Q1 2022 MTY Food Group Inc Earnings Call

April 8, 2022

Operator: Welcome to MTY Food Group Inc. Q1 2022 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulty hearing the conference, please press star, followed by zero for operator assistance at any time.

Speaker 1: At this time. All participants are now listen only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue upfor.

Speaker 1: If anyone has any difficulty hearing the conference, please press star, followed by zero for operator systems at any time.

Operator: Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.

Operator: I'd like to remind everyone that this conference call is being recorded on Friday, April 8th, 2022. And I'd now like to turn the call over to Eric Lefebvre, Chief Executive Officer. Please go ahead.

Eric Lefebvre: Good morning everyone, thank you for joining us for MTY's first quarter conference call for fiscal 2022. The press release and MDNA with complete financial statements and related notes were issued earlier this morning and are available on our website as well as on sedar.

Eric Lefebvre: During the call, we will be referring to forward-looking statements and to certain numbers that are not IFRS measures. You can refer to our MDNA for more details. I also remind you that all figures presented on today's call are in Canadian dollars unless otherwise stated.

Eric Lefebvre: Our network demonstrated great resilience once again in the first quarter of 2022. Although we faced stringent public health measures in Canada and had to close our dining rooms for the better part of the quarter, we're pleased with our overall financial results. Net income attributable to owners increased 24% year-over-year to 16.6 million in the first quarter of 2022, while cash flows from operations and adjusted EBITDA improved 27% and 9% respectively.

Eric Lefebvre: Although the recovery was slowed down by those public health measures, our system sales grew 16% to $885.7 million in the first quarter of 2022, mainly due to momentum in the recovery from the COVID-19 pandemic. Canadian sales continued to recover with 46% growth in system sales year-over-year.

Eric Lefebvre: US system sales improved 4% in the first quarter of 2022 and international sales increased 12% during the same period.

Eric Lefebvre: Despite the new lockdown that affected the segment in the first quarter, casual dining concepts added $44 million to overall system sales growth in the first quarter, representing an increase of 86% year-over-year.

Eric Lefebvre: Sales from our Casual dining locations were still off from pre-pandemic pace by 53% during the first quarter and we hope the lifting of COVID-19 related restrictions in Q2 will help us close that gap in the coming quarters.

Eric Lefebvre: Mall and office hour locations have also shown a promising trend in the first quarter, with sales increases of 63% and 73% respectively over the same period last year. Similar to casual dining locations, we are still lagging the first quarter of 2020 by 34 and 71% respectively, so there's room to improve as customers return to normal office and workers and tourists return to urban areas.

Speaker 2: Similar to casual dining locations, we are still lagging the first quarter of 2020 by 34 and 71% respectively, so there's room to improve as customers return to normal office and workers and tourists return to urban areas.

Eric Lefebvre: Of note, nine of our top 10 brands have shown positive system sales growth in the quarter, growing by an average of 5.4% over the first quarter of last year. Those brands combined represent 71% of the network's total sales.

Eric Lefebvre: Given the relative strength of Canada and incremental growth in the United States in Q1 of 2022, the geographical split changed somewhat year-over-year. The US represented 60% of system sales this quarter versus 67% last year. Canada increased at 36% from 29% and international remains stable at 4%.

Speaker 2: The geographical split changed somewhat year-over-year. The? U's represented 60% of system sales this quarter versus 60 first 60 seven percent life.

Speaker 2: Canada increased the 36% from 29% and international remains stable atfor.

Eric Lefebvre: Digital sales declined slightly in the first quarter of 2022 to $210.8 million, or 24% of total sales, reflecting the impact of the reopening of more traditional sales channels. The Canadian segment however delivered solid results, with a year-over-year improvement of 9.5 million. Digital sales and the digital experience as a whole remain a key area of focus for our brands, and we believe there's significant growth potential if we take the right actions and make our platforms relevant to customers. Accordingly, we will keep investing time, efforts, and resources in digital to make sure we harvest the potential of those sales channels.

Speaker 2: Digital failm and the digital experience as a whole remain a key area of focus for our brands, and we believe there's significant growth potential if we take the right actions and make our platforms relevant tocusto.

Speaker 2: Accordingly, we will keep investing time, efforts and resources and digital to make sure we harvest the potential of those sales.

Eric Lefebvre: Turning to our network, we ended the first quarter with a total of 6,704 locations. We opened 75 new locations- an all-time high for a first quarter and acquired another 31 through the [inaudible] transaction for a total edition of 106 locations. However, we permanently closed 121 locations, including 23 from an insolvent international partner. Although this slightly eroded our location count, we're highly encouraged by the opening of 75 new locations throughout MYS's network in the first quarter, compared to 41 in the same period last year. These new openings bode well for further openings in the future.

Speaker 2: However we permanently closed 121 locations, including 23 from an insolvent international park.

Speaker 2: Although this slightly eroded our location count, were highly enchcouraged by the opening of 75 new locations throughout mpys's network in the first quarter, compared to 41 in the same period last year. These new openings bode well for further openings in the future.

Speaker 2: missionary pressure and supply chain disruptions- our issues our teams are coping with on a daily bas.

Eric Lefebvre: Inflationary pressure and supply chain disruptions are issues our teams are coping with on a daily basis. Our teams have done a phenomenal job keeping our store stock and making sure we don't have to compromise on the food we offer to our guests.

Eric Lefebvre: Preserving our franchisee's profitability is of tremendous importance for us and we're trying to help as much as we can with various initiatives that involve menu adjustments, innovation, marketing, and promotions on lower food cost items, efficiency improvements, training, price increases, etc. Inflation is something we've had to deal with in the past and so far customers have been accepting the price increases without material impacts on traffic.

Speaker 2: Inflation is something we've had to deal with in the past and so far customers have been accepting the price increases without material impacts on traffic.

Eric Lefebvre: Labor challenges represent another ongoing issue that affects the operating hours, quality of service, and the overall experience for customers. We recently implemented the scholarship program in the US to help franchise partners attract and retain quality employees. MTY will provide grants to certain qualifying employees to help them pay for the cost of their studies. It's a classic win-win situation for all parties involved. The program is in the startup phase and if it works as anticipated, it could expand rapidly.

Speaker 2: We recently implemented the scholarship program in the? U's to help franchise partners attract and retain quality employees.

Speaker 2: andpi will provide dreps to certain qualifying employees to help them pay for the cost of studies. It's a classic win-win situation for all parties involved.

Speaker 2: Program is in the startup phase and if it's works as anticipated, it could expandrapid.

Eric Lefebvre: During the last quarter, MTY has continued to produce strong cash flows, despite the lingering impact of COVID-19-related restrictions. It is now eight full quarters of pandemic ups and downs during which we've repaid $213 million of long-term debt, positioning MTY advantageously for future merger and acquisition opportunities.

Eric Lefebvre: We're continuing to seek accretive acquisitions aggressively but, as always, we will remain disciplined in our approach and we will focus on transactions we believe can create the most shareholder value.

Eric Lefebvre: Will now turn it to Renee who will discuss MTY's financial results in greater details.

Renée St-Onge: Thank you, Eric and good morning everyone. As previously mentioned, we're pleased with our financial results in the first quarter of 2022 considering that public health measures were strengthened in Canada during parts of the quarter. Total revenues for the quarter increased 18% to 140.5 million. The increase can mainly be attributed to growing recurring revenue streams from franchise locations in Canada. Altogether, revenue from franchise locations in Canada surged to 54% year-over-year.

Renée St-Onge: Food processing, distribution, and retail revenue in Canada also contributed to growth, improving 27% year-over-year on the strength of new listings in retail and expansion into new territories.

Renée St-Onge: Revenue from franchise locations in the US and international meanwhile grew 6% year-over-year in the first quarter of 2022.

Speaker 4: A 2020 two.

Renée St-Onge: As mentioned by Eric, a large portion of the growth in our [inaudible] US franchise division came from improvements and system sales in the casual dining segment which grew by 86% year-over-year. The growth in the casual dining segments had the largest impact on our street fund location sales, which represent 80% of total system sales.

Renée St-Onge: As for the decrease of $5.7 million in the revenues in the US corporate-owned location segments, the decrease is primarily due to the sale of several top American locations that were converted into franchises.

Renée St-Onge: MTY opened the first quarter with 82 locations temporarily closed due to the pandemic. 69 of these locations were so shut down as at February 28, 2022. Altogether, 225 locations were closed for one or more days during the quarter. Today, 67 remain shut. These bring predominantly located in non-traditional locations such as cinemas, hospitals, and gym, or locations that have closed down due to an outbreak of COVID-19 on the premises. These locations usually reopen quickly however. These data points are a significant improvement over last year when 321 locations were closed at the end of the first quarter.

Speaker 3: uary 20 e gh, twentthousand and 20, two. alltogether two hundred 20. five locations were cloed for one or more days during the quarter. Today, 67 remain shut. These bring predominantly located in nontraditional locations such as cinemas, hospitals and gym, or locations of- quote them- to an outbreak of COVID-19 unpremise.

Speaker 3: Implications usually reopopen quickly. How?

Speaker 3: These data points are a significant improvement over last year, when 321 locations were closed at the end of the first quarter.

Renée St-Onge: Adjusted EBITDA improved 9% year-over-year to 35.6 million in the first quarter of 2022. The Canadian segment contributed 41% of total adjusted EBITDA, representing a year-over-year increase of 4.4 million. The US and international segments contributed 59% of total adjusted EBITDA, accounting for a year-over-year decrease of 1.4 million or 6%.

Speaker 4: 2020 two.

Speaker 3: Canadian segment contributed 41% of total adjusted bitidda, representing a year-over-year increase of four point four million.

