Papa Murphy’s continues refranchising push

Papa Murphy’s Holdings Inc. continued to sell company-owned stores in the fourth quarter as it worked toward a target of being 95% franchised by the end of 2020, executives said Thursday.

The Vancouver-Wash.-based take-and-bake pizza brand refranchised 29 and closed 10 company-owned stores in 2018, bringing its total to 106 company-owned stores at the end of the quarter.

Related: Papa Murphy's considers sale of company amid continued sales decline in 3Q

Nik Rupp, Papa Murphy’s chief financial officer, said the company has targeted, by the end of 2020, having no more than 50 company-owned stores in the system, which totaled 1,437 units at the end of 2018.

The company announced in November that it was seeking strategic alternatives, including a possible sale.

Weldon Spangler, Papa Murphy’s CEO, said in a fourth-quarter earnings call that the company’s board was still doing its review of strategic options.

 “Although we’ve made significant progress in reviewing the strategic alternatives,” Spangler said, “we are not yet in a position to make further public comment regarding the review until it has been completed. We hope to be able to provide a further update in the near future.”

For the fourth quarter ended Dec. 31, with store closures and refranchising, Papa Murphy’s income fell 83.6% to $2 million, or 12 cents a share, from $12.2 million, or 72 cents a share, in the prior-year period. Revenues fell 16.9%, to $32 million, from $38.5 million in the same quarter last year.

Same-store sales declined 1.3% in the fourth quarter, but they were positive in October, which the company said was the first period of positive same-store sales growth in 37 months.

Spangler said the positive October reflected strides Papa Murphy’s had made in its initiatives to drive sales, including a new e-commerce platform introduced last March.

“Since then, we’ve continued to see a steady increase in the mix of online orders with fourth quarter e-commerce sales seeing growth of 34% over Q3 of 2018,” Spangler said.

Online check averages remained higher than in-store transactions in the fourth quarter, up about 28% more than check averages from within the four-wall stores, he said.

“In addition, while delivery orders are still a very small part of the overall business, the mix in our top 10 stores offering delivery hit 4% during Q4 2018,” he said.

“At year-end, delivery was available in 480 stores, and orders remain highly incremental,” Spangler noted. “With our strategic focus on improving customer convenience, we have set a goal to double the number of stores offering delivery by the end of 2019.”

A branded mobile smartphone app was introduced in the fall, and Spangler said the next step will be a loyalty program. The company is in the process of selecting a company to add that later this year, he said.

Papa Murphy’s, founded in 1981, has stores in 37 states, Canada and the United Arab Emirates.

Contact Ron Ruggless at [email protected]

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