Pizza Pizza Royalty (TSX:PZA) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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View the webcast at https://www.pizzapizza.ca/investors/

Summary

Pizza Pizza Royalty reported a 5% decrease in same-store sales for Q2 2026, with Pizza Pizza down 4.9% and Pizza 73 down 5.3%.

The company reduced its monthly dividend by 12.9% due to ongoing macroeconomic challenges, preserving financial stability and working capital.

Promotional strategies included the 'Buck an Inch' pizza offer and expanding menu with innovations like Golden Crispy chicken tenders and loaded poutine recipes.

The company opened six new locations and closed eight, focusing on strategic growth in high-revenue traditional locations.

Management highlighted challenges such as tough prior year comparisons, reduced international student numbers, and increased competition in the QSR sector.

Future outlook remains cautious due to economic pressures, but the company remains committed to innovation and strategic expansion domestically and internationally.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by and welcome to Pizza Pizza Royalty's earnings call for the second quarter of 2026. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. As a reminder, the conference is being recorded on August 5, 2026.

I will now turn the call over to Christine D'Sylva, CFO.

Christine D'Sylva, Chief Financial Officer

Thank you. Good afternoon everyone and welcome to Pizza Pizza Royalty's earnings call for the second quarter ended June 30, 2026. Joining me on the call today is Pizza Pizza Limited's President and Chief Executive Officer Paul Goddard and Chief Operating Officer Philip Boudreau. Just a quick note, 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 and all forward-looking statements should be considered in conjunction with the cautionary language in our earnings release and the risk factors included in our annual information form. Please refer to our earnings release and the MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to non-IFRS measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call. With that, I'd like to turn the call over to Paul to provide a brief business update.

Paul Goddard, Chief Executive Officer

Thank you and good afternoon everyone. Thanks for joining the call. This afternoon we released our results for the second quarter of 2026 which you can find posted on our website. The overall macroeconomic environment remained challenging throughout the second quarter. Persistent pressures on consumer confidence, discretionary spending and overall QSR demand continued to weigh on our retail sales and guest traffic across both brands. So in the second quarter our overall same store sales decreased by 5.0%.

Pizza Pizza restaurants were down 4.9% while Pizza 73 restaurants were down 5.3%. Before addressing our operational highlights, I want to comment on the dividend adjustment we announced in May. In light of the ongoing macroeconomic headwinds and lower overall sales volume across the network, our board took the prudent step to reduce our monthly dividend by about 12.9%. It was $0.01 per share from 7.75 cents to 6.75 cents and this decision was made to ensure our distribution payout ratio remains sustainable while preserving our working capital balance.

Maintaining financial stability and protecting long term shareholder value remain core priorities for our leadership team and our board. Beyond broader economic pressures, a few additional factors impacted our top line sales comparisons this quarter. First, tough prior year comps with the 2025 NHL playoff runs which everyone I'm sure remembers. We faced a difficult comp against Q2 of 2025 as a result and last year's second quarter benefited significantly from that deep extended NHL playoff runs, multiple runs by multiple teams which generated exceptional home viewing—sorry, home viewing—event-based sales at our non-traditional locations and late night pizza consumption that did not repeat to the same extent this year. Second, declines in international student enrollment affecting many of our non-traditional sites at colleges—so reduced numbers of international students across Canada at many of these post-secondary campuses. I think many are familiar with that—that just presented direct headwinds for our non-traditional locations at these campuses we have across the country and nearby hubs as well.

This demographic traditionally represents a high frequency late night customer base and the volume did drop significantly and impacted both transaction counts and overall sales at these sites. So navigating these shifting consumer dynamics requires us to be agile and creative. And while input costs and market conditions remain challenging, we are focused on execution and that means driving traffic through value and product innovation, expanding our store network in key markets and really leaning into operational efficiencies to build long term customer loyalty and engagement.

Starting with our value and product offerings, our core pizza category remains resilient, supported by strong value offerings across every price point. In this environment, value gets customers through the door, but continuous menu innovation and cultural relevance keeps them coming back. In the second quarter we executed a comprehensive strategy focused on value leadership, key cultural moments and high impact product launches. So as example first on value, we took aggressive steps to reinforce our value leadership position and support our walk-in channel.