Speaker 3: The US and international segments contributed 59% of total adjusted EBITDA, accounting for a year-over-year decrease of 1.4 million or 6%.

Renée St-Onge: Our franchising segment margin saw a slight decrease from 50% to 47%. This was partly due to the company longer qualifying for the government wage subsidy as well as an inflation impact on wages that was slightly more elevated compared to the same quarter last year.

Speaker 5: pectcty.

Speaker 3: As well as an inflation impact on wages that was slightly more elevated compared to the same quarter last year.

Renée St-Onge: Our processing, distribution, and retail segments had a strong performance however and were impacted by the rising cost of supply on the market.

Speaker 3: Was impacted by the rising cost of supply on the market.

Renée St-Onge: Net income attributable to owners reached 16.6 million, or 68 cents per diluted share in the first quarter of 2022, compared to 13.4 million, or 54 cents per diluted share in the same period last year.

Renée St-Onge: Now turning to liquidity and capital resources, cash flows from operations amount to 39.7 million in the first quarter of 2022, compared to 31.3 million in the first quarter of 2021, or a 27% year-over-year improvement.

Renée St-Onge: Excluding the variation in non-cash working capital items, income taxes, interest rate, and other operations generated 36.9 million of cash flows in the first quarter of 2022, compared to 34.4 million in the same period in 2021.

Renée St-Onge: Free cash flows reached 37 million or a $1.51 per diluted share in the first quarter of 2022 compared to 30.3 million or a $1.23 per diluted share in the same quarter last year.

Renée St-Onge: In terms of capital allocation during the first quarter of 2022, we used cash to reduce our debt by $10.1 million. Of particular note, interest on long-term debt is down $1.9 million year-over-year due to our discipline in debt reduction as well as the utilization of interest rate swap instruments.

Renée St-Onge: We also paid out dividends totaling $5.1 million in the first quarter and repurchased 256,400 shares for a total consideration of $14.6 million under our NCIB program.

Renée St-Onge: At the end of the quarter, long-term debt mainly in the form of bank facilities and home facts on acquisition stood at 362.2 million. We also closed the quarter with 52.5 million of cash on hand, leaving us in a healthy cash flow position.

Speaker 6: Position.

Renée St-Onge: Between our available credit facility and our cash, we have approximately 315 million in liquidities at our disposal. And with that, I thank you for your time, and we will now open the lines for questions. Operator?

Operator: Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. We will pause for just a moment to compile the Q&A roster.

Operator: And our first question will come from John Zamparo from CIBC. Please go ahead, your line is open.

John Zamparo: Thanks, good morning. I wanted to start on the restaurant openings number you referenced, it was quite strong relative to Q1's in the past. My question is: when you look at this quarter and say the past quarter or two and also your development pipeline, what are the two or three brands that are driving most of that growth?

Eric Lefebvre: Yeah, well, it's not one brand or two brands, it's multiple brands that are driving the growth. Obviously, we have some larger brands, like Goldstone, that tend to open more stores than the others just because of the sheer number of locations. But we have other really good brands that are performing well in terms of their pipeline and in terms of opening new stores. So yeah, I mean we're pushing on certain brands to develop faster, to take markets and it's working out. So those efforts have started before the pandemic and continued during the pandemic and we're seeing now the results of the efforts we've put in and now that the environment seems to be a little bit more favorable for investors to put money into restaurants, it's starting to open more in line with what we expected.

John Zamparo: Ok and then as a follow-up on that you've mentioned in the past- I think it was the last call, Eric- that you've seen delays in opening restaurants, whether it was equipment shortages or construction permits. Is that contributing to the increase in openings or do you get a sense that it's more a function of franchisee profitability?

Eric Lefebvre: Well, yeah, the problems of the supply chain and construction are still very real. We are facing significant delays and our construction groups are working with suppliers to try to secure the necessary equipment to be able to open stores effectively. But right now, the delays are still pretty important, and when it comes to the base building that the landlords are building, even that suffers some significant delays. So the number we open is certainly not a function of the delays or the removal of those delays. So it's still a factor for us at the moment and for the future, it takes a lot longer to open stores.

John Zamparo: Ok, that's helpful. And then on the digital side, you'd mentioned last call that you'd relaunched digital in much of Canada in November. I know you're operating with some restrictions in the quarter but can talk about the progress of the rollout so far?

Eric Lefebvre: Yeah well, in November what happened is really we were able to undo and basically detangle everything in Canada because, if you remember, everything was on common platform and it took us some time to get there. So the first step was to be able to get the brands on individual brand platforms, so we've done that now. We're still ironing out some kinks when it comes to digital, especially for the online ordering, the loyalty platforms, even the websites need to be a little bit better for a lot of our brands, so we're still working on that, but we're happy with the progress. We're seeing some real good progress with the brands that were a little bit farther down the road and in terms of how the process was going to work, we're seeing the basket sites improve, we're seeing the customer experience improve, and now we're tracking some of the really important metrics to see how we progress, not only in terms of the amount of sales, but also in terms of customer satisfaction and how seamless the experience needs to be for our customers. Because when you look at digital, it's not only the online sale that you want to generate, but it's an entire experience. And for as much as we work for the last 42 years on the in-store experience, I think now the online experience is becoming almost as important as the in-store experience. So you need to provide customers with the proper website, with the proper digital marketing, social media content, and everything to create that experience and create that emotional connection to your brand outside of the store because a lot of your interactions with your customers don't happen in the store anymore, it happens before they visit the stores or it happens between visits. So we need to really put a lot of emphasis on that and this is what we're doing at the moment. So it's a work in progress, I don't think it's ever going to end. I think that's something that' we're always going to be working on going forward, but there is certainly a ramp-up that we need to do now, and I'm pretty happy with where we are at the moment.

John Zamparo: Alright, that's helpful color, thanks for that. And then one last one and I'll get back in the queue. The financial statements made reference to a change in control of a JV, can you just add some color there?

Eric Lefebvre: Yeah, really nothing happened. Business-wise nothing happened. It's purely the result of interesting accounting standards, I'll call it that- but business- wise nothing happened. This is related to the transaction with Turtle Jackson Coop. So I mean the business is continuing and nothing happened there. It's just after we met the two-year mark, there was some wording in the agreement that triggered some accounting, but other than that- I mean business-wise-nothing changed.

Speaker 2: Interesting accounting standards, I'll call it that- but business wise nothing happened. This related to the transaction with Turtle Jackson coop. So I mean the business is continuing and nothing happened there. It's just after we met the two year Mark. There were some wording in the agreement that triggered some accounting, but other than thatb- I mean business wise- nothing.

John Zamparo: Okay, understood. That's great. Thank you very much.

Operator: Our next question comes from Michelle Sreethar from National Bank Financials. Please go ahead, your line is open.

Michelle Sreethar: Hi, thanks for taking my questions. Just given the pervasive market concerns regarding the consumer backdrop, I was hoping you could provide us with your insight on what you're seeing with the consumer. Are you seeing a trade down in price sensitivity and, if so, maybe you can characterize that?

Speaker 8: Just given the pervasive market concerns regarding the consumer backdrop, I was hoping you could provide us with your insight on what you're seeing with the consumer. Are you seeing trade down any price sensitivity and, if So, maybe you can characterize that?

Eric Lefebvre: Yeah well, obviously we're walking a very fine line with what's happening in the world in general with a lot of different factors at stake. For us, I mean, there are a number of different factors we need to work on, pricing is one of them, customer experience is another. But ultimately, if we're better than our competitors, our customers will continue to come. So we need to continue to work on being better than the rest of the market. We need to provide that experience to the customers. We need to give customers value. Everything is relative, so if you increase your prices, but your perception of value is still superior, your customers will continue to come because they perceive that value. So we need to work on a number of different factors, but so far, I mean, we haven't seen declines in traffic and customers are still loyal to MTY. We're acquiring new customers with a lot of new initiatives in Canada and the US. I'm seeing a lot of creative stuff being done by our teams. So far the customer is there for us, we don't take the customer for granted, because there's a lot going on. So our teams just need to continue to work really hard to be better than everyone and our franchisees need to continue in that same way.

Speaker 2: Everything is. Everything is relative. So if you increase your prices, but you're, your perception of value is still superior, your customers will continue to come because they perceive that value. So we need to work on a number of different factors, But so far, I mean, we haven't seen declines in traffic and customers are still loyal to empty Y. we're acquiring new customers with a lot of new initiatives in Canada and the? U's and seeing a lot of creative stuff being done by our teams. So far to custommer is there for us. We don't think the customer for granted, because there's a lot, there's a lot going on. So it's you know. Our teams just need to continue to work really hard to be better than everyone in our franchisees need to continue in that same, in that same way.

Michelle Sreethar: Ok. Obviously, the public market has reflected the clients in the stocks of many discretionary type names. I'm wondering if you're seeing that lower evaluation percolate into the acquisition market and maybe on that topic as well given where valuation stands, is management more keen to acquire a buyback stock?

Speaker 8: Given value where valuation stands, as management more keen to acquire a buybacksto.

Eric Lefebvre: Yeah well, I can't necessarily comment on what the public market is doing because the markets are still a mystery to me, but as far as the acquisition pipeline is for us, valuation is still high, but given the volume of deal flow that's coming back now, I think ultimately we will find good targets at attractive prices. So we've been disciplined in the past and we've had periods in the past where there were no acquisitions and we were patient and then all acquisitions came in a flurry at the same time. So I'm not saying this is what's going to happen this time but where we're confident that valuation is going in the right direction. I think the number of deals that are available in the market is increasing and that will help with the pricing, and it's up to us to be able to find the right targets and find common ground with the sellers to be able to acquire good quality concepts. There's no magic formula there but, as always, we're patient, we're disciplined, and then we're waiting for the market to be there for us, and we're not going to force transactions just for the sake of forcing transactions.

