The parent to the Papa Murphy’s Take ‘N’ Bake Pizza chain filed for an initial public offering Tuesday with the goal of raising $70 million.

Long considered a candidate for a public offering, Vancouver, Wash.-based Papa Murphy’s Holdings Inc. is the second restaurant chain to announce a proposed IPO this week. On Monday, the parent of the fast-casual Zoës Kitchen chain filed for an $80.5 million IPO.

Papa Murphy’s will trade on the NASDAQ Global Select Market under the trading symbol FRSH.

Jefferies LLC, Robert W. Baird & Co., and Wells Fargo Securities are acting as joint book running managers for the proposed offering. William Blair & Company LLC, Raymond James & Associates Inc., and Stephens Inc. are acting as co-managers.

Affiliates of New York-based private-equity firm Lee Equity Partners LLC acquired a majority stake in Papa Murphy’s International in May 2010 from Charlesbank Capital Partners.

Late last year, Lee Equity Partners made a significant investment in the emerging fast-casual pizza concept Project Pie, which is based in San Diego and has seven locations.

In filings with the Securities and Exchange Commission, Papa Murphy’s said it acquired about 26 percent of outstanding common units in Project Pie in December for about $2 million. The move gives Papa Murphy’s a foothold in a rapidly growing fast-casual niche within the $38 billion pizza segment. Project Pie projects growth of between 200 to 300 units within the next five years, both domestic and international.

Founded in 1981, Papa Murphy’s is known for its customizable pizzas. Unlike most pizza chains, guests take the freshly prepared pies home to bake in their own ovens. Price points range from the value-positioned $5 Faves line of classic pizzas, to more premium Stuffed pizzas, priced at $15 per pie.

Systemwide sales increased from $385.9 million in 2004 to $785.6 million in 2013, according to SEC filings. Same-store sales for 2013 increased 2.8 percent over the prior year, and the company said units have generated positive same-store sales growth in 35 of the last 40 quarters, averaging increases of about 4 percent over the last decade.

For fiscal 2013, however, the franchisor recorded a net loss of $2.6 million, compared with a loss of $2.1 million in fiscal 2012. Revenue for 2013 increased 20 percent, to $80.5 million, compared with $66.9 million the prior year.

As of the end of fiscal 2013, the nearly fully franchised chain included 1,418 locations in 38 states, Canada and the United Arab Emirates. About 69 units are company-owned. The company projects the chain has the potential to reach 4,500 units in the U.S., including about 2,500 new locations in existing markets.

The simplified business model is attractive to franchisees: units are typically about 1,400 square feet and have a relatively low build-out cost because the concept requires no ovens or freezers. Labor costs are lower than full-service restaurants because there is no dine-in service.

Franchisees are expected to open between 105 and 115 units in 2014. Last year, 98 franchise locations opened.

Papa Murphy’s recently introduced online ordering after testing the service in about 300 units last year. The move increased frequency and average transaction size, the company said.

The chain is also in the early stages of testing a remodeling program. Last year it debuted a new “Create” design that highlights the concept’s fresh ingredients.

Contact Lisa Jennings at lisa.jennings@penton.com.
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