In mid May we introduced our Buck an Inch special featuring Buck Martinez, as many will know from the Blue Jays, pricing every two-topping pizza at just $1 per inch from a 10 inch $10 small up to an $18 XXL pizza and this simple, compelling value message resonated immediately, quickly surging to our number one selling menu offer in our sales mix. The popularity of this offer has allowed us to remove a number of legacy deals, simplifying the menu and helping streamline operations at the restaurants.

In late May, we increased the size of our pizza slices as well nationally by 25% with only a nominal price adjustment to protect profitability. This move delivered a noticeable boost in perceived customer value and elevated the overall slice experience. This return to our famous XXL Pizza Slices has been extremely well received by customers and alongside our slice refresh our $5 meal deal, the slice and drink combo continued to perform well, driving sustained improvements in walk-in traffic and sales throughout Q2.

Second, we leaned heavily into culture to keep our brands top of mind, capitalizing on the immense viewer engagement during the FIFA World Cup. We introduced Dip cup nations featuring dip trios matching participating country flags which was quite fun and really had good take up. We also launched the Pitch Party Pizza, transforming our party pizza box into an interactive tabletop football or soccer game complete with mini nets driving an increase in party pizza sales.

A significant increase I will say. We also capitalized on match play momentum with something called pydration breaks instead of hydration breaks. So we had codes associated with that offering 25% off pizzas during match hydration breaks and our media analysis of that showed that we were the number one search pizza brand in Canada during the activation of the hydration break. So that was a great success. Together these activations established Pizza Pizza as the most searched pizza brand like I said and we're pretty proud of that.

Finally, targeted menu innovation allowed us to drive incremental snack and individual consumption occasions across both brands. At Pizza 73, we expanded our core chicken category with the launch of Golden Crispy chicken tenders, reinforcing Pizza 73's strength in chicken and providing a premium craveable option for family and group orders. We also brought back our popular 420 Pre rolls with new flavors, elevated packaging and an attractive 2 for $5 value offer.

This campaign doubled our pre roll sales during 420 week and sustained strong momentum through its month long LTO run. To capture the growing snacking market, we launched three new loaded poutine recipes at Pizza Pizza, driving a 36% year over year sales lift in our poutine category. So we're definitely encouraged by that. And so as you can see, hopefully by balancing everyday value, high energy cultural campaigns and smart product innovations, we are continuing to give consumers compelling reasons to choose our brands every day.

Turning to our restaurant network with well over 800 restaurants now from coast to coast, we have many points of convenience for our customers to experience our brand. During the quarter we opened four traditional and two non-traditional Pizza Pizza locations and closed one traditional and six non-traditional Pizza Pizza restaurants and one non-traditional Pizza 73. It is worth noting that while our non-traditional locations saw the majority of the closures, our core high revenue traditional restaurants expanded net positive by three locations across BC, Ontario and Quebec.

And as mentioned on numerous previous calls, our business is driven by two revenue streams. That traditional restaurant network, which generates about 90% of our royalty pool sales, and our non-traditional and special event locations which typically generate the remaining 10%. And as I alluded to earlier, our non-traditional segment continues to face some headwinds, particularly those locations within colleges and universities where lower attendance tied to international student policies—essentially, you know, fewer students essentially coming in from afar—has resulted in reduced operating hours and overall sales and challenges for those colleges themselves. Looking ahead, we continue to look at growth opportunities across our network and at the same time we're taking a more disciplined approach than ever, carefully selecting locations and formats to ensure long term profitability, particularly in the context of rising costs. We want sales growth, we want network growth, but we want viable great locations. And I will say our long term growth track record speaks for itself both for same store sales and network growth as we've grown from I think it was roughly 500 locations back in 2005 at our IPO to well over 800, as I said as of 2025, and that's a 20 year period.

So if you look at things on an ROE basis, return on equity or CAGR growth rate, I think we look quite good over time. We've had a lot of institutional long term holders and retail holders and as you well know, if you're familiar with our stock, our dividend is often in the 6 to 8% yield range, which represents a reliable, consistent investment for retail and institutional investors alike. And we certainly look forward to getting more investors on board as well at these levels.

So we are really now Canada's very own national pizza QSR chain leader. And we're excited to grow beyond our borders, first in Mexico and then on to other countries that suit our system and our brand well. In closing, while we expect the macroeconomic environment to remain challenging in the near term—consumers are hurting and we know that—we are not standing idly by on the sidelines. We are proactively driving our business forward, leaning into our scale, sharpening our value proposition and relentlessly focusing on menu innovation.