Speaker 2: youknow as far as the acquisition pipeline is for us valuation is still high. But given the volume of deal flow that's coming back. Now we I think ultimately we will find good targets at attractive prices. So we've been disciplined in the past and now we're you know we and we've had periods in the past where there were no acquisitions and we were patient and then all acquisitions came in a flurry at the same time. So I'm not saying this what's going to happen this time but where we're confident that you know valuation is going in the right direction. I think the.

Speaker 2: The number of deals that are available in the market is increasing and that will help with the pricing, and it's up to us to be able to find the right targets and find comemonin ground with the sellers to be able to acquire good quality concepts.

Speaker 2: There's no magic formula there but, as always, we're patient, we're disciplined, and then we're waiting for the market to be there for us, and we're not going to force transactions just for to sake of forcingtransact.

Michelle Sreethar: Ok, and what's your point of view on share repurchases in your balance sheet strength and your cash flow generation?

Speaker 8: Balance sheet strength in your cashflow.

Eric Lefebvre: Yeah well, in terms of capital allocation in general is a discussion we have with the Board every time we meet and even sometimes between meetings. So our priority remains to acquire good quality businesses to add them to our network. So I mean we've repurchased shares, as you've seen in the statements, we're still open to repurchasing shares, but our priority remains to find good M&A targets and if we do, we'll allocate more capital towards that then. If we don't, then we'll buy back MTY. The valuation is, I think, attractive on our stock and the execution risk is non-existent, so it's not a bad offer for us, but as I said, our priority remains M&A.

Michelle Sreethar: Ok and drilling a little deeper into the banners and concepts that MTY employees, it looks like QSR, including Cold Stone and [inaudible] performed well despite some restrictions. Papa Murphy's was steady while lapping tough year-over-year costs. Looking forward, is there any color you can provide on how we should think about the growth of these various buckets?

Speaker 8: Q employees looks like Q's R, including coldstone and fast casual performmanit formed well despite, you know, some restrictions. Papa Murphy's at, you know steady while lapping toughy over year.

Speaker 8: Looking forward. Is there any color you can provide on how we should think about the growth of these variousbu?

Eric Lefebvre: Yeah, well I think the buckets can be separated a little bit differently. If you look at our at our casual dining segment, we were still under massive lockdown during Q1, we missed pretty much all of the quarter with our dining rooms, our casual dining are predominantly back in Ontario and even some in the rest of Canada were also affected. So if you compare our Q1 2020 sales to our Q1 2022 sales, pretty much all of the discrepancy that's left for us to make up is coming from the casual dining segment. So for me it's encouraging, we know casual dining is now operating a full capacity, and it's up to us to capture these customer dollars and make sure that customers continue to come to our stores and to come once and we create that intent to return and then sales will work for us. So the other segments I think are doing well, they're doing what they need to do. As you said, Cold Stone is rocking and that's really good for MTY and we hope it continues this way. But yeah, there's a lot of other concepts that are doing great. As I mentioned earlier, nine of our top 10 brands are comping positive in Q1 in terms of system sales, which is really good because this is a large chunk of our revenue.

Speaker 2: The other segments, I think, are doing well. They're doing what they need to do. As you said, cold Stone is rockin and that's really good for M ty Y and we hope it continues this way. But Yeah, there's a lot of other concepts that are doing great. As I mentioned earlier, nine of our top 10 brands are comping positive in Q1 in terms of system sales, which is really good because this is a large chunk of our revenue.

Michelle Sreethar: Thank you for your color.

Operator: Our next question comes from Michael Glen, from Raymond James. Please go ahead, your line is open.

Michael W. Glen: Eric, can you just characterize the M&A environment like how different is it in the US and Canada right now and where is your preference? Is it more in the US or is it more in Canada right now?

Eric Lefebvre: Yeah, the deal flow is coming back, which is good news. So I mean, where we used to see a deal here and there that was probably priced too expensive a few months ago, now we're seeing a regular deal flow that looks a lot more like what we had before the pandemic. So there's a number of deals out there in both countries in all segments- corporate franchise, QSR, fast casual, casual dining-so it's a little bit of everything. So we're pretty happy with that and we're optimistic with it. When it comes to preference and countries or geographies, we remain very opportunistic buyers. We'll price everything according to the risk that's involved with these acquisitions. So I mean, in Canada- we're happy, US-we're happy. I think, naturally, the depth of the US market will make it that there are more opportunities in the US and they're probably larger. But we're totally agnostic when it comes to one country or the other.

Michael W. Glen: And if you're thinking of M&A is there anything like over time you do a number of tuck-ins which tend to be quite nicely accretive to your EBITDA. Is there anything? Are you seeing some large transactions or do you think investors should be thinking about MTY doing something of the scale of Papa Murphy's or even bigger?

Speaker 10: Tend to be quite nicely accretive to EBITDA. Is there anything? Are you seeing some large transactions or do you think investors should be thinking about M T Y doing something of the scale of PA Murphy, or even bigger?

Eric Lefebvre: I'm not going to close the doors on any possibilities. One of our mentors is known to make the small acquisitions if they are strategically relevant, and they also make the really, really big acquisitions when strategically it makes sense. So for us to close the door on the size of a deal, not necessarily. I think in general, average-sized deals are probably more common on the market. There are probably more of those available for us and they're probably priced a little bit more reasonably. But if we find a larger deal that's attractive to us strategically and accretive for shareholders, we'll go for it. So I'm not saying there's going to be one or the other, or there could be both big and small deals, there could be a combination of average-sized deals. There can be any sorts of different combinations that happen but I'm not going to close the door on any types of deals.

Speaker 2: You know one of our one of our mentors is.

Speaker 2: Is known to make the small acquisitions if there strategically relevant, and they also make the really big acquisitions when strategically make sense. So for us to close the door on the size of a deal. Not necessarily, I think in general.

Speaker 2: Average sized deals are probably more common on the market. There's probably more of those available for us and there're probably priced a little bit more reasonably. But if we find a larger deal that's attractive to us strategically.

Speaker 2: An accretive for shareholders, will go for it. So I'm not saying there's going to be 1, that or the other, or there could be both big and small deals. There could be a combination of average sized deals. There can be.

Speaker 2: Any sorts of different combinations that happen I'm not going to close the door on any types of.

Michael W. Glen: And in terms of real estate, what are you seeing in terms of rent levels and site availability? Are you able to like competition if a site comes available? Are you seeing a lot of interest in those sites and rents continue to move higher or just characterize that situation?

Speaker 10: In terms of real estate. What are you seeing in terms of rent levels and site availability? Are you able to like competition if a site comes available? Are you able to? Are seeing a lot of interest in those sites and rents? Are rents continue to move higher or just characterize that situation?

Eric Lefebvre: Yeah, it's a competitive environment for real estate. There's no question about that one because I think the economy in general is doing well and two there are important delays in construction of new sites. But when you look at it from a different perspective, I don't know that many companies in North America that open the number of stores we've opened in North America in the last three months. So I have to assume it makes us attractive for landlords because they know we're serious, they know we open, and they know we are going to open a lot more in the future. So I hope it gives us better access to sites, I think it does. MTY is not perfect, and certainly sometimes it can be frustrating working with us because we have a certain set of standards. But we're opening a lot of stores and I think a lot of our brands are attractive for landlords also as they are for customers. So again, I'm pretty optimistic on the availability of real estate. Now in terms of cost there's inflation there like in everything, so again, we need to be disciplined on setting up our franchisees for success and not just getting any franchisee in any site for any brand, because sometimes the math doesn't work and we need to be disciplined and say: well, we're going to need to pass on this really good site because it's just too expensive for that brand or it's too expensive period. But there's inflation, but again there are so many different sites throughout North America that we can go to that we're always going to find good sites at that reasonable prices that we can afford.

Speaker 2: But when you look at it from a different perspective, I don't know that many.

Speaker 2: Companies in North America that open the number of stores we've open the North America in the last three months. So I have to assume it makes us attractive for landlords because they know we're serious, to know we open and they know we are going to open a lot more in the future. So I hope it gives us.

Speaker 9: Better access to sites. I think it does. M p. why is not perfect, and certainly sometimes no, it can be frustrating. Working with usk Z, we have a certain setep of standards.

Speaker 9: But you know we're opening a lot of stores and I think a lot of our brands are attractive for landlords also and as they are for customers. So I'm pretty again, I'm pretty optimistic on the availability of real estate now in terms of cost. There's inflation there like, and everything. So we need to again, we need to be disciplined on I'm setting up our franchisees for success and not just getting any franchiseing any site for any brand, because you know, sometimes the math doesn't work and we need to be.

Speaker 9: We need to be disciplined and say: well, you know what the' we're going to need to pass on this really good site because' it's just too expensive for that brand or it's too expensive period So, but there's inflation, but again there's.

Speaker 9: There's so many different sites throughout North America that we can go to the PO. We're always going to find.

Speaker 9: Good sites at that reasonable prices that we can'tafford.

Michael W. Glen: Okay then, in terms of- I'm not sure if you said this, but in general, how much price are you putting through right now or recommending? How much price you putting through or recommending for your franchisees to put through?

Speaker 10: Or recommending these price? Are you putting through or recommending for your franchisees to put through?

Eric Lefebvre: Yeah, that's a brand-by-brand discussion. There are various prices going on for sure for all of our brands, so that's no secret, but it's really a brand- by-brand discussion. Ultimately, our franchisees have the freedom to influence on price, so it's a fine line we're walking again. It's: do we increase price to preserve margins but lose a bunch of customers? So we need to be cautious we're benchmarking our competitors, we're looking at the market, we're trying to improve the value offer that we have for customers, but price is something we just can't avoid at the moment, so there was price done last year, there was priced done this year, there's going to be more price done in the future. Some brands have gone very light, with almost no pricing at all, and some brands have had to go 14-15%, depending on the product mix and what they sell to customers.

