Papa Murphy’s to Close Up to 50 Stores

Papa Murphy’s parent company plans to close approximately 45 to 50 corporate-owned locations after a store-by-store review found that a wider group of underperforming restaurants was draining more than C$10 million a year.

The pizza closures form most of MTY Food Group’s programme to shut 68 corporate stores across several brands over the next six to nine months.

MTY is closing stores it operates directly

The decision applies to corporate-owned restaurants rather than the entire Papa Murphy’s franchise network.

MTY has 7,040 restaurants across its brands, including 6,808 franchised or operated under agreements and 232 owned by the company.

The 68 planned closures represent almost 30% of that corporate portfolio but less than 1% of the total network.

That distinction prevents the announcement from being read as a collapse of the Papa Murphy’s system.

Most locations are operated by franchisees, whose stores are separate businesses. Individual franchise restaurants can still open, close or change ownership outside MTY’s corporate programme.

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The stores lost more than C$10 million

The official MTY second-quarter release said the 68 locations produced combined losses exceeding C$10 million during the previous 12 months.

Management expects the closures and lease negotiations to cost between C$10 million and C$12 million.

The company recorded a C$7.5 million impairment charge against right-of-use assets during the quarter because of the decision.

Closing a restaurant does not end its financial obligations immediately.

MTY must negotiate with landlords, dispose of equipment, transfer or dismiss employees and settle contracts. Stores with longer lease terms may take more time and money to exit.

The company expects the full process to require six to nine months, with the easier locations closing first.

Papa Murphy’s became the largest part of the plan

Chief executive Eric Lefebvre said during the earnings call that about 45 to 50 of the 68 stores were Papa Murphy’s locations.

MTY had taken control of a group of struggling franchised stores roughly two years earlier as part of a turnaround effort.

Operating them directly gave the company more control over staffing, marketing and store-level changes. It also transferred rent, wages and daily operating losses from franchisees to MTY.

The new decision signals that the expected recovery did not justify continued ownership.

Management said the Papa Murphy’s stores are not responsible for all of the programme’s losses or most of its exit costs. Other MTY brands are also included among the 68 locations.

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The closure news came with weaker quarterly results

MTY reported second-quarter revenue of C$279.9 million, down from C$304.9 million a year earlier.

Same-store sales declined 2.1%, while total system sales fell 3.5% to approximately C$1.4 billion.

Normalized adjusted EBITDA dropped to C$60.2 million from C$70 million. Adjusted earnings per share declined to C$0.97 from C$1.17.

Management attributed the pressure to softer consumer spending, commodity and operating costs, weaker corporate-store profitability and currency movements.

The group still generated C$43 million in operating cash flow, an increase from the previous year’s quarter.

It also opened 84 restaurants and closed 78 during the period, producing six net openings before the newly announced corporate closures.

Take-and-bake pizza faces a difficult marketing equation

Papa Murphy’s sells uncooked pizzas that customers take home and bake.

The model reduces the need for restaurant ovens, dining rooms and delivery fleets. It competes, however, against national pizza chains with large advertising budgets, immediate hot-food convenience and aggressive digital promotions.

Corporate ownership does not solve that positioning problem automatically.

A weak location still needs enough local demand to cover rent, labor and ingredient costs. If sales remain low, a relatively simple store can continue losing money.

The company can improve menus, loyalty programmes and marketing across the brand while concluding that specific stores are no longer economically viable.

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Customers do not yet have a final closure list

MTY has not published the addresses of every Papa Murphy’s store scheduled to close.

Lease negotiations and operational timing may affect the final order.

Customers should therefore verify local hours through the restaurant directly rather than assuming every corporate location will close immediately.

Franchisees may also acquire viable stores from the company, although MTY has not announced a broad transfer programme.

A closing notice at one location does not establish that nearby franchise restaurants are included.

The company is choosing a smaller loss now

The C$10 million to C$12 million exit cost will reduce near-term cash flow.

Management’s calculation is that a one-time cost is preferable to recurring annual losses from stores with little prospect of recovery.

That approach should improve the average quality of the corporate portfolio after the closures.

It will also leave MTY with fewer company-operated restaurants from which to test new products and operating methods before offering them to franchisees.

The company is accepting that trade-off to protect cash and management attention.

TL;DR

• MTY plans to close 68 corporate restaurants across several brands.

• About 45 to 50 are Papa Murphy’s locations.

• The 68 stores lost more than C$10 million over 12 months.

• Closure and lease costs are expected to reach C$10 million to C$12 million.

• The programme should take six to nine months.

• Most Papa Murphy’s restaurants are franchised and not part of the corporate closure plan.

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