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Papa Murphy’s franchisees have been closing locations. | Photo: Shutterstock.
Growth has been hard to come by at MTY Food Group, the Montreal-based brand collector, though it owns several different types of chains both in the U.S. and Canada. Unsurprisingly, then, the company is looking to make another acquisition.
“We’re ready to pounce,” CEO Eric Lefebvre told analysts on Friday, according to a transcript on the financial services site AlphaSense.
MTY operates dozens of restaurant chains, including Papa Murphy’s, Cold Stone, Wetzel’s Pretzels, SweetFrog, Famous Dave’s and many others.
Performance of those brands has been mixed, though the company said last week that its same-store sales declined 2% as a group. “2024 is a challenging year from a macroeconomic point of view,” Lefebvre said.
Its biggest issue is store closures at Papa Murphy’s. The take-and-bake pizza chain has been shrinking. It closed a net of 43 locations last year, according to data from Restaurant Business sister company Technomic. It has continued to close restaurants this year.
Papa Murphy’s is the biggest brand in the MTY portfolio, accounting for one out of every seven restaurants. Its struggles have been reflected in MTY’s overall stagnation.
The company’s brands finished the third quarter with 7,066 locations, down 41 from the second quarter.
“Store openings were affected by delays and inspections, with many new locations opening in the first few days of the subsequent quarter,” Lefebvre said. Store closures were higher, too, he said, largely because of the higher number of closures at Papa Murphy’s. (MTY does not break out data by brand in its quarterly earnings reports.)
Lefebvre said that same-store sales at Papa Murphy’s were “a little bit better” this quarter than in past periods as the company’s experiments with promotions gain some traction.
But, he said, operators are closing restaurants. “There’s still a number of closures,” Lefebvre said. “There are certain markets that are a little bit more troubled than others. So we don’t see massive closures across the board. We see specific clusters of stores being shut by their owners.”
While Papa Murphy’s tries saving the store, there are instances in which the company doesn’t have the proper infrastructure in place to run the restaurant as a buyer is found, leading to the closure.
Other brands in the MTY portfolio appear to be doing just fine, notably snack brands such as Wetzel’s, which MTY bought in 2022. “Wetzel’s is doing fantastic, comping positive with a lot of store openings and a lot of new stores being sold,” Lefebvre said. “We’re probably doing a little bit better than we anticipated with Wetzel’s so far.”
Still, MTY has been designed to make acquisitions. While company executives say they are focused on organic growth from existing brands, its business model requires periodic deals to achieve a certain growth trajectory.
The market for those deals has been uncertain. Some franchise brands continue to fetch top dollar from buyers. But most of the deals continue to take place on the lower end of the price spectrum.
“There’s been a lot of troubled companies that have been on the market recently,” Lefebvre said.
He added that the company is routinely presented with opportunities. “they’re not always interesting and sometimes they’re not realistic, sometimes they’re just not a good fit,” Lefebvre said.
“We’re ready when the market is going to be ready for us,” he said.
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Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.
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