Papa Murphy’s to divest stake in Project PiePapa Murphy’s to divest stake in Project Pie

Papa Murphy’s Holdings Inc. plans to divest its interest in the fast-casual Project Pie chain to focus on its primary Take ’N’ Bake Pizza brand, the company said Wednesday.

The Vancouver, Wash.-based company, which operates and franchises 1,476-unit Papa Murphy’s Take ’N’ Bake Pizza, holds a 40-percent interest in Project Pie, along with the call rights option of increasing that investment. Carlsbad, Calif.-based Project Pie has 18 units, with another five locations scheduled to open within the next month.

In a call with analysts following the report of first-quarter earnings, Papa Murphy’s president and CEO Ken Calwell said he believes there is strong value in the Project Pie brand and in the fast-casual pizza category as a whole.

However, “We want to be fully focused on the incredible growth opportunity we have right before us with Papa Murphy’s,” Calwell said. “As we approach our 1,500th store opening and the $1 billion system sales mark with Papa Murphy’s, we believe we are only one-third of the way towards our goal of opening at least 4,500 Papa Murphy’s stores in the U.S. alone.”

Papa Murphy’s first invested about $2 million in Project Pie in December 2013. The company said the carrying value of that investment, in aggregate, is currently about $4.8 million.

The Project Pie investment stems from Papa Murphy’s ownership by Lee Equity Partners, before the take-and-bake pizza chain went public in March 2014.

In late 2013, Lee Equity Partners made a significant investment in the then-six-unit Project Pie, based in Carlsbad, Calif., which had aggressive growth plans to reach 200 to 300 units within five years.

In Securities and Exchange Commission filings related to the IPO, Papa Murphy’s said it had acquired 26 percent of outstanding common units in Project Pie for $2 million.

Papa Murphy’s, meanwhile, is seeing results from new menu innovations and the rollout of a new point-of-sale system, Calwell said.

Calwell credited a 5.6-percent increase in domestic systemwide same-store sales to the success of the Gourmet Delite line of pizzas launched in the fourth quarter of 2014, as well as the ongoing rollout of the new POS system, which is now in 1,100 units. The POS is expected to be in all units by mid 2016.

The POS has opened doors for the launch of online ordering, now available in about 570 locations. Though still a small percentage of the mix, online orders tend to have check averages that are 25 percent to 30 percent higher than those placed in units, Calwell said.

“With POS and online ordering, we’re laying the foundation for precision marketing, which we see as the ultimate benefit of the digital strategy,” he said. “With precision marketing, we’ll have the capability to build increased awareness and drive frequency as purchased by marketing directly to our customer with a targeted message most relevant to our primary target — moms — giving her what she wants, when and where she wants it.”

Contact Lisa Jennings at [email protected].
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