With a resilient business model, a proven track record through these economic cycles, and the dedication of our franchisee partners across Canada, we are fully confident in our ability to navigate this period and strengthen our competitive position. And as always, I want to do a little shout out to our owner-operators. They are really the absolute key frontline people and they're the extension of our bigger team and also our employees. Internally, we work very seamlessly together and it's all about the passion and the hard work day in and day out and I think that's something that makes us real special and we're very proud of.

So thank you again for joining us today and I'll now ask Christine to provide our detailed financial update.

Christine D'Sylva, Chief Financial Officer

Thanks, Paul. And as a reminder, Pizza Pizza Royalty is a top-line restaurant royalty corp that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the trademarks, 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 that are in the pool and by adding new restaurants to the pool each year.

As announced earlier this year, on January 1st of 2026 the royalty pool increased by 20 restaurants as a result of adding 39 new restaurants, less 19 which permanently closed. So for fiscal 2026 there were 814 restaurants in the royalty pool comprised of 712 Pizza Pizzas and 102 Pizza 73s. This is compared to 2025 when there were 794 restaurants in. So with that, I'll briefly cover the financial results for the quarter and as Paul mentioned, same store sales growth is the key driver of yield for the shareholders and during the quarter that decreased by 5%.

Both brands saw a decline in traffic which resulted in Pizza Pizza restaurants reporting a decrease of 4.9% and Pizza 73 restaurants reporting a decline of 5.3%. The positive impact of the 20 restaurants added to the pool was offset by the same store sales declines and resulted in an overall decrease to the royalty pool, system sales and the corresponding royalty income. The partnership's royalty income earned as a percentage of royalty pool sales decreased 3.6% to $10 million for the quarter.

As a reminder, the Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System sales for the first quarter of the year are generally the lowest, while system sales for the last quarter of the year are generally the highest. Turning to partnership expenses, administrative expenses including listing costs, as well as director, legal and auditor fees decreased in comparison to the prior year. This quarter they totaled $181,000 compared to $283,000 in the prior year's comparable quarter.

The decrease in the quarter reflects lower professional and director fees in addition to administrative expenses. The partnership is making interest-only payments on its $47 million credit facility. Interest paid in the quarter was $439,000. As a reminder, in March of 2025, the company renewed the credit facility for three years, with maturity now set for April 2028, the balance of the facility remained unchanged. However, the credit spread increased slightly from 0.875% to 1%.

Additionally, in 2025 the partnership entered into a new three-year forward swap. The three-year swap locked in interest at 2.51%, which was an increase from the maturing swaps of 1.81%. Now the all-in rate on the credit facility for the next three years will be 3.51% compared to the maturing rate of 2.685%. After the partnership received its royalty and interest income and paid its administrative and interest expense, any resulting cash was then available to distribute to the partners based on their ownership and after the 2026 vend-in Pizza Pizza Limited's ownership increased to 27.2%.

Pizza Pizza Royalty shared in the remaining 72.8% of the partnership distributions. It paid its corporate taxes and any residual cash was available for dividends to the company's shareholders. As previously announced and Paul mentioned earlier on the call, the company reduced its monthly dividend from 7.75 cents per share to 6.75 cents beginning with the May dividend and this was done in response to the ongoing market conditions and their impact on top line system sales.

So for the quarter the company declared dividends of $5.2 million or 21.25 cents per share compared to $5.7 million or 23.25 cents per share. The payout ratio decreased to 102% from 108% in the prior year's comparable period and the company used $100,000 of its working capital to end the quarter with $2.2 million. The $2.2 million working capital reserve is available to stabilize dividends and fund other expenditures in the event of short to medium term sales variability.

The company has historically targeted the payout ratio at or near 100% on an annualized basis and with the recent dividend decisions, the company continues to target this on a go-forward basis. That concludes my financial overview. I'd like to turn the call back to the operator to poll for questions.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Cheryl Zhang with TD Cowen.

Please go ahead. Cheryl.

Cheryl Zhang, Analyst at TD Cowen

Hi, good afternoon, Paul and Christine. Great to hear from you. Hope you're both doing well.

Paul Goddard, Chief Executive Officer

Hi, Cheryl.

Christine D'Sylva, Chief Financial Officer

Thanks, Cheryl, you too.

Cheryl Zhang, Analyst at TD Cowen

Thanks for taking a question. I wanted to first double click on the consumer behavior. I'm wondering if there's any change in consumer behavior that I can point to in Q2 versus Q1 and if you can comment on what are consumers cutting back on in their purchases.

