Papa Murphy's Ramps Up Refranchising

Papa Murphy's, the "Take 'n' Bake" pizza brand, is looking to refranchise some of its company-owned locations in select markets. The move, say officials, will generate cash flow and reduce leverage.

In a statement, the brand says it has observed a strong correlation between the level of penetration in a market and customer awareness, which in turn drives sales. So, Papa Murphy's has focused on investing to accelerate unit growth in some underpenetrated markets in order to reach a tipping point that enhances the opportunity for local advertising and ultimately drives increased sales and profits. The brand says it has achieved market scale and efficiency by investing in new stores and consolidating stores from exiting owners.

"Our long-term strategy has always been to deliver attractive returns through an asset-light, franchised business model. More recently, we have focused our financial resources on accelerating the build out of several markets because we see materially stronger store performance in markets with greater penetration and higher brand awareness," said Jean Birch, chair of the board and interim CEO of Papa Murphy's Holdings, Inc. "We are excited to now enter the next phase of our strategic development plan by refranchising these stores to high-quality franchisees that are well-capitalized and can further grow these markets."

Papa Murphy's is working alongside Franchise Performance Group, a franchise consulting and brokerage firm, to identify the best franchise candidates for the refranchising initiative.

"Refranchising these locations will generate significant cash flow which we will use to reduce leverage. As we sell company stores, we retain the royalty annuity that investors find so attractive in a franchised system," says Birch. "This, combined with our previously announced, first-ever national television campaign, a renewed focus on product innovation, and tight control on SG&A management, positions us well to return the company to profitable growth."