Pizza Pizza Royalty's (PZRIF) CEO Paul Goddard on Q4 2021 Results - Earnings Call Transcript

Pizza Pizza Royalty Corp. (OTCPK:PZRIF) Q4 2021 Earnings Conference Call March 2, 2022 5:30 PM ET

Company Participants

Alex Sewrattan – Director of Finance

Paul Goddard – Chief Executive Officer

Christine D’Sylva – Chief Financial Officer

Conference Call Participants

Derek Lessard – TD Securities

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Pizza Pizza Royalty Corp’s Earning Call for the Fourth Quarter of 2021. [Operator Instructions] And as a reminder, this conference is being recorded on Wednesday, March 2, 2022.

I now would like to turn the conference over to Alex Sewrattan, Director of Finance. Please go ahead, sir.

Alex Sewrattan

Thank you. Good afternoon everyone, and welcome to Pizza Pizza Royalty Corp’s earnings call for the fourth quarter ended December 31, 2021. Joining me on the call today are Pizza Pizza Limited’s Chief Executive Officer, Paul Goddard; and Chief Financial Officer, Christine D’Sylva.

Our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary language in our earnings press release and the risk factors included in our annual information form.

Please refer to our earnings press release and MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to our non-IFRS financial measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers and media can contact us after the call.

Before turning the call over to Paul for the business update, I wanted to spend a few moments reviewing the structure of the Corp for our new investors. Pizza Pizza Royalty Corp indirectly owns the Pizza Pizza and Pizza 73 brands and trademarks through its subsidiary, Pizza Pizza Royalty Limited Partnership. This partnership has two partners, Pizza Pizza Royalty Corp, the public company which owns 76.5%; and the other partner, Pizza Pizza Limited, the private operating company, which owns the remaining 23.5%.

The Royalty Corp is a top line restaurant Royalty Corp that earns a monthly royalty through a lease agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its restaurant operations, Pizza Pizza pays the partnership a monthly royalty calculated as a percentage of Royalty Pool sales. Growth in the Corp is derived from increasing the same-store sales of the restaurants in the Royalty Pool and by adding new restaurants to the pool each year.

The Royalty Pool is adjusted at the beginning of each year by adding new restaurants opened in the previous year, less any restaurants that have been permanently closed. For the fiscal year 2021, the Royalty Pool was adjusted on January 1, 2021, to include 622 Pizza Pizza restaurants and 103 Pizza 73 restaurants.

With that review, I’ll turn the call over to Paul Goddard to provide a business update.

Paul Goddard

Thank you, Alex. And welcome everyone to Pizza Pizza’s fourth quarter investor conference call. Today I will be discussing our fourth quarter results and will share a brief outlook for 2022. And then Christine will summarize our key financial highlights before the Q&A at the end.

Last year, our Pizza Pizza and Pizza 73 restaurants were impacted by local governments restrictions in response to the COVID-19 pandemic. However, we were encouraged to see our results strengthen as 2021 progressed when compared to 2020. Customer orders and sales in the second half of 2021 improved significantly compared to the first half of the year, especially at key non-traditional locations and in our catering and walk-in businesses.

However, by the end of the fourth quarter, the Omicron variant caused restrictions to be reinstated, which negatively impacted our restaurants. Provincial governments across Canada reinstated restrictions on in-restaurant dining and indoor social and event gatherings. And these restrictions continued into 2022. Here, just the optimistic the recent lifting of restrictions in most provinces, we will have the wind at our backs and will continue experiencing the strong momentum we experienced in the latter part of 2021. And that's of course barring any new unexpected restrictions.

Today, we are pleased to present the financial results of the Royalty Corp for the fourth quarter, which ended December 31, 2021. Results for the fourth quarter were driven by strong same store sales at both brands. Pizza Pizza reported same our sales growth of 13.9% and Pizza 73 reported 5% growth, for a combined 12.4% same store sales growth. The positive results of the quarter were mainly due to the increase in guest traffic, an easing of government restrictions. As a result, our board was pleased to announce an 8.3% increase in the shareholder dividend effective February, 2022.

