Papa Murphy is a retail food outlet currently featuring take and bake pizza, salads, desserts and other related products. Papa Murphy’s experience is different from traditional pizza restaurants. Customers create a personalized pizza, take the pizza home and bake their pizza at home.
It´s core values are “Great Quality, Great Value, and Great Guest Service”
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In May of 2019, Papa Murphy’s Holdings merged with a wholly-owned subsidiary of MTY Food Group Inc., a publicly-traded Canadian corporation (“MTY Food Group” ). They, or one or more of its subsidiaries, franchises over 50 different restaurant concepts in Canada and the United States.
At the end of the fiscal 2020 year there were 1,326 Papa Murphy’s Stores operating. In the United States there were 1,231 Franchised Stores and 58 company operated stores. There were also 37 stores operating in Canada and the United Arab Emirates. Papa Murphy’s is the fifth largest pizza chain in the United States as measured by systemwide sales and total number of stores. The CEO is Eric Lefebvre and has been in that role since 2019. Before this he was the CEO of MTY Food Group and also served as the CFO since 2012 before that.
How Much is a Papa Murphy’s Franchise?
The initial Papa Murphy’s Franchise Fee is $25,000. You have to pay this upfront fee when opening a Papa Murphy franchise.
Papa Murphy Franchise Cost
The estimated total investment necessary to begin operation of a Papa Murphy Franchise ranges from $296,075 – $534,731
Additional Cost Breakdown
The following costs are part of the upfront costs included in the initial investment. Many of these are one-time fees that are needed to launch the franchise.
Papa Murphy Franchise Cost (Detailed)
| Franchise Fee | $25,000 |
| Lease and Utilities Deposits and Payments | $2,500 – $6,000 |
| Leasehold Improvements | $75,715 – $179,410 |
| Signs | $6,000 – $10,000 |
| Stamped Architectural Drawings | $6,250 – $9,350 |
| As Built Survey | $2,500 – $3,700 |
| Opening Package (Equipment / Point of Sale Systems) | $123,750 – $183,550 |
| Miscellaneous Development Service Fees | $0 – $1,270 |
| Inventory | $5,000 – $7,000 |
| Initial Marketing Fees and Expenses – 6 months | $30,000 |
| Franchise Premises Rent – 3 months | $2,090 – $10,526 |
| Materials and Supplies | $500 – $2,000 |
| Training Costs | $0 – $550 |
| Travel & Living Expenses while training | $3,395 – $12,510 |
| Employee Training | $500 – $1,500 |
| Insurance – 3 months | $375 – $1,175 |
| Bookkeeping / Payroll Service – 3 Months | $1,500 – $1,600 |
| Additional Funds – 3 Months | $10,000 – $50,000 |
| Total Estimated Initial Investment | $296,075 – $534,731 |
Papa Murphy’s On-Going Cost and Fees:
Royalty Fee: 5% of weekly Net Sales
Brand Marketing Fee: 2% of weekly Net Sales
Local Marketing and Promotion and Regional Cooperative Advertising: Minimum of the greater of 5% of your Net Sales or $2,000 each month.
How Much Do Franchise Owners Make?
Papa Murphy’s Franchise Sales Figures
| 2020 | 2019 | |
|---|---|---|
| Number of Franchised Stores | 1,193 | 1,230 |
| Net Sales | ||
| Highest | $2,323,824 | $2,031,293 |
| Lowest | $140,648 | $97,922 |
| Franchised Store Average Net Sales | $615,496 | $568,241 |
| Number of Franchised Stores Exceeding Average Net Sales | 498 | 496 |
| Percentage of Franchised Stores Exceeding Average Net Sales | 41.7% | 40.3% |
| Franchised Store Median Net Sales | $532,262 | $504,406 |
2019 Papa Murphy Median Franchise Net Sales:
$504,406
1- Based on a midpoint investment of $415,403 with estimated profits of $50,440 at a 10% profit margin it would take about 9 years to recoup your investment.