Speaker 2: Have the freedom to.

Speaker 2: To influence on price. So it's a fine line we're walking again. It's: do we increase price to preserve margins but lose a bunch of customers? So we need we need to be cautious. We're benchmarking our competitors, we're looking at the market, we're trying to improve the value Ofer that we have for customers.

Speaker 9: cris is something we just kind ofavoided the moment. So there was price done last year. There was priced done this year. There's going to be more priced done in the future. No some brands of.

Speaker 9: Some brands have gone very light, with almost no pricing at all, and some brands have had to go 14- 15%, depending on the product mix and what they sell to customers.

Michael W. Glen: Okay, thanks for taking the questions.

Operator: Our next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead, your line is open.

Sabahat Khan: Great, thanks and good morning. You know a while for the pandemic I think there was a bit of an increased focus on maybe rolling out some comment, POS overlays just focused on kind of digging into some of the operational performance of the franchisees and I guess are we at the point of the pandemic where we've gone from focusing on a recovery to going back to some of those initiatives? Are there anything you're more focused on? I just wanted to get an update on where you might be on that.

Eric Lefebvre: Yeah, we never really lost focus on these things but given the pressures that we're coming from outside, we decided to lift the pedal a little bit but definitely the focus is still there. We want to have better data to be able to better assist our franchisees with their businesses, so we are trying to collect more and more. It's not an easy one, franchisees are all short-staffed, franchisees are all fighting for every minute they have in their day, so it's hard to implement these types of initiatives but they're necessary. So we are getting back at it, but we're also very sensitive to the individual situation of each franchisee and their ability to spend time on something that's not directly related to the operations of their location.

Speaker 2: Yeah that definitely the focus is still there we want to have better data to be able to better assist our franchisees with their businesses. So we are trying to collect more and more. It's not an easy one franchisees are all short staff. Franchisees are all you know fighting for every minute they have in their day. So it's hard to implement these types of initiatives but they're necessary. So we are we are getting back at it. But we're also very sensitive to the individual situation of each franchisee and their ability to.

Speaker 9: Spend time on something that's not directly related to the operations of their location.

Sabahat Khan: And then just one last one I guess as we are at this point in the recovery, are there any banner that you look across your network that maybe didn't perform even enough to get buyers there, opportunities to rationalize network as you look at M&A opportunities or are you comfortable with the mix of banners you currently have in your portfolio?

Speaker 7: Didn't perform even you know enough to get buyer there. Opportunities rationalize network as you look at how many oppun ou with the mix banner currently have your.

Eric Lefebvre: Well, there are certainly some brands that are suffering more than others, but we owe it to those franchisees to do the best we can to bring their business back to where they thought it would be when they invested, to the trajectory it had before the pandemic, so we're not giving up on any of them. We love all our brands, we love all our franchisees, and we owe it to everyone to try to do as good as we can with each brand. So we're not in exit mode at the moment, there are brands that are struggling more. I think, for example, the brands that are predominantly in major urban areas that depend on office traffic, for example, are still struggling. So we need to try to push and try to make the brands better and try to make the brands more relevant and attract a bigger proportion of the customers that are available for us to increase our market share. But we're not in exit mode, we're not giving up on any of our brands and we're giving up on our franchisees either.

Speaker 2: But we owe it to those franchisees to do the best we can to bring their business back to where they thought it would be when they invested, to where, to the trajectory had before the pandemic.

Speaker 2: So we're not giving up on any of them. We love all our brands, we love all our franchisees and we owe it to everyone to try to do as good as we can with each brands. So we'renot exit MO. At the moment, there are brands that are struggling more. I think, for example, the brandbrands that are predominantly in major urban areas that depend on office traffic, for example, are still struggling. So we need to try to push and try to make the brands better and try to make a brands more relevant and attract a bigger proportion of the customers that are available for us, increase our market share. But we're not in exit.mo, we're not ving any of ourbrsand we giving on ourfranchisee.

Sabahat Khan: Great. Thanks so much for the color.

Operator: Our next question comes from Derek Lessard from TD Securities. Please go ahead, your line is open.

Derek J. Lessard: Thanks, Eric and good morning. I guess, maybe just to hit back on the pricing trends or menu pricing, I think some of the overall data in Canada and the US suggests that pricing is up 4-5% and in some cases, 7-8% in the US. Is that sort of the magnitude of the overall price increases that you guys have been able to push through, or is it lower than that?

Eric Lefebvre: Some brands are lower, some brands are higher. I would say on average, we're probably in that ballpark for the last 12 months. Yeah, we're probably in that ballpark on average, but yes, like I said earlier, some brands have had to push prices a lot more just because of the [inaudible] mix we have and some brands have had to do less because again, the products did not suffer the same amount of inflation.

Derek J. Lessard: Okay, and I think you touched on it earlier. But I guess are you able to add some color to I guess the pull of the consumer between obviously, things like higher grocery these days, spend on fuel and gas versus having that discretionary spend on restaurants and if you're seeing any of that, I guess those headwinds start to creep through and into your sales numbers?

Speaker 12: Guess the pull of the consumer between obviously, things like higher grocery these days, spend on fuel and gas versus- you know that- having that discretionary spend on restaurants and the Pier. Seeing any of that, I guess those headwinds start to creep through and into your sales numbers.

Eric Lefebvre: We're not seeing it yet. I'm not saying it's never going to happen, but right now we're not seeing declines in traffic related to all sorts of inflation, customers are loyal and discretionary income seems to be there at least when it comes to buying food in restaurants. So again, I'm pretty optimistic about the future. I think we're doing a great job. I think our teams are really providing that value offering that customers are looking for. And value offering doesn't necessarily mean cheap price, it just means that the perception of value is there in relation to the price we're asking. So right now the consumers are there for us and we're not necessarily seeing a letdown, so hopefully it's going to keep this way but there's certainly some pressure on price and we need to be very careful how far we go.

Speaker 2: We're not seeing declines in traffic related to all sorts of inflation customers or loyal discretionary incomees seems to be there at least, at least when it comes to buying food and restaurants.

Speaker 2: So again, I'm pretty optimistic about the future. I think we're doing a great job. I think our teams are really providing that value offering that customers are looking for. And value offering doesn't necessarily mean cheap price. It just means that you know the perception of value is there in relation to the price we're asking. So right now the consumers are there for us and we're not necessarily seeing it letdown, So hopefully it's going to keep this way, but's there's certainly some pressure on price and we need to be very careful how far we go.

Derek J. Lessard: Okay, and on one last one for me, you mentioned some client acquisition initiatives, just wondering if you could point out a couple of them that you're working on now and maybe some of the some of the success that you're seeing what those initiatives?

Eric Lefebvre: Yeah well, I'll give you one example, and there are similar examples in every brand, so, don't think of it as the one example, but we launched a dairy-free product with Cold Stone that's in partnership with silk, and that's just a gold mine for us, not in terms of a super large proportion of our sale, but in terms of the proportion of customers that are coming from that dairy-free product with silk, which is really well known that our customers that did not visit Cold Stone before. So that's a good customer acquisition strategy for us and what we're seeing is that the average basket size is very high and seems to indicate that whenever one of these customers buy silk comes to our stores, they tend to bring two or three of their friends or the family with them. So the basket size is really high for customers that are almost exclusively new customers for us. So this type of initiative is going on across the network, attracting new customers to our brands is important. We want loyal customers to continue to come to our stores, but we also want to acquire new customers if we can, and that's an example of a successful customer acquisition campaign.

Speaker 2: And that's just that. That's just a gold mine for us, not in terms of a super large proportion of our sale, but in terms of the proportion of customers that are coming from that very is free product with silk, which is really well knownthat our customers that did not visit cold on before. So that's a good customer acquisition strategy for us and what we're seeing is that the average basket size is very high and seems to indicate that whenever one of these customers that by silk comes to our stores, that tend to bring two or three of their friends or the family with them. So the basket size is really high for customers that are almost exclusively new customers for us. So this type of initiatives is going on across a network. Attracting new customers to our brands is important. We want loyal customers to continue to come to our stores, but we also want to acquire new customers if we can, and that's an example of a successful customer acquisition campaign.

Derek J. Lessard: Okay thanks, that's helpful. Thanks, Eric.

Operator: As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from George Doumet from Scotia Bank. Please go ahead, your line is open.

George Doumet: Yeah, thanks, good morning, Eric. How did Papa Murphy's do this quarter and how's its comp compared to pre-pandemic levels? And I also think last call you mentioned some initiatives that you guys are working on. Can you be talked about that a little bit too?

Eric Lefebvre: Yeah, Papa Murphy's continued more or less on the trend it was for Q4, so it was slightly off. So yeah, we're still working on the number of initiatives. I think Pizza is still a very relevant market. I think most of the major Pizza players have suffered a little bit in the last few months but we're still well above our 2019 and our pre-pandemic 2020 levels, which is good. But we're working to try to preserve that volume that we have and we have a certain number of initiatives that are in place, other new initiatives that are coming and we need to help our franchise partners generate more sales for their stores to be profitable in the long run. So a lot going on, we're happy in general with the brand, with Papa Murphy's. We'd like the sales to be comping positive, but we're confident we're going to get there with everything we're working on.

Speaker 2: So Yeah RE, we're still working on the number of initiatives.

