MTY Food Group, the Montreal-based restaurant chain collector, is taking steps to turn around Papa Murphy's amid a volatile U.S. restaurant environment and an increasingly competitive pizza market.
Same-store sales in the U.S. at MTY's brands declined 2.5% in the third quarter, the company said Friday. MTY owns several brands, including Cold Stone Creamery, Wetzel's Pretzels and Famous Dave's, but Papa Murphy's is the largest. The bulk of MTY's sales come from its U.S. restaurants.
The company does not break out sales by brand, but executives suggested that MTY's chains all improved outside of Papa Murphy's.
They also said that the pizza chain has over the past year worked with franchisees to "close a certain number of underperforming locations."
"This allows us to focus our time, resources and support on markets and stores where we are seeing strongest growth and guest engagement," Eric Lefebvre, CEO of MTY, told analysts Friday, according to a transcript on the financial services site AlphaSense. "These actions ensure the brand is on strong footing and remains healthy, sustainable and well-positioned for future expansion."
Exactly how many Papa Murphy's locations have closed is uncertain. MTY operates a lot of restaurant chains, and as a system they opened 15 more locations in the quarter than they closed, finishing with just more than 7,000 restaurants in the U.S., Canada and some international markets.
It opened 96 restaurants and closed 81 locations. But the closure rate was lower than it was a year ago, when closures numbered 105. Papa Murphy's is MTY's largest single brand, and executives implied it was largely dragging the system down.
But Papa Murphy's as a system has been closing locations and shedding sales for years. System sales last year fell 4% to $728 million. The chain closed 78 units in 2024, according to data from Restaurant Business sister company Technomic. But the company acquired 35 locations from operators last year, a rarity for a brand that typically relies on franchisees to operate all its locations.
Between 2019 and 2024, the company has closed nearly 300 restaurants, or more than 20% of the system. MTY's comments suggest it has closed more restaurants this year.
MTY executives believe they have strategies in place to fix the pizza chain. The company plans to relaunch its loyalty program with "aggressive incentives" to generate interest, which will give the company "an opportunity to reconnect with some guests and re-engage them with the brand."
The company is planning menu optimization, including a new lineup of pizzas, along with efforts to simplify operations and improve the customer experience. "Papa Murphy's team is focused on building a stronger, more agile business, one that honors our heritage while evolving to meet the needs of today's guests and tomorrow's opportunities," Lefebvre said.
Executives largely blamed Papa Murphy's problems on competitiveness in the pizza space. "You look at our competitors, they all admitted to overinvesting in marketing in the last few quarters, not something we can afford to do," Lefebvre said. "So we need to compete differently."
But he also blamed franchisees for pulling back on local marketing. "We have some franchisees that are pulling out a little bit of their local marketing efforts," Lefebvre said. "Pizza is very marketing driven. So as soon as you close the tap, you see their sales go down right away."
He did add that Papa Murphy's closures will likely slow from the rate they've been closing the past two years. And he hinted at other changes to come. "We remain positive on the brand," Lefebvre said. "We have a lot of new things that are coming for next year that we can't necessarily announce now, but we're pretty pumped about what we're doing with the brand and it's looking really good."
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