelled 80,800 of its shares (2022 – 256,400) for $4.2 million (2022 – $14.6
million) through its NCIB.
During the year ended November 30, 2023, cash flows generated by operating activities were $184.6 million, compared
to $148.5 million in the prior year. The increase is mainly attributable to higher adjusted EBITDA, due in part to the
acquisitions of BBQ Holdings, Wetzel's Pretzels and Sauce Pizza and Wine, partially offset by higher interest and
income taxes paid. Excluding the variations in non-cash working capital items, income taxes, interest paid and other,
operations generated $274.8 million, compared to $183.3 million last year.
The Company's revolving credit facility payable to a syndicate of lenders has an authorized amount of $900.0 million
(2022 – $900.0 million), an accordion feature of $300.0 million (2022 – $300.0 million) and matures on October 28,
2025. As at November 30, 2023, US$558.0 million was drawn from the revolving credit facility (November 30, 2022 –
US$408.9 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, 2023, the Company was in compliance with the covenants of the credit agreement.
Page 21
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
Three months
ended November 30,
Twelve months
ended November 30,
2023
6,895
43
181
—
7,119
94
2022
6,516
41
49
—
6,606
60
2023
6,589
41
158
—
6,788
330
2022
6,603
42
51
23
6,719
245
Closed during the period
(97)
(178)
(381)
(507)
Acquired during the period
Disposed of during the period (2)
Total, end of the period
Franchises, end of the period
Corporate-owned, end of the period
—
—
7,116
301
(1)
6,788
379
—
7,116
6,897
332
(1)
6,788
6,589
Canada
US
41
158
6,788
(1) On December 3, 2021, the Company gained control over its 70% interest in 11554891 Canada Inc. – see Note 8 to the
43
176
7,116
Total, end of the period
consolidated financial statements.
(2) Sale of Buns master trademark.
Page 22
Openings / Acquisitions
During the fourth quarter of 2023, the Company’s network did not acquire any location (2022 – 301 locations) and
opened 94 locations (2022 – 60 locations). The breakdown by geographical location and by location type is as follows:
During the year ended November 30, 2023, the Company’s network acquired 379 locations (2022 – 332) and opened
330 locations (2022 – 245 locations). The breakdown by geographical location and by location type is as follows:
Page 23
Closures
During the fourth quarter of 2023, the Company’s network closed 97 locations (2022 – 178 locations). The breakdown
by geographical location and by location type is as follows:
Excluding the newly acquired brands, the average monthly unit volume of a new location opened was approximately
$47,000 while that of a recently closed location was approximately $35,000.
During the year ended November 30, 2023, the Company’s network closed 381 locations (2022 – 507 locations). The
breakdown by geographical location and by location type is as follows:
Page 24
The table 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,
% of system sales
Twelve months ended
November 30,
2023
16%
63%
21%
2022
13%
66%
21%
2023
15%
76%
9%
2022
11%
80%
9%
The geographical breakdown of MTY’s locations and system sales is as follows:
Geographical location
Canada
US
International
% of location count
November 30,
% of system sales
Twelve months ended
November 30,
2023
35%
58%
7%
2022
37%
56%
7%
2023
32%
65%
3%
2022
39%
58%
3%
The territories that had the largest portions of total system sales were Quebec (Canada) with 17%, California (US) with
12%, Ontario (Canada) with 8%, Washington (US), Arizona (US) and Oregon (US) with 4% each.
The geographical distribution of system sales is as follows:
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,
2023
80%
10%
10%
2022
78%
11%
11%
2023
61%
10%
29%
2022
68%
12%
20%
Page 25
System sales
During the three and twelve-month periods ended November 30, 2023, MTY’s network generated $1,341.6 million and
$5,641.2 million in sales, respectively. The breakdown of system sales is as follows:
(millions of $)
Canada
US
International
TOTAL
First quarter of 2023
First quarter of 2022
Variance
Second quarter of 2023
Second quarter of 2022
Variance
Third quarter of 2023
Third quarter of 2022
Variance
Fourth quarter of 2023
Fourth quarter of 2022
Variance
Year-to-date 2023
Year-to-date 2022
Variance
423.9
320.3
901.2
532.0
32%
69%
450.1
420.8
980.1
599.9
7%
63%
473.2
454.8
952.8
614.0
4%
55%
437.0
438.1
—
869.3
734.7
18%
37.4
33.4
12%
39.8
33.6
18%
41.1
35.9
14%
35.3
33.7
5%
1,362.5
885.7
54%
1,470.0
1,054.3
39%
1,467.1
1,104.7
33%
1,341.6
1,206.5
11%
1,784.2
1,634.0
3,703.4
2,480.6
153.6
136.6
5,641.2
4,251.2
9%
49%
12%
33%
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 – 2022
Net increase in sales
generated by concepts
acquired during the last
24 months
Net variance in system sales
Cumulative impact of foreign
exchange variation
438.1 734.7
33.7 1,206.5 1,634.0 2,480.6
136.6 4,251.2
0.8 152.9
(26.9)
(1.9)
0.8 154.5
0.4
(28.4) 145.5
4.7 1,092.7
28.0
6.5 1,103.9
4.6 178.1
—
8.6
0.4
9.0
— 102.1
5.9 108.0
Reported sales – 2023
437.0 869.3
35.3 1,341.6 1,784.2 3,703.4
153.6 5,641.2
System sales for the three-month period ended November 30, 2023 increased by 11% compared to the same period
last year. US contributed to most of the increase, with an improvement of $134.6 million, or 18%, attributable mostly to
the acquisition of BBQ Holdings in September 2022 and Wetzel's Pretzels and Sauce Pizza and Wine in December
2022. Excluding the acquisitions of BBQ Holdings, Wetzel's Pretzels and Sauce Pizza and Wine, system sales slightly
decreased by 2%.
For the twelve-month period ended November 30, 2023, system sales were up by 33% compared to 2022. Excluding
the acquisitions and the impact of foreign exchange variation, organic systems sales growth for the network increased
by 4%, with Canada contributing to 82% of that increase. The casual and quick service restaurant concepts in Canada
drove the increase, representing 45% and 37% of the total year-over-year organic growth, respectively, and sales
increases of 13% and 10%, respectively. Major brands in Canada such as Ben & Florentine, Toujours Mikes, Thaï
Express, Manchu Wok, Pizza Delight and Jugo Juice, to name a few, greatly outperformed prior year as customer
Page 26
returned to in-person dining and due to the gradual return to office for many employees, as well as the resumption of
travel.
Papa Murphy’s and Cold Stone Creamery continue to be the only concepts that currently represent more than 10% of
system sales, generating approximately 18% and 16% respectively of the total sales of MTY’s network, and generated
organic system sales growth of 2% and 12% respectively for the twelve-month period ended November 30, 2023.
Famous Dave's, Wetzel's Pretzels and Village Inn 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.
Same-Store Sales (1)
During the quarter ended November 30, 2023, same-store sales decreased by 1% over the last year. By region, same-
store sales were broken down as follows for the last eight quarters:
February
2022
20.7 %
5.5 %
7.9 %
9.8 %
May
2022
22.7 %
(0.2) %
13.4 %
7.3 %
Three months ended
August November February
2022
2022
15.0 %
12.0 %
0.3 %
1.6 %
(8.4) %
11.8 %
6.8 %
6.3 %
2023
18.1 %
5.2 %
(3.0) %
10.1 %
May
2023
August November
2023
2023
6.1 %
3.6 %
1.7 %
4.7 %
3.4 %
2.0 %
(0.3) %
2.6 %
(1.2) %
(0.5) %
(3.8) %
(0.9) %
Region
Canada
US
International
Total
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for
definition.
With the significant impacts of the COVID-19 pandemic subsiding by the second quarter of 2022, the Company is once
again reporting same-store sales data. Although eight quarters of comparable data is being disclosed in the table, it is
important to note that prior to the second quarter of 2023, the pandemic did have an impact on the year-over-year
percentages disclosed, as the repeated lifting and restoring of pandemic-related restrictions made same-store sales
figures less relevant. The second quarter of 2023 represents the first fully comparable quarter since the outbreak of
COVID-19 in March 2020.
In the fourth quarter of 2023, same-store sales were negative in all geographical segments. The decline is mostly
attributable to the economic situation.
Page 27
By restaurant type, same-store sales were broken down as follows for the three and twelve months:
Three months ended
November 30
2023
2022
Twelve months ended
November 30
2023
2022
Quick service restaurant
Fast casual
Casual
Canada
Quick service restaurant
Fast casual
Casual
US
Quick service restaurant
Fast casual
Casual
2.8 %
(4.4) %
(1.6) %
(1.2) %
0.4 %
(2.1) %
(3.3) %
(0.5) %
17.4 %
7.0 %
20.3 %
15.0 %
(0.2) %
5.3 %
5.3 %
0.3 %
(4.9) %
13.9 %
(10.8) %
(3.8) %
(8.9) %
8.7 %
(23.3) %
(8.4) %
10.9 %
(0.3) %
6.7 %
5.5 %
3.0 %
1.0 %
(2.5) %
2.5 %
(3.0) %
11.2 %
0.6 %
(2.0) %
22.7 %
12.2 %
15.3 %
16.3 %
0.6 %
10.0 %
26.1 %
1.6 %
3.7 %
50.4 %
5.9 %
5.6 %
International
(1) Refer to the Supplemental Information section for a list of brands included in each category.
In the fourth quarter of 2023, quick service restaurant has remained strong in Canada and the US. The brands in this
division are a great option for customers looking for attractive but affordable menu options during economic uncertainty.
2022 same-store sales were exceptionally high due to the pandemic recovery.
Digital sales
System sales versus digital sales breakdown is as follows for the years ended November 30, 2023 and 2022:
(1) US digital sales of the first quarter of 2023 missing digital sales of approximately 200 locations due to unavailability of
information.
For the year ended November 30, 2023, digital sales increased by 25% compared to the same period last year,
including the impact of foreign exchange rates, from $820.3 million to $1,027.4 million, and represented 19% of total
Page 28
sales, compared to 20% in the same period last year. 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 acquisitions and the impact of foreign exchange, digital sales grew by 5%. The lower
proportion of digital sales as a percentage of total sales compared to the same period last year for the Canadian
segment is partially due to the return to in-person dining while for the US segment is partially attributable to the
acquisition of BBQ Holdings and Wetzel's Pretzels, whose digital sales represent approximately 15% and 1% of their
system sales respectively.
System sales versus digital sales breakdown is as follows for the three months ended November 30, 2023 and 2022:
Digital sales for the fourth quarter of 2023 increased by 27% compared to the same period last year, including the
impact of foreign exchange rates, from $208.5 million to $265.4 million, and represented 20% of total sales, compared
to 18% in the same period last year. Excluding the impact of foreign exchange and acquisitions, digital sales grew by
6% in the quarter. Canadian digital sales saw a decrease of $8.1 million in the fourth quarter of 2023 mainly as a result
of a decrease of $6.7 million and $3.1 million in casual and fast casual digital sales, respectively, while US digital sales
saw a growth of $65.0 million, of which $33.1 million, or 51% of the growth comes from the acquisitions in late 2022
and early 2023. The Company continues to endeavor to grow digital sales in parallel with the resumption of in-store
sales in a post-pandemic environment.
CAPITAL STOCK INFORMATION
Stock options
As at November 30, 2023, there were 440,000 options outstanding and 137,776 that were exercisable.
Share trading
MTY’s stock is traded on the TSX under the ticker symbol “MTY”. From December 1, 2022 to November 30, 2023,
MTY’s share price fluctuated between $49.91 and $73.50. On November 30, 2023, MTY’s shares closed at $51.50.
Capital stock
The Company’s outstanding share capital is comprised of common shares. An unlimited number of common shares are
authorized.
As at February 14, 2024, the Company’s issued and outstanding capital stock consisted of 24,306,861 shares
(November 30, 2022 – 24,413,461) and 440,000 granted and outstanding stock options (November 30, 2022 –
440,000). During the year ended November 30, 2023, MTY repurchased 80,800 shares (2022 – 256,400) for
cancellation through its NCIB.
