A lot of people dream about opening a restaurant. But the truth is, most restaurants barely make money. After food costs, rent, staff wages, and taxes, there’s often very little left over.
Getting one off the ground takes a ton of upfront capital, and keeping it running is a full-time job with long hours and constant pressure. Between permits, inspections, staffing headaches, and razor-thin margins, you’re buying yourself a very demanding job.
You could try to invest in restaurant stocks instead. But those come with their own headaches. They still deal with inflation, labour shortages, high turnover, and intense competition. It’s the same problems, just at a bigger scale.
That’s why I prefer restaurant royalty companies. These firms don’t actually run the restaurants. They collect a slice of gross sales through licensing or royalty agreements. It’s an asset-light business model with fat margins and far fewer moving parts. And unlike most restaurant operators, these businesses often pay solid, reliable dividends.
Here are two TSX restaurant royalty stocks that pay monthly and yield over 6% today.
Pizza Pizza
Pizza Pizza Royalty Corp (TSX:PZA) owns the royalty rights to the Pizza Pizza and Pizza 73 brands. It does not operate restaurants, hire staff, or manage real estate. Instead, it collects a percentage of sales from every franchised location that uses its branding.
As of January 1, 2025, the royalty pool includes 797 restaurants across Canada. That breaks down to 697 Pizza Pizza locations and 100 Pizza 73 stores. The company added 20 net new restaurants in the most recent update, showing that it is still expanding at a steady pace.
Because the business is tied to system sales and not restaurant profits, it tends to be more predictable. When people order pizza, the royalty pool benefits. The company passes along that income to shareholders in the form of monthly distributions. The current yield is 6.2%, although this can fluctuate.
The Keg
The Keg Royalties Income Fund (TSX:KEG.UN) works in a similar way. It owns the trademarks and intellectual property behind The Keg Steakhouse and Bar. In exchange, it receives a royalty on gross sales from each franchised location in its royalty pool.
There are 104 restaurants in the pool today, generating more than $700 million in combined annual sales. The fund does not run the restaurants. It simply earns a piece of top-line revenue, which it then distributes to investors.
The payout is made monthly and is supported by a conservative payout ratio, typically under 70 percent. That gives the fund room to maintain or increase distributions, even if sales soften temporarily. Right now, the yield sits at 6.1%.
The Foolish takeaway
If you want restaurant exposure without the operational grind, these royalty names offer a better path. You don’t have to flip burgers, manage staff, or worry about food costs. You just hold the stock and collect income. And in today’s market, getting a reliable 6% annualized yield paid monthly is not something to take for granted.
