Same-store sales at Papa Murphy’s Take ‘N’ Bake Pizza are benefiting from the continued rollout of a new point-of-sale system and improved operations, parent company Papa Murphy’s Holdings Inc. said Wednesday after reporting strong second-quarter earnings.

The Vancouver, Wash.-based operator recorded a widened loss of $1.6 million for the June 30-ended quarter, but that largely represented expenses related to its initial public offering in May.

Pro forma net income, which excludes most of the one-time charges associated with the IPO, increased 175 percent, to $1.1 million, or 7 cents per share, compared with $400,000, or 2 cents per share, a year ago.

Papa Murphy’s president and chief executive Ken Calwell said a better-than-expected increase in same-store sales at company-owned restaurants, of 5.7 percent, indicates that the chain is on track to see domestic comps grow at least 2 percent for the fiscal year systemwide.

Papa Murphy’s is mostly franchised. Of its 1,436 locations systemwide, 67 units are company-owned.

Franchised locations recorded more modest same-store sales growth, of 1.2 percent, for the second quarter. Calwell said the disparity indicates the effectiveness of initiatives to improve operations, which company locations and certain “early adopter” franchise operators have put in place. For example, all company-owned locations have rolled out the chain’s new POS system.

Franchise operators are also getting on board, and the POS system is available in about 900 locations, about 60 percent of the unit base, but it will be another 18 months before the program is systemwide.

Locations with the POS system have shown improved unit-level profitability, including better management of food costs and higher scores on speed of service and accuracy, he said.

The new POS system will also set the stage for online and mobile ordering.

Papa Murphy’s is testing online and mobile ordering in about 300 locations. Even without marketing the tool yet, those units are showing a higher average check, he said.

“Those who order online tend to order more than when in stores,” said Calwell. “The consumer has more time, so it helps drive add-on sales. Mom is looking for a meal, not just pizza, so she has more time to carefully consider what she’d like to add.”

Meanwhile, Calwell declined to comment in detail about ongoing litigation with franchise operators that have charged the company with misrepresenting the health of the brand in franchise disclosure documents.

However, the CEO expressed confidence in the outcome, noting that the company has not felt the need to set aside any reserve to address potential costs.

Additionally, in a minor victory for the company, a Washington State court judge recently ruled that franchise operators that haven’t sued must first go through mediation if similar disputes arise, which Calwell said would allow company officials to sit down with operators and help them work through their business.

Contact Lisa Jennings at lisa.jennings@penton.com
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