Page 29
Normal Course Issuer Bid Program
On June 29, 2023, the Company announced the renewal of the NCIB. The NCIB began on July 3, 2023 and will end on
July 2, 2024 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 months ended November 30, 2023, the Company repurchased and cancelled a total of
80,800 common shares (2022 – nil and 256,400 common shares, respectively) under the current NCIB, at a weighted
average price of $51.58 per common share (2022 – nil and $57.01 per common share, respectively), for a total
consideration of $4.2 million (2022 – nil and $14.6 million, respectively). An excess of $3.2 million (2022 – nil and $11.4
million, respectively) of the shares’ repurchase value over their carrying amount was charged to retained earnings as
share repurchase premiums.
SUBSEQUENT EVENT
Dividends
On January 24, 2024, the Company announced an increase to its quarterly dividend payment, from $0.250 per
common share to $0.280 per common share. The dividend of $0.280 per common share will be paid on February 15,
2024.
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.
The provisions include $4.7 million (November 30, 2022 – $1.5 million) for litigations, disputes and other contingencies,
representing management’s best estimate of the outcome of litigations and disputes that are ongoing at the date of the
statement of financial position, as well as self-insured liabilities related to health and workers’ compensation and
general liability claims. These provisions are made of multiple items; the timing of the settlement of these provisions is
unknown given their nature, as the Company does not control the litigation timelines.
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
was $16.4 million as at November 30, 2023 (November 30, 2022 – $18.6 million). In addition, the Company could be
required to make payments for percentage rents, realty taxes and common area costs. As at November 30, 2023, the
Company has accrued $1.6 million (November 30, 2022 – $1.6 million), included in Accounts payable and accrued
liabilities in the consolidated financial statements, with respect to these guarantees.
Page 30
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, 2023, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
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, operating cash flows,
discount rates, royalty rates and average term life. 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.
Page 31
During the years ended November 30, 2023 and 2022, the Company recognized impairment charges on its
property, plant and equipment (Note 15 of the consolidated financial statements). The total impairment on
property, plant and equipment of $0.2 million (2022 – $0.5 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, 2023 and 2022, the Company also recognized impairment charges on
its right-of-use assets (Note 11 of the consolidated financial statements) of $0.4 million and $1.0 million,
respectively.
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, 2023, the Company recognized impairment charges of $9.2 million
(2022 – $13.4 million) on its franchise rights and trademarks (Note 15 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.
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, 2023 and 2022, no impairment charge on goodwill was required.
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, 2023 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 1, Presentation of Financial Statements
IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors
IAS 12, Income Taxes
IFRS 16, Leases
IAS 1, Presentation of Financial Statements
Issue date
January 2020,
July 2020,
February 2021 &
October 2022
Effective date for
the Company
Impact
December 1, 2024
In assessment
December 1, 2023
February 2021
May 2021
December 1, 2023
September 2022 December 1, 2024
In assessment
In assessment
In assessment
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.
Page 32
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
recognize 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 recognizing 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.
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
Page 33
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.
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
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, 2022 and 2023 saw a shortage of qualified
workers, as well as an increase in labour costs due to competition and increased wages. Many individuals 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 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.
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 or through the consumption of foods. The risk of
contracting viruses transmitted through human contact 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. Viruses transmitted through the consumption of foods, such
as salmonella, could cause guests to have negative views of a brand, which could cause severe reputational and
potentially irreversible damages and, similar to viruses transmitted through human contact, may adversely affect the
business and operating results.
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
Page 34
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 and into 2023, 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, 2023 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 and monitoring procedures.
Page 35
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, 2023 and 2022. 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.
(In thousands $)
Carrying
amount
$
2023
Fair
value
$
Carrying
amount
$
Restated (1)
2022
Fair
value
$
Restated (1)
5,389
333,706
5,389
333,706
4,560
338,776
4,560
338,776
759,134
759,134
550,197
550,197
Financial assets
Loans and other receivables
Finance lease receivables
Financial liabilities
Long-term debt (2)
(1) See Note 7 to the consolidated financial statements.
(2) Excludes contingent considerations on Küto Comptoir à Tartares acquisition and 11554891 Canada Inc.,
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 were subject to
earn-out provisions and the calculations have now been finalized; the contingent considerations for Küto Comptoir à
Tartares and 11554891 Canada Inc. are repayable in November 2024 and within the next 12 months, respectively.
These contingent considerations have been recorded at fair value and are remeasured on a recurring basis.
A fair value remeasurement gain of $2.2 million was recorded for the contingent considerations for the year ended
November 30, 2023 (2022 – gain of $1.8 million).
On December 8, 2022, one of the Company’s wholly owned subsidiaries completed the acquisition of all of the issued
and outstanding shares of Wetzel’s Pretzels. The transaction consideration included US$3.0 million held in escrow
contingent on the execution of several lease contracts within 12 months of the acquisition. As at December 8, 2023,
only a portion of the contracts were executed and therefore $2.2 million (US$1.6 million) was released from escrow and
recorded as a Gain on contingent consideration from a business acquisition in the consolidated statement of income.
Page 36
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 19 of the consolidated financial statements) which is remeasured at each reporting period.
A fair value remeasurement loss of $0.4 million (2022 – loss of $0.3 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 19 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 0 on the carrying amount as at November 30, 2023 and 2022.
A fair value remeasurement gain of $0.7 million (2022 – gain of $1.4 million) was recorded for this obligation to
repurchase the 11554891 Canada Inc. partner.
Cross currency interest rate swaps
On October 27, 2023 and November 27, 2023, 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, respectively
(November 30, 2022 – one floating to floating 3-month cross currency interest rate swap and one floating to floating 2-
month cross currency interest rate swap). A derivative liability fair value of $2.6 million was recorded as at November
30, 2023 (November 30, 2022 – nil). The Company has classified this as level 2 in the fair value hierarchy.
3-month
2023
2-month
2022
2-month
US$51.1 million US$142.9 million US$64.9 million US$150.0 million
6.18%
CA$70.0 million CA$196.0 million CA$87.0 million CA$201.0 million
5.80%
3-month
6.59%
5.95%
6.18%
6.66%
7.14%
7.14%
Receive – Notional
Receive – Rate
Pay – Notional
Pay – Rate
Fixed interest rate swaps
On March 24, 2023, the Company entered into a three-year SOFR fixed interest rate swap for a notional amount of
US$200.0 million. The period of three years ends on April 10, 2026. Under the terms of this swap, the interest rate is
fixed at 3.32%. A derivative asset fair value of $6.6 million was recorded as at November 30, 2023 (November 30, 2022
– nil). The Company has classified this as level 2 in the fair value hierarchy and has designated this as a cash flow
hedge of the Company’s interest rate risk from its credit facility. A fair value remeasurement gain of $6.3 million was
recorded in the Company’s consolidated statement of comprehensive income for the year ended November 30, 2023
(2022 – nil).
On May 30, 2023, the Company entered into a two-year SOFR fixed interest rate swap for a notional amount of
US$100.0 million. The period of two years ends on May 30, 2025. Under the terms of this swap, the interest rate is
fixed at 3.64%, unless the 1-month term SOFR exceeds 5.50%; if the 1-month term SOFR exceeds 5.50%, the
Company will pay the 1-month term SOFR. A derivative asset fair value of $1.3 million was recorded as at November
30, 2023 (November 30, 2022 – nil). The Company has classified this as level 2 in the fair value hierarchy. A fair value
remeasurement gain of $1.3 million was recorded in the Company’s consolidated statement of income for the year
ended November 30, 2023 (2022 – nil).
Page 37
The swaps were recorded in the consolidated statements of financial position as follows:
(in thousands $)
3-year SOFR fixed
interest rate swap
$
2-year SOFR fixed
interest rate swap
$
4,647
1,970
6,617
—
1,272
1,272
Total
$
4,647
3,242
7,889
Current portion
Long-term portion
November 30, 2023
Fair value hierarchy
The changes in the carrying amount of the financial liabilities classified as level 3 in the fair value hierarchy are as
follows:
(In thousands $)
2023
$
2022
$
Financial liabilities classified as level 3, beginning of year
Change in control over interest in 11554891 Canada Inc.
Repayment of contingent consideration on 11554891 Canada Inc.
Revaluation of financial liabilities recorded at fair value
4,952
7,867
—
(2,932)
3,459
13,346
Financial liabilities classified as level 3, end of year
As at November 30, 2023 and 2022, the financial liabilities classified as level 3 in the fair value hierarchy were
comprised of the following:
13,346
—
(875)
(2,404)
—
10,067
Issuance of contingent consideration on Küto Comptoir à Tartares acquisition
(In thousands $)
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 classified as level 3
FINANCIAL RISK EXPOSURE
2023
$
2022
$
600
3,626
2,288
7,179
10,067
1,853
7,867
13,346
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, 2023.
Credit risk
The Company’s credit risk is primarily attributable to its trade receivables and finance lease 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
and finance lease receivables 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 and finance
lease receivables.
Page 38
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. The Company from time to time may enter into fixed interest rate derivatives
to manage its cash flow risk exposure, with long-term commitments requiring Board approval to ensure compliance
with the Company’s risk management strategy. As at November 30, 2023, the Company holds floating-to-fixed interest
rate swaps in order to hedge a portion of the interest rate cash flow risk associated with floating interest rate debt.
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. $757.8 million
(November 30, 2022 – $550.1 million) of the credit facility was used as at November 30, 2023. A 100 basis points
increase in the bank’s prime rate would result in additional interest of $7.6 million per annum (2022 – $5.5 million) on
the outstanding credit facility.
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, 2023, US$558.0 million (November 30, 2022 – US$408.9 million) was drawn from the revolving credit facility. Of
that amount, US$194.0 million (November 30, 2022 – US$214.9 million) was not exposed to foreign exchange risk as a
result of two (2022 – two) cross currency interest rate swaps, and US$364.0 million (November 30, 2022 – US$194.0
million) 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, 2023 and 2022, 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
(In thousands $)
USD
$
2,593
988
2023
CAD
$
3,522
1,342
USD
$
5,424
463
2022
CAD
$
7,327
625
(192)
(364,000)
(360,611)
(261)
(494,385)
(489,782)
(212)
(194,000)
(188,325)
(286)
(262,055)
(254,389)
All other factors being equal, a reasonable possible 5% rise in foreign currency exchange rates per Canadian dollar
would result in a loss of $18.0 million (2022 – loss of $9.4 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.
Page 39
As at November 30, 2023, the Company had an authorized revolving credit facility for which the available amount may
not exceed $900.0 million (November 30, 2022 – $900.0 million) and including an accordion feature amounting to
$300.0 million (November 30, 2022 – $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, 2023:
(In millions $)
Carrying
amount
$
Contractual
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
147.6
767.4
n/a
535.2
1,450.2
147.6
769.2
102.6
615.9
1,635.3
147.6
11.2
26.9
66.9
252.6
—
0.2
26.9
66.9
94.0
—
757.8
49.6
117.7
925.1
—
—
(0.8)
364.4
363.6
(1) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of the
reporting period.
NEAR-TERM OUTLOOK
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 feeling the impact of economic uncertainty, which comes from
rising inflation and interest rates and the threat of a looming recession. While some aspects of the business are
gradually stabilizing post-pandemic, 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 increases in minimum wage rates in many jurisdictions in which
the network operates on top of the increases in commodity prices due to inflation.
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, 2023, have concluded that the Company’s
disclosure controls and procedures were effective.
Page 40
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, 2023. 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 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.
