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Pizza Pizza Royalty Income Fund Announces First Quarter Financial Results

Attention Business Editors:

Pizza Pizza Royalty Income Fund (the 'Fund') (TSX: PZA.UN) and Pizza Pizza Limited (the 'Company') today announced results for the first quarter ended March 31, 2010.

The Fund's 2010 First Quarter Summary:

--  Royalty Pool system sales decreased 1%
--  Same store sales decreased 2.3%
--  Pre-tax earnings decreased 3.9%

Same store sales (SSS) decreased 2.3% for the quarter compared to the same period last year. During the quarter a slight improvement in the Ontario marketplace was offset by continuing poor economic conditions in the Albert market. SSS is the key driver of yield growth for Fund unitholders.

According to the RBC Economics Research outlook newsletter released for March 2010, signs of an economic recovery are still sparse in Alberta, and so far evidence points to a relatively weak recovery at this stage. Despite the disappointing softness of the recovery entering 2010, it is expected that the pace of activity will accelerate moderately in the period ahead.

SALES

The restaurants in the Royalty Pool increased to 671 on the January 1, 2010 adjustment date, to include the royalties from 34, net new restaurants. In the prior year, the Royalty Pool included 637 restaurants.

System sales from the 671 restaurants in the Royalty Pool for the quarter ended March 31, 2010 were $108.3 million. For the prior year, comparative quarter, system sales for the 637 restaurants in the Royalty Pool were $109.4 million. The period SSS decrease was partially offset by system sales generated from the addition of 34 net, new restaurants to the Royalty Pool on January 1, 2010.

EARNINGS and INCOME TAX MATTERS

Net Earnings before Income Taxes

Net earnings before income taxes for the quarter ended March 31, 2010 were $4.6 million, or $0.213 per unit, as compared to $4.8 million, or $0.221 per unit, for the comparable quarter in 2009, which equates to a 3.6% decrease per unit.

The net earnings per unit before income tax, decreased as a result of the decline in the sales of the Royalty Pool restaurants and the decrease in the Fund's proportionate interest in the Partnership.

Income Tax Matters

The Specified Investment Flow-Through (SIFT') tax legislation, that was enacted in 2007 and that will apply to the Fund commencing on January 1, 2011, has raised a number of organizational and tax planning issues for consideration by the Fund's Trustees. The SIFT Legislation will impose a tax (the 'SIFT Tax') on certain income earned by the Fund and will treat the distribution of such income to investors as a dividend from a taxable Canadian corporation. In preparation for the application of the SIFT Legislation, in 2007 the Fund began executing a tax planning strategy to conserve the significant, discretionary tax deductions that are available to it. Although the SIFT Tax is expected to result in an adjustment to the Fund's monthly distributions commencing in 2011, the Trustees expect that the Fund's earnings that would otherwise be subject to the SIFT Tax will be partially sheltered from the SIFT Tax as a result of this tax planning strategy.

In addition, the Trustees have been researching and considering options available to the Fund to convert from its current structure as a trust to a corporation. In 2008, as part of the SIFT Legislation, the federal government enacted rules that permit the Fund to convert to a corporation on a tax-deferred rollover basis, provided that the conversion is completed prior to January 1, 2013. The Trustees continue to consider whether to convert to a corporate structure prior to 2011 but should they decide not to convert prior to 2011 the Trustees recognize that they have until the end of 2012 to complete the conversion using the tax-deferred rollover provisions.

DISTRIBUTIONS

The Fund declared distributions of $5.1 million or $0.233 per unit for the quarter ended March 31, 2010, equating to a 109% payout ratio; for the 2009 comparable quarter, the Fund declared distributions of $5.1 million or $0.233 per unit for a payout ratio of 105%.

During the first quarter, distributions were supplemented by drawing $609,000 from the working capital reserve. Accordingly the working capital reserve decreased from $2.42 million at December 31, 2009 to $1.81 million at March 31, 2010.

The Fund's historically, conservative distribution policy has produced a net $1.81 million working capital reserve, which will continue to be available for use at the Trustees' discretion in the event of future, short- to medium-term reductions in system sales and, thus, the Fund's royalty income. As a royalty income fund, the Fund does not have any capital expenditure requirements or significant cash commitments other than fixed interest expense and administrative expenses.

NEW RESTAURANT DEVELOPMENT

As at March 31, 2010, there were 682 locations consisting of 377 traditional Pizza Pizza and 72 traditional Pizza 73 restaurants. As well, there were 224 non-traditional Pizza Pizza locations and 9 non-traditional Pizza 73 locations. During the current quarter, the Company opened 12 locations and closed one.

ROYALTY POOL ADJUSTMENT - JANUARY 1, 2010

As previously announced, effective January 1, 2010, the pool of restaurants (the 'Royalty Pool'), on which royalties are paid to the Fund by the Company, has been increased to include 31 new Pizza Pizza restaurants and 12 new Pizza 73 restaurants. Of the 31 new Pizza Pizza restaurants opened between January 1, 2009 and December 31, 2009, ten are traditional restaurants and 21 are non-traditional locations. The 12 Pizza 73 restaurants are comprised of ten traditional restaurants and two non-traditional locations opened between September 2, 2008 and September 1, 2009. The Royalty Pool will decrease by nine Pizza Pizza restaurants which were closed during the year, of which five were traditional and four non-traditional. With the addition of the 34 net, new restaurants, royalty payments to the Fund during 2010 will be based on 671 restaurants in the Royalty Pool. Also with the addition of the 34 restaurants, the Company now owns 26.3% of the fully diluted units of the Fund.

