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Papa Murphy’s loss widens in 3Q as store count falls

Chain focusing on refranchising, staff cuts to franchise sales and development

With sales falling and its loss widening, Papa Murphy’s Holdings Inc. said Wednesday that it cut staff in its franchise sales and development departments to focus on selling company stores to franchisees.

The Vancouver, Wash.-based take-and-bake pizza chain said its same-store sales declined 4.1 percent in the third quarter ended Oct. 2, and 9.8 percent on a two-year “stacked” basis. 

Revenue at the company declined 6 percent to $26.8 million, from $28.5 million, while the company reported a net loss of $1.9 million, or 11 cents per share — far worse than the 3-cent loss the company reported a year ago.

Included in the loss was a $4.4 million, non-cash charge related to the impairment of assets in four company-store markets. The precise nature of the impairment was uncertain as of Wednesday’s earnings release.

Meanwhile, the number of locations in the chain has declined by 40 since last year. Papa Murphy’s now operates 1,542 locations, 148 of them company owned. A year ago the chain operated 1,582 locations, 166 of them company owned.

Weldon Spangler, Papa Murphy’s CEO, said that the company has since the end of the quarter cut “capacity” in its franchise sales and development functions, expected to save the company more than $1 million in 2018.

The company is not focused on new unit openings, he said. “As the system focuses on top-line growth and absorbing the refranchising of over 100 company stores, we don’t believe new unit openings will be significant,” Spangler said in a statement.

Papa Murphy’s has contracted with a third party to sell company stores to franchisees, a process expected to begin next week. The company wants franchisees to operate 95 percent of its locations. Spangler said the company is committed to doing do “with a sense of urgency.”

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

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