In this FDD Talk 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 2020 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 2020 FDD

• Section IV – Number of franchised and company-owned Papa Murphy’s outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Papa Murphy’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average, median, highest, and lowest net sales for the top third, middle third, and lower third of the 1,319 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 30, 2019

• 2019 average, median, highest, and lowest net sales for the top third, middle third, and lower third of the 1,230 domestic Papa Murphy’s Take ‘N’ Bake Pizza franchised stores that were open and operating for all of the trailing 52 weeks ending on September 30, 2019

• 2019 average, median, highest, and lowest net sales for the top third, middle third, and lower third of the 89 domestic Papa Murphy’s Take ‘N’ Bake Pizza company-owned stores that were open and operating for all of the trailing 52 weeks ending on September 30, 2019

• 2019 average net sales, cost of goods sold, labor costs, advertising expenses, occupancy costs, other store expenses, royalties, and store contribution for the 659 Papa Murphy’s franchised stores that were open and operating for all of the trailing 52 weeks ending on September 30, 2019, and submitted profit and loss statements in the appropriate format for this period

• 2019 average weekly net sales during the first 12 full operating weeks for the 3 Papa Murphy’s stores that opened in fiscal year 2019 and had 12 or more full operating weeks as of the week ended December 30, 2019

Section I – Background Information

18 Things You Need to Know About the Papa Murphy’s Franchise

Announces Partnership with No Kid Hungry to Help Feed Kids During School Closures and Beyond

1.  In late April 2020, Papa Murphy’s announced that it was teaming up with No Kid Hungry during this COVID-19 pandemic to feed kids in need, particularly the many vulnerable children across the country that are losing the meals they depend on during school closures. Together with No Kid Hungry and its generous guests, Papa Murphy’s aims to make a positive impact, one pizza at a time.

2.  The funds raised through Papa Murphy’s partnership with No Kid Hungry will go towards providing emergency grants to immediately help schools and community groups feed kids during the COVID-19 outbreak and beyond.

3.  From April 20 to May 20, Papa Murphy’s donated $1 for every Cheese or Pepperoni Mini Murph Make ’n’ Bake Pizza Kit sold online to the No Kid Hungry organization. Guests also have the option to donate in one of the three following ways:

• Online through checkout;
• At the register;
• Via a secure link on the No Kid Hungry webpage (www.nokidhungry.org/papamurphys).

4.  Kim McBee, senior vice president of marketing for Papa Murphy’s, said, “Our hearts go out to every person impacted by the coronavirus crisis, and we are grateful for this opportunity to join No Kid Hungry’s efforts to provide relief to those in need. Simply ordering and enjoying a fresh and fun Mini Murph kit can make a significant difference for a child in need.”

5.  During this unique time of stay-at-home and social distancing measures, Papa Murphy’s continues to focus on the highest level of service for guests and communities. Stores have made it easier than ever for customers to bake their favorite pizza at home and to contribute to the No Kid Hungry campaign.

6.  Customers can order online or through their favorite delivery app. At the store, “quick pick-up” racks are conveniently placed near the entrance, so guests can limit time inside. Where possible, curbside pick-up and drive-thru options are also offered, to allow guests to stay in their vehicles.

7.  Diana Hovey, senior vice president of Share Our Strength, the organization behind the No Kid Hungry campaign, added, “We’re proud and thankful to partner with Papa Murphy’s and greatly value their support of our mission that no child should ever go hungry.”

Alaska Location Makes Delivery by Air

8.  In mid-January 2020, it was reported by Alaska Public Media that Papa Murphy’s in Anchorage flies hundreds of miles to deliver about 150 pizzas each week. Owner Tyler Williams said the shop offers assembled pizzas for its Anchorage customers to take home to bake. The rest of the uncooked pies are flash-frozen for air delivery to customers throughout Alaska.

9.  According to Williams, “They get flown out frozen. Once the customer gets them it takes two to three days, depending on weather. They defrost them, it takes just a couple hours on the counter.” Williams continued, “All of our pizzas are made fresh in house, we grate our cheese every day, process our veggies every day, make our dough every day. So it’s all extremely fresh product that we make and we flash freeze them.”