Speaker 2: Think Pizza still a very relevant market. That know, I think most of the major Pizza players have suffered a little bit in the last few months but we're still well above our 2019 or 2000 and pre pandemic 2000 and twenty levels, which is good. But we're working to try to preserve that volume that we have and we have a certain number of initiatives that are that are in place, other new initiatives that are coming and we need to help our franchise partners generate more sales for their stores to be profitable in the long run. So a lot, a lot going on. Where we're happy in general with the brand, with Papa Murphy.

Speaker 2: We'd like the sales to be comping positive, but we're confident we're going to get there with everything we're working on.

George Doumet: Ok, thanks, and congrats on the 75 openings, it's a big number. I'm just wondering maybe how sustainable the number is going forward and maybe switching to closures, do you think we've seen the worst of them, or is that going to maybe I guess stay a little bit elevated given that we're seeing a lot of government aid coming off?

Eric Lefebvre: Yeah well, I'll start with the openings-75 is a good number. We would have liked to be better than 75, to be honest with you, and we slipped a little bit because of the delays in construction. So normally openings tend to be a lot more predictable than closures. But in this environment, we know our pipeline, we know the number of stores we have ready for construction or under construction, but we don't how long it's going to take. So is 75 an indication for the future? I think we can do better than that, but the key is to be able to build them, so from one quarter to the next, there might be variations just based on the delays caused by construction. So we'll see how the next quarters come, but we're pretty optimistic when it comes to the number of store openings. As far as the closures are concerned, you saw there was 23 related to one partner that became insolvent that also affected our Q4. They're now at zero, so that 23 is not going to happen again. So that leaves about 100 closures. It's too high, so we need to work on that. There are some closures that are happening for various reasons, labor shortage is one of them. We have some partners that elected to not renew certain leases in certain territories where they had multiple stores to just concentrate their workforce in their remaining stores. I think it's a short-term decision that will have adverse consequences in the long term. So we're trying to work with our franchisees to prevent that from happening and we're trying to come up with new initiatives to attract work force so we don't have to take drastic actions like these ones. But closures are a little bit more unpredictable, so I wouldn't necessarily say too much about closures, although I can say that we're not happy with the number we have now. We want to close fewer than that.

Speaker 2: Think we can do better than that, but the key is to be able to build them. So from one quarter to the next, there might be variations just based on.

Speaker 2: On the delays caused by construction. So we'll see how the next quarters come, but we're pretty optimistic when it comes to the number of store openings. As far as the closures are concerned, you saw there's 23 related to one partner that became insolvent. That also affected our Q4. They're now at zero, So that 23 is not going to happen again.

Speaker 2: So that leaves about 100 closures. It's too high, So we need- we need to work on that. There are some closures that are happening for various reasons, and labor shorttage is one of them. You, we have some partners that.

Speaker 2: Elected to not renew certain leases in certain territories where they had multiple stores to just concentrate their workforce and remaining stores. I think it's a short term decision that will have adverse consequences in the long term. So we're trying to work with our.

Speaker 2: Franchisees to prevent that from happening and we're trying to come up with new initiatives to attract wordforce So we don't have to take drastic actions like these ones. But closures are a little bit more unpredictable, So I wouldn't necessarily.

Speaker 2: Say too much about thelauters, although I can say that we're not happy with the number we have now. We want to close fewer.

George Doumet: Thanks for that. Just one last one for me, on the labor situation as it relates to our franchisees, would you characterize any of them as worse, better, or the same since our last quarterly update?

Eric Lefebvre: I think it's slightly better. I think we're starting to readjust. We had a scare when we lockdown again in most of Canada, because it took us so long to rebuild our teams after the previous lockdown, and we were worried that we'd lose all our staff again, but for the most part the staff stayed, so I think we avoided a disaster there. So I think we're getting slightly better in terms of staff. It's certainly not perfect, we'd like to have more people available to work in our stores, but it is what it is. We're not the only sector that's suffering from a labor shortage. And it's up to us to make our sector more attractive as restaurant owners, as franchise owners, we need to make restaurant sexy again and it's going to take some time. Our industry has been seen as unstable because of all the pandemic's up and downs, but again, we're not giving up on that and I think the restaurant industry is a great industry for people to work in and it's up to us to promote it this way.

George Doumet: Ok, thanks for answering.

Operator: Our next question comes from Derek Lessard from TD Securities. Please go ahead, your line is open.

Derek J. Lessard: Eric, just a follow-up. I was just wondering if you had a view internally maybe on the office [inaudible] locations and whether or not you might think that some of those maybe or some of those sales may be permanently impaired, especially if we don't all get back to work as we were pre-pandemic?

Eric Lefebvre: Yeah, that's definitely a good question. There are definitely a certain amount of these sales that are not coming back. We have terminated some leases in some malls or some office hours where we feel traffic is not going to come back, and we're going to have to make decisions in the future again on some of them. What we're seeing now is that the really good malls are always going to be really good malls, so traffic is there, traffic is back for the most part. The malls that are what I would call it B or C malls are struggling a little bit more to generate the traffic again. So this is where some decisions might need to be made and as far as office hours are concerned, we can look at it in two different ways. We can look at it as well: maybe business traffic is never going to be where it was- it's a possibility- but we can also look at it as an opportunity where maybe some operators will choose to vacate these premises and maybe this an opportunity for MTY to bring in some concepts that we've adjusted to be relevant in this type of environment. So I prefer to look at it as an opportunity for office hours-and we're working with some of our teams to try to create that offer that's going to be interesting for franchisees and that's also going to be interesting for landlords, and that will be relevant in an environment where traffic is slightly reduced but where there is traffic that is looking for certain service. So I like to look at office hours as an opportunity.

Speaker 2: Know we can look at it in two different ways. We can look at it as well: maybe business traffic is never going to be where it was- it's a possibility- and but we can also look at it as an opportunity where maybe some operators will choose to vacate these premises and maybe this an opportunity for M T Y to bring in some. You know concepts that we've adjusted to be relevant in this type of environment. So I prefer to look at it as an opportunity for office hours- and we're working with some of our teams to try to create that offer that's going to be interesting for franchisee and that's also going to be interesting for landlord and that will be relevant- and environment where traffic is slightly reduced but where there is traffic that is looking for certain service. So I like to look at office hours as an oppunity.

Derek J. Lessard: Thanks for that.

Operator: We have no further questions in queue. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Speaker 15: The host has ended this call. goodbyelet me, mat ter herackuiover.

Operator: Good morning ladies and gentlemen. Thank you for standing by. Welcome to MTY Food Group Inc. Q1 2022 Earnings Conference Call.

Operator: At this time, all participants are in now listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

Operator: If anyone has any difficulty hearing the conference, please press star followed by zero for the operator to assist at any time.

Operator: Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking, subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I'd like to remind everyone that this conference call is being recorded on Friday, April 8th, 2022. I'd now like to turn the call over to Eric Lefebvre, Chief Executive Officer. Please go ahead.

Eric Lefebvre: Good morning everyone. Thank you for joining us for MTY's first quarter conference call for fiscal 2022. The press release and MDNA with complete financial statements and related notes were issued earlier this morning and are available on our website as well as on sedar.

Speaker 3: During the call we will be referring to forward-looking statements and to certain numbers that are not IFRS measures. You can refer to our MDNA for more details.

Speaker 3: I also want to remind you that all figures presented on today's call are in Canadian dollars, unless otherwise stated.

Speaker 3: Our network demonstrated great resilience once again in the first quarter of 2022. Although we face stringent public health measures in Canada and had to close our dining rooms for the better part of the quarter, we're pleased with our overall financial results. Net income attributable to owners increased 24% year-over-year to $16.6 million in the first quarter of 2022, while cash flows from operations and adjusted EBITDA improved 27% and 9% respectively.

Speaker 3: Although the recovery was slowed down by those public health measures, our system sales grew 16% to $885.7 million in the first quarter of 2022, mainly due to momentum in the recovery from the COVID-19 pandemic. Canadian sales continued to recovery, with 46% growth in system sales year-over-year.

Speaker 3: US system sales improved 4% in the first quarter of 2022 and international sales increased 12% during the same period.

Speaker 3: Despite the new lockdown that affected the segment in the first quarter, casual dining concepts added $44 million to overall system sales growth in the first quarter, representing an increase of 86% year-over-year.

Speaker 3: The sales from our casual dining locations were still off from pre-pandemic base by 53% during the first quarter and we hope the lifting of COVID-related restrictions in Q2 will help us close that gap in the coming quarters.

Speaker 3: Small and office tower locations have also shown a promising trend in the first quarter, with sales increases of 63% and 73% respectively over the same period last year.

Speaker 3: Similar to casual dining locations, they are still lagging the first quarter of 2020 by 34% and 71% respectively. So there's room to improve as customers return to normal habits and workers and tourists return to urban areas.

Speaker 3: Of note, nine of our top 10 brands have shown positive system sales growth in the quarter, growing by an average of 5.4% over the first quarter of last year.

Speaker 3: Those brands combined represent 71% of the network's total sales.

Speaker 3: Given the relative strength of Canada and incremental growth in the United States in Q1 of 2022, the geographical split changed somewhat year-over-year. The US represented 60% of system sales this quarter, versus 67% last year.

Speaker 3: The geographical split changed somewhat year-over-year. The? U's represented 60% of system sales this quarter, versus six first 67% last year.

Speaker 3: Canada increased with 36% from 29% and international remains stable at 4%.

Speaker 3: Digital sales declined slightly in the first quarter of 2022 to $210.8 million, or 24% of total sales, reflecting the impact of the reopening of more traditional sales channels. The Canadian segment however, delivered solid results, with a year-over-year improvement of $9.5 million.

Speaker 3: Digital sales and the digital experience as a whole remain a key area of focus for our brands and we believe there is significant growth potential if we take the right actions and make our platforms relevant to customers.