Even with the easing of restrictions, we still have restaurants that continue to be impacted by the loss of walk-in sales, specifically those located in urban markets, which are particularly managed or sorry – particularly impacted rather by corporate work from home policies. As a reminder at Pizza Pizza, approximately 40% of our sales typically come from our walk-ins. Additionally many of our non-traditional locations specifically those in colleges and universities had not reopened by December 31.

So while we wait for the full and hopefully permanent reopening of the economy, at Pizza Pizza Limited we continue to focus on our core competitive advantages of convenience, innovation, high quality menu offerings, and network expansion. This year, we had tremendous success with our national expansion program. During the year Pizza Pizza opened 22 traditional restaurants and 12 non-traditional Pizza Pizza locations and opened two traditional Pizza 73 restaurants.

The new locations opened across all provinces Pizza Pizza operates in, including BC, Quebec, Ontario, Alberta, Manitoba, Nova Scotia and New Brunswick, that's seven provinces proud of that. It's something we're really pleased to see. And we've really bolstered our construction efforts right across the country. And really seen that accelerated growth this year. And we expect to maintain this pace by the way, with projected unit growth of approximately 5% in our traditional restaurants in 2022.

During the year two traditional and 30 non-traditional Pizza Pizza restaurants closed, and three non-traditional Pizza 73 restaurants closed permanently. While the sheer number of non-traditional closures seems large, the locations are closed, have been closed for most of the last two years in any event due to COVID and our smaller low volume sites. So I just wanted to mention that. And as mentioned on last quarter, the majority of these closures were lower volume movie theater locations.

Beyond the borders of Canada in November Pizza Pizza Limited signed an international license and royalty agreement with the Pizza Pizza Royalty Corp to use the Pizza Pizza rights in Mexico. We have a master of franchisee in Mexico and are in the early stages of a long-term development plan. The appeal for pizza continues to grow in Mexico as one of the highest per capita pizza consumption markets in the world in fact. And accordingly, we are definitely excited to introduce Mexico to our innovative and unique offerings and do see further international potential as well for Pizza Pizza down the road.

That said, we remain laser-focused on growing our business across Canada. And it's safe to say we are certainly known and respected as a major homegrown national brand and the leading pizza chain in the country, whether the architect is store count, overall sales or pizza market share. We believe we are the market share leader in all major urban markets, though we do see definite incremental opportunity in parts of the country where we may not yet have deep enough market penetration.

So turning now to our Canadian restaurant operations, Pizza Pizza, like companies across all industries is facing significant inflation in our input costs and labor. And our goal is to strike a balance between increasing retail prices to guard our restaurants bottom line profits. Also ensuring we don't adversely impact overall transaction volumes or customer order counts.

Over the last year, we have been strategic in taking modest price, increases across our menu to offset those input costs. And we will continue to monitor the supply chain landscape and judiciously pass along price increases where needed while also looking at operational efficiencies to lower costs, and also just keep our overall food costs as percent of sales in line with historical levels as best we can.

And all the while we will be careful to make sure that we still provide tremendous value to our customers, something we're certainly known for. And this is definitely no small task when we see double digit increases in virtually every input costs we see whether its meats, tomato sauce, dough, wheat futures and oil. Cheese, we've seen approximately 8% mandated price increase with supply management in Canada as of February. And we're likely to see more increases there as well.

And just to give people a sense, if you don't know already, cheese is about 40% of the cost of a pizza. So it’s the major one, but everything's going up basically. So there's no question, input costs have gone up significantly across the board. And we expect them to continue to go up more this year, putting pressure on our franchisees and on our private operating company as well, Pizza Pizza Limited. Fortunately, however, we have been able to manage our overall food costs well and non-food costs and it's challenging, but we're doing quite well on that so far. And part of this has been due to the selective price increases, as I mentioned earlier.

