News

Papa Murphy's franchises company-owned stores in select markets

January 17, 2017

Less than two weeks after take-and-bake brand, Papa Murphy’s, announced theappointment of board chair Jean Birch to Interim CEO after Ken Calwell's departure from the company, the brand is making moves to change its overall ownership mix by franchising company-owned stores in select markets, according to a news release. The move expands the scope of the chain's work with Franchise Performance Group in order to drive up unit growth in what a news release said are currently under-penetrated markets. 

Franchise Performance Group is a strategic franchise recruiting advisory firm, which is being enlisted by Papa Murphy's leadership to help cut a path forward using higher levels of brand penetration in specific markets as an overall system growth strategy. Papa Murphy's leadership believes that increasing the number of the brand's outlets in a specific area simultaneously boosts customer brand awareness, which then drives sales and ultimately overall system profits. 

Papa Murphy's said it achieves market scale and efficiency by investing in new outlets and consolidating outlets operated by owners who leave the brand. 

"Our long-term strategy has always been to deliver attractive returns through an asset-light, franchised business model," Interim CEO and Board Chair Jean Birch, said in a news release. "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. 

"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.  …
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. 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."

Papa Murphy's is the largest take-and-bake chain in the U.S., operating more than 1,500 stores in 38 states, as well as in Canada and the United Arab Emirates. Birch replaced former CEO Ken Calwell after a news release said Colwell resigned "to pursue other interests."

Meanwhile, the search is on for a permanent CEO as well as a new director, since Calwell also held that position after John Barr vacated it last September. Over the past year, the brand's stock value has fallen to half of what it was a year ago, when it traded for nearly $10. Last Friday, however, the stock closed at $4.44.