Speaker 3: Accordingly, we will keep investing time, efforts and resources and digital to make sure we harvest the potential of those sales channels.

Speaker 3: Turning to our network, we ended the first quarter with the total of 6704 locations. We opened 75 new locations, an all-time high for our first quarter, and acquired another 31 through the [inaudible] transaction, for a total addition of 106 locations.

Speaker 3: However, we permanently closed 121 locations, including 23 from an insolvent international partner.

Speaker 3: Although this slightly erodes our location count, were highly encouraged by the opening of 75 new locations throughout MPY's network in the first quarter, compared to 41 in the same period last year. These openings bode well for further openings in the future.

Speaker 3: Inflationary pressure in supply chain disruptions are issues our teams are coping with on a daily basis.

Speaker 3: Our teams have done a phenomenal job keeping our store stock and making sure we don't have to compromise on the food we offer to our guests.

Speaker 3: Preserving our franchise's profitability is of tremendous importance for us and we're trying to help as much as we can with various initiatives that involve menu adjustments, innovation, marketing, and promotions on lower food cost items, efficiency improvements, training, price increases, et cetera.

Speaker 3: Inflation is something we've had to deal with in the past and so far customers have been accepting the price increases without material impacts on traffic.

Speaker 3: Labor challenges represent another ongoing issue that affect operating hours, quality of service, and the overall experience for customers.

Speaker 3: We recently implemented the scholarship program in the US to help franchise partners attract and retain quality employees.

Speaker 3: MTY will provide grants to certain qualifying employees to help them pay for the cost of studies. It's a classic win-win situation for all parties involved.

Speaker 3: The program is in the start-up phase and if it's works as anticipated, it could expand rapidly.

Speaker 3: During the last quarter, MPY has continued to produce strong cash flows, despite the lingering impact of COVID-related restrictions. It is now eight full quarters of pandemic ups and downs during which we've repaid $213 million of long-term debt, positioning MPY advantageously for future merger and acquisition opportunities.

Speaker 3: We're continuing to seek accretive acquisitions aggressively but, as always, we will remain disciplined in our approach and we'll focus on transactions we believe can create the most shareholder value.

Speaker 3: I'll now turn it to Renee, who will discuss MPY's financial results in greater details.

Renée St-Onge: Thank you, Eric and good morning everyone. As previously mentioned, we're pleased with our financial results in the first quarter of 2022 considering that public health measures were strengthened in Canada during parts of the quarter. Total revenues for the quarter increased 18% to $140.5 million. The increase can mainly be attributed to growing recurring revenue streams from franchise locations in Canada. Altogether, revenue from franchise locations in Canada surged 54% year-over-year.

Speaker 4: Good processing, distribution, and retail revenue in Canada also contributed to growth, improving 27% year-over-year on the strength of new listings in retail and expansion into new territories.

Speaker 4: Revenue from franchise locations in the US and international meanwhile grew 6% year-over-year in the first quarter of 2022.

Speaker 4: As mentioned by Eric, a large portion of the growth in our Canadian and US franchise division came from improvements in system sales in the casual dining segment, which grew by 86% year-over-year. The growth in the casual dining segments had the largest impact on our street front location sales, which represents 80% of total system sales.

Speaker 4: As with the decrease of $5.7 million in the revenues in the US corporate owned location segments, the decrease is primarily due to the sale of several Papa Murphy's locations that were converted into franchises.

Speaker 4: MTY opened the first quarter with 82 locations temporary closed due to the pandemic. 69 of these locations were still shut down as at February 28, 2022. Altogether, 225 locations were closed for one or more days during the quarter. Today, 67 remain shut. These being predominantly located in non-traditional locations such as cinemas, hospitals, and gyms, or locations have closed down to an outbreak of COVID-19 on premise.

Speaker 4: These locations usually reopen quickly however. These data points are a significant improvement over last year, when 321 locations were closed at the end of the first quarter.

Speaker 5: Adjusted EBITDA increased 9% year-over-year to $35.6 million in the first quarter of 2022. The Canadian segment contributed 41% of total adjusted EBITDA, representing a year-over-year increase of $4.4 million. The US and international segment contributed 59% of total adjusted EBITDA, accounting for a year-over-year decrease of $1.4 million or 6%.

Speaker 5: Our franchising segment margin saw a slight decrease from 50% to 47%. This was partly due to the company no longer qualifying for the government-wage subsidy, as well as an inflation impact on wages that was slightly more elevated compared to the same quarter last year.

Speaker 5: Our processing, distribution, and retail segment had a strong performance however and was impacted by the rising cost of supply on the market.

Speaker 5: Net income attributable to owners reach $16.6 million, or 68 cents per diluted share in the first quarter of 2022, compared to $13.4 million, or 54 cents per diluted share in the same period last year.

Speaker 4: Now, turning to liquidity and capital resources, cash flows from operations amounted to $39.7 million in the first quarter of 2022, compared to $31.3 million in the first quarter of 2021, or a 27% year-over-year improvement.

Speaker 5: Excluding the variation in non-cash working capital items, income taxes interest paid, and the others, operation generated $36.9 million of cash flows in the first quarter of 2022, compared to $34.4 million in the same period in 2021.

Speaker 5: Free cash flows reached $37 million, or a $1.51 per diluted share, in the first quarter of 2022, compared to $30.3 million, or a $1.23 per diluted share, in the same quarter last year.

Speaker 4: In terms of capital allocation, during the first quarter of 2022, we used cash to reduce our debt by $10.1 million. A particular note: interest on long-term debt is down $1.9 million year-over-year due to our disciplined debt reduction as well as the utilization of interest rate swap instruments.

Speaker 4: We also paid out dividends totaling $5.1 million in the first quarter and repurchased 256,000 shares for total consideration of $14.6 million under our NCIB program.

Speaker 5: At the end of the quarter, long term debt, mainly in the form of bank facilities and home tax acquisition, stood at $362.2 million. We had also closed the quarter with $52.5 million of cash on hand, leaving us in a healthy cash flow position.

Speaker 5: Between our available credit facility and our cash, we have approximately $350 million in liquidities at our disposal.

Speaker 5: And with that, I thank you for your time, and we will now open the line for questions. Operator?

Operator: Thank you. If you would like to ask a question, please press star, followed by the number one on your telephone keypad. To withdraw your question, please press star one again. We'll pause for just a moment to compile the Q&A roster. And our first question will come from John Zamparo from CIBC. Please go ahead, your line is open.

John Zamparo: Thanks. Good morning. I wanted to start on the restaurant openings number you referenced that it was quite strong relative to Q1's in the past. My question is when you look at this quarter and say the past quarter two and also your development pipeline, what are the two or three brands that are driving most of that growth?

Eric Lefebvre: Yes well, it's not one brand or two brands, it's multiple brands that are driving the growth. Obviously, we have some larger brands, like Coldstone that tend to open more stores than the others just because of the share number of locations. But we have other really good brands that are performing well in terms of their pipeline and in terms of opening new stores. So yes, I mean we're pushing on certain brands to develop faster and to take markets and it's working out. So those efforts have started before the pandemic and continue during the pandemic and we're seeing, now the results of the efforts we've put in, and now that the environment seems to be a little bit more favorable for investors to put money into restaurants. It's starting to open more in line with what we expected.

John Zamparo: Okay and then, as a follow-up upon that you've mentioned in the past, I think it was the last call, Eric, that you've seen delays in opening restaurants, whether it was equipment shortages or construction permits. Is that contributing to the increase in openings or do you get a sense it's more a function of franchisee profitability?

Eric Lefebvre: Well, yeah, the problems with the supply chain and construction are still very real. We are facing significant delays and our construction groups are working with suppliers to try to secure the necessary equipment to be able to open stores effectively. But right now, the delays are still pretty important and even when it comes to the base building that the landlords are building, even that suffers some significant delays. So, the number we opened is certainly not a function of the delays or the removal of those delays. So, it's still a factor for us at the moment and for the future. It takes a lot longer to open stores.

John Zamparo: Okay, that's helpful. And then on the digital side, you mentioned last call that you relaunched digital in most of Canada in November . I know you're operating with some restrictions in the quarter, but can you talk about the progress of the rollout so far?

Eric Lefebvre: Yes well, in November, what happened is really we were able to undo and basically detangle everything in Canada because, if you remember, everything was uncommon platform and it took us some time to get there. So the first step was to be able to get the brands on individual brand platforms, so we've done that now. We're still ironing out some kinks when it comes to digital, especially for the online ordering, the loyalty platforms, even the websites need to be a little bit better for a lot of our brands. So we're still working on that, but we're happy with the progress. We're seeing some real good progress with the brands that were a little bit farther down the road in terms of how the process was going to work. We're seeing the basket size improve. We're seeing the customer experience improve. And now we're tracking some really important metrics to see how we progress not only in terms of the amount of sales, but also in terms of customer satisfaction and how seamless the experience needs to be for our customers because when you look at digital, it's not only the online sale that you want to generate, but it's an entire experience.

Eric Lefebvre: And for as much as we work for the last 42 years on the in-store experience, I think now the online experience is becoming almost as important as the in-store experience. So you need to provide customers with the proper website, with the proper digital marketing, social media content, and everything to create that experience and create that emotional connection to your brand outside of the store because a lot of your interaction with your customers doesn't happen in the store anymore, it happens before they visit the stores or it happens between visits. So we need to really put a lot of emphasis on that and this is what we're doing at the moment, so it's a work in progress. I don't think it's ever going to end. I think that's something that we're always going to be working on going forward, but there's certainly a ramp-up that we need to do now and I'm pretty happy with where we are at the moment.

John Zamparo: Alright, that's helpful color, thanks for that. And then one last one and then I'll get back in queue. The financial statements made reference to a change in control of the JV. Can you just add some color there?