Wetzel's Pretzels
Sauce Pizza and Wine
Total
assets
13%
2%
Current
assets
3%
6%
Non-
current
assets
14%
1%
Current
liabilities
2%
1%
Non-
current
liabilities Revenue Net income
7%
3%
16%
2%
5%
1%
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, 2023, 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:
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
Kahala Brands Ltd - Cold Stone 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
BF Acquisition Holdings, LLC – Baja Fresh
Mexican Grill and La Salsa Fresh Mexican
Grill
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
%
ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
September 2013
March 2015
July 2014
September 2018
October 2014
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
# of corporate
locations
—
3
2
—
—
—
—
5
—
15
—
—
5
9
2
—
1
—
2
5
—
—
13
1
17
4
40
October 2016
100%
167
16
Page 42
Brand
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 Urban
Barbecue, Tahoe Joe’s Steakhouse, Bakers
Square, Craft Republic, Fox & Hound and
Champps
Wetzel's Pretzels
Sauce Pizza and Wine
Definition of non-GAAP measures
Acquisition year
December 2016
March 2019
May 2017
September 2018
June 2017
September 2017
December 2017
December 2017
March 2018
%
ownership
60%+
5%
83.25% +
9.25%
100%
100%
100%
100%
100%
March 2018
April 2018
September 2018
December 2018
March 2019
May 2019
July 2019
July 2019
December 2019
December 2021
September 2022
100%
100%
100%
100%
100%
100%
100%
100%
70%
100%
100%
December 2022
December 2022
100%
100%
# of franchised
locations
5
# of corporate
locations
—
15
23
20
36
5
253
26
32
331
31
24
1,301
129
40
20
31
198
328
—
—
4
2
3
—
8
1
7
—
—
13
103
—
—
3
—
103
38
13
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. See reconciliation of adjusted EBITDA to
Income (loss) before taxes on pages 14 and 20.
Represents revenue less operating expenses (excluding transaction costs related to
acquisitions). See reconciliation of normalized adjusted EBITDA to Income (loss) before
taxes on pages 14 and 20.
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:
Represents adjusted EBITDA divided by revenue.
Adjusted EBITDA as a %
of revenue
Normalized adjusted
EBITDA as a % of revenue Represents normalized adjusted EBITDA divided by revenue.
Free cash flows per
diluted share
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
Recurring revenue
streams
Non-controllable
expenses
Controllable expenses
Variance in recurring
revenue and expenses
Represents cash flows provided by operating activities divided by diluted shares.
Comprised of royalties and other franchising revenues that are earned on a regular
basis in accordance with franchise agreements in place.
Comprised of government subsidies that are not directly in control of management and
royalties paid to third parties.
Comprised of wages, professional and consulting services and other office expenses,
that are directly in the control of management.
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.
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
Digital 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 are sales made by customers through online ordering platforms.
Page 44
Free cash flows (1) loop to cash flows provided by operating activities
Three months ended
(In thousands $)
February May
2022
2022
August November February May
2023
2022
2022
2023
August November
2023
2023
Cash flows provided by
operating activities (2)
38,783 30,040 42,228
37,430 33,467 51,860 51,495
47,764
Additions to property, plant
and equipment
Additions to intangible
assets
(1,149) (3,494)
(1,327)
(2,700)
(7,897) (11,030)
(7,962)
(3,235)
(1,672) (1,346)
(713)
(257)
(120)
(393)
(696)
(836)
Proceeds on disposal of
property, plant and
equipment
Free cash flows (1 & 2)
95
666
36,057 25,284 40,854
84
286
375
34,759 25,931 40,683 43,212
246
481
587
44,280
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
(2) Prior period amounts have been adjusted to reflect a reclassification amounting to $5.7 million for the year ended November
30, 2022 between cash flows provided by operating activities and the effect of foreign exchange rate changes on cash. The
Company also reassessed the presentation of certain acquisition accounts, leading to the reclassification of accounts that
were previously reported as Accounts payable and accrued liabilities to Cash. Accordingly, adjustments amounting to $2.1
million for the first quarter of 2023 and $3.9 million for the second quarter of 2023 were made to prior period amounts.
Income before taxes, excluding impairment charges and reversals (1)
(in thousands $)
Year ended
November 30, 2023
Year ended
November 30, 2022
Income before taxes
Impairment charge – right-of-use assets
Impairment charge – property, plant and equipment and intangible
assets
Income before taxes, excluding impairment charges and
109,985
428
9,432
reversals (1)
(1) See section “Definition of non-GAAP measures” found in the Supplemental Information section for definition.
119,845
96,170
969
13,916
111,055
Page 45
System sales (1) to royalties
System sales (1)
Franchise royalty income
as a % of franchise
sales
Royalties
Canada
(millions of $) Corporate Franchised
32.0 1,752.2
Sales for the twelve months ended
November 30, 2023
US & International
Total
1,784.2
Corporate Franchised
462.0 3,395.0
Total
3,857.0
TOTAL
5,641.2
—
—
5.35%
93.7
—
—
—
—
5.09%
172.8
—
—
N/A
266.5
Canada
(millions of $) Corporate Franchised
29.4 1,604.6
Sales for the twelve months ended
November 30, 2022
US & International
Total
1,634.0
Corporate Franchised
90.0 2,527.2
Total
2,617.2
TOTAL
4,251.2
—
—
5.23%
83.9
—
—
—
—
5.10%
129.0
—
—
N/A
212.9
Canada
(millions of $) Corporate Franchised
7.6
429.4
Sales for the three months ended
November 30, 2023
US & International
Total
Corporate Franchised
Total
437.0
111.4
793.2
904.6
TOTAL
1,341.6
—
—
5.40%
23.2
—
—
—
—
5.12%
40.6
—
—
N/A
63.8
Canada
(millions of $) Corporate Franchised
8.0
430.1
Sales for the three months ended
November 30, 2022
US & International
Total
438.1
Corporate Franchised
74.3
694.1
Total
768.4
TOTAL
1,206.5
System sales (1)
Franchise royalty income
as a % of franchise
sales
Royalties
System sales (1)
Franchise royalty income
as a % of franchise
sales
Royalties
System sales (1)
Franchise royalty income
as a % of franchise
sales
Royalties
—
—
5.28%
22.7
—
—
—
—
4.94%
34.3
—
—
N/A
57.0
(1) See section “Definition of supplementary financial measures” found in the Supplemental Information section for definition.
Page 46
BRANDS BY CATEGORY
Quick service restaurant
America’s Taco Shop
Blimpie
Built Custom Burgers
Buns Master
Café Dépôt
Fast casual
Baja Fresh Mexican Grill
Big Smoke Burger
Grabbagreen
Küto Comptoir à Tartares
La Boite Verte
Casual
Allô! Mon Coco
Bakers Square
Barrio Queen
Baton Rouge
Ben & Florentine
Cold Stone Creamery
La Salsa Fresh Mexican Grill
Casa Grecque
Country Style
Cultures
Mucho Burrito
Pinkberry
Dagwoods Sandwiches and Salads
Real Urban Barbecue
Extreme Pita
Frullati Café & Bakery
Samurai Sam’s Teriyaki Grill
South Street Burger
The Great Steak & Potato Company Sushi Go
Champps
Craft Republic
Famous Dave’s
Fox & Hound
Giorgio Ristorante
Granite City
Jugo Juice
Kahala Coffee Traders
Kim Chi
Koryo Korean Barbeque
Sushi-Man
Sushi Shop
Thaï Express
ThaïZone
Timothy’s World Coffee
Tosto Quickfire Pizza Pasta
Yuzu Sushi
O’Burger
Koya Japan
La Crémière
La Diperie
Manchu Wok
Maui Wowi
Mmmuffins
Mr. Souvlaki
Mr. Sub
Vanellis
Muffin Plus
NrGize Lifestyle Café
Papa Murphy’s
Planet Smoothie
Ranch One
Rocky Mountain Chocolate Factory
Rollerz
SenseAsian
Sukiyaki
Surf City Squeeze
SweetFrog
Taco Time
Tasti D-Lite
TCBY
Tiki Ming
Valentine
Van Houtte
Vie & Nam
Villa Madina
Wasabi Grill & Noodle
Johnnie’s New York Pizzeria
Madisons New York Grill & Bar
Toujours Mikes
Pizza Delight
Scores
Steak Frites St-Paul
Tahoe Joe’s Steakhouse
COOP Wicked Chicken
The Counter Custom Burgers
The Works Gourmet Burger Bistro
Turtle Jack’s Muskoka Grill
Tutti Frutti
Village Inn
Page 47
Page 48
Consolidated financial statements of
MTY Food Group Inc.
November 30, 2023 and 2022
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, 2023 and 2022, and its financial performance and its cash flows for the years then ended,
in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of income for the years ended November 30, 2023 and 2022;
the consolidated statements of comprehensive income for the years ended November 30, 2023
and 2022;
the consolidated statements of changes in shareholders’ equity for the years ended on
November 30, 2023 and 2022;
the consolidated statements of financial position as at November 30, 2023 and 2022;
the consolidated statements of cash flows for the years ended November 30, 2023 and 2022; 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, ca_montreal_main_fax@pwc.com
“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, 2023. 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
Our approach to addressing the matter included
the following procedures, among others:
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.
Impairment assessment of goodwill,
trademarks and franchise and master
franchise rights
Refer to note 3 – Accounting policies, note 4 –
Critical accounting judgments and key sources
of estimation uncertainty, note 13 – Intangible
assets, note 14 – Goodwill and note 15 –
Impairment charge – property, plant and
equipment and intangible assets to the
consolidated financial statements.
As at November 30, 2023, the Company had
goodwill, trademarks (intangible assets with
indefinite useful lives), franchise and master
franchise rights (intangible assets with definite
useful lives) balances totalling $719.2 million,
$892.8 million and $205.6 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.
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 $9.2 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
Our approach to addressing the matter included
the following procedures, among others:
Tested how management estimated the fair values
of the trademark and franchise rights, which
included the following:
- Read the purchase agreement.
- Tested the underlying data used by
management in the discounted cash flow
models and the mathematical accuracy
thereof.
- Evaluated the reasonableness of significant
assumptions used by management related to
projected system sales, operating cash flows
and average term life by considering the
current and past performance of Wetzel’s
Pretzels 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 for
the trademark valuation and the excess
earnings method using the discounted cash
flow model for the franchise rights valuation as
well as in evaluating the reasonableness of
certain key assumptions such as the discount
rate and royalty rate.
Valuation of the trademark and franchise
rights acquired in the Wetzel’s Pretzels
business combination
Refer to note 3 – Accounting policies and
note 7 – Business acquisitions to the
consolidated financial statements.
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) for a purchase price totaling
$285.5 million. The fair values of identifiable
assets acquired included $145.8 million of
intangible assets, of which $97.4 million is
related to one trademark and $48.4 million is
related to franchise rights.
The fair value of the trademark was estimated
based on the relief from royalty method using a
discounted cash flow model. In determining the
fair value of the trademark, the Company
developed key assumptions such as projected
system sales, discount rate and royalty rate.
The fair value of franchise rights were estimated
based on the excess earnings method using
a discounted cash flow model. In determining
the fair value of the franchise rights, the
Company developed key assumptions such as
projected operating cash flows, average term
life and discount rate.
We considered this a key audit matter due to
the judgment by management in estimating the
fair value of the trademark and franchise rights,
including the development of key assumptions.
Key audit matter
How our audit addressed the key audit matter
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. Professionals with specialized
skill and knowledge in the field of valuation
assisted us in performing our procedures.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, 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 Andrew Popliger.
/s/PricewaterhouseCoopers LLP1
Montréal, Quebec
February 14, 2024
1 CPA auditor, public accountancy permit No. A125677
MTY Food Group Inc.
Consolidated statements of income
Years ended November 30, 2023 and 2022
(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
Impairment charge – property, plant and equipment and intangible assets
Other (expenses) income
Unrealized and realized foreign exchange loss
Interest income
(Loss) gain on de-recognition/lease modification of lease liabilities
(Loss) gain on disposal of property, plant and equipment and intangible
assets
Revaluation of financial liabilities and derivatives recorded at fair value
Loss on remeasurement of joint venture interest
Gain on contingent consideration from a business acquisition
Income before taxes
Income tax expense
Current
Deferred
Net income
Net income attributable to:
Owners
Non-controlling interests
Net income
Net income per share
Basic
Diluted
27 & 31
11 & 12
13
11
11
15
24
8
7
30
23
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2023
$
2022
$
26 & 31
1,169,334
716,522
898,588
54,934
34,559
52,142
11,402
428
9,432
1,061,485
(2,632)
1,048
(702)
(1,448)
3,676
—
2,194
2,136
534,440
21,548
29,473
12,428
3,210
969
13,916
615,984
(5,690)
253
798
108
2,932
(2,769)
—
(4,368)
109,985
96,170
12,459
(6,998)
5,461
104,524
24,669
(3,678)
20,991
75,179
104,082
442
104,524
74,817
362
75,179
4.26
4.25
3.06
3.06
Page 6
MTY Food Group Inc.