2- Based on a midpoint investment of $415,403 with estimated profits of $75,660 at a 15% profit margin it would take about 5 years to recoup your investment.
3- Based on a midpoint investment of $415,403 with estimated profits of $100,881 at a 20% profit margin it would take about 5 years to recoup your investment.
2020 Papa Murphy Median Franchise Net Sales:
$532,262
1- Based on a midpoint investment of $415,403 with estimated profits of $53,226 at a 10% profit margin it would take about 8 years to recoup your investment.
2- Based on a midpoint investment of $415,403 with estimated profits of $79,839 at a 15% profit margin it would take about 6 years to recoup your investment.
3- Based on a midpoint investment of $415,403 with estimated profits of $106,452 at a 20% profit margin it would take about 5 years to recoup your investment.
Based on the median sales provided by Papa Murphy’s franchise locations, at an average of a 15% profit margin it will take around 6 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Papa Murphy’s Take ‘N’ Bake Pizza stores; the extent of market penetration and brand awareness that Papa Murphy’s Take ‘N’ Bake Pizza stores have attained in your market. Also the quality of management and service at your Franchised Store
MTY Franchising USA Income Statement
Consolidated Statements of operations and comprehensive income
| Notes | November 30,2020 | November 30,2019 | |
|---|---|---|---|
| Revenue | 20 | 193,340 | 179,562 |
| Cost and expenses | |||
| Operating expenses | 21 | 141,443 | 133,100 |
| Depreciation – property, plant and equipment | 8 | 1,415 | 886 |
| Amortization – intangible assets | 9 | 14,174 | 13,147 |
| Impairment charge of property, plant and equipment | 8 & 11 | 579 | – |
| Impairment charge of intangible assets and goodwill | 9, 10 & 11 | 62,143 | 1,249 |
| Interest expense | 22 | 16,764 | 15,296 |
| Management fees charged by parent company | 26 | 1,830 | 1,155 |
| Other (loss) income | |||
| (Loss) gain on disposal of property, plant and equipment | (276) | 69 | |
| (276) | 69 | ||
| (Loss) income before income taxes | (45,284) | 14,798 | |
| Income tax expense (recovery) | 24 | ||
| Current | 3,076 | 2,481 | |
| Deferred | (11,133) | 868 | |
| (8,057) | 3,349 | ||
| Net (loss) income and comprehensive (loss) income | (37,227) | 11,449 |
Income Statement Key Insights
MTY Franchising is the owner of Papa Murphy’s franchise. The company was not profitable in 2020 with a net income of (37.2 million) in 2020. However, the year prior the company saw a net income of $11.5 million. There were lYoY changes in the income statement. The largest was in the section impairment charge of intangible assets and goodwill. They rose from $1.2 million to $62.1 million. This is a result of an accounting charge that is incurred when the fair value of goodwill drops below the previously recorded value from the time of an acquisition. Impairment occurs when the assets acquired no longer generate the financial results expected at the time of purchase.
