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Ladies and gentlemen, thank you for standing by, and welcome to the Pizza Pizza Royalty Corp. Earnings call for the first quarter of 2021. (Operator Instructions.) I would now like to hand the call over to Alex Sewrattan, Director of Finance. Please go ahead.
Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp's earnings call for the first quarter ended March 31, 2021. Joining me on the call today are Pizza Pizza Limited's Chief Executive Officer, Paul Goddard, Chief Financial Officer, Christine D'Sylva, and Senior Vice President of Strategic Analysis and Implementation, Curt Feltner.Our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary language in our earnings press release and the risk factors included in our annual Information Form.Please refer to our earnings press release and MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to our non-IFRS financial measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers and media can contact us after the call.Before turning the call over to Paul for the business update, I wanted to spend a few moments reviewing the structure of the corp., for our new investors. Pizza Pizza Royalty Corp., indirectly owns the Pizza Pizza and Pizza 73 brands and trademarks through its subsidiary, Pizza Pizza Royalty Limited Partnership.This partnership has 2 partners; Pizza Pizza Royalty Corp., the public company, which owns 76.5%; and the other partner, Pizza Pizza Limited, the private operating company, which owns the remaining 23.5%. The Royalty Corp., is a top line restaurant Royalty Corp., that earns a monthly royalty through a lease agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its restaurant operations, Pizza Pizza Limited pays the partnership a monthly royalty calculated as a percentage of royalty [pool] sales. Growth in the corp is derived from increasing the same-store sales of the restaurants in the Royalty Pool and by adding new restaurants to the pool each year.The Royalty Pool is adjusted at the beginning of each year by adding new restaurants opened in the previous year, less any restaurants that have been permanently closed. For the Fiscal Year 2021, the Royalty Pool was adjusted to include 622 Pizza Pizza restaurants and 103 Pizza 73 restaurants on January 1, 2021.So with that review, I'll turn the call over to Paul Goddard to provide a business update.
Thank you, Alex, and good afternoon. Thank you, everyone, for taking the time to attend our call this afternoon. Today, we will highlight the results of our first quarter ended March 31, 2021.On balance, our Q1 results demonstrated our brand's resilience during these uncertain times. The pandemic first impacted our sales in mid-March 2020. So Q1 is lapping a mostly pre-pandemic quarter last year. Recurring virus waves and lockdowns continued affecting important sales channels; particularly walk-in sales and our nontraditional sales; including business catering.Before the pandemic, as a reminder, our business was comprised of 2 primary revenue streams; our traditional restaurant network, which generates 90% of our Royalty Pool sales and our nontraditional and special event locations, which typically generate the remaining 10% of sales.So within our traditional restaurant network across the country, our customers access our food in 3 different ways; number one, ordering for delivery, digitally or via 967-1111; number two, by ordering ahead for pickup, again, digitally or by phone; or, three, by walking into one of our many convenient locations on a spur of the moment basis.Fortunately, our traditional restaurants have remained open for delivery and takeout business since the pandemic began, including throughout the latest lockdowns in Ontario and other provinces. However, our customer dine-in channel, where customers typically walk in, order on the spot and then stick around for a slice and a drink, let's say, has generally been closed since the onset of the pandemic due to the public health guidelines with the exception of a few occasional brief periods.While our businesses, of course, deemed essential, and has therefore been allowed to remain open, Pizza Pizza and Pizza 73 system sales have still been impacted in material ways. As restaurant operators take significant and necessary measures in their restaurants to protect the health of their employees and their customers, while focusing, of course, on delivery and pickup orders, which is the channel they can control at the moment.Our teams have also been very proactive and agile in complying with all social distancing recommendations and requirements of the applicable health authorities, including the closure of restaurant city areas. And although it varies a fair bit depending on which province we're talking about, generally speaking, it's just a tough reality that the lack of dine-in, combined with working from home, virtual schooling, reductions in broader social and business activities have all led to a significant decrease