Paul Goddard, Chief Executive Officer

Yeah, it's a good question, Cheryl. I mean, I think just generally speaking backdrop is, you know, still quite negative out there. I mean, you know, obviously we had even less traffic this quarter, which we're not happy about. It does seem like some customers are reducing their frequency. So that obviously impacts overall traffic occasions. And we do sense that people are just generally in this environment more likely to shop around. You know, even though we have a loyal customer base, some people are only loyal to their last great deal they received and they'll hop around and get a, you know, similarly priced burger or even another pizza slice, etc. So that's, that's a factor. Just, you know, generally customers struggling and then, you know, overlying all this, I made the comment in my prepared remarks was just the fact that the, pardon me, the NHL playoffs last year, we had that long, long run, you know, with the Oilers and other teams, the Leafs and we just, this year we just didn't see that. And you know, we were lapping also Four Nations last year as well. And so that was really good for us last year and we just don't have that this year.

So because we are somewhat leveraged to the success or lack of success of the big sports events, that's a factor, at least through that kind of fan base that really likes to eat more pizza when these events are on. But I think just generally speaking we are seeing a little bit less frequency and just people being a little more choosy, pivoting more to pick up, saving on delivery fee and also on third party platforms. I think they're getting expensive, not just for us, but I think all restaurants out there.

So some people only use a certain third party app, but we're trying to make it more and more attractive to have them use our organic apps which are really much more effective, come with our time guarantee and whatnot. And we also see just from some of our data analysis, some people are just not having as many add ons. They might have gone for a drink before two drinks, they might downgrade to one, maybe not get a dessert, maybe not get a dipping sauce.

So we have to counter things like that. We have been really actively promoting things like dipping sauces as add ons because maybe a little more proactively than perhaps we used to in the past because people are hurting. So I think it's hard to just get a definitive behavior change just specifically in Q1 and Q2, but certainly things are not better I would say overall.

Christine D'Sylva, Chief Financial Officer

And Cheryl, I think, I don't know if you remember, for Pizza 73 they used to be like 90% delivery, 10% walk in and pick up. And over the years and even especially in the last few years they've shifted to almost 40% walk in and pickup as combination of their sales. So to what Paul's saying, people are still coming but they're shifting and trading down slightly but within our own ecosystem. So that's also a trend that we are seeing more of.

Paul Goddard, Chief Executive Officer

Yeah. So as much as we can, we're obviously, you know, very known for value and we can segment our customer base in some places where value is not as key but obviously for our main core value is critical. So pricing and convenience, we know that's one of our advantages. We have a lot of levers to pull there and our omnichannel approach does help provide customers lots of ways to get to us. And so we'll take them however they want to get us. You know, pick up, walk in delivery, even third party app. But we'll take them all. But we do notice, I mean more than ever, you know, pricing is super, super competitive and we've got to have that convenience factor.

Cheryl Zhang, Analyst at TD Cowen

That's all very helpful. Thank you both for the color. And speaking of competition, how it sounds like competitive activity has increased in Q2 versus Q1. Is that a fair comment? And do you feel that you need to increase promo versus what you have now?

Paul Goddard, Chief Executive Officer

I think our mix of promos to none is fairly consistent. Although we're certainly not happy with our traffic this quarter. We have noticed, I would say a little more of the sort of what we call sort of in some cases sort of irrational deep discounting by some significant players where they'll often the end of a certain period or cycle or quarter, they'll, you know, have extreme, extreme discounting for a period. And that does drive traffic. But we don't think that's a super sustainable economic model.

So we've tried not to chase that. We'd rather provide sort of consistent value on those real traffic moving items. And we're not, you know, certainly we do do discounts and opportunistic things and we've been successful with things like SMS broadcasts to certain customers that are sort of dormant customers and things with, you know, very attractive discounts. But that's not to all our customers, it's only to targeted people. So we're trying to be smart about it rather than just discount all of our products, you know, out of just, you know, extreme desperation for traffic.

Because we want to be sustainable, we want to make sure operators can also make money at the end of the day. So we're driving top line all the time. That's critical for investors and that network growth. But we got to make sure that the bottom line works for franchisees. So we, it's always a tightrope, but I think generally we've been trying to find that pretty well.

Cheryl Zhang, Analyst at TD Cowen

Yeah, absolutely. And then do you feel like you're gaining or losing share versus your pizza category peers in this environment?