And one key point we'd like to reiterate on these calls to our investors as well, is that a key attribute of the Royalty Corp remember is that revenues are based on top line systems sales of the restaurants in the Royalty Pool and not on the profitability of either PPL or the restaurants themselves. Moreover, the company is not subject to the variability of earnings or expenses of either PPL or the restaurants.

So this therefore mitigates much risk for our investors. And as long as we consistently generate those positive same store sales growth and grow the net number of restaurants in our network. Investors should continue to be well rewarded with our strong monthly dividend and our yield is circle of 6%[ph], as you all know at the moment. And over time should see further dividend increases based on strong performance, as long as we get that strong performance. So we think this is really been an outstanding, longstanding track record. We're proud of that, and we're more just than ever about creating even more value for our shareholders as we look to the future.

Finally, Pizza Pizza continues to leverage its brand and its proud history of homemade innovation and innovation alongside our strategic partners too. By the way of example, last quarter through our longstanding partnership with MLSE, we introduced Score a Slice promotion, which is significantly enhanced from a prior version we had. And now if some of you haven't had the chance to go to Raptors or Leafs game, you’ll see that very visually, very apparently but during Raptors games and more recently for 2021, the Leafs for the first time as well are part of this. But fans are essentially directed to a massive QR code shown on the arena scoreboard and it loads basically a free slice coupon into their digital wallet to use with their Pizza Pizza app.

So for instance, if the Leafs score first in the first period, that’s the contest we set up, up pops the QR code and thousands of fans at the venue pull up their smartphones and they download our award-winning Pizza Pizza app.

And in addition to being a fun digital giveaway for existing customers, it’s fun. The crowd loves it. It really gets them going supporting the team more as well. And really this was a phenomenal program to drive organic app downloads for fans that didn’t already have our app as well. And that introduces them to our entire array of fast and convenient organic ordering platforms. But we’re really pushing the app. And also with the apps and continue to reinvest in those and enhance them all the time. We’re not going to stop if anything we will do even more in the future.

We also, as part of that, introduce SMS push notifications, which sounds pretty simple as text messages, but actually there’s a lot of complexity behind the scenes to get something that’s really data driven, intelligent, and based on marketing data. And so we’ve just started to do those now. And that’s really exciting. I think we’re going to see some real benefits from that. That’s just early days right now, but we really like what we see – which a lot of companies really don’t have the capability of doing it in a sophisticated way. So feel pretty excited about that one.

And we continually evaluate and enhance these ordering platforms to ensure that customers have the best experience possible, want to be fast, easy, and we want to be available to them no matter how they want to come to us. So from the time they place their order to delivery to their door or pick up at the store, we’ll do it right. We’ll do it fast. We’ll make it easy. And customers will continue to see us bring out new, innovative features in the coming quarters with our apps. We like being first. We like doing things that are truly making the experience better.

Just as one example, at Pizza 73, we have a digital scratch and win aspect. So when you finish your order, there’s a – it’s like a, kind of like a lottery scratch and win card, but it’s on your screen and you actually scratch away the different squares to see what you want. And that’s something that I haven’t seen anyone else do. And that’s just a fun, little thing designed to get a return order it’s not renewable until your next order. So it keeps you sticky in that channel, keeps you ordering on the app. It keeps you coming back to Pizza 73. And you’ll continue to see other app, innovative apps features developed for Pizza Pizza app as well.

Our diverse high quality menu, our appealing websites and apps and our strong customer ratings, all of these things helped keep us out in front of our competitors and have helped us whether the COVID-19 pandemic well over these past two years. They say never waste a good crisis. And we sure took these words to heart and went on offense, not defense these past two years. It’s certainly been tough for us and everyone else in the world, but we have emerged stronger and closer. And I think that means not only our corporate people, but our franchisees teams as well of operators.

I think we’re really more cohesive than ever going through the tough times together. And that’s really proven out by our latest results and our overall trends. And with this accelerated network growth to boot where we are committed more than ever delivering great food and the very best customer experience across Canada. And we know that this means we’ll gain new and returning loyal customers more and more over time.