Consolidated statements of comprehensive income
Years ended November 30, 2023 and 2022
(In thousands of Canadian dollars)
Net income
Other comprehensive income
Items that may be reclassified subsequently to net income
Translation adjustments
2023
$
2022
$
104,524
75,179
Unrealized gain on translation of foreign operations
7,644
35,577
Cash flow hedges
Change in fair value of financial instruments
Gain realized on financial instruments transferred to earnings
Deferred tax expense on foreign currency translation adjustments and cash
flow hedges
Total comprehensive income
Total comprehensive income attributable to:
Owners
Non-controlling interests
The accompanying notes are an integral part of the consolidated financial statements.
9,581
(3,265)
(2,256)
11,704
—
—
(491)
35,086
116,228
110,265
115,786
442
116,228
109,903
362
110,265
Page 7
MTY Food Group Inc.
Consolidated statements of changes in shareholders’ equity
Years ended November 30, 2023 and 2022
(In thousands of Canadian dollars)
Reserves
Capital
stock
$
Contributed
surplus
$
Other
$
Accumulated
other
comprehensive
(loss) income
(Note 21)
$
Total
reserves
$
Retained
earnings
$
Equity
attributable
to owners
$
Equity
attributable
to non-
controlling
interests
$
Total
$
Balance as at November 30, 2021
Net income for the year ended
November 30, 2022
Other comprehensive income
Total comprehensive income
305,961
(850)
3,855
(21,320)
(18,315) 359,993
647,639
1,259 648,898
—
—
—
—
—
—
—
35,086
—
35,086
74,817
—
74,817
35,086
109,903
362
—
75,179
35,086
362 110,265
Shares repurchased and cancelled
(Note 20)
Dividends
Share-based compensation (Note 22)
Balance as at November 30, 2022
Net income for the year ended
November 30, 2023
Other comprehensive income
Total comprehensive income
(3,180)
—
—
302,781
—
—
Shares repurchased and cancelled
(Note 20)
Dividends
Share-based compensation (Note 22)
Balance as at November 30, 2023
(1,002)
—
—
301,779
—
—
—
(850)
—
—
—
—
—
(850)
—
—
1,002
4,857
—
—
—
13,766
—
—
1,002
(11,438)
(20,518)
—
17,773 402,854
—
—
—
11,704
— 104,082
—
11,704
(14,618)
(20,518)
1,002
723,408
104,082
11,704
115,786
—
(403)
—
(14,618)
(20,921)
1,002
1,218 724,626
442 104,524
11,704
442 116,228
—
—
—
792
5,649
—
—
—
25,470
—
—
792
(3,165)
(24,407)
—
30,269 479,364
(4,167)
(24,407)
792
811,412
—
(183)
—
(4,167)
(24,590)
792
1,477 812,889
Page 8
MTY Food Group Inc.
Consolidated statements of changes in shareholders’ equity (continued)
Years ended November 30, 2023 and 2022
(In thousands of Canadian dollars)
The following dividends were declared and paid by the Company:
$1.000 per common share (2022 – $0.840 per common share)
The accompanying notes are an integral part of the consolidated financial statements.
2023
$
2022
$
24,407
20,518
Page 9
MTY Food Group Inc.
Consolidated statements of financial position
As at November 30, 2023 and 2022
(In thousands of Canadian dollars)
Notes
2023
$
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
Current portion of derivative assets
Other assets
Prepaid expenses and deposits
Loans and other receivables
Finance lease receivables
Contract cost asset
Deferred income taxes
Derivative assets
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 derivative liabilities
Current portion of lease liabilities
Long-term debt
Lease liabilities
Deferred revenue and deposits
Deferred income taxes
Other liabilities
9
10
11
24
11
30
24
12
11
13
14
17
18
19
24
11
19
11
18
30
The accompanying notes are an integral part of the consolidated financial statements.
2022
$
Restated
(Note 7)
59,479
77,373
18,517
2,111
1,153
83,500
3,982
—
3,032
14,906
264,053
3,407
255,276
6,455
224
—
90,081
159,815
1,003,298
547,756
2,330,365
58,895
82,998
20,731
2,266
924
80,154
12,543
4,647
3,824
14,077
281,059
4,465
253,552
7,324
93
3,242
112,801
181,718
1,116,577
719,187
2,680,018
147,557
4,656
147,952
—
14,918
10,428
2,626
112,446
440,583
153,999
1,490
133,206
9,813
16,468
9,530
—
114,522
439,028
756,936
422,751
53,025
193,618
216
1,867,129
551,429
400,401
48,405
165,834
642
1,605,739
Page 10
MTY Food Group Inc.
Consolidated statements of financial position (continued)
As at November 30, 2023 and 2022
(In thousands of Canadian dollars)
Shareholders' equity
Equity attributable to owners
Capital stock
Reserves
Retained earnings
Equity attributable to non-controlling interests
Notes
20
2023
$
2022
$
Restated
(Note 7)
301,779
30,269
479,364
811,412
302,781
17,773
402,854
723,408
1,477
812,889
2,680,018
1,218
724,626
2,330,365
Approved by the Board on February 14, 2024
The accompanying notes are an integral part of the consolidated financial statements.
Page 11
MTY Food Group Inc.
Consolidated statements of cash flows
Years ended November 30, 2023 and 2022
(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
Impairment charge – intangible assets
Unrealized foreign exchange loss (1)
Loss (gain) on de-recognition/lease modification of lease liabilities
Loss (gain) on disposal of property, plant and equipment and intangible
assets
Revaluation of financial liabilities and derivatives recorded at fair value
Loss on remeasurement of joint venture interest
Income tax expense
Share-based compensation
Income taxes paid
Interest paid
Other
Changes in non-cash working capital items
Cash provided by operating activities
Investing activities
Considerations on acquisitions
Cash acquired through acquisition and change in control
Issuance of loans and other receivables
Additions to property, plant and equipment
Additions to intangible assets
Proceeds on disposal of property, plant and equipment
Cash used in investing activities
Notes
2023
$
2022
$
Restated
(Note 7)
104,524
75,179
11
11 & 12
13
15
11
15
24
8
32
7
7 & 8
12
13
52,142
11,402
54,934
34,559
233
428
9,199
2,632
702
1,448
(3,676)
—
5,461
792
274,780
(29,015)
(50,287)
(3,184)
(7,708)
184,586
12,428
3,210
21,548
29,473
535
969
13,381
5,690
(798)
(108)
(2,932)
2,769
20,991
1,002
183,337
(17,570)
(11,781)
1,386
(6,891)
148,481
(300,395)
9,349
1,867
(30,124)
(2,045)
1,689
(319,659)
(261,768)
14,820
61
(8,670)
(3,988)
1,131
(258,414)
Page 12
MTY Food Group Inc.
Consolidated statements of cash flows (continued)
Years ended November 30, 2023 and 2022
(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 provided by financing activities
Net increase (decrease) in cash
Effect of foreign exchange rate changes on cash (1)
Cash, beginning of year
Cash, end of year
Notes
2023
$
32
32
11
20
32
7
318,884
(110,388)
(43,639)
(4,167)
(157)
(183)
—
(24,407)
135,943
870
(1,454)
59,479
58,895
2022
$
Restated
(Note 7)
275,626
(80,214)
(18,960)
(14,618)
(1,817)
(403)
(33,800)
(20,518)
105,296
(4,637)
2,885
61,231
59,479
(1) Prior year amounts have been adjusted to reflect a reclassification of $5,690 between cash flows provided by operating
activities and the effect of foreign exchange rate changes on cash.
The accompanying notes are an integral part of the consolidated financial statements.
Page 13
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.
Description of the business
Basis of preparation
Accounting policies
Critical accounting judgments and key sources of estimation uncertainty
Change in accounting policies
Future accounting changes
Business acquisitions
Change in control
Accounts receivable
Inventories
Leases
Property, plant and equipment
Intangible assets
Goodwill
Impairment charge – property, plant and equipment and intangible assets
Credit facility
Provisions
Deferred revenue and deposits
Long-term debt
Capital stock
Accumulated other comprehensive (loss) income
Stock options
Net income per share
Financial instruments
Capital disclosures
Revenue
Operating expenses
Guarantee
Contingent liabilities
Income taxes
Segmented information
Statement of cash flows
Subsequent event
2
15
15
16
28
30
30
32
39
41
41
42
46
47
48
49
51
51
52
53
53
54
54
55
56
61
62
63
63
63
64
66
68
70
Page 14
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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 14, 2024.
The accounting policies set out below have been applied consistently to all periods presented in the consolidated
financial statements, with the exception of:
•
•
•
hedging and derivative financial instruments as disclosed in Note 3 to these consolidated financial
statements;
fixed interest rate swaps as disclosed in Note 3 to these consolidated financial statements; and
IAS 37 as disclosed in Note 5 to these consolidated financial statements.
Page 15
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
Principal subsidiaries are as follows:
Percentage of equity interest
Principal subsidiaries
MTY Franchising Inc.
MTY Franchising USA, Inc.
Kahala Brands Inc.
Papa Murphy’s Holdings Inc.
BBQ Holdings, Inc. (Note 7)
Wetzel’s Pretzels, LLC (Note 7)
11554891 Canada Inc.
9974644 Canada Inc.
2023
%
100
100
100
100
100
100
70
65
2022
%
100
100
100
100
100
—
70
65
Functional currency
Canadian dollar
US dollar
US dollar
US dollar
US dollar
US dollar
Canadian dollar
Canadian dollar
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 16
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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.
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.
Page 17
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Business combinations (continued)
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)
viii)
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.
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.
Page 18
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Revenue recognition (continued)
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 $31,166 (November 30, 2022 – surplus of $33,819). 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 19
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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.
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 recognized 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.
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.
Page 20
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Taxation (continued)
Deferred tax (continued)
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:
Buildings
Equipment
Leasehold improvements
Rolling stock
Computer hardware
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
25 to 50 years
3 to 10 years
Lesser of the term of the lease or useful life
5 to 7 years
3 to 7 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 21
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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, average term life 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 22
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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, 2023, goodwill is allocated as follows:
Canada Goodwill Unit
US Goodwill Unit A
US Goodwill Unit B
US Goodwill Unit C
US Goodwill Unit D
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 Papa
Murphy’s, BBQ Holdings, Inc. (“BBQ Holdings”) and
Wetzel’s Pretzels
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
One CGU comprised of Wetzel’s Pretzels brand in the
US & International operating segment
Page 23
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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.
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, 2023, cash and restricted cash included $368 of restricted cash
(November 30, 2022 – $680) 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.
The Company currently classifies its cash, accounts receivable and loans receivable as assets measured at
amortized cost.
Page 24
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Financial instruments (continued)
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.
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.
Page 25
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Financial instruments (continued)
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
Derivative financial instruments
Derivative financial instruments designated as cash
flow hedges
Hedging and derivative financial instruments
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTPL
FVTPL
FVTPL
FVTPL
FVTPL subject to hedge
accounting requirements
The Company applies general hedge accounting requirements of IFRS 9, Financial Instruments.
Fixed interest rate swaps
Periodically, the Company uses fixed interest rate swaps to manage the interest rate risk associated with its
borrowings from its credit facility. Where the general hedge accounting requirements are met, the Company
designates those fixed interest rate swaps as a cash flow hedge of the interest from its credit facility. Accordingly,
changes in the fair value of the derivative financial instruments, which are included in Current portion of derivative
assets and Derivative assets, are recognized in Other comprehensive income. Realized gains and losses in
Accumulated other comprehensive income are reclassified to Interest on long-term debt over the same periods as
the interest expense on the long-term debt is recognized in earnings.
Provisions
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.
Page 26
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
Provisions (continued)
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
27) 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.
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.
Page 27
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
3.
Accounting policies (continued)
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 22.
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.
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 31). 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.
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.
Page 28
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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
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, 2023, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
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, operating cash
flows, discount rates, royalty rates and average term life. 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, 2023 and 2022, the Company recognized impairment charges on its
property, plant and equipment (Note 15). The total impairment on property, plant and equipment of $233 (2022
– $535) 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, 2023 and 2022, the Company also recognized impairment charges on
its right-of-use assets (Note 11) of $428 and $969, respectively.