Eric Lefebvre: Yeah, really nothing happened in business-wise nothing happened. It's purely the result of interesting accounting standards, I'll call it that but business-wise, nothing happened. This is related to the transaction with Turtle Jackson and Coop. So I mean the business is continuing and nothing happened there. It's just after we met the two-year mark, there was some wording in the agreement that triggered some accounting, but other that, I mean, business-wise, nothing changed.

John Zamparo: Okay understood, that's great. Thank you very much.

Operator: Our next question comes from Michelle Sreethar from National Bank Financial. Please go ahead, your line is open.

Michelle Sreethar: Thanks for taking my questions. Just given the pervasive market concerns regarding the consumer backdrop, I was hoping you could provide us with your insight on what you're seeing with the consumer. Are you seeing trade down, any price sensitivity? And if so, maybe you can characterize that by market.

Eric Lefebvre: Yes well, obviously, we're walking a very fine line with what's happening in the world in general, there's a lot of different factors at stake for us. I mean, there's a number of different factors we need to work on. Pricing is one of them, customer experience is another. But ultimately, if we're better than our competitors, our customers will continue to come. So we need to continue to work on being better than the rest of the market. We need to provide that experience to the customers. We need to give customers value.

Speaker 8: Everything is relative. So if you increase your prices but your perception of value is still superior, your customers will continue to come because they perceive that value. So we need to work on a number of different factors, but so far, I mean, we haven't seen declines in traffic and customers are still loyal to MPY. We're acquiring new customers with a lot of new initiatives in Canada and the US and seeing a lot of creative stuff being done by our teams. So far, the customer is there for us. We don't take the customer for granted, because there's a lot going on. So our teams just need to continue to work really hard to be better than everyone and our franchisees need to continue in that same way.

Michelle Sreethar: Okay, obviously, the public market has reflected to clients in the stocks of many discretionary type names. I'm wondering if you're seeing that lower valuation perculating into the acquisition market and maybe on that topic as well, given a value where valuation stands, as management will be keen to acquire or buy back stock.

Eric Lefebvre: Yes, well, I can't necessarily comment on what the public market is doing because the markets are still a mystery to me. But as far as the acquisition pipeline is for us the valuation is still high. But given the volume of deal flow that's coming back now, I think ultimately we will find good targets at attractive prices. So, we've been disciplined in the past and we've had periods in the past where there were no acquisitions and we were patient and then all acquisitions came in a flurry at the same time. So, I'm not saying this is what's going to happen this time but we're confident that valuation is going in the right direction.

Speaker 8: As far as the acquisition pipeline is for us the valuation is still high. But given the volume of deal flow that's coming back. Now I think ultimately we will find good targets at attractive prices. So we've been disciplined in the past and now we're and we've had periods in the past where there were no acquisitions and we were patient and then all acquisitions came in a flurry at the same time. So I'm not saying this is what's going to happen this time but we're confident. thatvaluation is going in the right direction. I think the.

Speaker 8: I think the number of deals that are available in the market is increasing and that will help with the pricing, and it's up to us to be able to find the right targets and find common ground with the sellers to be able to acquire good quality concepts

Eric Lefebvre: So, there's no magic formula there. But we're patient, we're disciplined, then we're waiting for the market to be there for us and we're not going to force transactions just for the sake of forcing transactions.

Michelle Sreethar: Okay. And what's your point of view on share repurchases, given your balance sheet strength in your cash flow generation?

Eric Lefebvre: Yes well, in terms of capital allocation in general, there is a discussion we have with the Board every time we meet and even sometimes between meetings. So, our priority remains to acquire good quality businesses to add them to our network. So, we've repurchased shares, as you've seen in the statements. We're still open to repurchasing shares, but our priority remains to find good M&A targets, and if we do, we'll allocate more capital towards that. And if we don't, then we'll buy back MTY. The valuation is, I think, attractive on our stock and the execution risk is non-existent. So, it's not a bad offer for us. But, as I said, our priority remains M&A.

Michelle Sreethar: Okay. And drilling a little deeper into the banners and concepts that MTY employs, it looks like QSR, including Coldstone and Fast Casual performed well, despite some restrictions. Papa Murphy's steady while lapping tough year-over-year comps. Looking forward is there any color you can provide in terms how we should make the growth of these various buckets?

Eric Lefebvre: Yeah, well, I think the buckets can be separated a little bit differently. If you look at our casual dining segment, we were still under massive lockdown during Q1. We missed pretty much all of the order with our dining rooms, our casual dining are predominantly to get back in Ontario and even some in the rest of Canada were also affected. So, if you compare our Q1 2020 sales to our Q1 2022 sales, pretty much all of the discrepancy that's left for us to make up is coming from the casual dining segment. So, for me it's encouraging. We know casual dining is now operating at full capacity and it's up to us to capture these customer dollars and make sure that customers continue to come to our stores and when they come once we create that incentive to return.

Speaker 10: Right now and where is your? Where is your preference? Is it more in the us, or is it more in Canada right now?

Speaker 3: Now we'reyeah, the deal flow is coming back, which is good news. So I mean, where we used to see deal here and there that was probably pricice to expensive few months ago, now we're seeing a regular deal flow that looks a lot more like what we had before the pandemic. So there's a number of deals out there in both countries in all segments- corporate franchise Q's, R F casual, casual dining- So it's a little bit of everything. So we're pretty happy with that and we're optimistic with it. When it comes to preference in countries or geographies, we remain very opportunistic. Buyers will price everything according to the risk that's involved with these acquisitions. So I mean: canada- we're happy, u's- we're happy, I think. Naturally the depth of the U's market will will make it that's there's more opportunities in the U's and they're probably larger.

Speaker 3: But we're totally agvnostic when it comes to one country or the other. And if you're thinking of MA, is there anything like? Over time you do a number of tuck-ins which tend to be quite nicely accretive to your EBITDA. Is there anything? Are you seeing some large transactions are? Do you think investors should be thinking about mtii doing something of the scale of Papa murphys or even bigger?

Speaker 3: I'm not going to close the doors on any possibilities. you- one of our, one of our mentors is- is known to make the small acquisitions if there's strategically relevant and they also make the really, really big acquisitions when strategically makekes sense. So for us to close the door on the size of a deal- not necessarily, I think. In general, average size deals are probably more common on the market. There's probably more of those available for us and they're probably priced a little bit more reasonably. But if we find a larger deal that's attractive to us strategically.

Speaker 3: And accretive for shareholders'll go for it. So not saying there's going to be one or the other, or there could be both big and small deals. There could be a combination of average sized deals. There can be any sorts of different combinations that happen that. I'm not going to close the door on any types of deals.

Speaker 10: And in terms of real estate, what are you seeing in terms of rent levels and site availability?

Speaker 11: Are able to like competition if the site comes available. Are you able to? Are you seeing a lot of interest in those sites and rents? Are rents continue to move higher or just characterize that situation?

Speaker 12: Yes it's a competitive environment for real estate. There's no question about that. one because I think the economy in general is doing well and to there are important delays in construction of new sites.

Speaker 12: But when you look at it from a different perspective, I don't know that many.

Speaker 8: Companies in North America at opened the number of stores we've opened in North America in the last three months. So I have to assume it makes us attractive for landlords because they know we're serious, they know we open and they know we are going to open a lot more in the future. So I hope it gives us.

Speaker 8: Better access to sites. I think it does mpty. Why is not perfect? And certainly sometimes you know it can be frustrating working with us because we have a certain set of standards. But you know we're opening a lot of stores than I think a lot of our brands are attractive for landlords also and as they are for customers. So I'm pretty again, I'm pretty optimistic on the availability of real estate now in terms of cost. There's inflation there, like and everything. So we need to again. We need to be disciplined on setting up our franchisees for success and not just getting any franchiseing, any site for any brand because, you know, sometimes the math doesn't work and we need to be.

Speaker 8: We need to be disciplined and say, well know what, we're going to need to pass on this really good site because it's just too expensive for that brand or it's too expensive period, So but there's inflation. But again there's. There's so many different sites throughout North America that we can go to that we're always going to find.

Speaker 8: Good siid, that's reasonable prices that we can affordokay. And then, in terms of- I'm not sure if you said this, but in general, how much price are you putting through right now?

Speaker 8: So recommending put price, are you putting through or recommending for your franchise to put through?

Speaker 12: Yes that's a brand-by brand discussion. There is bricece, that going on, for sure, all of our brands, So that's little secret, but it's really a brand-bybrand discussion. Ultimately, our franchiseeshave the freedom to.

Speaker 12: To influence on price So it's a fine line we're walking again. It's we increase price to preserve margins but lose a bunch of customers. So we need we need to be cautious. We're benchmarking our competitors. We're looking at the market we're trying to improve the value. Ofer that we have for customers but.

Speaker 3: Price is something we just can'of avoid at the moment. So there was price done last year. There was priceed done this year. There's going to be more price done in the future. No some brands of.

Speaker 3: Some brands have gone very light, with almost no pricing at all, and some brands have had to go 14% - 15%, depending on the product mix and what we sell to customers.

Speaker 8: Okay thanks for taking the question.our next question comes from siabboat conh from RBC Capital Markets. Please go ahead. Your line is open.

Speaker 13: That great thanks and good morning. You know a while for the pandemic. I think there's a bit of an increased focus on maybe rolling out some comment and you know P's overlay just focusused on kind of digging at some of the operational performance that the, the franchisees and I guess I we at the point in the pandemic where you know we've gone from, you know, focusing on a recovery to going back to some of those initiatives, or are there anything you're morefocusedon So want to get an update on that way youmightbe on that.