So we are seeing positive economic signs in many ways as I mentioned earlier. We have the inflationary concerns as well, but I think that overall we’re more hopeful that now that these long lasting restrictions have been lifted, that we’ll be able to do better than we have then. And yet we are trending well, which is great.

So we know that as restrictions continue to lift and customers return to these urban city centers, which we can start to see happening now and to our nontraditional sites, when they all reopen, we’ll be ready to greet them with our high quality, hot and fresh food, our welcoming staff and our newly open restaurants, which we’re super excited about. And again, you see most of our growth is in the BC and in Quebec regions, but there are other places such as New Brunswick where we opened up another location to even these smaller markets.

So looking back at 2021, I just want to thank our strong team of restaurant owner operators across the country for all their efforts, especially during these tough times, as well as our internal teams at both brands. I think everyone’s been working really nicely together and there’s an excitement level inside the company that despite a challenging macro environment for the world and for everywhere. We are excited to see our momentum picking up.

So a crisis like COVID really does test a company’s culture and fortitude. And yet we feel like we’ve learned to work even closer like I said, and more united than ever before. So we think we have a special combination of entrepreneurial nature, real innovative entrepreneurial attitude and a real hunger to do better and better. And it’s pretty exciting when we start to see the fruits of our labors come to reality.

So thank you for listening and I’ll now turn it over to Christine to provide a brief financial update.

Christine D’Sylva

Thanks, Paul. Today I’ll briefly cover the financial results for the quarter, a quarter where the easing of restrictions and the partial reopening of the economy helps support sales. Same-store sales growth, the key driver of yield growth for the shareholders of the company increased 12.4% for the quarter. Pizza Pizza restaurants had same-store sales growth of 13.9% for the quarter, while Pizza 73 restaurants had positive 5% for the quarter. For the year, same-store sale increased 0.5% with Pizza Pizza increasing 2.1% and Pizza 73 decreasing 7.1%.

Royalty Pool system sales for the quarter increased 11.4% to 137.7 million from 123.7 million in the same quarter. By brand sales from the 622 Pizza Pizza restaurants in the pool increased 12.9% to 116.7 million for the quarter. Sales from the 103 Pizza 73 restaurants increased 3.5% to 21 million for the quarter compared to 20.3 million in the fourth quarter of 2020. For the year, sales increased 1.1% to 493.6 million from 488.3 million from 2020.

The Partnership’s Royalty income earned as a percentage of Royalty Pool sales increased 10.8% to 8.9 million for the quarter and increased 0.4% to 31.8 million for the year. The increase in Royalty Pool sales and Royalty income reflects the increase in same-store sales.

Additionally, while the number of stores in the Royalty Pool are 24 fewer than the comparative period, the financial impact for shareholders was mitigated by Pizza Pizza Limited continuing to pay royalties as part of the deficit or make-whole carryover amount. This make-whole payment will continue to be added to the Royalty Pool until Pizza Pizza Limited has sufficient sales from new store openings to offset the sales lost when stores permanently closed.

Turning to the Partnership expenses, administrative expenses include listing costs as well as director, legal and auditor fees. Administrative expenses for the quarter were 179,000 and we’re 559,000 for the year.

In addition to admin expenses, the Partnership pays interest expense on its $47 million credit facility. Interest paid in the quarter was 350,000 and was 1.3 million for the year. The Partnership is presently making interest-only payments on the facility. The interest rate swap agreements have fixed to the facility at Bankers’ Acceptance rates of 1.81% plus a credit spread. The credit spread ranges based on the level of debt to EBITDA. Due to the impact COVID-19 on the Partnership, the credit spread in the facility increased by 25 basis points in April of 2021 for a combined interest rate of 2.935%.

The debt to EBITDA ratio for the last four quarters was 1.49 to one. And therefore the credit spread will decrease to the lower tier in 2020. Please reference the company’s MD&A for a full credit spread schedule. Now, after the Partnership receives Royalty income and pays administrative and interest expense, the net resulting cash is available for distribution to the two partners based on their ownership percentage.