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 29
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(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, 2023, the Company recognized impairment charges of $9,199 (2022 –
$13,381) on its franchise rights and trademarks (Note 15) 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.
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, 2023 and 2022, no impairment charge on goodwill was required.
5.
Change in accounting policies
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 were adopted effective December 1, 2022 and resulted in no significant adjustment.
6.
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, 2023 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 1, Presentation of Financial Statements
IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors
IAS 12, Income Taxes
IFRS 16, Leases
Issue date
January 2020,
July 2020, February
2021 & October
2022
Effective date for
the Company
Impact
December 1, 2024
In assessment
February 2021
May 2021
September 2022
December 1, 2023
December 1, 2023
December 1, 2024
In assessment
In assessment
In assessment
Page 30
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
6.
Future accounting changes (continued)
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.
Page 31
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
6.
Future accounting changes (continued)
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
recognize 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 recognizing 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.
7.
Business acquisitions
I) Sauce Pizza and Wine (2023)
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. As of the
date of the acquisition, Sauce Pizza and Wine was operating 13 corporate-owned restaurants. The purpose of the
transaction was to diversify the Company’s range of offerings in the US.
The transaction included a purchase price totaling $15,228 (US$11,165) and a holdback on acquisition of $1,089
(US$798), as detailed below. The resulting aggregate cash outflow in connection with the Sauce Pizza and Wine
acquisition was $13,539 (US$9,926).
Consideration paid:
Purchase price
Working capital
Cash
Discount on non-interest-bearing holdback
Total consideration
Cash
Holdback
Net cash outflow
2023
$
15,228
(547)
31
(53)
14,659
(31)
(1,089)
13,539
Page 32
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
I) Sauce Pizza and Wine (2023) (continued)
The final purchase price allocation is as follows:
Net assets acquired:
Current assets
Cash
Inventories
Prepaid expenses and deposits
Property, plant and equipment
Right-of-use assets
Intangible assets – Trademark
Goodwill (1)
Current liabilities
Accounts payable and accrued liabilities
Gift card and loyalty program liabilities
Current portion of lease liabilities
Lease liabilities
Net purchase price
2023
$
31
250
255
536
5,212
9,913
5,647
4,989
26,297
107
1,481
1,661
3,249
8,389
11,638
14,659
(1) Goodwill is deductible for tax purposes.
Total expenses incurred related to acquisition costs amounted to $215.
From December 15, 2022 to November 30, 2023, the Company’s consolidated statement of income included
revenue of $32,927 and net income of $1,298 attributable to Sauce Pizza and Wine.
The acquisition of Sauce Pizza and Wine would not have had a significant impact on the Company’s revenue and net
income for the year ended November 30, 2023 if the acquisition had occurred on December 1, 2022.
Page 33
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
II) Wetzel’s Pretzels (2023)
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.
As of the date of the acquisition, Wetzel’s Pretzels was operating 328 franchised and 38 corporate-owned
restaurants. The purpose of the transaction was to diversify the Company’s range of offerings in the US.
The transaction included a purchase price totaling $285,478 (US$210,189), as detailed below. The resulting
aggregate cash outflow in connection with the Wetzel’s Pretzels acquisition was $276,160 (US$203,328). The
transaction consideration also includes US$3,000 held in escrow contingent on the execution of several lease
contracts within 12 months of the acquisition. As at December 8, 2023, only a portion of the contracts were executed
and therefore $2,194 (US$1,600) was released from escrow and recorded as a Gain on contingent consideration
from a business acquisition in the consolidated statement of income.
Consideration paid:
Purchase price
Total consideration
Cash
Net cash outflow
2023
$
285,478
285,478
(9,318)
276,160
Page 34
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
II) Wetzel’s Pretzels (2023) (continued)
The final purchase price allocation is as follows:
Net assets acquired:
Current assets
Cash
Accounts receivable
Inventories
Current portion of loans and other receivables
Current portion of finance lease receivables
Income taxes receivable
Prepaid expenses and deposits
Loans and other receivables
Finance lease receivables
Property, plant and equipment
Right-of-use assets
Intangible assets – Franchise rights
Intangible assets – Trademark
Goodwill (1)
Current liabilities
Accounts payable and accrued liabilities
Income taxes payable
Current portion of deferred revenue and deposits
Current portion of lease liabilities
Lease liabilities
Deferred revenue and deposits
Deferred income taxes
Net purchase price
(1) Goodwill is partially deductible for tax purposes.
2023
$
9,318
1,364
360
61
824
1,863
1,028
14,818
807
10,389
6,903
18,440
48,352
97,383
161,142
358,234
8,721
743
91
1,271
10,826
28,515
1,275
32,140
72,756
285,478
Page 35
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
II) Wetzel’s Pretzels (2023) (continued)
Total expenses incurred related to acquisition costs amounted to $433.
From December 8, 2022 to November 30, 2023, the Company’s consolidated statement of income included revenue
of $77,005 and net income of $15,488 attributable to Wetzel’s Pretzels.
The following pro forma information for the year ended November 30, 2023 represents the Company’s results of
operations as if the acquisition of Wetzel’s Pretzels had occurred on December 1, 2022. 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
III) BBQ Holdings (2022)
2023
$
1,171,325
105,867
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 10 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 $14,006 (US$10,204),
as detailed below. The resulting aggregate cash outflow in connection with the BBQ Holdings acquisition was
$284,298 (US$207,123).
Consideration paid:
Cash
Amount paid for early settlement of options
Total consideration
Cash consideration paid
Repayment of long-term debt
Net cash outflow
As previously
reported Adjustments
$
$
250,443
13,951
264,394
250,443
33,800
284,243
—
55
55
55
—
55
2022
$
250,443
14,006
264,449
250,498
33,800
284,298
Page 36
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
III) BBQ Holdings (2022) (continued)
The final purchase price allocation is as follows:
Net assets acquired:
Current assets
Cash
Accounts receivable (1)
Inventories
Income taxes receivable
Other assets (1)
Prepaid expenses and deposits (1)
Loans and other receivables (1)
Property, plant and equipment (1)
Right-of-use assets (1)
Intangible assets – Franchise rights (1)
Intangible assets – Trademarks (1)
Intangible assets – Other (1)
Goodwill (2)
Current liabilities
Accounts payable and accrued liabilities (1)
Gift card and loyalty program liabilities (1)
Current portion of deferred revenue and deposits (1)
Current portion of lease liabilities (1)
Long-term debt
Lease liabilities (1)
Deferred income taxes (1)
Other liabilities (1)
As previously
reported Adjustments
$
$
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
—
(738)
—
—
(247)
372
(613)
120
(810)
111
(1,880)
(10,995)
710
18,500
5,143
(1,061)
5,095
(583)
85
3,536
—
26
1,440
86
5,088
28,269
7,288
5,289
1,228
—
2,221
44,295
316
73,638
109,371
9,279
155,694
2,092
90,539
485,224
30,708
15,539
—
17,326
63,573
33,800
92,045
30,440
917
220,775
Net purchase price
264,394
55
264,449
(1) During the year ended November 30, 2023, the Company finalized the purchase price allocation of the BBQ
Holdings acquisition and recorded adjustments to its previously reported preliminary purchase price allocation
reported in the fourth quarter of 2022. The adjustments related to the fair values of accounts receivable, other
assets, prepaid expenses and deposits, loans and other receivables, property, plant and equipment, right-of-use
assets, franchise rights, trademarks, other intangible assets, accounts payable and accrued liabilities, gift card
and loyalty program liabilities, current portion of deferred revenue and deposits, current portion of lease
liabilities, lease liabilities, deferred income taxes and other liabilities.
(2) Goodwill is partially deductible for tax purposes.
Total expenses incurred related to acquisition costs during the year ended November 30, 2023 amounted to $509, for
a total of $5,290 incurred for the BBQ Holdings acquisition.
Page 37
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
III) BBQ Holdings (2022) (continued)
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.
IV) Küto Comptoir à Tartares (2022)
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 cash outflow
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
(1) Goodwill is deductible for tax purposes.
2022
$
9,033
3,459
196
12,688
(3,459)
(250)
8,979
2022
$
302
302
145
46
1,090
4,970
3,380
2,908
12,841
40
67
35
142
11
153
12,688
Page 38
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
7.
Business acquisitions (continued)
IV) Küto Comptoir à Tartares (2022) (continued)
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.
8.
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 19).
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 39
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
8.
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 40
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
9.
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 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
10.
Inventories
Raw materials
Work in progress
Finished goods and supplies
Food and beverage
Total inventories
2023
$
91,861
8,863
82,998
71,121
2,118
2,175
7,584
82,998
2023
$
7,545
3,399
54
—
(9)
(1,999)
(127)
8,863
2023
$
3,262
1,761
8,248
7,460
20,731
2022
$
Restated
(Note 7)
84,918
7,545
77,373
64,333
2,513
1,841
8,686
77,373
2022
$
Restated
(Note 7)
8,456
1,017
957
44
22
(3,072)
121
7,545
2022
$
2,386
1,011
7,326
7,794
18,517
Inventories are presented net of a $26 allowance for obsolescence (November 30, 2022 – $26). All of the inventories
are expected to be sold within the next 12 months.
Inventories expensed during the year ended November 30, 2023 were $271,014 (2022 – $178,768).
Page 41
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
11.
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.
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, 2023 and 2022:
Offices,
corporate and
dark stores
$
Store locations
subject to
operating
subleases
$
Other
$
Total
$
45,798
17,304
13,067
—
1,072
150
59,937
17,454
108,886
—
531
109,417
999
(13,795)
(969)
(10,749)
(657)
146,817
17,317
28,353
(34,477)
(428)
12,644
611
(447)
170,390
(1,373)
—
(193)
176
11,677
—
—
(1,526)
—
282
14
—
10,447
8
(405)
—
(41)
6
1,321
219
—
(655)
—
(5)
1
—
881
1,007
(15,573)
(969)
(10,983)
(475)
159,815
17,536
28,353
(36,658)
(428)
12,921
626
(447)
181,718
Balance as at November 30, 2021
Additions
Additions through business acquisitions
(Restated – Note 7)
Change in control over interest in 11554891
Canada Inc. (Note 8)
Depreciation expense
Impairment charge
De-recognition/lease modification of lease
liabilities
Foreign exchange
Balance as at November 30, 2022
Additions
Additions through business acquisitions (Note 7)
Depreciation expense
Impairment charge
De-recognition/lease modification of lease
liabilities
Foreign exchange
Other
Balance as at November 30, 2023
Page 42
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
11.
Leases (continued)
Finance lease receivables
The following table provides the net carrying amount of the finance lease receivables and the changes in the years
ended November 30, 2023 and 2022:
Finance lease receivables, beginning of year
Additions
Additions through business acquisitions (Note 7)
Change in control over interest in 11554891 Canada Inc. (Note 8)
Lease renewals and modifications
Lease terminations
Other adjustments
Interest income
Receipts
Foreign exchange
Finance lease receivables, end of year
Recorded in the consolidated statements of financial position as follows:
Current portion
Long-term portion
2023
$
2022
$
338,776
22,205
11,213
—
54,690
(7,810)
(76)
11,438
(97,236)
506
333,706
399,269
17,001
—
2,858
21,456
(15,483)
(800)
10,210
(101,051)
5,316
338,776
2023
$
2022
$
80,154
253,552
333,706
83,500
255,276
338,776
Page 43
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
11.
Leases (continued)
Lease liabilities
The following table provides the net carrying amount of the lease liabilities and the changes in the years ended
November 30, 2023 and 2022:
Lease liabilities, beginning of year
Additions
Additions through business acquisitions (Note 7)
Change in control over interest in 11554891 Canada Inc. (Note 8)
Lease renewals and modifications
Lease terminations
Other adjustments
Interest expense
Payments
Foreign exchange
Lease liabilities, end of year
Recorded in the consolidated statements of financial position as follows:
Current portion
Long-term portion
2023
$
514,923
25,221
39,836
—
80,331
(6,699)
(1,547)
22,840
(140,875)
1,167
535,197
2023
$
112,446
422,751
535,197
2022
$
Restated
(Note 7)
473,548
16,631
109,417
3,916
21,869
(9,226)
334
13,420
(120,011)
5,025
514,923
2022
$
Restated
(Note 7)
114,522
400,401
514,923
Page 44
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
11.
