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The chain has a unique business model
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Sales have fallen across the entire pizza category
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More locations are likely to shut down
Most people eat out or order takeout because it’s convenient. Not having to cook is one of the main draws behind spending the money to either eat in a restaurant or bring food home.
That makes the Papa Murphy’s model a challenging one to sell to consumers. The chain offers what it calls “Take ‘N’ Bake” pizza.
It shares how that works on its website.
“We make it fresh. You bake it to perfection. Delicious pizza you can take home and make your own. Prepared from scratch with fresh ingredients so you can take it, bake it, and enjoy it fresh out of the oven,” it shared.
So, essentially, Papa Murphy’s sells takeout pizza you still have to cook.
The model has been surprisingly successful, but it has struggled over the past few years. The chain’s owner, MTY Food Group, has closed hundreds of locations over the past two years, with plans to shut down more.
MTY Food Groups CEO Eric Lefebvre made it clear that while Papa Murphy’s has closed over 100 locations, it’s shutting down stores on a strategic basis.
“As part of our ongoing efforts to strengthen the brand and position it for long-term success, we’ve made the difficult but strategic decisions in partnership with our franchisees to close a certain number of underperforming locations over the last year. This allows us to focus our time, resources and support on markets and stores where we are seeing strongest growth and guest engagement,” he shared during the company’s third-quarter earnings call.
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The CEO made it clear that many of these closures were based on the commitment level of the franchisee and its willingness to spend money.
“What we’re seeing also at the moment is we have some franchisees that are pulling out a little bit of their local marketing efforts,” he said.
That has an immediate negative impact.
Pizza is very marketing driven. So as soon as you close the tap, you see the sales going down right away.
In cases where franchisees don’t want to invest, Papa Murphy’s has been working with them to exit markets. Lefebvre does believe that the worst is behind the chain.
“Will there be more store closures in the future? Probably a few. But I think you’re not going to see closures of the magnitude we’ve seen in the last two years,” he added.