So speaking to shareholder dividends and working capital, the company declared dividends of 4.4 million for the current quarter or $0.18 per share, compared to 3.9 million or $0.16 per share in the fourth quarter of 2020. The resulting payout ratio for the quarter was 87%.

On an annual basis, the company declared dividends of 16.9 million or $0.685 per share, compared to 16.6 million or $0.6739 per share in 2020. And the annualized payout ratio was 94% compared to 90% in 2020.

In April, 2021, the company was initially impacted by COVID-19 and reduced its monthly dividend. Since then, the dividend has increased three times with the most recent dividend increase being an 8.3% increase effective February, 2022. The monthly dividend is now $0.065 per share for an annualized rate of $0.78 per share. The result of all of this is a company’s working capital ratio, which increased 1.1 million in the year and we end the year at 6.5 million.

With the government mandated restrictions beginning to ease in most provinces, the company will continue to monitor sales and Royalty income to determine when additional dividend adjustments may be warranted.

That concludes our financial overview. I’d like to turn the call back to the operator to poll for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And your first question will be from Derek Lessard at TD Securities. Please go ahead.

Derek Lessard

Yes. Good afternoon, everybody. Happy to hear your voices. Hopefully I see you in person soon.

Paul Goddard

Likewise. Hi Derek.

Christine D’Sylva

Hi Derek.

Derek Lessard

A couple of questions for me. Good to see some really positive comps this quarter, Paul, you pointed to improving customer traffic and easing of restrictions. Just wondering if you could help me maybe connect the dots on the Omicron spike that hit us just before the holidays and wondering if you could or if you’re able to quantify the impact on sales?

Paul Goddard

I think Chris probably has a little more detail than me. But basically in essence, I mean we have very good momentum for most of Q4. But if you recall as of about mid-December, I don’t know the exact day that’s when really Omicron, I think sort of suddenly kind of came to the floor and really resulted in those restrictions that went really from mid-December all the way through pretty much ended January, right? So that'll – that's a new part, but to that, second half of December is a pretty big chunk of time of Q4 where we were really restricted.

And so we did, I think considerably well that we were a little disappointed because we were really, I guess earlier on in Q4 really seen momentum come back, even with despite a lot of nontraditionals for instance being close. So I guess I just say, that mid-December was this really kind of sudden cutoff of a lot of good momentum. But that said, I mean, we did still do really well on some of our key dates, such as Christmas Eve, Christmas Day, Boxing Day, a New Year’s Eve. I can’t recall the Christmas Eve if it fell in this year within fiscal 2021, or if it was in 2022, but I know if you can comment on that.

Christine D’Sylva

Yes, that’s exactly right, Paul. It happened in the middle of the year and it really hit us more the non-traditional and the social gatherings that would’ve happened over the holidays, but however, we did have strong results on those peak days, Christmas, Christmas Eve, as well as New Year Eve.

Derek Lessard

Okay. And that’s helpful. The – on the Pizza 73 sales, clearly they’re not back to pre pandemic levels yet, but trending in the right direction. And I remember correctly they were down in Q3. I just, how should we be thinking about the sequential sales trend there out west? And are you seeing the consumer come back in a more meaningful way?

Paul Goddard

Yes, I think we’ve put a lot of effort into 73, because you like to say, we have had some negative sales since for sales for a while. So I think it does seem to me, especially in recent times that we are seeing some positive momentum that hopefully we can hang our hat on a little more reliably. I mean, just in a macro level too, when you’re getting these very high commodity prices.

Obviously, there’s negative aspects of that too of course, not only in Canada, but abroad. But I mean, there’s some of that, I think we’re trying to really make sure there though that we really keep the focus on value as well. I think it’s still early days, but a lot of people think Alberta is going to be very strong this year. I’d like to think that’s the case. You think that a lot of indicators point that way, but it’s still early.

