Papa Murphy’s will close 45–50 locations due to competition in the pizza market
UBS managing director and senior portfolio manager Jason Katz joins ‘Varney & Co.’ to give his view on the markets in the second half of the year.
The Canadian restaurant franchisor and operator plans to close between 45 and 50 Papa Murphy’s stores amid tough competition for the pizza chain.
Papa Murphy’s is known for its take-out pizzas that customers can pick up at the store after placing a drive-in, call or online order and cook at home. The brand is owned by MTY Food Group, which operates in some locations and sells to others.
MTY Food Group CEO Eric Lefebvre said on the earnings call that “Papa Murphy’s, in its pizza competition, is currently suffering a little bit.”
He said the company also divested three stores it believed it could reposition in a better location, but 45 to 50 Papa Murphy’s locations will be closed after the move didn’t produce the desired results.
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MTY Food Group CEO Eric Lefebvre said Papa Murphy’s faces a tough competitive landscape in the pizza space. (Getty Images)
“After almost two years of efforts and successful changes in those markets, we came to the conclusion that these markets are probably not suitable for Papa Murphy’s at this time, and we have chosen to close many of these stores in these areas,” explained Lefebvre.
Across MTY’s brands, the company is closing 68 underperforming corporate stores that have lost more than $10 million in the past 12 months with their operations “mostly deteriorating.”
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Papa Murphy’s is a take-out pizza chain founded in Vancouver, Wash. (Getty Images)
Lefebvre called the closing a “significant step” that would be “the right long-term business move” despite the number of smaller stores in the near term.
He said that while there is a heavy weighting of Papa Murphy’s restaurants in the closings across MTY’s portfolio, “they don’t account for a lot of the losses or costs of the stores that we’re going to close. There’s a certain number of other locations that will cost more and that will also drag on big profits.”
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| A ticker | Security | Finally | Change | change % |
|---|---|---|---|---|
| MTYFF | MTY FOOD GROUP INC | 23.51 | +0.30 |
+1.29% |
Lefebvre said the closing process will take “between six and nine months to complete, so we will review the markets where we are.”
“We have the first series of stores scheduled to close next week. Then we will proceed in an orderly manner, and we do not want to rush into any of these decisions and cause further damage.”
“We will do things to protect the workers, also, those in the store and take the time to negotiate properly with the landlords, to deal with all the distribution problems that may arise by closing a certain number of locations,” he added.
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Lefebvre indicated that there may be additional store closures or sales where it makes sense for the company, saying “it is not a fire sale, but we are also in the process of reducing the company’s store portfolio.”
