It has been a while since I wrote a post. This past week I took on a trade in my margin account. I purchased 100 units @$20.10 plus commissions of BPF.UN (Boston Pizza Royalties Income Fund) based on the Toronto Stock Exchange. I also own this income fund in my TFSA since March 2010.
In July 2002, Boston Pizza International Inc. sold the BP Rights to the Fund. These Rights include trademarks used in operations of the Boston Pizza Restaurants in Canada. BPI then entered into an agreement with the Fund which gives BPI the exclusive license to us the BP Rights for a period of 99 years in exchange for a monthly royalty payment of 4% of the franchise sales of Boston Pizza Restaurants in the Royalty Pool. Any new stores opened during the Calendar year are added to the Royalty Pool on January 1st the following year. (Annual Report 2012)
The 4% royalties from sales at all the restaurants in the royalty pool go into the fund. The fund is not responsible for capital expenditures of the restaurants. The fund has administrative expenses and interest charges on its debt only. That means the fund can have high payouts to its unit holders.
The franchisees pay a royalty greater than 4% from their sales. Franchisees pay 7% royalties on gross food sales and and additional 2.5% on gross food sales to a national advertising fund.
BPF.UN was created as the owners of Boston Pizza did not want to give up equity but wanted to share some profits with other people. The current owners of Boston Pizza are George Melville and Jim Treliving ( who is also on Dragon's Den).
For more information on BPF.UN, go to Boston Pizza Royalties Income Fund.
For more information on Boston Pizza, go to Boston Pizza's website.
Disclosure: Long BPF.UN (in my TFSA)