Speaker 12: The focus. Yet we never really lost focus on these things, but we, given the pressures that we're coming from outside, we decided to lift the better a little bit. But yes, definitely the focus is still there. We want to have better data to be able to better assist our franchisees with their businesses, So we are trying to collect more and more. It's not an easy. one franchisees are all short staffed. Franchisees are all fighting for every minute they have in their day, So it's hard to implement these types of initiatives, but they're necessary. So we we are getting back at it, but we're also very sensitive to the individual situation of each franchisee and their ability to spend time on something that that's not directly related to the operations of their locations.

Speaker 13: Okay and then 1, last one I guess you know, as we are at this point in their recovery, are there any banner that you look across your network? You know that maybegetting perform even you know know enough to get byy there opportunities rationalize the network. As you look at how many oortities you comouable with the mix of baners that you currently have in your portfoli. There there are certainly some brands that are suffering more than others.

Speaker 12: But we owe it to those franchisees to do the best we can to bring their business back to where we thought it would be when they invested, to where to trajectory had before to pandemicso. We're not not giving up on any of them. We love all our brands. We love all our BR, our franchisees, and we owe it to everyone to try to do as good as we can with each brands. So we not exit mode. At the moment, there are brands that are struggling more. I think, for example, the brands that are predominantly in major urban areas, that depend on office traffic, for example, are still struggling. So we need to try to push and try to make the brandsands better and try to make the brands more relevant and attract a bigger proportion of the customers thatare available for us increase our market share. But we're not in exitmode. We're not giving onany of our's and we'renot giving up onour franchisee either.

Speaker 7: S so much pretparticularour next question comes from dereick AR, from T V Securities. Please go ahead. Your line is openyou know. Thinks Eric, and good morning I guess the. Maybe just they hit back on the, on the pricing trends or or menu pricing. I think you know some of the. Some of the overall data in Canada and the? U's suggest that pricing has is up core 5% and in some cases, and then 7- 8% in in the U's. Is that sort of the magnitude of the overall price increases that you guys have been able to push through, or is it? Or is it lower than thatsome brands are lower, some BRS are higher and it would say on average, we're probably in that ballpark for the last 12 months. So we we're probably in that ballpark on average, but yes some, like I said earlier, some brands have had to push prices a lot more just because of the phomix we have.

Speaker 3: And some brands have had to do less because again, the products did not suffer the same amount of inflationokay, and I think it touched on it earlier. But I guess are you able to add some color to thei guess the the pull of the consumer between obviously, the things like higher grocery, the days spend on fuel and gas, versus that having that discretionary spend on restaurants and the appeure seeing any of that, I guess those headwinds start to creep through and into year sales numberswe're we're not seeing it yet. I'm not saying it's never going to happen, But right now'rewe're not seeing declines in traffic related to all sorts of inflation. Customers are loyal. Discretionary incomees seems to be there at least, at least when it comes to buying food and restaurants. So So again,' I'm pretty optimistic about the future. I think we're doing a great job, I think our teams are.

Speaker 12: Really providing that that value offering that customers are looking for. And value offering doesn't necessarily mean cheap price. It just means that the perception of value is there in relation to the price we're asking. So right now the consumers are there for us and we're not necessarily seeing it let down, So hopefully it's going to keep this way, but there's- there's certainly some pressure on on price and we need to be very careful how far we go. Ok, and and 1: one last once for me. You mentioned some client acquisition initiatives. Just wondering if you could point out a couple of them that you know that you you're working on now and maybe some of the some of the success that you're seeing, what those initatives?

Speaker 12: Yes well, I'll give you one example- and there's similar examples in every brand, So don't think it has the one example, but we launched a dairy free product with coldstone. That's called in partnership with silk.

Speaker 12: And's just that's just a gold mine for usnot in terms of a super large proportion of our sales but in terms of the proportion of customers that are coming from that there is free product with silk which is really well knownthat our customers that did not visit cold on before. So that's a good customer acquisition strategy for us and what we're seeing is that the average basket size is very high and seems to indicate that whenever one of these customers that by silk comes to our stores that tend to bring two or three of their friends or the family with them. So the basket size is really high for customers that are almost exclusively new customers for us so. So this type of initiatives is going on across the network attracting new customers to our brands is important. We want loyal customers to continue to come to our stores but we also want to acquire new customers if we can and that's an example of.

Speaker 3: A successful custoofmer requisition gamping. Okay thanks, that's helpful. Thanks our. As a reminder, if you would like to ask a question, please press star, followed by the number one on your telephone keepy pad. Our next question comes from George demee from Scotia Bank. Please go ahead, your line is open.

Speaker 14: Yes thanks, governing our. How did P mphfey do this quarter and how's it comping compared to preree pandemic levels? I also think last call you mentioned on some initiatives that you guys were working on. Can may be possible a little bit too. Yes, P up mphfees continue more or less on the trendit was for Q4, So slightly off. So yes RE, we're still working on a number of initiatives.

Speaker 12: I think Pizza is still a very relevant market that I think most of the major Pizza players have suffered a little bit in the last few months. But we're still well above our 2019 or 2000 and prepandemic 2000 and twenty levels, which is good. But we're working to try to preserve that volume that we have and we have a certain number of initiatives that are that are in place, other new initiatives that are coming and we need to help our franchise partners generate more sales for their stores to be profitable in the long run. So a a lot going on. We're happy in general with the brand, with papamurphfees.

Speaker 12: You we'd like the sales to be compping positive, but we're confident we're going to get there with everything. We're working it. onoffokay, Thank think. Rest on the 75 openings. It's a big number. I wondering maybe, how sustainable the number is going forward and maybe switching to closures. You think we've seen the worse of them, or or is that going to? Maybe trying going to, I guessstay a little bit oflevated, given that we're seeing a lot of government coming off?

Speaker 13: Yes well, in terms- I'll start with the openings- 75 is a good number. We would have liked to be better than 75, to be honest with you, and we slipped a little bit because of the delays in construction. So normally openings tend to be a lot more predictable than closures. But in this environment, we know our pipeline, we know the number of stores we have ready for construction or under construction, but we don't how long it's going to think. So this 75, an indication for the future.

Speaker 12: I think we can do better in that, but the key year to be able to build them. So from one quarter to the next there might be variations, just just based on the delays caused by by construction. So we'll see how the next quarter is come. But we're pretty optimistic when it comes to the number of store openings. As far as the closures are concerned, you saw there's 23 related to one partner that became insolvent. That also affected our Q4. They're now at zero, So that 23 is not going to happen again.

Speaker 12: So that leaves about 100 closures. It's too high, So we we need to work on that. There are some closures that are happening for various reasons. Labor shorttage is one of them. We have some partners that.

Speaker 12: Elected to not renew certain leases in certain territories where to had multiple stores to just concentrate their workforce and remaining stores. I think it's a short-term decision that will have adverse consequences in the long term. So we're trying to work with our.

Speaker 3: Franchisees to prevent that from happening and we're trying to come up with new initiatives to attract workforce So we don't have to take drastic actions like these ones. But closures are a little bit more unpredictable. So I wouldn't necessarily say too much about closures, although I can say that we're not happy with the number we have now. We want to close fewer and.

Speaker 14: Okay thanks for that is one last one for me on on the labor situation as it relates to our franchisees. Would you chararacterize and maybe is worse, better or the same since since our last quarterly update?

Speaker 12: I think it's slightly better. I think we're starting to readjust. We had, we had, a scare when, when we lock down again- and most of canada- because it took us so long to rebuild our teams after the previous lockdown, and we we that we lose all our staff again, but for the most part of staff states, So I think we avoided a disaster there. So I think we're getting slightly better. In terms of staff. It's certainly not perfect. We'd like to have more people available to work in our stores, but it is what it is. We're not the only sector that's that's suffering from labor shortage, and it's up to us to make our sector more attractive. As restaurant owners, as franchisres, we need to make restaurants sexy again, and you know it's going to take some time. The- our industry has been seen, as you know, unstable because of all the, and they makes up ups and downs.

Speaker 15: But you know where we're again, we're not giving up on that and I think the restaurant industry is a great is a great industry for people to work in and it's up to us to to promote it this way TR. Our next question comes from Derek L from T D Securities. Please go ahead, your line is open there. Just a follow up. I just wondering if you had a if few internally maybe, on the, the office mobile cations, and whether or not you might think that some of those maybe, or some of those sales may be permanently impaired, especially if we don't all get back to to work as as we were. Prepandemic Yeah, and Yeah, that's that's definitely a good question there. There are definitely a a certain amount of these sales that are not coming back. We have terminated some leases and some malls or some office hours where we feel traffic is not going to come back.

Speaker 3: And we're going to have to make decisions in the future again on some of them. But we're seeing now is that the really good malls are always going to be really good malls, So traffic is their. Traffic is back forward. The most part, the malls that are what I would call it B or cmall are struggling a little bit more to generate the traffic again. So this is where some decisions might need to be made. And as far as office hours are concerned.

Speaker 3: We can look at it in two different ways. We can look at it as well- maybe, maybe business traffic is never going to be where it was. It's a possibility. But we can also look at it as opportunity where maybe some operators will choose to vacate these premises and maybe this is an opportunity for MTY to bring in some concepts that we've adjusted to be relevant in this type of environment. So I prefer to look at it as an opportunity for office hours and we're working with some of our teams to try to create that offer that's going to interesting for franchisee, that's also going to be interesting for landlord and that will be relevant an environment where traffic is is slightly reduced, but where there is traffic that is looking for certain service. So I like to look at office hours as an opportunitythanks for that.

Speaker 1: We have no further questions in que. This will conclude today's conference call. Thank you for your participation. You may now disconnect.

Q1 2022 MTY Food Group Inc Earnings Call

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