MTY Food Group Inc. (TSE:MTY) announced plans to close 68 of its corporate-owned stores, representing roughly 29% of its 232 company-run locations, as the company seeks to restructure its operations and improve margins. The closures include 45 to 50 Papa Murphy's stores, effectively exiting the company's direct management of that brand.
Scope of the Closures
The 68 closures represent less than 1% of MTY's global network of 7,040 restaurants, but the impact is concentrated on its corporate-owned portfolio. At the end of 2025, Papa Murphy's had 49 company-operated units, meaning the planned closures would eliminate nearly all of them. CEO Eric Lefebvre noted that the 45-50 figure was from memory, and the exact count could vary.
Financial Impact
MTY estimates exit costs of C$10 million to C$12 million, roughly equal to the losses these stores generated over the past year on a four-wall EBITDA basis. The charges represent 31% to 37% of the company's second-quarter free cash flow of C$32.2 million. The company expects the process to take six to nine months, with most activity in the fiscal third quarter.
In its second quarter, MTY reported an 8.2% decline in revenue to C$279.9 million, with normalized adjusted EBITDA falling C$9.8 million to C$60.2 million. Corporate-store margins slipped to 5% from 9% a year earlier. CFO Renée St-Onge said the reduced store base should help margins return to the "high single-digit level" after the closures.
Papa Murphy's Struggles
Papa Murphy's, the take-and-bake pizza chain, has underperformed since MTY took back three groups of locations from franchisees two years ago. While some stores improved, management concluded that many markets are not viable for the concept. Lefebvre noted that U.S. pizza consumers exhibit "very little loyalty" and are highly price-sensitive, making it difficult to sustain profitability amid heavy discounting.
The chain's total store count has declined 13% from 1,168 in 2023 to 1,014 in 2025, with 965 franchised locations. The upcoming closures affect 4.4% to 4.9% of the overall network, but most of MTY's company-run Papa Murphy's sites will disappear. This shift could reduce revenue but increase royalty income while lowering operating costs.
Broader Implications
Lefebvre emphasized that Papa Murphy's accounts for 66% to 74% of the restaurant closures but not the majority of losses or exit costs, indicating that other MTY brands are also underperforming. The company has not released a list of closing locations, and management is working carefully with employees, landlords, and distributors.
Risks remain: lease-termination fees could exceed estimates, some central costs may persist, and MTY lacks precise profitability data for individual franchisees, meaning more underperforming Papa Murphy's stores could still exist. Investors will focus on corporate-store margins and U.S. same-store sales (excluding Papa Murphy's) over the next two quarters. June same-store sales were roughly flat, and management expects margins to recover to high single digits. If those metrics improve, the C$10 million to C$12 million charge may prove a worthwhile fix. If not, MTY's challenges run deeper than the stores being closed.