Industry News | June 5, 2017 | By Alex Dixon | QSR Exclusive Brief

Papa Murphy’s to Shutter Stores, Invest in Digital

Corey Coyle
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As part of a plan that will result in the refranchising of company-owned locations, Papa Murphy’s announced it will shutter up to 16 stores across several markets by the end of the year.

The 1,500-unit brand says the closures will benefit annual EBITDA by around $1 million amid a difficult sales environment. In Q1 2017, Papa Murphy’s same-store sales fell 5 percent, including a nearly 10 percent decrease at company-owned stores over the year. Revenue fell $1 million to $32 million, and the company experienced a net loss of $5.4 million.

"As we work to prepare for the refranchising of a majority of our company-owned stores, we have assessed the ongoing viability of certain locations and are taking action to optimize the near-term value of the portfolio to benefit both the company and the franchise-owners acquiring the markets," interim CEO and board chair Jean Birch said in a statement. "We have a clear opportunity to reduce short-term losses while giving new owners a more profitable portfolio of stores from the start."  

Papa Murphy’s will also enhance its digital ordering through a partnership with platform Olo, which will enable online and mobile ordering to be fully integrated with third-party marketplace and delivery services. Through the platform’s Dispatch delivery network and Rails marketplace platform, which partners with delivery service providers and services such as Uber and DoorDash, Papa Murphy’s will be able to deliver products to customers’ homes.

“Two of our key near-term strategies include improving customer convenience and supporting our franchise-owners with cost-effective tools to help them run better operations,” Birch says. “Olo's digital expertise and ability to integrate and simplify the ordering and delivery processes support both of these key goals."

Papa Murphy’s will spend $5.1 million to make the digital ordering transition, and estimates the move to Olo will benefit annual EBITDA by about $0.9 million.