10.  He said that the air deliveries began as a simple matter of supplying a demand. “We just had people calling us, asking us to bring pizzas to the airport and drop them off,” Williams said.

11.  Orders are shipped out frequently and travel as far as Prudhoe Bay at the top of the state, which would be a delivery of 855 miles (1,376 kilometers) by car. “Now we do several bush orders a week,” Williams said. “We work with several schools in Alaska and churches, stuff like that. We do big fundraisers.”

12.  Flying to remote parts of the state can be expensive, but Williams said Papa Murphy’s partners with airlines to minimize shipping costs. Williams continued, “Our profit per pizza is a little bit less. But the fact that we’re shipping, because we’re covering the shipping cost in most cases, since we’re doing orders of 10 or more, there’s enough margin there to make it work.”

Company History

13.  Papa Murphy’s began in 1995 after Terry Collins acquired Papa Aldo’s Pizza and Murphy’s Pizza. Papa Aldo’s Pizza was founded in 1981 in Hillsboro, Oregon, while Murphy’s Pizza was started in 1984 by Robert Graham in Petaluma, California. Both Papa Aldo’s Pizza and Murphy’s Pizza were take-and-bake concepts.

14.  Collins, who had worked as a fast-food executive with experience at Burger Chef and Pepsico, first met Robert Graham in 1988. Although Graham had developed a good pizza recipe, he was unable to grow Murphy’s Pizza due to a lack of fast-food experience. Collins was so impressed by Graham’s concept that he bought a majority stake in Murphy’s Pizza. Then in 1990, Collins expanded his holdings by acquiring Papa Aldo’s Pizza.

15.  After a few years of operating Papa Aldo’s Pizza and Murphy’s Pizza separately, Collins tested a unified brand in 1994. A year later, he decided to completely merge the Papa Aldo’s Pizza and Murphy’s Pizza brands into Papa Murphy’s. Papa Murphy’s grew quickly over the next few years and in 2010, the company was sold to Lee Equity Partners of New York.

16.  Under this new ownership, Papa Murphy’s expanded even more and by 2012, the chain had over 1,350 stores. However, sales slumped over the next few years. After a loss in the third quarter of 2016, Papa Murphy’s announced that it would launch its first national advertising campaign in 2017.

17.  In recent years, Papa Murphy’s has closed several stores while sales continued to decline. In 2019, Papa Murphy’s was acquired by MTY Food Group for $190 million.

Entrepreneur’s Franchise 500

18.  Papa Murphy’s did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Papa Murphy’s franchise costs, based on Item 7 of the company’s 2020 FDD.

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 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  1,369
• Outlets at the End of the Year:  1,334
• Net Change:  -35

2018

• Outlets at the Start of the Year:  1,334
• Outlets at the End of the Year:  1,291
• Net Change:  -43

2019

• Outlets at the Start of the Year:  1,291
• Outlets at the End of the Year:  1,256
• Net Change:  -35

Company-Owned

2017

• Outlets at the Start of the Year:  168
• Outlets at the End of the Year:  145
• Net Change:  -23

2018

• Outlets at the Start of the Year:  145
• Outlets at the End of the Year:  106
• Net Change:  -39

2019

• Outlets at the Start of the Year:  106
• Outlets at the End of the Year:  74
• Net Change:  -32

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

Part 1 – System Store Performance

• As of September 30, 2019, there were 1,343 domestic Papa Murphy’s Take ‘N’ Bake Pizza stores open.

• The statements in this System Store Performance section are based on information reported by the 1,319 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 30, 2019. These stores represent 89 company-owned stores and 1,230 franchise-owned stores (collectively referred to herein as “System Stores”).

• The System Stores were divided into three groups with the same number of stores in each group based on Net Sales results: top third (“High”), middle third (“Medium”), and lower third (“Low”).

System Stores (Franchised and Company-Owned Outlets)