Paul Goddard, Chief Executive Officer

I think we do have some recent data basically saying that both in Ontario and nationally we have gained some share. And so that's positive. I think despite the fact that traffic's down, I think that reflects that the whole pizza segment is a tough place to be even within the tough sector of QSR. And I think I still big believer in long term ubiquity of pizza and people still love it, but there are a lot of other choices. And so it does. We do take some comfort in the fact that we did gain some share there.

Even though, look, even when it's in our favor, I will say sometimes market share data, it's sort of a directionally helpful but in absolute terms, you know, sometimes the data can be a little bit questionable. That's all I will say. But we have said that we in our biggest market of Ontario, it's gone up and nationally so that's good. And sometimes it's down a little bit too, but I think this has been quite encouraging. So I do think some of the things we've been putting out there have been resonating even though traffic is still not where you want it to be.

Cheryl Zhang, Analyst at TD Cowen

Okay, that's helpful, thank you. And I know it's probably still early, but any initial reads on how things are trending so far in Q3?

Paul Goddard, Chief Executive Officer

I don't think we really have much to say there yet. I mean, I would just say that our marketing team continues to have a lot of great innovation, you know, success there. I think there's some interesting things coming out and we have just launched our ancient grains as well just recently. So that's... It's still early, but we're very encouraged by that protein-forward product that really speaks to sort of an individual pizza with some really creative recipes that are fun like a cup-and-charred pepperoni with jalapenos and honey, you know, Mike's Hot Honey and things like that.

So these are, I think, something that we hope will do really well. That's just one example, but it's a little early to say that. But I think things like that and also the slice, the extra, extra large slices that we put out there, we are, I think, encouraged—at least early signs of that seems to be hitting people where they, you know, they have less slice. It's competitive against a, you know, $5 offering that someone else might offer. And that's a pretty good deal.

Slice and a big drink. A big slice and a drink. So some of those are a couple examples of, I think, where we hope for Q3 to go. And also we will—I mean, things like the Calgary Stampede, you know, that was actually quite successful for us. We had a saddle slice out there, there's three deep-fried slices. And we had similar thing here in Toronto that really resonated. I think we came in second place for the most innovative food offering and it drove a lot of social media and a lot of transactions there.

So, you know, that's not, you know, the biggest sales driver in the company, obviously. But these little victories sometimes do add up. And so we think we really spoke to people there and we were sort of culturally relevant at the right time. And that's something we're pretty proud of the team doing, being pretty quick and agile. And what we try and do is amplify those and get those things to be more significant. So it's material.

Cheryl Zhang, Analyst at TD Cowen

That's great. Thank you. And in terms of your sales by channel, how much of your sales is from third party versus your own digital channels and in store?

Paul Goddard, Chief Executive Officer

Yeah, we've—just for competitive reasons, we would rather not disclose that. It's, you know, it's a portion that we think it's an important channel. But we are way more driven by our organic channels. And those are something that we're, you know, really putting more dollars into. And I think you'll start to see that more over time in the next, you know, six months as well. I think just the fruits of our labors there. Those are important channels though, the third party.

We know that there's some people that only order on those channels and so we have to talk to those customers as well. And it's still valuable, but it's a very expensive channel for us and everyone else and we'd rather pivot them. So we do things on our packaging and as much as we can, to the extent we have customer data or the ability to try and leverage them through the packaging, through QR codes and things like that that say, hey, next time order organically, we'll give you a free Coke or two free side items or something like that.

We're trying to sort of steal back from those third party channels as much as we are also using them. But I would say it's a small portion, it's significant, but it's not a, you know, certainly nothing like a majority of our sales or anything like that. Our organic channels are much more significant. Our walk-in, our delivery, our—we've got a great fleet of drivers and we've got a great pickup and walk-in capability that we prefer to really have people use.

Cheryl Zhang, Analyst at TD Cowen

That's helpful, thank you. And maybe switching gears to cost and inflation. Wonder if you can comment on the cost environment, any notable inflation that you're seeing in either food supply or energy.

Paul Goddard, Chief Executive Officer

I don't want to ask Christine for that, but I don't think on energy—or Philip, perhaps, just on supply chain—inflation-wise there's some areas perhaps, but I don't think there's any major increases there. We've had some increases in onions and some produce that we were able to mitigate and also some proteins as well that we're working closely with our suppliers on. But, you know, those are industry issues we see at the grocery store as well. And we're certainly not immune to it in the business side.