FINANCIAL HIGHLIGHTS

The following table sets out selected financial highlights of the Fund and the Pizza Pizza Royalty Limited Partnership (the 'Partnership'):

3 months ended    3 months ended
March 31, 2010    March 31, 2009
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(in thousands of dollars, except number of restaurants, days in the quarter
and per unit amounts)

Restaurants in Royalty Pool                           671               637
Same store sales                                     -2.3%             -4.3%
Days in the Quarter                                    90                90
System sales reported by Pizza Pizza
restaurants in the Royalty Pool          $        89,990   $        88,033
System sales reported by Pizza 73
restaurants in the Royalty Pool                   18,309            21,352
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$       108,299   $       109,385
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Royalty - 6% on Pizza Pizza system sales  $         5,399   $         5,282
Royalty - 9% on Pizza 73 system sales               1,648             1,922
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Total Royalty on System Sales                       7,047             7,204
Partnership expenses                                 (757)             (788)
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Earnings available for distribution to
the Fund and
Pizza Pizza Limited                                 6,290             6,416
Pizza Pizza Limited's interest                     (2,103)           (2,043)
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Equity income                                       4,187             4,373
Interest income                                       450               450
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Net earnings before non-cash future
income tax expense                       $         4,637   $         4,823
Provision for (recovery of) future income
taxes                                                248              (293)
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Net earnings                              $         4,389   $         5,116
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Basic earnings per Fund unit excluding
the impact of non-cash future income tax
expense                                  $         0.213   $         0.221
Basic earnings per Fund unit              $         0.201   $         0.234
Diluted earnings per Fund unit            $         0.204   $         0.231

Distributions declared                    $         5,072   $         5,072
Distributions per Fund unit               $         0.233   $         0.233
Payout ratio                                          109%              105%

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March 31, 2010    March 31, 2009
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Working capital of Partnership            $         1,814   $         2,965
Total assets                              $       229,201   $       225,923
Total liabilities                         $         7,619   $         7,371
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The unaudited, consolidated financial statements of the Fund, together with its Management's Discussion and Analysis, will be available at www.sedar.com and on the Fund's website at www.pizzapizza.ca on or before May 7, 2010.

The Fund will host a conference call to discuss the results on Friday, May 7, 2010 at 9:00 a.m. EST. The call can be accessed by dialing 416-640-5933 or 1-866-399-6716. A replay will be available until Thursday, May 20, 2010 by dialing 647-436-0148 or 1-888-203-1112 and entering the reservation number: 5045262.

Forward Looking Statements

Certain statements in this report may constitute 'forward-looking' statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this report, such statements include such words as 'may', 'will', 'expect', 'believe', 'plan', and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this report. These forward-looking statements involve a number of risks and uncertainties. The following are some factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: competition; changes in demographic trends; changing consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; legislation and governmental regulation; accounting policies and practices; and the results of operations and financial condition of the Company. The foregoing list of factors is not exhaustive and should be considered in conjunction with the other risks and uncertainties described in the Fund's Annual Information Form. The Fund assumes no obligation to update these forward looking statements, except as required by applicable securities laws.

About the Fund, a publicly-traded entity

The Fund is a limited purpose, open-ended trust established under the laws of Ontario. The Fund, indirectly through the Partnership, has acquired the trademarks and trade names used by the Company in its Pizza Pizza and Pizza 73 restaurants. The Pizza Pizza trademarks were licensed to the Company in 2005 for 99 years, for which the Company pays the Fund a royalty equal to 6% of the system sales of its Pizza Pizza restaurants in the Royalty Pool. There are 590 Pizza Pizza restaurants in the Royalty Pool for 2010. On July 24, 2007, the Partnership acquired the trademarks and other intellectual property of Pizza 73 (the 'Pizza 73 Rights') and licensed them to the Company for 99 years, for which the Company pays the Fund a royalty equal to 9% of the 81 Pizza 73 restaurants in the Royalty Pool for 2010. As a result of the January 1, 2010 Adjustment Date, the 2010 Royalty Pool will contain 671 restaurants.

A key attribute of the Fund is that revenues are based on top-line, system sales of the Royalty Pool restaurants and not on the profitability of either the Company or the restaurants in the Royalty Pool. Moreover, the Fund is not subject to the variability of earnings or expenses of the operating companies. The Fund's only expenses are administration expenses and the interest on debt. Thus, the success of the Fund depends primarily on the ability of the Company to maintain and increase system sales of the Royalty Pool restaurants and to meet its royalty obligations.

The Fund's trust units are listed on the Toronto Stock Exchange under the symbol PZA.UN.

About Pizza Pizza Limited, a privately-owned, operating company

The Company, a privately-held Canadian corporation, is one of Canada's most successful operators in the quick service restaurant industry. It operates franchised, owner/operator and corporate restaurants under the brand names Pizza Pizza and Pizza 73. The Pizza Pizza brand celebrated its 40th anniversary in 2007 and dominates the Ontario pizza quick service industry and is expanding nationally. The Pizza 73 brand is celebrating its 24th anniversary in 2009 and operates largely in Alberta. The Company is guided by a mission to provide the 'best food, made especially for you' and a focus on quality ingredients, customer service, community contribution and continual innovation, especially in offering health-conscious menu choices.