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’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?

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

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

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?

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.