Papa Murphy’s offering stores as franchises

Following a difficult 2016 and the resignation of its top executive, Papa Murphy’s announced plans Tuesday to sell company-owned stores as franchises with the help of a consulting firm.

The Vancouver-based seller of take-and-bake pizza will rely on Franchise Performance Group to help sell stores. In the announcement, executives said refranchising was always part of the plan.

“Our long-term strategy has always been to deliver attractive returns through an asset-light, franchised business model,” said board chair Jean Birch, who replaced Ken Calwell as CEO at the start of the year, in a statement.

By selling company-owned stores, Papa Murphy’s trades one revenue stream for another: Instead of from pizza sales, its revenues will come from royalties, licensing fees and property rentals paid by franchisees. It takes labor and commodity costs out of the equation for Papa Murphy’s, as well.

The company invested heavily in new locations in recent years. Earnings reports filed with the Securities and Exchange Commission show the company added nearly 25 percent to its store count, both franchised and company-owned, since 2014.

A November filing shows Papa Murphy’s Holdings Inc. had 166 corporate-owned stores and 1,375 franchises.

“Refranchising these locations will generate significant cash flow which we will use to reduce leverage,” Birch said in a statement.

Papa Murphy’s Holdings Inc., traded as FRSH on the Nasdaq exchange, saw share prices drop 60 percent in 2016. Then-CEO Calwell called the company’s third-quarter sales “disappointing” before announcing his resignation at the end of September. For the year, sales dropped 5.2 percent.

The pizza company, which went public in 2014, also expects to launch its first national television advertising campaign this year.