in our normally very robust walk- in sales, especially for those in our urban locations. And again, walk-in is a very critical channel for us, typically giving us 40% of total store sales.So despite this uncontrollable pandemic headwind, if you like, the very good news here is that are delivery and pickup sales, which combined, give us that 60% of sales, continue to offset a sizable portion of those lost walk-in sales. And we continue to innovate and go on the offense to drive those parts of the business that we can control, such as driving our deliveries and the pickup business, which is -- has been really strong, and especially leveraging our digital advantage in the market.During the early stages of pandemic, we quickly introduced innovative customer-centric safety measures such as contactless pickup and delivery transactions with [indiscernible] and an industry first, an award-winning tamper free Pizza box, which provides customers additional assurances when ordering, and that's gone over really well as well.The other 10% of our typical sales are from our nontraditional locations, along with our special community events, have, for the most part, remain closed since the onset of the pandemic under the various government mandates. Simply put, our nontraditional business, including sporting arenas, colleges, universities, hospitals, etc., major outdoor, entertainment venues; they're largely responsible for that reported decrease in our first quarter sales.And as you will have seen or will be shortly from our Q1 press release, for the first quarter, system sales from the 725 restaurants in the Royalty Pool decreased 13.9% to $108.2 million from $125.7 million in the same quarter last year, and there were 749 restaurants in the Royalty Pool.Same-store sales, the key driver of yield growth for shareholders of the company decreased 13.3% for the quarter. Also, as a reminder to investors, the company's first quarter has historically been the weakest sales quarter and the fourth quarter is the strongest. So there is that seasonality factor.Meanwhile, the company's working capital reserve is sitting at a healthy $5.2 million as at March 31, 2021, and the dividend payout ratio was 106%. Looking at the last 4 quarters, the [rolling] and payout ratio was just 86%. So we will continue to monitor our payout ratio very carefully as always. And while our target payout ratio is 100% annually. We also need to remain vigilant given the ongoing effects of the pandemic across Canada. And however, we are pleased to see cautiously, but the long time delayed, but if you like, recently accelerated rollout of the vaccination programs in most provinces, are beginning to help bring the cases down, generally speaking. And at this time, it seems that there really may be some proper sunshine at the end of the tunnel this time as opposed to the headlights of yet another locomotive filled with more COVID variants coming our way. So we'll see. Regardless, our goal continues to be to provide stability in our dividends to shareholders and dividend growth over time.Now I'd like to touch on restaurant operations at PPL, private operating company, given it is the true engine behind our underlying business. I'd -- just to [kick] that off. I'd say first off, operations excellence requires excellent people and excellent execution, and that's what we're seeing. So I'd just like to personally have a shot out to our -- all of our employees, our restaurant owners, operators, their teams, our incredibly great delivery drivers, who have shown incredible energy and courage throughout this whole crisis. And our suppliers, too. They've all shown tremendous resilience, courage, collaboration and leadership. We've all helped each other. It's been actually a good story that way at least. And our teams performed exceptionally well under exchange circumstances. So it's really inspiring and heart warning to see people helping each other.Now of course, our customers we are always grateful to them. Their safety is our #1 priority, but we are so grateful to keep their trust and keep earning their loyalty every day. On the marketing front, we have a quick update. At both Pizza Pizza and Pizza 73, our marketing strategies are structured to support restaurant profitability while also increasing customer orders and order frequency; whether you prefer to phone 967-111, with your Pizza Pizza app or simply walk into your local neighborhood Pizza Pizza.Our time guarantee ensures you get your pizza on time or it's free. And this is yet another key differentiator from competitors and always has been. And we stand behind that guarantee, and we will continue to always strive to be top of mind and the most convenient, the most reliable and the best quality pizza chain, not just the biggest one.So more than ever, Pizza Pizza is focused squarely on future growth and innovation. Consumers continue to migrate at a dizzying pace toward online purchasing in large numbers, which is, of course, only accelerated into 