In a significant restructuring effort aimed at long-term financial stability, MTY Food Group—the Montreal-based conglomerate overseeing more than 80 restaurant brands—has announced the upcoming closure of 68 underperforming corporate-owned restaurant locations. Among the most notable impacts of this decision is the “take and bake” pizza chain Papa Murphy’s, which faces the closure of up to 50 of its corporate-operated stores.
Financial Headwinds and Strategic Review
The decision to shutter these locations follows a difficult second quarter for MTY, which ended on May 31, 2026. During this period, the company’s net income fell sharply to $15.4 million, down from $57.3 million in the same quarter of the previous year. Total revenue for the quarter also saw a decline, dropping to $279.9 million from $304.9 million a year earlier, while same-store sales decreased by 2.1%.
MTY CEO Eric Lefebvre noted that the affected restaurants had collectively lost more than $10 million over the past year. Following a rigorous, location-by-location operational review, the company concluded that the fundamentals of these specific stores no longer supported continued investment. Lefebvre described the move as a necessary, if difficult, step toward improving the overall quality and economic health of MTY’s portfolio.
Challenges in the Pizza Sector
The closures highlight the intensifying pressure within the U.S. pizza market, a sector characterized by heavy competition and shifting consumer habits. MTY management highlighted that the pizza category is particularly challenging, noting that consumers often lack brand loyalty and prioritize the cheapest available option.
- Intense Competition: Papa Murphy’s has struggled to compete as other pizza chains push aggressive promotions to attract value-conscious diners.
- Performance Issues: Excluding the Papa Murphy’s banner, MTY’s U.S. same-store sales were described as relatively flat during the last quarter, indicating that the pizza chain’s struggles were a primary driver of the group’s soft performance.
- Operational History: Many of the Papa Murphy’s locations identified for closure were originally converted from franchise to corporate ownership approximately two years ago. Management ultimately determined that these specific markets were not suitable for the Papa Murphy’s model at this time.
Implementation and Future Outlook
The process of closing the 68 identified stores is expected to occur over the next six to nine months, with some locations slated to shut down as early as this week. MTY expects to incur between $10 million and $12 million in costs related to lease terminations and other closure-related activities.
While the immediate impact involves a reduction in store count, MTY leadership views this as a vital step in “portfolio optimization”. The company remains committed to its development pipeline and expects store openings to accelerate later in 2026, particularly during the third and fourth quarters. Moving forward, MTY aims to focus on higher-quality assets and expects its corporate margins to eventually settle at a high-single-digit level as these changes take effect.
Despite these challenges, the company’s improved free cash flow is expected to provide the necessary flexibility to navigate the current economic environment while executing its long-term strategy. For now, the move signals a broader trend in the QSR industry where parent companies are increasingly retreating from direct store operations to prioritize more sustainable and profitable franchise models.
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