Review of A & W Food Services of Canada

MAY 05, 2026 - The company went through a large corporate transition in October 2024 to convert AW from an open-ended trust with a stable, high-yield profile to a growth-oriented, capital-light franchisor. With that said, after two years, the company has not yet accelerated growth as investors expected. The key revenue driver for AW in recent years has been service fee migration, as AW raised its royalty fees from 2.5% to 3.5% in FY2025. This migration has been a significant tailwind for margin expansion in FY2025 and into next year. The company’s long-term growth algorithm of 3%–5% same-store sales growth (SSSG) along with ~2% unit growth is expected to benefit long-term holders, though AW has underperformed from an SSSG perspective and has room for improvement. AW is trading at a discount valuation given the quality of the business. Overall, despite weak same-store sales in recent quarters, AW’s business model remains highly attractive. We are maintaining our rating at “B”.