So I think we’re just really assuming that if we don’t have the economy help us, what are we going to do? So we’re trying to really make sure we maintain a lot of our value offering. So we don’t see a decline in transactions volume, and we’re trying to do a little more marketing, more digital as well, and just try and drive a lot of new business as well that we perhaps we haven’t had before. I don’t know if Christine can add to that or wants to add or…

Christine D’Sylva

Yes, and we are doing, we’re looking at our website and our apps and we are always looking in the process of innovating and improving. So that’s one project that we will be looking at to look at the customer service from the time they order, place the order to the time to deliver it, the entire process is being evaluated. So there’s a lot of work happening at Pizza 73 that will continue to build on the momentum we have.

Paul Goddard

Yes. And just add maybe a little more Derek too. We are – we have the launch beer at both brands and we’ve got, I think it’s over 30 locations in Alberta where we now have beer available. We’ll be working more closely as well with the flames and oilers. We hope to extend our Score a Slice program, which we’ve done with MLSE into a lot of these other NHL markets, because we think it’s so beneficial to us and to the teams as well in the fan base. So we’re doing that. We’re also in our chicken sandwiches, a lot of our food innovation side we’ve really been pushing as well. Chicken has been really strong at both brands. So I think, we’re focusing on the value on the pizza side, but also the chicken side, even though you’re going to a lot of inflation there, especially on chicken.

We’ve – I think we’ve kind of successfully added to our – kind of our whole menu there. And you’ve introduced things like ice cream as well at Pizza Pizza, which is actually was kind of an experiment. And actually it’s incredible, people really like Ben and Jerry’s ice cream throughout the winter with Pizza Pizza. So there are all these things do kind of add up and just we’re trying to sort of provide a lot of innovation and hopefully get some real transaction volume on some of these new things.

Just in case consumer confidence isn’t necessarily that strong if you know what I mean. And I think we definitely see a stronger customer sentiment here, I would say overall than in Alberta. I think Alberta we’re still just waiting and seeing a little bit, and hopefully we’ll get the economy a little more hit our backs.

Derek Lessard

And just maybe just a little bit more color on that innovation pipeline. I mean, sandwiches or the chicken sandwiches seem like was a big one for you. How does the – I guess how does the future pipeline look?

Paul Goddard

Well? I mean, we’ve certainly done a lot of innovation. I think this year to be honest, you might see we’ve done so much, I guess, in the last year or two, especially that you might see a bit less in terms of macro new categories and things. But we’ve successfully introduced a lot of things like Keto Crust at Pizza 73, which it did really well here, and that’s still kind of early days there. So, we’ve got a lot of new crust emphasizing chicken, new sauces, that type of thing.

But we also – are also trying to not necessarily load up franchisees with too much in the way of new food innovation right now, either just because of the overall environment, they’ve got a lot to deal with. They’ve got labor constraints right now. There’s operational simplicity is still quite a high priority as well. So that’s another balance we have to strike. So I think you will continue to see food innovation. We’ve always been really successful, not with every single innovation, but generally our track record is pretty good. Most of the time we hit it pretty well. And so we’ll keep innovating, but I think that might be a little bit less than the last year overall, I would say just in terms of what we’ve already done and it’s more leveraging and marketing what we have created and getting more traffic there.

Derek Lessard

Okay. And that makes a total sense. I guess, you did touch on the tougher operating environment and inflation and wage pressure specifically, and I guess COVID hasn’t helped this situation, just curious about how the franchisee health has been holding up? And whether or not I know you mentioned it in your prepared remarks that the operating company is feeling some of the pressure, but just wondering if you guys have had to step in and help a little bit more given the challenges?

Paul Goddard

Well, we have, I mean, I’d say that we’re probably getting better and better at how we do assist stores as well. So we do provide some help to restaurants when needed, but – and we’ve taken advantage for the people that are really and they are really struggling bottom say quartile or so where they’ve really needed things like the wage subsidy and serve and things like that like everyone was taking advantage of, but it’s sort of a good news, bad news thing. As far as our sales are recovered, we become less eligible for those sort of programs. And they’ll be kind of winding down and we don’t want to be dependent on government handouts either, but it certainly helps some of our people and then over and above that, even if those programs no longer exist are winding down.