2021, in large part due to the pandemic, of course, and just overall increasing consumer comfort with e-commerce even before the pandemic.So the world has changed, we all know it, and we all know that people are not going to revert back to their offline habits once the pandemic effects recede, and that's good for us. As we've always stated and shown through our ongoing digital initiatives, Pizza Pizza Limited realized, I would say, before most other competitors did way back when, how critical it would be to invest in our digital platforms. We were the first national pizza chain to launch our iPhone app in 2009, for which we want a prestigious Webby award, and the only pizza chain in Canada to launch a fully functional Apple Watch app and also a native iPad app. No other pizza play in Canada has more digital channels for customers to choose from. No one is more convenient than we are. And we're able to capitalize on this digital e-commerce surge that we're seeing across all retail and QSR.Our customer delivery and pickup orders transacted through our array of digital ordering platforms account for about 2-thirds of all orders, and this percentage will only continue to increase, benefiting our customers, our company, our franchisees, everyone involved. It's a true win-win win all around with faster, more automated, more efficient order capture and processing.As I touched on, innovation and continual evolution have always been the key to our success, fueling Pizza Pizza's growth, not only in technology, but also staying current and ahead of the curve, even on our menu offerings. And also, I'd say our restaurant ambience and overall our branding. It's always changing and improving. So this innovation is creative, it's a growth mindset we have, and it's a fabric of our company culture. It's really who we are. We'll always push for ever-increasing quality and service yet always at a decent attractive price.And really, part of our innovation culture means we're just never satisfied with the status quo. I mean, we always see an opportunity. We're just not going to sit back, given that we -- even if we're a market leader, that's just not good enough, right? The market is getting more competitive, and we've got to keep pushing harder than ever. So pretty excited about the innovation pipeline going out the rest of this year as well and beyond.I would say that in Q1, as an example, we did add super food crust; really exciting for our extensive alternative crust offerings. And no other national chain has come so close to offering what we offer in terms of a variety of crusts and so many healthy options, catering to numerous customer segments with our cauliflower crust, our keto crust, our gluten-free whole wheat crust we've had for a while and also our gourmet thins, which has been really successful.And additionally, on the fun and tasty side of things, popcorn chicken has added to our menu recently at both brands, and that was an immediate customer favorite, too. So that always feels good when we hit the mark on the menu creation side, and I think we're getting better and better at doing that, even though we realize not every menu innovation wins, but we're still not -- we're not going to sit back, and we're going to keep trying and innovating all the time.Also in the back half of the quarter, we partnered with the number one card game in the world, UNO, to offer our customers the ultimate pizza and game night experience; which was a timely offering to families who may be a bit tired of Zoom and online games at this point and school, for not matter. This campaign was massively successful, especially on our multiple social media channels as well. And it hit at just the right time as we anticipated. So that's been a real [gift].Our diverse high-quality menu, continually enhanced websites and suite of apps, plus our ever-improving customer service stats, our quality scores have positioned the company well to weather this pandemic and come out stronger, gain market share and increase our restaurants bottom line profits along with our top line sales.We're seeing positive economic signs and more hopeful than we were last quarter, I would say, overall, that the worst is over. I'm not going to claim victory, far from it, but I think things are looking overall better than they have been. So hopefully, these long-lasting lockdowns will finally be lifted soon or start to. It will very by province, I'm sure. But our core markets, Ontario, Quebec, Alberta, we'll see that, I think, hopefully, soon. So we can get the economy safely back on track with a largely fully vaccinated population and one that hopefully feels safe and we're confident to get back out there and live their lives.Just wanted to give a quick update on restaurant development, this has been especially exciting for us recently, I will say, and we'll continue to be moving forward as well. During the quarter, PPL opened 3 traditional and 4 nontraditional Pizza Pizza restaurants, while one traditional