Christine D'Sylva, Chief Financial Officer

And we try to use—we use our buying power because we are the distributor for all of our Ontario and Quebec stores. So we have some strong buying power in terms of these items. So we have a lot of power to negotiate with our vendors, and we've got a lot of great vendors who we've been in partnership with for many, many years. So we're always working with them to kind of get us through these highs and the lows as we build out and look at the food cost.

Because we do really need to balance the profitability of the stores and what our end customers can afford to cover right now. Yeah, sure.

Paul Goddard, Chief Executive Officer

And just the only thing I'd add to that—those good comments, Cheryl—is that your point on energy is we do have some long-term marketing deals using our economies to scale with our restaurants. So we sort of essentially control their commodity rate for things like natural gas across most of our restaurants there rather than having them sign up with retail door knockers, for instance, that used to come and sign you up on exorbitant energy rates. So we do think that we're helping mitigate costs for franchisees for things like natural gas and to some extent electricity. But certainly with the macro backdrop with oil price pressures, with sustained geopolitical issues and things in the Middle East, you know, if crude were to stay up and go up more and more, then we could expect to see some commodity price increases over the longer term. But I think we're generally pretty well insulated from that right now.

That hasn't been quite as much of an issue as it used to be. I remember many years ago, 15, 20 years ago with franchisees, things like the cost of natural gas were a major, major input cost. So we still really manage it as best we can, to the extent we can. And I think we've actually been pretty successful there. But, you know, sort of keep a close eye on it and do what we can to help the franchisees.

Cheryl Zhang, Analyst at TD Cowen

Okay, that's all very helpful context. Thank you. And maybe last one from me, can you comment on the health of your franchisees, any impact on their profitability, returns, and if you're seeing any changes in level interest in new stores?

Paul Goddard, Chief Executive Officer

I think overall, I mean, pipeline-wise, I think we're feeling pretty good. I mean, we're... That's something that's been very good. I mean, if anything, we have to, you know, we screen people and we get a lot more interest than people we can take. And we don't always get franchisee pipeline where we want them because everyone might want to be in downtown Toronto or something. But I think we're pretty happy with that. And development-wise, I know we've, you know, we're trying to grow roughly 2% a year or, you know, two dozen sort of traditional stores type of thing in terms of the, you know, average unit volume.

The bottom line, I mean, it's certainly tough, you know, but I think overall we've been pretty happy with some of our key metrics, our food cost. We try and really be within a certain range that we know our own KPIs for rental, independent sales labor as best we can approximate with the franchisees' labor. And we just really expect good operational field management as well and coaching the franchisees to say, manage your labor carefully, do a great job with service and execution and so that you do get a good bottom line.

So certainly rents, we always try and hold the line on as best we can, but there is a level of inflation. Labor's generally always going up, you know, the average hourly wage and things like that. So these are all headwinds and we can't always get price on the revenue side. So we've really tried to help franchisees, but things like subsidies and things, I think we've done a really good job of managing that and sort of having franchisees not owe us more than they used to, even in these tough times.

So I would say, you know, there's always some people at the bottom of the portfolio that maybe need a little more help. But we, you know, we really think it's the core average franchisee should be self-sufficient and get a good return. And, you know, again, just that's a critical driver for us, for our franchisees, for the sustainability of the brand and for Pizza Pizza Limited selling, you know, items to people. But I just would stress again, as you know, Cheryl, like for the Pizza Pizza Royalty Corp, it's really the top line that's critical.

So we are exposed to that operational risk and so other franchisees, but, you know, we've had a great track record with PPRC because it's just top line revenue sales, that 6% that's driving that for the investor and giving them that sort of 6 to 7% yield typically and that net network growth. So we'll keep driving hard on that side. That's our duty to do that. And a lot of that's of course driven by traffic and sales. But on the side of the franchisee and the private operating company, we do want to make sure it's profitable.

Cheryl Zhang, Analyst at TD Cowen

That's great. Thank you, Paul. That's all from me. Thanks so much everyone.

Christine D'Sylva, Chief Financial Officer

Thanks, Cheryl.

Paul Goddard, Chief Executive Officer

Okay, thanks Cheryl. Nice speaking with you.

OPERATOR

There are no further questions. I will now turn the call over to Christine D'Sylva for closing remarks.

Christine D'Sylva, Chief Financial Officer

Thanks everyone for joining us on the call today. If you have any questions, please contact us. Our information is on the earnings release. Have a great evening.

OPERATOR

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.