Yes, we do have mechanisms to temporarily subsidize or try and push landlords to give us rent breaks, et cetera. We – there’s a lot of different levers we can pull. But generally we believe the best ways to drive sales growth, right. I mean and sometimes that's hard, but we try and really keep the focus there rather than keeping stores that are kind of not over time showing they can breakeven, usually it's an indicator that, either the franchisees, not the best franchisee, not to put it all in their shoulders, but it's often the case or it's a hyper competitive local market, even if you have a strong franchisee. So we'll kind of make the business judgment as to how do we best help that franchisee that may not be doing so well.

And we have seen a lot of new people coming into the system as well that have – sometimes a franchisee change can bring in a refresh person or family that has a lot of energy and really just takes a new look at things. So there's that. And there's also, I should mention a lot of – more effort I should say than we ever have put into LSM. So we have actually kind of a digital portal that essentially allows some level of LSM community driven, store driven innovation and marketing capability, it's limited. It's still kind of, templateized, I'm not going to make it sound like it's bigger than it is, but it is another tool that we think will really help at the local level as well, when they have some nuances and special emphasis in certain parts of the their marketing offering overall.

So trying to innovate there on the tech suite as well and make their lives easier getting rid of things like paper, as much as we can in our kitchens and just streamlining operations, because labor is such a key issue right now, whether it's in the restaurant or when it comes to drivers. So we're just trying to keep it as easy as possible, and yes, we help them. But generally we want to just arm them with great products so that they can sell their way back to profitability if they're not currently that profitable.

Derek Lessard

Okay. And…

Christine D’Sylva

Sorry, sorry, Derek. In addition, we have been successful throughout the course of the year taking price increases. I think Paul had mentioned it in his remarks that we've actually been able to maintain food cost at the store level through selective price increase on key specials. So we've worked really diligently a lot with data we have in terms of pricing and building out our models to ensure that we are able to take price and then monitoring it so that we haven't lost traffic. And we've been actually successful this year, taking price as well as increasing traffic.

So that's something that we've done and it's safeguarded at least food cost at the store level. So that way they can just focus on saving cost in terms of labor. So where Pizza Pizza, because we manage the menu at corporate level for all the stores, we're able to kind of strategically look at pricing on specials because our basket is so big, so we can take selective ones to drive overall basket increases.

Derek Lessard

That’s really good point, Chris.

Paul Goddard

I also mentioned just to add onto that Derek too is again, just our kind of behind the scenes, behind the curtain capability is we've also continually be investing in our system and so. Even our capability to actually change pricing in a more localized way down, in fact down to store level, not that we necessarily price down to a restaurant level, because there's diminishing returns with mass marketing, some of our mass marketing you can't price every store differently, nor would you want to.

But for instance, when we introduce beer that was only available in some market, so to depending, at some point when you're in Hamilton, if you logged onto our apps or our web for instance or called-in to the our call center you would get beer as an option, but if you lived in East Toronto where beer wasn't offered yet, you just wouldn't see it. So not only items would display or not display, but also the price for those individual items as well at the lowest level of granularity.

So it gives us a lot more flexibility than we ever had way back when and we have, so it's just another lever we can pull if we're in a extremely competitive local market or city or part of a city and things like that. So there's just sort of slowly a lot more capability getting developed behind the scenes, same with the business intelligence platform and data mining work we were doing.

Derek Lessard

And that seems all positive. Do you think you guys have – do you have to kind of take more price in the New Year to keep ahead of the inflation?

Paul Goddard

I think we'll be careful about it, but I anticipate it, go ahead, Chris. I mean, I think just, we don't see really things debating with input costs in the short term, but Chris wants, go ahead.

