Boston Pizza Royalties Income Fund (BPZZF) just released their Q1 2024 earnings call transcript BPZZF Q1 2024 Earnings Call Transcript, and at first glance, things seem… fine. Franchise sales are down a mere 1% year-over-year. They're renovating restaurants, opening new ones, celebrating their 60th anniversary with heart-shaped pizzas. It's practically a capitalist fairytale.

Except for one chilling detail, a detail buried deeper than pepperoni in a double-cheese extravaganza: the phantom traffic decline.

This isn't your run-of-the-mill dip, the kind explained away by a rainy Tuesday or a particularly gripping season finale. No, this decline is spectral, insidious, lurking beneath the surface of seemingly stable sales figures. While executives boast about average check increases thanks to strategic menu pricing, they skirt around a chilling truth: fewer people are walking through their doors.

Exhuming the Evidence: A Tale Told in Quarters

Let's exhume the evidence. In Q4 2023, same-restaurant sales growth was a paltry 0.6%. That's down from 5.3% in Q3. Now, 0.6% isn't inherently bad, especially when propped up by higher prices. But pair that with their admission that they're chasing 2019 guest traffic levels, and a ghastly picture emerges.

Here's the equation: if sales are flatlining and the average check is increasing, guest traffic MUST be declining. It's basic math, the kind even a ghost can understand. Yet, Boston Pizza avoids explicitly quantifying this drop, opting instead for vague pronouncements about focusing on guest visitation.

This silence speaks volumes.

The Specter of Doubt: Industry Trends or Brand-Specific Boos?

Is this a harbinger of a deeper trend within the casual dining sector, a sector already grappling with inflationary pressures and shifting consumer habits? Are Canadians truly tightening their belts, or is there something more specific at play with the Boston Pizza brand?

The company, for its part, remains cautiously optimistic, touting their promotional calendar (Pasta Tuesdays, anyone?) and new restaurant openings. But their optimism feels forced, a desperate attempt to ignore the ghostly footsteps echoing through their restaurants.

Points to Ponder: Unmasking the Phantom Menace

Takeout and delivery, while significant, don't negate the in-restaurant traffic issue. This reliance on off-premise dining might mask the severity of the decline, but it doesn't change the fundamental reality: fewer butts in seats. Their focus on "affordable luxury" might be a double-edged pizza cutter. Yes, value is crucial in this economic climate, but emphasizing it could further solidify their position as a "treat" rather than a regular dining destination. This isn't just a Q4 blip. The trend is evident in the deceleration of same-restaurant sales growth throughout 2023.

Can Boston Pizza Exorcise the Ghost or Will They Be Forever Haunted?

The question remains: can Boston Pizza exorcise this phantom traffic decline? Or are they doomed to wander the restaurant industry, forever haunted by the ghosts of customers past?

Only time will tell, but investors would be wise to pay attention to the unsettling sounds emanating from this seemingly stable company. Sometimes, the most terrifying things are those we can't see.

"Fun Fact: The original Boston Pizza location, opened in Edmonton, Alberta in 1964, was called "Boston Pizza & Spaghetti House." Perhaps a return to their roots, and a more prominent emphasis on spaghetti, could help revive their flagging fortunes?"