MTY Plans Closure of Up to 50 Papa Murphy’s Stores

MTY Food Group will close 68 corporate-owned restaurants over the next six to nine months, including about 45 to 50 Papa Murphy’s stores. The affected locations lost more than C$10 million last year, and MTY expects closing stores and exiting leases will cost another C$10 million to C$12 million.

The company plans to complete most closures during its fiscal third quarter. MTY chief executive Eric Lefebvre told analysts the C$10 million loss figure reflects four-wall EBITDA, meaning losses at the restaurant level before corporate overhead. Management described the programme as a targeted cleanup of underperforming sites rather than an attempt to break up the Papa Murphy’s franchise system.

Closures are concentrated in several clusters of Papa Murphy’s restaurants MTY took under corporate control about two years ago. Lefebvre said the company repossessed three clusters from franchisees in hopes of turning them around; some locations improved, but others were in markets he called “not well-suited to the take-and-bake pizza chain.”

Between 45 and 50 Papa Murphy’s stores are now expected to close. MTY said those locations do not account for the majority of the losses or exit costs tied to the wider 68-store programme.

The 68 selected restaurants were performing worse than the network average, with average same-store sales declines of about 8% to 9%. On a company-wide basis, MTY reported second-quarter same-store sales down 2.1%, including a 2.2% drop in the U.S. Organic system sales fell 1.7%, and corporate-store profit margins narrowed to 5% from 9% a year earlier.

The Papa Murphy’s take-and-bake model reduces in-store equipment and labour needs but competes with supermarket pizza and chains that offer cooked food, home delivery, loyalty programmes and strong digital promotions. Lefebvre described the American pizza market as having “very little loyalty” and noted that frequent promotions can boost traffic while ongoing discounting may squeeze franchisee margins.

MTY operated 7,040 restaurants at the end of the quarter, including 6,808 franchised or operator-run locations. The 68 closures represent about 1% of MTY’s network.

Analysts pressed for timing and cost details during MTY’s earnings call. Scotiabank analyst John Zamparo sought clarification; Lefebvre confirmed most closures will occur in the third quarter and said final expenses will depend on lease terms and local market conditions.

MTY expects the programme to take six to nine months and said it aims to reduce exposure to loss-making locations while maintaining the broader franchise network.