Pizza Pizza was closed. PPL also opened 2 traditional Pizza 73 restaurants and closed one nontraditional Pizza 73 restaurant.New restaurant construction continues across Canada as government-mandated restrictions on commercial construction have been lifted or largely lifted in the provinces. And PPL management expects to accelerate our restaurant network expansion to about 5% traditional restaurant growth and continue our successful and exciting renovation program as well in 2021.Management feels there are excellent retail sites available. We've seen it generally attractive commercial rent levels reasonable, at least, in some cases, very attractive. And we plan to take full advantage of the opportunities to go on offense, as I said, when others or some others are really forcing to go into or defensive retreating mode or, frankly, may lack the capital to expand or for some unfortunate folks out there to even continue operating altogether in this very tough environment.As previously mentioned, during the quarter, substantially all traditional Pizza Pizza and Pizza 73 restaurants remain open across Canada. However, that majority of nontraditional Pizza Pizza and Pizza 73 restaurants, special events, etc., and catering, catering has been low but all of this nontraditional clump has remained closed, with the exception of really just a handful of these small locations and hospitals, gas stations, etc. So really, I mean, our [NTS] network is essentially shut down along with our walk-in, and so we're looking forward to that surging back, and we'll be ready when the market is ready for us.And as I said at the beginning, this year has been such a monumental challenge for everyone, and I want to personally thank our entire team for their hard work and efforts this year. It seems like it's never going to end sometimes. I'll talk about perseverance for everyone. But we're -- I think we're really planning and I think we're feeling pretty good going forward about how we're handling things so.And the health and safety of our customers and our restaurant teams continues to remain a top priority for us. Pizza Pizza has implemented strict protocols in our restaurants and our deliveries as well. Super critical for us. We've got our uniform drivers with masks on and gloves on. We've got a platform that people put the box on, so the box doesn't ever touch the ground. You can tip in advance. It's all contactless. And that's -- I think that's optional in some places, but I think it's going to just increase and become more of the way we do things. So it's great to see that we can adapt so quickly and make our customers feel safer and happier and it's faster as well. Faster and more efficient. So if there's any silver lining, that's maybe one of them.So we are completely committed to delivering great food and the very best customer experience each and every time. And we know that mastering these fundamentals, if you like, is just what we look at. It's -- every day, it's got to be better on these fundamentals, every aspect, better execution, better strategy and just having that discipline.I think that we do that better than anyone else can. We have got some worthy competitors, but we're going to keep trying our darndest to beat them every day out there. And it means we will gain more new returning customers, new ones. We'll drive our organic sales and our digital, and we will continue to see our performance improve. And particularly, once we are finally able to reopen the floodgates, even if maybe the floodgates don't open all at once, but maybe it's a series of flood gates opening in sequence, but once we're able to fire on all cylinders again, with all our sales channels being fully operational, we're pretty excited about that.And meanwhile, we're going to push as we are in the channels we control, in delivery and pickup. And so far, I think we're managing that pretty well. So thanks again for listening and for joining the call this afternoon. I'll now ask Christine D'Sylva, our CFO, to provide a brief financial update.
Thanks, Paul. Before I go over the financial results for the quarter, I'd like to briefly discuss the January 1 Royalty Pool adjustment. As Alex mentioned, on January 1 of each year, the Royalty Pool is adjusted by adding new restaurants opened in the past year, less any restaurants which have permanently closed.On January 1, 2021, the Royalty Pool decreased by 24 restaurants as a result of opening ten restaurants, less 34 restaurants, which permanently closed in 2020. In the case where sales of closed restaurants exceed the sales of the restaurants added to the pool, which we saw in 2021, the deficit will be paid by Pizza Pizza to the partnership in that year and will continue to be paid for subsequent years, until there are sufficient sales from new restaurants to offset the deficit. So essentially, the partnership will not be short any system sales in 2021 on account of the 2020 closures.For 2021, there are 725 restaurants in the Royalty Pool, made