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, 2023:
2024
2025
2026
2027
2028
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
$
133,706
117,694
98,288
79,284
58,784
128,145
615,901
—
—
—
—
—
—
—
91,843
78,687
64,411
49,131
33,292
57,085
374,449
2,239
376,688
(38,328)
338,360
(4,654)
(80,154)
253,552
1,482
1,373
785
402
257
235
4,534
—
—
—
—
—
—
—
The Company has recognized net rent expense of $19,108 (2022 – $4,985) related to its short-term leases, leases of
low-value assets, and variable lease payments.
Page 45
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
12.
Property, plant and equipment
Cost
Leasehold
improve-
Land Buildings
$
$
ments Equipment
$
$
Computer
hardware
$
Rolling
stock
$
Total
$
Balance as at November 30, 2021
Additions
Transfer to assets held for sale
Disposals
Impairment (Note 15)
Foreign exchange
Change in control (Note 8)
Additions through business
acquisitions (Restated – Note 7)
Balance as at November 30, 2022
Additions
Disposals
Impairment (Note 15)
Foreign exchange
Additions through business
acquisitions (Note 7)
Balance as at November 30, 2023
1,236
1,900
(1,055)
—
—
(174)
—
5,416
7,323
—
—
—
13
5,134
30
(993)
—
—
(65)
—
5,778
9,884
93
(515)
—
6
8,235
2,020
(63)
(737)
(282)
(508)
307
36,565
45,537
13,476
(1,442)
(21)
354
15,363
2,949
—
(1,392)
(253)
(185)
99
23,479
40,060
14,984
(2,487)
(193)
216
4,422
1,721
—
(122)
—
64
—
3,053
9,138
1,534
(408)
(19)
33
596 34,986
8,670
(2,111)
(2,271)
(535)
(867)
406
50
—
(20)
—
1
—
12 74,303
639 112,581
37 30,124
(5,037)
(233)
622
(185)
—
—
—
7,336
—
9,468
7,535
65,439
4,771
(191)
57,351 10,087
— 12,115
491 150,172
Accumulated depreciation
Balance as at November 30, 2021
Eliminated on disposal of assets
Foreign exchange
Depreciation
Balance as at November 30, 2022
Eliminated on disposal of assets
Foreign exchange
Depreciation
Balance as at November 30, 2023
Carrying amounts
Leasehold
improve-
Land Buildings
$
$
ments Equipment
$
$
Computer
hardware
$
Rolling
stock
$
Total
$
—
—
—
—
—
—
—
—
—
1,813
—
—
279
2,092
(290)
2
337
2,141
4,725
(253)
53
2,438
6,963
(1,197)
85
8,618
14,469
8,229
(692)
51
1,811
9,399
(1,711)
70
7,066
14,824
2,405
(119)
45
1,343
3,674
(249)
22
2,168
5,615
288 17,460
(1,084)
(20)
149
—
5,975
104
372 22,500
(3,584)
(137)
—
179
87 18,276
322 37,371
Leasehold
improve-
Land Buildings
$
$
ments Equipment
$
$
Computer
hardware
$
Rolling
stock
$
Total
$
November 30, 2022 (Restated – Note 7)
November 30, 2023
7,323
7,336
7,792
7,327
38,574
50,970
30,661
42,527
5,464
4,472
267 90,081
169 112,801
Page 46
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
13.
Intangible assets
Cost
Balance as at November 30, 2021
Additions
Additions through business
acquisitions (Restated – Note 7)
Change in control (Note 8)
Foreign exchange
Net impairment (Note 15)
Balance as at November 30, 2022
Additions
Additions through business
acquisitions (Note 7)
Disposals
Foreign exchange
Impairment (Note 15)
Balance as at November 30, 2023
Accumulated amortization
Balance as at November 30, 2021
Foreign exchange
Amortization
Balance as at November 30, 2022
Disposals
Foreign exchange
Amortization
Balance as at November 30, 2023
Carrying amounts
Franchise
and master
franchise
rights Trademarks Step-in rights
$
$
$
Customer
lists
$
Other (1)
$
Total
$
364,793
—
608,353
—
1,199
—
10,318
—
7,906 992,569
3,988
3,988
10,369
2,700
12,443
(3,842)
386,463
—
48,352
—
1,464
(1,292)
434,987
160,664
16,200
18,958
(9,539)
794,636
—
103,030
—
3,082
(7,907)
892,841
—
—
—
—
1,199
—
—
—
—
—
1,199
3,380
—
—
—
13,698
—
—
—
—
—
13,698
—
638
—
2,092 176,505
18,900
32,039
(13,381)
14,624 1,210,620
2,045
2,045
— 151,382
(303)
4,594
(9,199)
16,414 1,359,139
(303)
48
—
Franchise
and master
franchise
rights Trademarks Step-in rights
$
$
$
Customer
lists
$
Other (1)
$
Total
$
—
—
—
—
—
—
—
—
978
—
120
1,098
—
—
100
1,198
2,456
—
966
3,422
—
—
966
4,388
3,918 172,295
5,554
94
1,663
29,473
5,675 207,322
(61)
(61)
742
16
1,977
34,559
7,607 242,562
164,943
5,460
26,724
197,127
—
726
31,516
229,369
Franchise
and master
franchise
rights Trademarks Step-in rights
$
$
$
Customer
lists
$
Other (1)
$
Total
$
November 30, 2022 (Restated – Note 7)
November 30, 2023
189,336
205,618
794,636
892,841
101
1
10,276
9,310
8,949 1,003,298
8,807 1,116,577
(1) Other items include $2,372 (November 30, 2022 – $1,987) of licenses with an indefinite term that are not
amortized.
Page 47
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
13.
Intangible assets (continued)
Indefinite life intangible assets consist of trademarks and perpetual licenses, where each brand represents a
separate CGU for impairment testing, for 67 CGUs (November 30, 2022 – 66 CGUs) totaling $895,213 (November
30, 2022 – $796,623).
14.
Goodwill
The changes in the carrying amount of goodwill are as follows:
Goodwill, beginning of year
Business acquisitions (Note 7)
Change in control (Note 8)
Foreign exchange
Goodwill, end of year
Accumulated impairment, beginning of year
Foreign exchange
Accumulated impairment, end of year
2023
$
613,477
167,579
—
4,212
785,268
65,721
360
66,081
2022
$
Restated
(Note 7)
490,627
95,377
11,946
15,527
613,477
62,237
3,484
65,721
Carrying amount
719,187
547,756
As at November 30, 2023, goodwill was allocated to five (November 30, 2022 – four) goodwill units as follows:
Canada Goodwill Unit
US Goodwill Unit A (1)
US Goodwill Unit B (1)
US Goodwill Unit C (2)
US Goodwill Unit D (3)
2023
$
204,327
126,761
128,963
97,994
161,142
719,187
2022
$
Restated
(Note 7)
204,327
126,066
128,260
89,103
—
547,756
(1) Variance from prior year due to foreign exchange conversion.
(2) Variance from prior year due to acquisition of Sauce Pizza and Wine (Note 7) and acquisition of the assets of
two restaurants located in the state of California as well as foreign exchange conversion.
(3) Variance from prior year due to acquisition of Wetzel’s Pretzels (Note 7).
Page 48
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
15.
Impairment charge – property, plant and equipment and intangible assets
The Company performed its annual impairment test as at August 31, 2023. For six (two and four brands in the
Canada and US & International geographical segments, respectively) of its brands (2022 – five 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 $9,199 (2022 – $13,381). Additionally, the Company recorded $233
(2022 – $535) of impairment losses on its property, plant and equipment, for a total of $9,432 (2022 – $13,916) of
impairment charges on its property, plant and equipment and intangible assets for the year ended November 30,
2023, which have been recognized in the consolidated statements of comprehensive income.
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, 2023:
Canada
US & International
Impairment charge
Property,
plant and
equipment
$
Intangible assets
Franchise
rights
$
Trademarks
$
—
233
233
525
767
1,292
3,104
4,803
7,907
Impairment by geographical segment for the year ended November 30, 2022:
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
Total
$
3,629
5,803
9,432
Total
$
5,892
8,024
13,916
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 49
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
15.
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, 2023 and 2022:
($, except percentage
data)
Canada
Goodwill
Unit
US
Goodwill
Unit A
US
Goodwill
Unit B
US
Goodwill
Unit C
US
Goodwill
Unit D
Canada
Goodwill
Unit
US
Goodwill
Unit A
US
Goodwill
Unit B
2023
2022
Discount rates after tax
9.5%
10.5%
10.5%
10.5%
10.5%
9.8%
10.3%
10.3%
Discount rates pre-tax
12.4%
13.4%
13.8%
13.7%
13.6%
12.7%
13.1%
13.2%
Recoverable amounts
1,063,708 729,871
360,741
424,392
365,670
1,071,847 675,843
328,712
Long-term growth rates ranging from 0% to 2% (2022 – 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 (2022 – four brands) representing 0.3% (2022 – 1.8%) 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, 2023 and 2022. For the Canada Goodwill Unit, an increase of 1,080 basis points (2022 –
950 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% (2022 – 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 three brands (2022 – four brands) representing 0.7% (2022 – 0.5%) 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, 2023 and 2022. For US Goodwill Unit A, an increase of 440 basis points (2022 – 320 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% (2022 – 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, 2023 and 2022. For US Goodwill Unit B, an increase
of 200 basis points (2022 – 110 basis points) in the discount rate would have resulted in its recoverable amount
being equal to its carrying value.
Long-term growth rates of 2.0% were used in the impairment test for US Goodwill Unit C. A change of 100 basis
points in discount rates in US Goodwill Unit C would not result in additional impairment charges on intangible assets
or goodwill for the year ended November 30, 2023. For US Goodwill Unit C, an increase of 200 basis points in the
discount rate would have resulted in its recoverable amount being equal to its carrying value. For the year ended
November 30, 2022, 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. For the year ended
November 30, 2022, 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.
A long-term growth rate of 2.0% was used in the impairment test for US Goodwill Unit D. A change of 100 basis
points in discount rates in US Goodwill Unit D would not result in additional impairment charges on intangible assets
or goodwill for the year ended November 30, 2023. For US Goodwill Unit D, an increase of 160 basis points in the
discount rate would have resulted in its recoverable amount being equal to its carrying value.
Page 50
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
16.
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 (November 30, 2022 – $900,000), and an extension of its maturity by 18 months, until October 28, 2025.
The accordion feature amounting to $300,000 (November 30, 2022 – $300,000) remained unchanged. Transaction
costs of $1,817 were incurred during the year ended November 30, 2022 and will be deferred and amortized over the
remaining three years of the life of the revolving credit facility. As at November 30, 2023, US$558,023 was drawn
from the revolving credit facility (November 30, 2022 – US$408,850).
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, 2023, the Company was in compliance with its financial covenants.
17.
Provisions
The provisions recorded on the Company’s consolidated statements of financial position are related to litigations,
disputes and other contingencies, representing management’s best estimate of the outcome of litigations and
disputes that are ongoing at the date of the statement of financial position, as well as self-insured liabilities related to
health and workers’ compensation and general liability claims. These provisions are made of multiple items; the
timing of the settlement of these provisions is unknown given their nature, as the Company does not control the
litigation timelines.
The provisions also varied in part due to foreign exchange fluctuations related to the US subsidiaries.
Provisions, beginning of year
Reversals
Amounts used
Additions
Impact of foreign exchange
Provisions, end of year
2023
$
1,490
(574)
(12,188)
15,895
33
4,656
2022
$
1,692
(517)
(404)
680
39
1,490
Page 51
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
18.
Deferred revenue and deposits
Franchise fee deposits
Unearned rent, advances for restaurant construction and renovation
Supplier contributions and other allowances
Less: Current portion
2023
$
62,256
1,949
3,738
67,943
(14,918)
53,025
2022
$
Restated
(Note 7)
55,646
2,854
6,373
64,873
(16,468)
48,405
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.
