The closures will affect mostly Papa Murphy's restaurants, making the take-and-bake pizza chain the hardest-hit brand in MTY Food Group's restructuring plan. Company officials said some locations could begin closing immediately, while the remainder are expected to close over the next six to nine months.
MTY President and CEO Eric Lefebvre told analysts on July 10 that the company reviewed the performance and long-term outlook of its corporate-owned restaurants before deciding to close locations that no longer had a feasible path to improvement.
"Papa Murphy's certainly in the U.S. has been struggling more than our other brands as of recent. That's a significant weight on QSR," Lefebvre said. "We have some other brands also that have been exposed, where we have various initiatives that are coming. Nothing of the magnitude of the struggles we have with Papa Murphy's."
"The decision will reduce our store count in the near term, but we believe it is the right long-term action for the business," Lefebvre said.
Executives said the 68 restaurants selected for closure collectively lost more than 10 million Canadian dollars (US$7.1 million) over the past 12 months.
Lefebvre said many of the Papa Murphy's stores slated for closure were restaurants MTY assumed from franchisees about two years ago as part of a turnaround effort. Despite additional investment, many continued to underperform.
The company said it will phase in the closures rather than shut all affected restaurants at once.
"We don't want to rush into any of these decisions and cause further damage," Lefebvre said, adding that the slower approach will help manage employees, lease obligations, and supply chain operations.
The company also plans to close approximately 18 to 23 corporate-owned restaurants under other MTY brands, although executives did not identify those brands during the earnings call.
MTY owns several restaurant chains, including Baja Fresh, Cold Stone Creamery, Wetzel's Pretzels, Blimpie, Pinkberry, TCBY, Famous Dave's, and Village Inn.
During the earnings call, Lefebvre said Papa Murphy's has faced greater challenges than many of the company's other brands because of intense competition in the United States pizza market and aggressive promotional pricing.
He also indicated MTY will continue evaluating its corporate restaurant portfolio, leaving open the possibility of additional closures if other locations fail to improve.
He noted that “people have been talking about the price of restaurants being more expensive in the last few years," and emphasized the importance of pricing strategy.
"We need to be careful how we choose to do price, and if we choose to do price on certain items, then we need to provide consumers with a proper entry point that's going to give them a good value product, if they choose to go for the cheaper option or the more value-oriented option, that they have one in each of our concepts," Lefebvre said.