up of 622 Pizza Pizza locations and 103 Pizza 73 locations. This is compared to 2020 when there were 749 restaurants in the pool. So now let's briefly cover some financial results this quarter. As Paul mentioned, the financial results for the quarter continue to be impacted by COVID-19 and are being compared to an essentially non-COVID impacted period.Same-store sales growth, the key driver of [yield] growth for shareholders, decreased 13.3% for the quarter. Gross sales reported by the restaurants in the Royalty Pool were $108.2 million. This is a 13.9% decrease compared to $125.7 million in the first quarter of 2020. By brand, sales from the 622 Pizza Pizza restaurants decreased 14.2% to $90.2 million, and sales from the 103 Pizza 73 restaurants decreased 12.5% to $18 million for the quarter.Royalty income for the quarter was $7 million compared to $8.2 million in 2020. The decrease in Royalty Pool sales and royalty income for the quarter is due to the impact of COVID. And while the number of restaurants in the Royalty Pool decreased, the financial effect for shareholders was mitigated by Pizza Pizza continuing to pay royalties as part of that deficit and [make-whole] payment.Turning to the partnership expenses. Administrative expenses, including director, legal, auditor fees and listing costs, were $102,000 for the quarter. In addition to administrative expenses, the partnership pays interest on 47 million credit facilities. The interest paid was $314,000 for the quarter. The partnership is presently making interest-only payments on the non-revolving credit facility. The interest rate swap agreement, fixed the facility's interest at bank of acceptance rate of 1.81% plus a credit spread.For Q1, the credit spread was 0.875% for a combined rate of 2.685. The credit spread ranges based on the level of debt-to-EBITDA. Due to the impact of COVID on the partnership, the credit spread will increase to the next tier, effective April 2021. Please refer back to the company's MD&A for a full credit pride schedule.So after the partnership receives royalty income and paid administrative and interest expenses, the resulting net cash available is distributed to its 2 partners based on their ownership. The company declared shareholder dividends of $4.1 million for the quarter or $0.165 per share compared to $5.3 million or [$0.2139] per share for the first quarter of 2020. The resulting payout ratio was 106% for the quarter and 123% in the prior year.Our working capital reserves at the end of the quarter was $5.2 million, which decreased slightly during the quarter, largely due to COVID's impact as well our first quarter being generally the softest quarter of the year for us. It is expected that future dividends will continue to be funded entirely by cash flow from operations and our cash reserves.The company will continue to monitor system sales and royalty income, and we'll consider further changes to the monthly dividend, taking into account the duration and impact the pandemic has on restaurant operations as well as the timing and the pace of economic recovery in the markets that Pizza Pizza and Pizza 73 serve.So that concludes our financial overview. I'd like to turn the call back to our operator to poll for questions.
[Operator Instructions] And you do have a question from the line of Derek Lessard with TD Securities.
Thanks for bringing back to my youth with the UNO with UNO. I haven't heard that in a while. Paul -- yes. You definitely have, I'd say, I guess, a more positive tone in your voice and in your comments today that I've heard in a while. Is that a fair statement?
I think so. I mean, look, I guess what I'm trying to say in the comments is, look, there's things you can control, at least in a competitive market sense, right? We're always continuing every day. But delivery and pickup are really what we can control right now. Walk-in until it comes back, we can't really do much there. We can do some business development on the nontraditional side, we can get ready for sporting events to come back. But really, until the lockdowns are lifted, that door is really closed, right?So I just feel that, that's going to really surge back. And I think that things like pickup, delivery, we've done a pretty decent job. Obviously, I'm not pleased to see minus 13.3% or any minus, for that matter, in front of our same store sales staff. But given the context, given the market, yes, I think we've actually managed ourselves pretty well. And I think that there should be some cause for optimism if we can really truly get past this or 90% past this pandemic. I just -- it just feels that we should go to capitalize on some of the macro indicators out there.
Okay. And maybe just following up on that. And I'm wondering like if we're thinking about the reopening of the economy, how do you think your position in terms of your offering, maybe your competitive positioning? And how quickly can you get your, I guess, your nontraditional site opened once you get the okay?
