Published on 28 Oct 2021 Time 8 min read Last update by 20 Jun 2024

Papa Murphys Franchise Opportunity for 2024

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Papa Murphys Franchise is a retail food outlet currently featuring take and bake pizza, salads, desserts, and other related products. Papa Murphys franchise experience is different from traditional pizza restaurants. Customers create a personalized pizza, take the pizza home, and even bake it at home as well.

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Papa Murphys Franchise

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 Papa Murphy’s 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.

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How Much Is a Papa Murphy’s Franchise?

The initial Papa Murphys 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 onetime fees that are needed to launch the franchise.

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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

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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 Murphys 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

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Income Statement Key Insights

MTY Franchising is the owner of Papa Murphys 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 in 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

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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 Murphys 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. Franchises have closed at a rate of 35 units a year for the past three years. This is an indicator that these stores may not be performing well. Or their franchise term is up and they are not renewing it.

The initial Papa Murphys Franchise Fee is $25,000. You have to pay this upfront fee when opening a Papa Murphys franchise.

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 Murphys 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.

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