$16,767 (2022 – $15,391) 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, 2023:
Estimate for fiscal year:
2024
2025
2026
2027
2028
Thereafter
$
14,918
8,837
8,004
6,211
4,666
25,307
67,943
Page 52
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
19.
Long-term debt
Non-interest-bearing contract cancellation fees and holdbacks on acquisitions
Contingent considerations on Küto Comptoir à Tartares acquisition (Note 7) and
2023
$
2022
$
1,375
142
11554891 Canada Inc. (Note 8) (1)
Fair value of non-controlling interest option in 9974644 Canada Inc. (2)
Fair value of obligation to repurchase 11554891 Canada Inc. partner (Note 8) (3)
Revolving credit facility payable to a syndicate of lenders (4)
Credit facility financing costs
3,626
1,853
7,867
550,055
(2,584)
560,959
(9,530)
551,429
(1) The contingent considerations for the acquisition of Küto Comptoir à Tartares (payable November 2024) and
70% interest in 11554891 Canada Inc. (payable within the next 12 months) were subject to earn-out provisions
and the calculations have now been finalized.
600
2,288
7,179
757,759
(1,837)
767,364
(10,428)
756,936
Less: Current portion
(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 (November 30, 2022 – $900,000). As at November 30, 2023, the
Company had drawn US$558,023 (November 30, 2022 – US$408,850) 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.
20.
Capital stock
Authorized, unlimited number of common shares without nominal or par value:
Number
2023
Amount
$
Number
2022
Amount
$
Balance, beginning of year
Shares repurchased and cancelled
Balance, end of year
24,413,461
(80,800)
24,332,661
302,781
(1,002)
301,779
24,669,861
(256,400)
24,413,461
305,961
(3,180)
302,781
On June 29, 2023, the Company announced the renewal of the normal course issuer bid (“NCIB”). The NCIB began
on July 3, 2023 and will end on July 2, 2024 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, 2023, the Company repurchased and cancelled a total of 80,800 common
shares (2022 – 256,400 common shares) under the current NCIB, at a weighted average price of $51.58 per
common share (2022 – $57.01 per common share), for a total consideration of $4,167 (2022 – $14,618). An excess
of $3,165 (2022 – $11,438) of the shares’ repurchase value over their carrying amount was charged to retained
earnings as share repurchase premiums.
Page 53
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
21.
Accumulated other comprehensive (loss) income
The following table provides the net carrying amounts of Accumulated other comprehensive (loss) income by
category and the changes in the years ended November 30, 2023 and 2022.
Deferred tax
expense on
foreign currency
translation
adjustments and
cash flow hedges
$
Total
$
Translation
adjustments
$
Cash flow
hedges
$
(22,134)
35,577
—
13,443
7,644
—
—
—
—
—
—
9,581
814
(21,320)
—
35,577
(491)
323
—
—
(491)
13,766
7,644
9,581
—
(3,265)
—
(3,265)
—
21,087
—
6,316
(2,256)
(1,933)
(2,256)
25,470
Balance as at November 30, 2021
Unrealized gain on translation of
foreign operations
Deferred tax expense on foreign
currency translation adjustments
and cash flow hedges
Balance as at November 30, 2022
Unrealized gain on translation of
foreign operations
Change in fair value of financial
instruments
Gain realized on financial
instruments transferred to
earnings
Deferred tax expense on foreign
currency translation adjustments
and cash flow hedges
Balance as at November 30, 2023
22.
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,
2023 (November 30, 2022 – 60,000).
Under the stock option plan of the Company, the following options were granted and are outstanding as at November
30, 2023 and 2022:
Number of
options
2023
Weighted
average
exercise
price
$
2022
Weighted
average
exercise price
$
Number of
options
Outstanding, beginning and end of year
Vested, end of year
440,000
137,776
50.97
50.38
440,000
102,221
50.97
49.72
Page 54
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
22. Stock options (continued)
As at November 30, 2023, 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
3.3
5.8
1.1
4.3
As at November 30, 2022, 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
4.3
6.8
2.1
5.3
No options were granted during the years ended November 30, 2023 and 2022.
A compensation expense of $792 was recorded for the year ended November 30, 2023 (2022 – $1,002). The
expense is presented in Wages and benefits in Operating expenses in the consolidated statements of income.
23.
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
2023
2022
24,409,176
68,987
24,478,163
24,439,892
25,846
24,465,738
(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, 2023
was 13,334 (2022 – 240,000).
Page 55
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
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 were subject to
earn-out provisions and the calculations have now been finalized; the contingent considerations for Küto Comptoir à
Tartares and 11554891 Canada Inc. are repayable in November 2024 and within the next 12 months, respectively.
These contingent considerations have been recorded at fair value and are remeasured on a recurring basis.
A fair value remeasurement gain of $2,151 was recorded for the contingent considerations for the year ended
November 30, 2023 (2022 – gain of $1,794).
On December 8, 2022, one of the Company’s wholly owned subsidiaries completed the acquisition of all of the
issued and outstanding shares of Wetzel’s Pretzels. The transaction consideration included US$3,000 held in escrow
contingent on the execution of several lease contracts within 12 months of the acquisition. As at December 8, 2023,
only a portion of the contracts were executed and therefore $2,194 (US$1,600) was released from escrow and
recorded as a Gain on contingent consideration from a business acquisition in the consolidated statement of income.
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 19) which is remeasured at each reporting period.
A fair value remeasurement loss of $435 (2022 – loss of $278) 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 19) 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, 2023 and 2022.
A fair value remeasurement gain of $688 (2022 – gain of $1,416) was recorded for this obligation to repurchase the
11554891 Canada Inc. partner.
Cross currency interest rate swaps
On October 27, 2023 and November 27, 2023, 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, respectively
(November 30, 2022 – one floating to floating 3-month cross currency interest rate swap and one floating to floating
2-month cross currency interest rate swap). A derivative liability fair value of $2,626 was recorded as at November
30, 2023 (November 30, 2022 – nil) in Current portion of derivative liabilities in the consolidated statements of
financial position. The Company has classified this as level 2 in the fair value hierarchy.
Receive – Notional
Receive – Rate
Pay – Notional
Pay – Rate
3-month
US$51,114
7.14%
CA$70,000
6.66%
2023
2-month
US$142,909
7.14%
CA$196,000
6.59%
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%
Page 56
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Fair value of recognized financial instruments (continued)
Fixed interest rate swaps
On March 24, 2023, the Company entered into a three-year SOFR fixed interest rate swap for a notional amount of
US$200,000. The period of three years ends on April 10, 2026. Under the terms of this swap, the interest rate is fixed
at 3.32%. A derivative asset fair value of $6,617 was recorded as at November 30, 2023 (November 30, 2022 – nil).
The Company has classified this as level 2 in the fair value hierarchy and has designated this as a cash flow hedge
of the Company’s interest rate risk from its credit facility. A fair value remeasurement gain of $6,316 was recorded in
the Company’s consolidated statement of comprehensive income for the year ended November 30, 2023 (2022 –
nil).
On May 30, 2023, the Company entered into a two-year SOFR fixed interest rate swap for a notional amount of
US$100,000. The period of two years ends on May 30, 2025. Under the terms of this swap, the interest rate is fixed
at 3.64%, unless the 1-month term SOFR exceeds 5.50%; if the 1-month term SOFR exceeds 5.50%, the Company
will pay the 1-month term SOFR. A derivative asset fair value of $1,272 was recorded as at November 30, 2023
(November 30, 2022 – nil). The Company has classified this as level 2 in the fair value hierarchy. A fair value
remeasurement gain of $1,272 was recorded in the Company’s consolidated statement of income for the year ended
November 30, 2023 (2022 – nil).
The swaps were recorded in the consolidated statements of financial position as follows:
Current portion
Long-term portion
November 30, 2023
3-year SOFR fixed
interest rate swap
$
2-year SOFR fixed
interest rate swap
$
4,647
1,970
6,617
—
1,272
1,272
Total
$
4,647
3,242
7,889
Page 57
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Fair value of recognized financial instruments (continued)
Fair value hierarchy
The changes in the carrying amount of the financial liabilities classified as level 3 in the fair value hierarchy are as
follows:
Financial liabilities classified as level 3, beginning of year
Change in control over interest in 11554891 Canada Inc. (Note 8)
Repayment of contingent consideration on 11554891 Canada Inc.
Revaluation of financial liabilities recorded at fair value
Issuance of contingent consideration on Küto Comptoir à Tartares acquisition
(Note 7)
Financial liabilities classified as level 3, end of year
2023
$
13,346
—
(875)
(2,404)
—
10,067
2022
$
4,952
7,867
—
(2,932)
3,459
13,346
As at November 30, 2023 and 2022, the financial liabilities classified as level 3 in the fair value hierarchy were
comprised of the following:
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 classified as level 3
2023
$
2022
$
600
2,288
7,179
10,067
3,626
1,853
7,867
13,346
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, 2023 and 2022. 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
$
2023
Fair
value
$
Carrying
amount
$
Restated
(Note 7)
2022
Fair
value
$
Restated
(Note 7)
5,389
333,706
5,389
333,706
4,560
338,776
4,560
338,776
759,134
759,134
550,197
550,197
(1) Excludes contingent considerations on Küto Comptoir à Tartares acquisition and 11554891 Canada Inc., credit
facility financing costs, non-controlling interest option in 9974644 Canada Inc. and obligation to repurchase
11554891 Canada Inc. partner.
Page 58
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Determination of fair value
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.
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, 2023.
Credit risk
The Company’s credit risk is primarily attributable to its trade receivables and finance lease 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 and finance lease receivables 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 and finance
lease receivables.
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, 2023, US$558,023 (November 30, 2022 – US$408,850) was drawn from the revolving credit facility.
Of that amount, US$194,023 (November 30, 2022 – US$214,850) was not exposed to foreign exchange risk as a
result of two (November 30, 2022 – two) cross currency interest rate swaps, and US$364,000 (November 30, 2022 –
US$194,000) 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, 2023 and 2022, 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
USD
$
2023
CAD
$
USD
$
2,593
988
3,522
1,342
5,424
463
2022
CAD
$
7,327
625
(192)
(364,000)
(360,611)
(261)
(494,385)
(489,782)
(212)
(194,000)
(188,325)
(286)
(262,055)
(254,389)
Page 59
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
24.
Financial instruments (continued)
Foreign exchange risk (continued)
All other factors being equal, a reasonable possible 5% rise in foreign currency exchange rates per Canadian dollar
would result in a loss of $18,031 (2022 – loss of $9,416) 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. The Company from time to time may enter into fixed interest rate
derivatives to manage its cash flow risk exposure, with long-term commitments requiring Board approval to ensure
compliance with the Company’s risk management strategy. As at November 30, 2023, the Company holds floating-to-
fixed interest rate swaps in order to hedge a portion of the interest rate cash flow risk associated with floating interest
rate debt.
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. $757,759
(November 30, 2022 – $550,055) of the credit facility was used as at November 30, 2023. A 100 basis points
increase in the bank’s prime rate would result in additional interest of $7,578 per annum (2022 – $5,501) 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, 2023, the Company had an authorized revolving credit facility for which the available amount
may not exceed $900,000 (November 30, 2022 – $900,000) and including an accordion feature amounting to
$300,000 (November 30, 2022 – $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 16 and Note 19.
The following are the contractual maturities of financial liabilities as at November 30, 2023:
Carrying
amount
$
Contractual
cash flows
$
0 to 6
months
$
6 to 12
months
$
12 to 24
months
$
Thereafter
$
Accounts payable and accrued
liabilities
Long-term debt (Note 19) (1)
Interest on long-term debt (1)
Lease liabilities
147,557
767,364
n/a
535,197
147,557
769,201
102,597
615,901
1,450,118 1,635,256
147,557
11,157
26,877
66,853
252,444
—
229
26,877
66,853
93,959
—
757,767
49,605
117,694
925,066
—
48
(762)
364,501
363,787
(1) When future interest cash flows are variable, they are calculated using the interest rates prevailing at the end of
the reporting period.
Page 60
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
25.
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,
2023 and 2022 were as follows:
Debt
Equity
Debt-to-equity ratio
2023
$
2022
$
767,364
812,889
0.94
560,959
724,626
0.77
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.