I think the answer to the -- how quickly on the non-traditionals. I mean they are -- we are in franchise agreements with all these folks, whether it's a big one like MLSE as a franchisee or if it's a more modestly sized or seasonal NTS location or a college university, but I mean those places are very quick to open. Typically, we have a food service partner, if it's a college or university, an Aramark or Compass or a group like that. And we feel that can pretty much switch on very quickly. Our supply chain is very nimble that way, etc. So that is really not a worry. It's more, when will that happen? Where will that happen? We just don't know.And I think the sporting venues are still very up in the air. I mean you're getting positive signals from people like the Calgary Stampede saying that's going to happen. The Pacific National Exhibition looks like it's going to happen in Vancouver. Centre Island looks like it's going to be open. Wonderland might be open for part of the summer, but we don't know. They don't know. People like MLSE just don't know yet because they're all waiting too. So it's really quite conditional.I think -- but once we're actually permitted there will be health rules and prudential regulations, it can be very quick. We just don't quite know when that's going to be in earnest. Is it going to be June? Is it going to be more July, August? Or I really -- and it's obviously linked to the vaccination schedule.But I do think that we can't assume it's going to come back. So I mean, my challenge to my team is, well, let's make sure we do everything we can to show positive growth. And even if everything stays shut down longer than we thought or vaccination rates slow down due to shortages and we end up going all the way through the fall again with our kids back-to-school, what are we going to do? So we need to keep driving delivery and pickup and find other ways to grow.So I just think we've weathered it well on the basis of the company and the Royalty Corp., our working capital is obviously sitting pretty well. And obviously, it's a lot more fun when we get to not just stable dividends, but hopefully increasing dividends. But it's just too premature to talk about that because we just don't know the timing when all these will lift, but we can be very nimble once we're able to be.
Okay. And I was curious if the government or if any governments in any -- or any provincial governments have reached out to you or the restaurant industry in general, in advance of a reopening to see how you can reopen safely?
I think typically what's happening is actually, there is a lot of consultation going on, but it tends to be driven by the industry itself. So for instance, the CFA, the Franchising Association and Restaurants Canada is very active and we're very active with them as one of the bigger members. And also the Chambers of Commerce, I would say, probably even perhaps even more than Restaurants Canada.So we have had various meetings, I'd say, high-profile meetings with deputy ministers, their staff, etc., whether it's Ministry of Small Business, Finance, we had a Chamber of Commerce call with Chrystia Freeland a few weeks ago with a number of people, I would guess, probably about 30 executives from the restaurant sector on there.So there's definitely -- they're definitely sharing what we feel needs to happen. And I think it's not really the restaurants that are -- not worried that restaurants will be slow to reopen other than maybe labor could be difficult if there's no incentive for people to come back to work if they're getting too many -- as you mentioned, in the way of government money from an aid. But I think they've heard that message and they're really trying to focus more on wage subsidy versus to serve and things like that going forward.So subsidies are important. But businesses are very -- business is one is that certainty and I think the restaurant sector has had a really good track record improving. It's really been a super safe part of the market and it's always been good health and safety standards in restaurants and masking -- mask, gloves etc., versus other businesses perhaps out there or just other gatherings of people, social gatherings, that may not have had that discipline.So I think the government's really heard it loud and clear. We got lots of key messages, and we really stay on message with these folks. And I think they listen it's just that sometimes they don't always come back with what you just -- what you recommended, we think that they should do, right? There's a lot of different competing constituencies and perspectives out there. And there's always obviously the political element, and they don't always do, despite the best of intentions, they don't always do what makes sense, frankly. Or they don't have the most efficient answers. But I think there is good dialogue. It depends which province and the federal government has actually reached -- been quite open as -- even the Opposition Shadow Ministers.So there's good dialogue. It's just -- they don't always do what seems to make sense, it seems evident to everyone else, but perhaps not them sometimes.
All right. That's helpful. I guess -- and how are your core franchise base or franchisee base holding up, given just how long the pandemic has been going on? And maybe just a comment on your pipeline of new or potential franchisees?
