Papa Murphy’s initial stock offering Friday on the Nasdaq exchange went as well as could be expected for the Vancouver-based pizza chain, with the company’s stock price staying above its $11 per share opening price throughout the session before closing at $11.05.
Following the ringing of the opening bell by company CEO Ken Calwell, the company’s stock ranged in price from $12.10 to $11.03 over the course of the trading session. The company, using the trading ticker FRSH.
The company, which had hoped to raise up to $70 million to finance an aggressive growth strategy and to pay off debt, raised about $63.8 million in the offering.
Papa Murphy’s aims to expand its reach well beyond its 1,349 franchised outlets and 69 company owned stores in 38 states, Canada and the United Arab Emirates. It said in its stock filing that it sees potential for up to 4,500 outlets. It expects this year to grow by between 105 and 115 stores. It reported sales of $785,6 million in 2013. It’s revenue for that year of $36.9 million produced a one-year loss of $2.6 million.
The company has been owned since 2011 it has been owned by Lee Equity Partners Inc., a New York private equity firm that purchased the company for $180 million from Charlesbank Capital Investors of Boston.
Before the stock offering, Lee Equity and its affiliates owned approximately 62 percent of the company’s outstanding stock, and it will own 40 percent even after Friday’s stock sale, Papa Murphy’s said in a recent filing to the U.S. Securities and Exchange Commission.
Papa Murphy’s has faced discontent from some of its franchise owners. Last month, 20 franchisees who own a total of about 60 stores filed a lawsuit against the company in Clark County Superior Court.
Their 11-count suit accuses Papa Murphy’s International of failing to disclose accurate information about the financial performance of stores in Southern and Southeastern states and of collecting more than the contracted amount for advertising.
The franchise owners also said they were not told that they would need to spend more on advertising to achieve sales comparable to stores in the Pacific Northwest and other parts of the country, Howard Bundy, a Kirkland attorney representing the franchisees, told The Columbian.
Papa Murphy’s executives also heard last year from franchisees representing 820 stores who raised a wide range of communication, profitability, product quality, and strategic growth issues.
Those issues were outlined in a Sept. 20, 2013 letter to management obtained by The Columbian.
Calwell, who was set to return to Washington at the close of Friday’s market, was not available for comment, a company spokesperson said.
Papa Murphy’s is ranked in fifth place among all pizza chains in sales and in number of outlets. Its net losses — including a $2.6 million loss in 2013 — as well as a lack of national recognition and current unsettled relations with some franchisees are among the company’s challenges.
Papa Murphy’s take-and-bake concept was recently ranked by Market Force Information as No. 1 — ahead of bigger chains such as Papa John’s, Domino’s and Pizza Hut — among consumers who would recommend the brand to friends and family, and for food quality, customer service, atmosphere and overall value.