Page 61
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
26.
Revenue
For the year ended
November 30, 2023
November 30, 2022
US &
Canada International
$
$
TOTAL
$
US &
Canada International
$
$
TOTAL
$
93,703
5,567
172,834
6,746
266,537
12,313
83,860
5,141
128,968
6,729
212,828
11,870
160,094
1,772
161,866
162,467
5,996
168,463
39,514
393
44,981
40,141
3,515
387,908
462,653
6,337
76,503
41,598
12,983
502,167
6,730
121,484
81,739
16,498
781,426 1,169,334
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
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
Page 62
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
27.
Operating expenses
For the year ended
November 30, 2023
November 30, 2022
Canada
$
US &
International
$
TOTAL
$
Canada
$
US &
International
$
TOTAL
$
17,666
146,094
163,760
15,800
36,355
52,155
143,561
61,559
2,785
7,830
1,591
1,990
4,947
—
72
44,981
314
230,412
58,153
12,867
6,545
23,567
14,148
9,037
8,665
76,503
143,875
291,971
60,938
20,697
8,136
25,557
19,095
9,037
8,737
121,484
145,534
55,910
2,881
7,750
1,360
2,003
3,635
—
49
42,394
—
79,602
11,448
12,897
3,723
5,077
6,535
8,153
7,972
68,890
145,534
135,512
14,329
20,647
5,083
7,080
10,170
8,153
8,021
111,284
2,289
10,267
299,538
904
11,841
599,050
3,193
22,108
898,588
2,320
7,807
287,443
(216)
6,561
246,997
2,104
14,368
534,440
Cost of goods sold and rent
Retail, food processing and
distribution costs
Wages and benefits (1)
Other corporate store expenses (2)
Consulting and professional fees
Insurance and taxes
Utilities, repairs and maintenance
Advertising, travel, meals and
entertainment
Gift cards – related costs
Royalties
Promotional funds (3)
Impairment (reversal of impairment)
for expected credit losses
Other (2 & 4)
(1) Wages and benefits are presented net of investment tax credit of nil (2022 – $459).
(2) During the year ended November 30, 2023, the Company began presenting its other operating expenses
associated with its corporate stores in other corporate store expenses, to provide a more accurate overview of
its operating expense categories. Accordingly, prior year amounts have been adjusted to reflect a
reclassification of $14,329 from other operating expenses to other corporate store expenses.
(3) Promotional fund expenses include wages and benefits.
(4) Other operating expenses are comprised mainly of other office administration expenses.
28.
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 $16,352 as at November 30, 2023 (November 30, 2022 – $18,648). In addition, the Company could
be required to make payments for percentage rents, realty taxes and common area costs. As at November 30, 2023,
the Company has accrued $1,570 (November 30, 2022 – $1,570), included in Accounts payable and accrued
liabilities, with respect to these guarantees.
29.
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 17. 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 63
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
30.
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
Credits generated and used in current year
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
$
2023
%
$
2022
%
29,145
26.5
25,486
26.5
(17,710)
397
303
(3,197)
370
(10)
(3,136)
(959)
258
5,461
(16.3)
0.4
0.3
(2.9)
0.3
—
(2.9)
(0.9)
0.3
4.8
(6,126)
505
3,601
—
2
(754)
(768)
(875)
(80)
20,991
(6.4)
0.5
3.7
—
—
(0.8)
(0.8)
(0.9)
(0.1)
21.7
Page 64
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
30.
Income taxes (continued)
The variation in deferred income taxes during the years ended November 30, 2023 and 2022 were as follows:
November 30,
2022
$
Recognized
in profit or
loss
$
Recognized in
other
comprehensive
income Acquisition
$
$
Foreign
exchange
$
November 30,
2023
$
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
Derivative assets
Deferred revenue
Lease liabilities
Other
(15,208)
(88,159)
(41,280)
308
(1,359)
56
24,808
(2,214)
11,097
228
(206,766)
8,994
—
10,792
133,238
(145)
(165,610)
1,157
1,184
(4,818)
476
726
(425)
(14,669)
1,421
(11,270)
275
6,135
30,470
(1,777)
(4,692)
4,425
(1,620)
6,998
—
—
—
—
—
—
—
(2,256)
—
—
—
—
—
—
—
—
(2,256)
(2,717)
—
—
14
—
17
(880)
(7)
7,317
—
(41,757)
5,533
—
332
—
—
(32,148)
(68)
(144)
(211)
10
(3)
(7)
(206)
(3)
(110)
—
(779)
594
—
33
367
18
(509)
(16,836)
(87,119)
(46,309)
808
(636)
(359)
9,053
(3,059)
7,034
503
(243,167)
45,591
(1,777)
6,465
138,030
(1,747)
(193,525)
Page 65
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
30.
Income taxes (continued)
November 30,
2021
$
Recognized
in profit or
loss
$
Recognized in
other
comprehensive
$
income Acquisition
$
Restated
(Note 7)
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)
(8,905)
1,045
200
—
—
—
3,101
(1,561)
11,719
—
(35,326)
—
—
(1,257)
—
(30,984)
(339)
(1,443)
(580)
12
(35)
3
1,173
(2)
(1,138)
—
(5,998)
381
359
2,074
188
(5,345)
(15,208)
(88,159)
(41,280)
308
(1,359)
56
24,808
(2,214)
11,097
228
(206,766)
8,994
10,792
133,238
(145)
(165,610)
As at November 30, 2023, there were approximately $3,440 (November 30, 2022 – $2,170) 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 2038 and 2043.
The deductible temporary difference in relation to foreign exchange on intercompany loans for which a deferred tax
asset has not been recognized amounts to $1,313 (2022 – $987).
No deferred income tax liability is recognized on unremitted earnings of $105,739 (2022 – $80,931) 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.
31.
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 66
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
31. Segmented information (continued)
Below is a summary of each geographical and operating segment’s performance during the years ended November 30, 2023 and 2022.
November 30, 2023
Franchising
Corporate
CANADA
Processing,
distribution
and retail
Promotional
funds
Interco
Canada Franchising
Corporate
Total
US & INTERNATIONAL
Processing,
distribution
and retail
Promotional
funds
$
$
$
$
$
$
$
$
$
$
Interco
$
Total US &
International
Total
consolidated
$
$
Revenue
154,492
32,009
161,196
44,981
(4,770)
387,908
242,378
462,025
1,771
76,503
(1,251)
781,426
1,169,334
Operating expenses
79,303
32,901
144,387
44,981
(2,034)
299,538
117,380
408,840
314
76,503
(3,987)
599,050
Segment profit (loss)
75,189
(892)
16,809
—
(2,736)
88,370
124,998
53,185
1,457
—
2,736
182,376
898,588
270,746
Total assets
Total liabilities
1,504,876
23,845
69,381
1,146,662
20,779
13,795
10,248
10,248
— 1,608,350
602,996
447,737
— 1,191,484
360,675
294,035
—
—
20,935
20,935
—
—
1,071,668
2,680,018
675,645
1,867,129
November 30, 2022
Franchising
Corporate
CANADA
Processing,
distribution
and retail
Promotional
funds
Interco
Canada Franchising
Corporate
Total
US & INTERNATIONAL
Processing,
distribution
and retail
Promotional
funds
$
$
$
$
$
$
$
$
$
$
Interco
$
Total US &
International
Total
consolidated
$
$
Revenue
141,127
29,353
163,141
42,394
(5,392)
370,623
182,086
89,967
5,996
68,890
(1,040)
345,899
Operating expenses
71,548
29,266
145,992
42,394
(1,757)
287,443
95,463
87,319
—
68,890
(4,675)
246,997
Segment profit (loss)
69,579
87
17,149
—
(3,635)
83,180
86,623
2,648
5,996
—
3,635
98,902
716,522
534,440
182,082
Total assets (Restated
– Note 7)
1,299,304
22,253
51,612
11,761
— 1,384,930
740,092
183,284
—
22,059
—
945,435
2,330,365
Total liabilities
(Restated – Note 7)
957,112
21,575
10,718
11,761
— 1,001,166
298,107
284,407
—
22,059
—
604,573
1,605,739
Page 67
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
32.
Statement of cash flows
Changes in liabilities and assets arising from financing and investing activities for the years ended November 30, 2023 and 2022 were as follows:
Revolving
credit facility
$
Loan financing
costs
$
Non-interest-
bearing
contracts and
holdbacks
$
Non-
controlling
interest option
$
Contingent
considerations
$
Obligation to
repurchase
11554891
Canada Inc.
partner
Total
$
Balance as at November 30, 2022
Changes from financing activities:
Increase in term revolving credit facility
Repayments of term revolving credit facility,
holdbacks and contingent consideration
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 24)
Foreign exchange
Derivative liability on cross currency interest
rate swaps
Changes from investing activities:
Issuance of holdbacks (Note 7)
Balance as at November 30, 2023
550,055
(2,584)
142
1,853
3,626
7,867
560,959
318,884
—
(109,511)
—
—
—
—
957
(2,626)
—
(157)
904
—
—
—
—
—
(2)
—
—
47
—
(2)
—
—
—
—
—
—
435
—
—
—
—
318,884
(875)
—
—
—
(110,388)
(157)
—
—
—
—
904
47
(2,151)
—
(688)
—
(2,404)
955
—
—
(2,626)
—
757,759
—
(1,837)
1,190
1,375
—
2,288
—
600
—
7,179
1,190
767,364
Page 68
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
32. Statement of cash flows (continued)
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
$
Balance as at November 30, 2021
345,000
—
(1,395)
12,171
1,575
1,961
1,416 360,728
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 7)
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 24)
Foreign exchange
Changes from investing activities:
Change in control over interest in
11554891 Canada Inc. (Note 8)
Business acquisition (Note 7)
Issuance of holdback (Note 7)
Issuance of contingent
consideration (Note 7)
Balance as at November 30, 2022
275,626
(67,807)
—
—
—
—
—
(12,407)
—
—
(33,800)
—
—
(1,817)
—
—
—
(2,764)
—
—
—
—
—
—
—
—
33,800
—
628
—
—
—
—
—
—
—
550,055
—
—
—
(2,584)
—
—
—
19
—
109
—
—
250
—
142
—
—
—
—
—
—
—
—
—
—
—
—
— 275,626
—
(80,214)
—
—
(33,800)
(1,817)
—
628
—
19
278
—
(1,794)
—
(1,416)
—
(2,932)
(2,655)
—
—
—
—
—
—
7,867
—
—
7,867
33,800
250
—
1,853
3,459
3,626
—
3,459
7,867 560,959
Page 69
MTY Food Group Inc.
Notes to the consolidated financial statements
For the years ended November 30, 2023 and 2022
(In thousands of Canadian dollars, except per share amounts and stock options)
32. Statement of cash flows (continued)
Changes in non-cash operating activities are as follows:
Accounts receivable
Inventories
Other assets
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Provisions
Gift card and loyalty program liabilities
Deferred revenue and deposits
2023
$
(3,393)
(1,544)
(2,561)
1,238
(18,623)
3,146
12,560
1,469
(7,708)
2022
$
Restated
(Note 7)
(10,187)
(2,049)
(345)
(5,027)
(1,321)
(251)
9,368
2,921
(6,891)
Non-cash items amounting to $1,684 (2022 – $164) are included in proceeds on disposal of property, plant and
equipment. The non-cash items for the year ended November 30, 2023 were primarily related to commitments made
as part of the disposal of a portfolio of corporately-owned locations in the US segment.
33.
Subsequent event
Dividends
On January 24, 2024, the Company announced an increase to its quarterly dividend payment, from $0.250 per
common share to $0.280 per common share. The dividend of $0.280 per common share will be paid on February 15,
2024.
Page 70
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 (1)
Claude St-Pierre
Eric Lefebvre
Dickie Orr (2)
Victor Mandel (2,3)
Murat Armutlu (2,3)
Suzan Zalter (3)
(1) Chairman of the Board
(2) Audit Committee
(3) Compensation, Nomination and Governance Committee
INVESTOR RELATIONS
Eric Lefebvre
T. : 514 336-8885
F. : 514 336-9222
ir@mtygroup.com
MT YGROUP.COM