Sure. Well, that's a good question. I think, overall, we feel really quite good about the health of the whole portfolio. I mean, I recall last year, when we took some pain and we shut some stores. Really, it was actually fortunate. We've been doing this for a few years with more, I would say, more discipline as well, but it was timely because I think we were just leaner and meaner when we headed into the pandemic. And so I think that the folks we have now are leaner and meaner. We closed some stores that were really suffering, and we don't expect to see that level of closures. I mean we think that generally, you're weathering it quite well. Some stores are able to take advantage of some subsidies and rent programs and things where they can. But everyone realizes that's temporary.So we've tried to keep costs down. And even things like the rental program that we're doing that is refreshing store lobbies, these -- we've been careful about that because we're making sure we don't hit franchisees with what might be seen as unnecessary or untimely cost burdens. So we're really focused on their bottom lines and also just driving the top line sales.So obviously, overall, they're feeling good. We've also got more communication and transparency than we ever have. At least we think we always have with them, but we've got a series of meetings coming up in our different regions in the next sort of week or 2 as well. But there's constant dialogue there. And I think we're just all over an issue, should one come up; whether it's a rent issue, just low sales, a labor issue, what have you. And our team is really out there really on the ground and really very much in the face of the franchisee as a partner to help them. And I think that the pipeline side has been very strong. We don't always take the franchisees where we want them. So a lot of people say, I want to be in downtown Toronto or downtown Vancouver. And that might be where we want to be, but sometimes we're looking at other places as well.So -- but generally, we've been really happy with the interest across the country. Even in places like maritime. So we're feeling very strong there. And I think that's an indicator of the economy. A lot of people are interested in franchising, and I think we've weathered it better than most because of the robustness of our system, right? The channels we have, and we're not just a one channel. We're not a walk-in only sports bar, right? We have all these channels, and I think people can see that we can survive this, not only survive but thrive.So overall, we're always going to have people that drop off. There's always going to be the weakest of the weakest. I won't say we're never going to close a restaurant again, but I would say we feel pretty good considering what's going on and how others are being affected. I think the financial health overall of an average store through this has been actually reasonably good.And I don't know if Christine would have any other comment on that or more detail, but that's my 2 cents.
Yes. No, I think you've covered it. I think at Pizza Pizza as a franchisor, we're very much involved in our store operations. So from our franchising team to our real estate teams and our district sales teams, we're there to help the franchisees apply for the subsidies and the grants. We've been there, we're providing them all the information they need. So we've helped them through the pandemic, and we've worked together. And I think Paul kind of summarized it best. I think they're feeling better, and I think we feel good about where we're going with it.
Okay. And maybe I'll sneak another one in there for you, Christine. On the cash flow statement, there was some -- there was proceeds on the redemption of a short-term investment. I'm just -- I'm curious what that was?
Yes. We had a -- we have our cash locked up in some GIC's, and we just renewed the GIC and added more to it, just so we can earn some interest on this working capital reserve. So you'll see proceeds and you'll see reinvestment as well.
Yes. And one final one for me, Paul, the 5% network growth, that's probably as aggressive as I've seen you guys in a number of years, which I'd say is positive. Just wondering what's behind, I guess, that positive growth number?
Yes. Good observation there, Derek. And you're correct. Way back when, that was what we targeted. And then we -- frankly, we fell short for a number of years there. And I think we feel confident about it this year. I mean, our Q1 is right on target. I don't want to talk to you much about the future, but I like the trend. I like how we're managing it. We've actually also really internally at PPL, the way that we're managing our entire development area with real estate franchising construction; we've got, not only new faces, but new structure, new oversight with our chief operating officer as well. And Curt's also involved helping out with some of the real estate aspects as well as needed once in a while, at the executive level.So I think we're just communicating better, collaborating better, and we just see the opportunity, right? I think that there's definitely fear out there in the market with some folks, but the way we look at it is, look, this is a huge opportunity. We're just getting started in British Columbia. We've been really happy with the early days there, even though we're really building a brand out there, Pizza Pizza is not known to everybody out in British Columbia unless you're perhaps an expat from Ontario. And in Quebec, we've been really happy.So we continue to see a lot of growth there. And then some more -- to a minor extent, maritime, but we don't have the population out there. But even in Ontario, there's selective opportunities. And especially in the urban sectors where you see opportunistic leases come available and things like that. So I think we're just being very aggressive, and we see this as a great opportunity, while others are in retreat mode to actually grow. And I think we just feel like we've -- we're managing it overall better from a sort of holistic perspective, marketing ops, rent and just the timetable. And so that's -- we realize that's kind of aggressive based on our track record, but we also feel like we're on target and training well.
And that is all the questions at this time.
Okay. We'd like to thank everyone for joining the call today. If you do have any questions after the call, please give us a call. Our information is on the earnings press release, and you can find it on our website as well. Thank you very much, and have a good evening, everyone.
This concludes today's conference call. Thank you for your participation. You may now disconnect.