In this FDD Talk 2017 post, you’ll learn the following:
- Section I – Background information on the Papa Murphy’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Papa Murphy’s franchise, based on Item 7 of the company’s 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Papa Murphy’s franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Papa Murphy’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average, high, and low net sales for the top third, middle third, and lower third of the 1,420 domestic Papa Murphy’s Take ‘N’ Bake Pizza stores, both franchise-owned and company-owned, that were open and operating for all of the trailing 52 weeks ending on September 26, 2016
- 2016 average net sales, cost of goods sold, labor costs, advertising expenses, occupancy costs, other store expenses, royalties, and store contribution for the 850 Papa Murphy’s stores that were open and operating for all of the trailing 52 weeks ending on September 26, 2016, and submitted profit and loss statements in the appropriate format for this period
- 2016 average weekly net sales during the first 12 full operating weeks for the 81 Papa Murphy’s stores that opened in fiscal year 2016 and had 12 or more full operating weeks as of the week ended January 2, 2017
Section I – Background Information
12 Things You Need to Know About the Papa Murphy’s Franchise
Delivery from Amazon in Portland and Seattle
1. In late April, Papa Murphy’s announced that seven company-owned restaurants in the Seattle and Portland areas would add Amazon delivery services. According to John Birch, interim CEO of Papa Murphy’s, the company’s product is uniquely suited for delivery because it arrives fresh for customers to bake at home when it fits their schedule.
2. Amazon Prime members living near the restaurants offering the service can use Amazon or Prime Now mobile apps to order their pizzas, track the status of the delivery, and watch as the delivery driver travels from the restaurant to the delivery address in real time.
Strategic Realignment of Resources
3. In early February, Papa Murphy’s announced a “strategic realignment of resources” aimed at better supporting franchise owners and field staff while reducing overall selling, general & administrative (SG&A) expenses. As part of the realignment, certain management positions and other corporate personnel will be eliminated.
4. Papa Murphy’s expects to generate annual SG&A savings of about $1.5 million. For 2017, the company expects to reduce SG&A expenses by nearly $1.2 million, exclusive of a pre-tax charge of about $1 million related to severance.
Development Incentive Programs
5. Papa Murphy’s is currently focused on driving franchisee growth and profitability through several key initiatives including the refranchising of company-owned stores. The company hopes to partner with “high-quality, well-capitalized” franchisees who can buy company-owned stores and further expand select markets.
6. At the end of January, Papa Murphy’s announced a new Growth Market Development Incentive focused on attracting operators that align with the brand’s values and culture. Qualified franchisees signing area development agreements in select larger markets through 2017 may be eligible for more than $75,000 per store in financial incentives, including:
- 0% royalties for the first three years of operation on all stores in the market. For the average store, this equates to around $22,000 per year in savings.
- $35,000 paid by Papa Murphy’s to the franchisee/area developer to help fund opening costs. This will be paid upon the opening of every new store during the first three years of operation.
- $1,500 monthly rebate paid by Papa Murphy’s to the franchisee/area developer for each store that opens during the first three years.
7. In addition to the new incentive program, the company will continue to offer the Growth Market Development Incentive that started in September 2016 which provides a franchise fee reduction of $5,000 per store. Franchisees are required to sign a new multi-store agreement or area development agreement of at least two stores.
8. In late March, Papa Murphy’s unveiled two new value options, the XLNY (Extra Large New York-Style) Pizza for $7 and two medium 2-topping pizzas for $5.99 each. Participating stores in select markets offered one of the deals for a limited time.
9. In addition to the two value options, Papa Murphy’s released Cowboy Cookie Dough – a scratch-made cookie dough with oats, coconut, white chocolate chips, and semi-sweet chocolate chips. The cookie dough is available at all Papa Murphy’s locations until May 28.
10. Papa Murphy’s was started in 1995 after Terry Collins acquired the Papa Aldo’s Pizza and Murphy’s Pizza chains and merged the two companies. The new pizza chain was incorporated as Papa Murphy’s International, Inc.
11. In 2010, Papa Murphy’s was acquired by Lee Equity Partners of New York. As of 2017, there are over 1,500 locations in the U.S., Canada, and Dubai.
Entrepreneur’s Franchise 500
12. Papa Murphy’s has ranked on Entrepreneur’s annual Franchise 500 list every year in the last decade. The company’s highest rank was No. 19 in 2016, while its lowest rank was No. 169 in 2017.
Section II – Estimated Costs
- Please click here for detailed estimates of Papa Murphy’s franchise costs, based on Item 7 of the company’s 2017 FDD (updated).
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Papa Murphy’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.