The landscape of the quick-service restaurant (QSR) industry has faced significant headwinds in recent months, characterized by shifting consumer behaviors and persistent economic pressures. Among the companies navigating these turbulent waters is Montreal-based MTY Food Group Inc., which recently announced a strategic pivot aimed at long-term stabilization. On July 10, 2026, the company disclosed plans to close 68 underperforming, corporate-owned restaurant locations over the next six to nine months.
This decision follows a second-quarter financial report that revealed a sharp decline in profitability and a cooling in revenue, prompting a rigorous internal review of the company’s vast portfolio.
A Challenging Second Quarter
MTY Food Group, which oversees more than 80 brands—including well-known names such as Thai Express, Manchu Wok, Mr. Sub, and Bâton Rouge—reported a difficult second quarter ending May 31, 2026. The company’s net income attributable to owners dropped to $15.4 million, a significant decline from the $57.3 million recorded during the same period in the previous year.
Revenue for the quarter reached $279.9 million, representing an 8.2% decrease compared to 2025. Furthermore, same-store sales—a key metric for evaluating restaurant performance—fell by 2.1%. Management attributed these weaker-than-expected results to uneven consumer spending and a challenging operating environment that has pressured both corporate-owned and franchise markets.
Strategic Portfolio Optimization
The decision to close 68 locations was not taken lightly. According to MTY CEO Eric Lefebvre, the company conducted a store-by-store review to evaluate the economic profile and performance outlook of every corporate-owned unit.
- Financial Impact of Closures: The 68 restaurants slated for closure generated combined losses exceeding $10 million over the past 12 months.
- Targeting the Portfolio: While MTY operates a diverse range of concepts, the bulk of the closures—approximately 45 to 50 locations—will affect Papa Murphy’s, a U.S.-based take-and-bake pizza chain. The remaining closures will be spread across other brands within the MTY portfolio.
- Costs and Execution: The company expects to incur between $10 million and $12 million in lease termination and closure-related costs. The process is expected to occur over six to nine months, with the most significant activity projected for the third quarter of 2026.
Lefebvre emphasized that where a viable path to improvement existed, the company chose to continue investing. However, for locations where the fundamentals could no longer support ongoing operations, closure was deemed the “right long-term action” to protect the company’s economic health.
Looking Toward Stability
Despite the disappointing headline numbers, there were pockets of resilience within MTY’s performance. Free cash flow, net of lease repayments, improved significantly to $32.2 million, an increase of 80.9% year-over-year. This cash generation provides the company with greater flexibility to navigate the current economic downturn and execute its restructuring plans.
Furthermore, while same-store sales remained negative, management noted sequential improvements from the first quarter. In Canada, some concepts even saw positive same-store sales in June, though executives cautioned that it is too early to determine if this marks a sustained recovery.
The Road Ahead
The market reaction to the announcement was relatively muted, reflecting a focus on the company’s transition to a more efficient, asset-light model. By trimming its underperforming corporate units, MTY aims to improve its portfolio quality and focus resources on higher-velocity franchise banners.
As MTY moves forward, the company is also looking toward technological integration, including the use of data and AI to enhance customer communication and engagement. While the short-term optics may remain soft due to restructuring charges and reduced store counts, management believes these steps will position MTY to return to growth once broader economic conditions improve.
The success of this strategy will ultimately depend on whether the company can successfully stabilize its remaining portfolio and demonstrate that its core concepts can withstand the current pressure on consumer discretionary spending. For now, MTY is prioritizing fundamental health over rapid expansion, a cautious approach that highlights the ongoing evolution of the restaurant franchising industry in 2026.
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