MTY to close 68 stores, mostly Papa Murphy's
MTY Food Group is shuttering 68 underperforming corporate restaurants to halt $10 million in annual losses, signaling deepening distress in the US pizza sector.
MTY Food Group will close 68 corporately owned restaurants over the next nine months, beginning this week. Between 45 and 50 of the shuttered locations will be Papa Murphy's stores. The closures represent roughly 1 percent of MTY's total systemwide footprint.
The decision follows a comprehensive review of MTY's corporate portfolio, which revealed the targeted locations lost more than $10 million over the past year. Severing these leases will cost the company between $10 million and $12 million in one-time expenses. However, management views this as a decisive step to protect long-term margins by halting investment in locations where the financial outlook had deteriorated beyond repair.
The underperforming sites posted sales declines of 8 to 9 percent, severely lagging the broader system. MTY originally reclaimed these units from franchisees roughly two years ago to execute a turnaround. "After nearly two years of efforts and some successful turnarounds in those markets, we came to the conclusion that these markets are probably not appropriate for Papa Murphy's at this time, and we chose to close a lot of these stores in these locations," CEO Eric Lefebvre told analysts.
For investors, the closures underscore the brutal competitive landscape for US pizza operators. The segment is experiencing widespread consolidation, with Pizza Hut slated to be sold to LongRange Capital and Papa Johns shuttering hundreds of locations. The pain extends to fast-casual pizza, where Blaze Pizza replaced its CEO, Pieology declared bankruptcy, MOD Pizza was sold to avoid a similar fate, and Pie Five shrank from 100 stores to under 20.
Papa Murphy's has shrunk its US footprint for nine straight years, losing 523 stores since 2016 to fall from 1,537 to 1,014 locations. "This was a store-by-store process where we evaluated the performance outlook and economic profile of each location," Lefebvre said. "Where we saw a path to improvement, we chose to continue investing efforts into making our existing assets as productive as they can be. Where the fundamentals no longer supported that path, we made the decision to close the store."
