Pizza Pizza Royalty Corp. Serves Up Resilience in Q1 2025: Can the Momentum Hold?

Pizza Pizza Royalty Corp. (PZRIF), the Canadian pizza franchise royalty giant, delivered a mixed but largely encouraging performance in its Q1 2025 earnings call. While sales growth remained modest, strategic product launches, disciplined financial management, and cautious expansion plans suggest the company is navigating a challenging economic environment with resilience. Here’s what investors need to know.

The Financials: Growth Amid Caution

The company’s royalty pool system sales rose 1.6% year-over-year to $151.3 million, driven by same-store sales growth and new restaurant additions. Notably, Pizza 73 locations outperformed Pizza Pizza, with same-store sales jumping 4.3% versus just 0.6% for its larger sibling brand. This divergence highlights Pizza 73’s shift toward value-driven offerings like the Skinner Dinner—a $19 single-pizza deal endorsed by Edmonton Oilers goalie Stuart Skinner—which has helped broaden its appeal beyond its traditional two-pizza reputation.

A vibrant photo of Pizza Pizza’s 18-inch family pizza and Pizza 73’s loaded tater tots, with the Skinner Dinner prominently displayed.

The company maintained its dividend payout at $5.7 million (23.25¢ per share), though the payout ratio dipped to 17%, well below the annualized target of ~100%. Management cited this as a conservative move to bolster the working capital reserve, which fell to $5.2 million. While this suggests some near-term prudence, investors will monitor whether the reserve stabilizes as sales variability persists.

The Innovation Play: Betting on Value and Tech

The Q1 results underscored Pizza Pizza Royalty’s focus on value and convenience to counter rising cost pressures. New products like the 18-inch pizza (priced at $20 with three toppings) and stuffed crust pizzas at Pizza 73 have been critical in driving traffic. Meanwhile, hockey-themed promotions—including discounted deals timed with the Canada-US hockey final—showed how the company leverages regional cultural moments to boost sales.

Technology investments are another key lever. The Club 11 Eleven loyalty program, integrated into the company’s app, aims to reduce reliance on third-party delivery platforms. Initiatives like “Habs Delivery” codes in Toronto (targeting Montreal Canadiens fans) also highlight efforts to grow direct app orders, which carry higher margins.

Expansion and Risks: Eyes on Mexico, Hands on the Wheel

Pizza Pizza Royalty plans to add 2-3% more restaurants in 2025, with a focus on Ontario and Mexico. While 5-6 new Pizza Pizza locations are planned in Mexico, management stressed caution: “International markets come with regulatory and logistical risks,” noted CEO Paul Goddard. This pragmatism aligns with a broader theme of prioritizing quality over quantity.

Pizza Pizza Royalty Corp. (PZRIF) stock price performance vs. S&P 500 over the past year.

The Bottom Line: A Steady Hand in Uncertain Waters

Investors should take heart in Pizza Pizza Royalty’s ability to deliver consistent dividends and innovate in a competitive landscape. The renewed $47 million credit facility, with interest rates locked at 2.51%, provides financial flexibility. However, risks remain: a potential recession could pressure discretionary spending, while intense price competition from rivals like Domino’s Pizza and Pizza Hut demands relentless innovation.

The stock’s 1.52% post-earnings rise to $22.73 reflects investor optimism, but it still trails its 52-week high of $24.34. For long-term investors, the company’s focus on value propositions, loyalty-building tech, and disciplined capital management make it a compelling play on Canada’s pizza market—if management can execute on its growth plans without overextending.

Conclusion: A Slice of Stability in a Turbulent Economy

Pizza Pizza Royalty Corp. has shown it can weather economic headwinds through strategic product launches and financial prudence. With a working capital reserve of $5.2 million, a renewed credit facility, and same-store sales growth (even if modest), the company is well-positioned to navigate 2025. However, success hinges on executing its Mexico expansion carefully and maintaining its edge in value-driven marketing. For now, the recipe seems to be working—but investors should keep an eye on how the broader economy shapes up.