MTY Food Group Closes 68 Restaurants, Papa Murphy’s Hit Hardest

MTY Food Group announced Friday it will close 68 underperforming corporate-owned restaurants over the next six to nine months, with up to 50 being Papa Murphy’s locations. The Montreal-based restaurant operator reported second-quarter net income of $15.4 million, down 73% from $57.3 million a year earlier, and revenue fell to $279.9 million from $304.9 million. CEO Eric Lefebvre said the closures will cost $10 million to $12 million but are necessary to improve long-term profitability.

Why MTY is shutting down so many restaurants

The 68 locations slated for closure lost more than $10 million over the past year, according to CEO Eric Lefebvre. MTY operates over 7,000 restaurants globally under more than 80 brands including Thai Express, Mr. Sub, Manchu Wok, Cold Stone Creamery, and Wetzel’s Pretzels. While a handful of closures are in Canada, the majority are in the United States, though Lefebvre said no Quebec locations would close.

MTY’s earnings miss signals broader consumer pressure

Revenue of $279.9 million missed analyst expectations of $290.4 million. Same-store sales fell 2.1% year-over-year. Adjusted earnings per share came in at 97 cents, below the expected $1.12. Lefebvre blamed the weaker results on continued pressure on consumer spending and a difficult operating environment.

Stock plummets on restructuring news

MTY shares sank on Friday after the earnings announcement, falling 10.6% to C$33.75. The stock has declined 26.1% over the past year and trades at a P/E of 6.72. Meyka rates MTY.TO a B+ with a 12-month price forecast of C$31.94, suggesting limited upside from current levels. The RSI sits at 27.15, indicating oversold conditions.

Timeline and next steps

Some restaurants are scheduled to close as early as the week of July 13. Lefebvre said the company is taking a measured approach to minimize disruption for employees, landlords, and suppliers. The restructuring is expected to be completed within six to nine months. The company has not disclosed which specific locations will close or the total number of jobs affected.

Final Thoughts

MTY’s aggressive store closures reflect mounting pressure on quick-service restaurants from consumer spending weakness and high operating costs. With Meyka grading the stock B+ but forecasting a 5.5% decline to C$31.94 and the RSI deeply oversold at 27, the restructuring may stabilize the business but offers limited near-term upside.

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