MYT Franchising USA Cash Flow Statement
Consolidated statements of cash flows
| Notes | November 30, 2020 | November 30, 2019 | |
|---|---|---|---|
| Operating activities | |||
| Net (loss) income | (37,227) | 11,449 | |
| Items not affecting cash, restricted cash | |||
| Depreciation – property, plant and equipment | 1,415 | 886 | |
| Amortization – intangible assets | 14,174 | 13,147 | |
| Interest expense | 16,764 | 15,296 | |
| Loss (gain) on disposal of property, plant and equipment | 276 | (69) | |
| Impairment charge of property, plant and equipment | 579 | – | |
| Impairment charge of intangible assets and goodwill | 62,143 | 1,249 | |
| Deferred income tax (revoery) expense | (11,133) | 868 | |
| 46,991 | 42,826 | ||
| Interest paid | (16,192) | (14,365) | |
| Changes in non-cash working capital items | |||
| Accounts receivable | (4,344) | 167 | |
| Inventories | (1,006) | 10 | |
| Prepaid expenses and deposits | 1,487 | 518 | |
| Loans receivable | (236) | 869 | |
| Other current assets | (1,030) | – | |
| Income taxes | 25 | (2,959) | |
| Accounts payable | 3,080 | (1,233) | |
| Accrued liabilities | (2,662) | (742) | |
| Promotional funds payable | 6,297 | (163) | |
| Gift card liability | 2,474 | 3,019 | |
| Deferred revenue and deposits | 5,009 | 1,645 | |
| Other | (703) | – | |
| Net cash provided from operating activities | 39,190 | 29,592 | |
| Investing activities | |||
| Net cash outflow on acquisitions, net of cash acquired | (190,291) | ||
| Additions to property, plant and equipment | (1,723) | (1,075) | |
| Additions to intangible assets | (68) | (35) | |
| Proceeds on disposal of property, plant and equipment assets held for sale | 8,705 | 5,632 | |
| Net cash provided from (used in) investing activities | 7,364 | (185,769) | |
| Financing activities | |||
| Net advance to ultimate parent | (53,125) | (13,423) | |
| Net advance (to) from companies under common control | (105) | 100,034 | |
| Issuance of shares to parent company | – | 90,000 | |
| Repayment of long-term debt | (1,433) | (6,277) | |
| Net cash (used in) provided from financing activities | (54,663) | 170,334 | |
| Net (decrease) increase in cash, restricted cash | (8,109) | 14,157 | |
| Cash, restricted cash, beginning of year | 24,487 | 10,330 | |
| Cash, restricted cash, end of year | 16,378 | 24,487 |
MYT Franchising USA Cash Flow Statement Key Insights
In 2020, MYT Franchising had a net income of ($37.2 million) but their cash, cash equivalents and restricted cash was $16.4 million at the end of 2020 which is nearly a 50% decrease from the cash they started with at the beginning of the year. Net cash provided by operating activities increased to 39.1 million in 2020 compared to $29.5 million in 2019. However, in 2020 MYT Franchising used $54.6 million in financing activities. While in 2019 the company had $170 million provided by financing activities. That´s when they merged with Papa Murphy’s franchise.
How many Papa Murphy units have opened and closed?
System-wide Outlet Summary
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2018 | 1,334 | 1,291 | -43 |
| 2019 | 1,291 | 1,256 | -35 | |
| 2020 | 1,256 | 1,231 | -25 | |
| Company-Owned | 2018 | 145 | 106 | -39 |
| 2019 | 106 | 74 | -32 | |
| 2020 | 74 | 58 | -16 | |
| Total Outlets | 2018 | 1,479 | 1,397 | -82 |
| 2019 | 1,397 | 1,330 | -67 | |
| 2020 | 1,330 | 1,289 | -41 |
Over the last three years the company has been in decline. Both franchising units and company operated stores have decreased. Over the last three years franchises have closed at a rate of 35 units a year. This is an indicator that these stores may not be performing well. Or their franchise term is up and they are not renewing it.
Is it worth evaluating a Papa Murphy Franchise?
Papa Murphy’s has seen consistent store declines over the last year and their parent company posted a $37.1 million net income loss in 2020 which indicates this company has been struggling recently. However, with over 1,200 units still active in a pizza market worth almost $50 billion there is still lots of success to be had in potentially owning a Papa Murphy’s franchise if it is in a good location with high consumer demand.
Papa Murphy’s competes with regional and local pizza restaurants as well as national chains such as Domino’s Pizza, Pizza Hut, Papa John’s, and Little Caesars Pizza.
We strongly recommend you speak to at least 5 Papa Murphy’s franchisees to better understand the financials (see questions to ask).
Think Papa Murphy’s is the right franchise for you, or are you interested in other franchise opportunities in the Food and Beverage Industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.
