Core Viewpoint - Diversified Royalty Corp. has acquired the trademarks and certain intellectual property from Cheba Hut Franchising, Inc. for US$36 million, adding a ninth royalty stream to its portfolio, which is expected to enhance its revenue and tax position [1][4][10]. Acquisition Overview - The acquisition includes Cheba Hut's worldwide trademarks and certain intellectual property rights for a purchase price of US$36 million, funded through various financial instruments including an amended acquisition facility and new credit facilities [4][14][15]. - Following the acquisition, DIV licensed the Cheba Rights back to Cheba Hut for 50 years, with an initial royalty payment of US$4 million per annum, which will increase annually based on a fixed rate or U.S. CPI [5][6][8]. Financial Impact - The acquisition is projected to increase DIV's tax pools by approximately CAD$51 million, totaling around CAD$424 million, which can be depreciated over time to reduce cash taxes [6]. - The initial annual royalty revenue from Cheba Hut represents approximately 7% of DIV's pro-forma adjusted revenue [8][10]. Company Growth and Performance - Cheba Hut operates 77 fast casual, toasted sub sandwich restaurants in the U.S., with system sales of US$149 million and a same-store sales growth (SSSG) of 5% in 2024, forecasting over US$187 million in system sales for the fiscal year ending December 31, 2025 [7][8]. - The acquisition aligns with DIV's strategy of acquiring royalties from diverse, proven multi-location businesses, enhancing its revenue streams and market presence in the U.S. [10][11]. Dividend Policy - DIV's board has approved a 10% increase in its annualized dividend from CAD$0.25 to CAD$0.275 per share, effective July 1, 2025, with a pro-forma payout ratio estimated at approximately 94.9% [17][8]. Financing and Credit Facilities - DIV amended its Acquisition Facility to increase its size from CAD$50 million to CAD$70 million, extending the maturity date, which supports the funding of the acquisition without the need for equity raises [13][15]. - The financing structure includes a combination of cash on hand, drawn amounts from credit facilities, and secured loans, ensuring a robust financial strategy for the acquisition [14][15]. Strategic Partnerships - The partnership with Cheba Hut is viewed as beneficial, allowing Cheba Hut to maintain control over its operations while providing DIV with a stable revenue stream through royalties [10][12]. - The management of both companies expresses confidence in the long-term growth potential of Cheba Hut, indicating a strong alignment of interests [10][12].

Company Expansion - Fazoli's has opened its first international location in Calgary, Canada, marking a significant milestone in its expansion strategy [1] - The company plans to open a total of 25 units across Canada over the next nine years in partnership with Briwin Restaurants Inc. [1][2] Growth and Market Potential - Fazoli's has experienced strong domestic growth for over 35 years and is optimistic about its new global chapter [2] - Briwin Restaurants Inc., the partner for the Canadian expansion, has a successful track record as a multi-unit Fatburger franchisee, indicating strong potential for Fazoli's in the Canadian market [2] Company Overview - Founded in 1988, Fazoli's is the largest QSR Italian chain in America, operating approximately 200 restaurants in 26 states [5] - The chain is known for its quality Italian food offerings, including freshly prepared pasta, sub sandwiches, salads, pizza, and unlimited signature breadsticks [5] Parent Company Information - FAT Brands is a leading global franchising company that owns 18 restaurant brands and operates over 2,300 units worldwide [4] - The company focuses on acquiring, marketing, and developing various dining concepts, including fast casual and quick-service restaurants [4]