Christine D’Sylva

Yeah. I was going to say, we've been taking smaller increases and we're trying to make it more scheduled so that we can do smaller increases over the course of the year and make them consistent increases, instead of doing this large jump in terms of our pricing. So yeah, it is something that we are looking at this year and we'll be looking at it over the course of the year. It's not just once year, we're going to do it. We're going to look at it every couple months to keep, make sure that we are staying in on top of food cost, guarding profitability, but also guarding our transactions.

Derek Lessard

And I guess, you know, just in terms of the – because everybody's taking price, I was just wondering if there's been any changes to the competitive environment over the last, I guess, couple of weeks or several months and wondering if – because everybody isn't in the same boat, wondering if that's actually translating into more pizza share for you guys and wondering if there's any competitors and you don't have to name them, but just wondering if – how they – if there's competitors, whether they're independent are struggling more than others given the environment?

Paul Goddard

That's always a hard one to get the competitive sentiment, unless it's the larger publicly traded QSRs. But anecdotally, I mean, I do think that we are outperforming a number probably the independents. I don't have any hard data on that though that I could really hang my hat on. But I think it's just nasty reason as we seem to be getting more momentum and transaction count in spite of some price increases here and there. I would think that we are winning some transactions from people that otherwise might have gotten the pizza order.

So it's a little hard to tell. I don't have good data on it, but I do sense that there's some people that are really having a hard time and just even being solvent whereas, I think we're being very cautious to manage our costs as best we can and control what we can control. And I think for others, it's possibly a little harder.

Derek Lessard

That's fair Paul, and maybe just one last one for me. You did think about construction in BC and Quebec as being particularly robust, just maybe if you can talk about the network growth in BC and Quebec in particular?

Paul Goddard

Okay, sure. Yeah. We are round about 20 locations in BC. It might be Christine probably knows [indiscernible] or Alex, but I think we're 19, 20, 21 and we certainly think – I think we've got on the slate, something like eight to 10 this year there in that market. And we see still a lot of the upside there. And that's really just lower mainland, not even considering essentially other parts of BC or east – heading eastward into the Europe province more deeply.

And then in Quebec, I think we've, built out a lot of sort of Downtown Montreal. We've had great success in places like Laval to the north as well. And there's still a lot of opportunity there. And we are being fairly cautious as we sort of head outside of Montreal, just because we know it's a very different market. And I think it will probably be tougher for us just naturally as we get deeper into the just, almost purely French speaking communities, if we head towards somewhere like Quebec city, et cetera.

I think our pace of growth will, I expect probably be a little slower and a little more cautious but I still think there's a lot of opportunity there. And so those we've got, I think it is including our non-traditional restaurants. I think we're in a vicinity of about 60 restaurants in Quebec. So we do think that as long as we do our jobs right, we've got a great strong local team there that's largely Montreal based and Montreal natives, they know the market well, tons of experience. We're bolstering the team there. And I think we'll do more business development in that province as well to get non-traditional going.

Right now, we're not, we haven't done that much on the non-traditional side in Quebec. So that's another feature growth channel for us, but those are the biggest parts. We have done some work in The Maritimes. We've been happy with our growth in Halifax, actually. And our sales trajectory in that Nova Scotia market, places like New Brunswick, we've also got I think, two or three now, which is great. It's obviously a lot smaller, but it's really is, primarily the BC and Quebec story for the growth that are within Canada, but we will still opportunistically find other places to grow and including even in the Toronto or expanding market outside of a Greater Toronto area as well when we see opportunities.

Derek Lessard

Okay. That's it for me. Thanks everybody.

Paul Goddard

Okay. Thanks a lot Derek, great questions as always.

Operator

Thank you. And at this time I would like to turn a call back over to our speakers for closing comments.

Christine D’Sylva

All right. Thank you everyone for joining us on our call this evening. If you have any questions following the call, please contact us. Our information is on the earnings release. Thank you and have a good evening.

Operator

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time we ask that you please disconnect your lines.