MONTREAL — MTY Food Group, the Canadian franchising giant behind dozens of recognizable quick-service brands, has announced a targeted but significant reduction in its corporate store footprint. The move, spearheaded by CEO Eric Lefebvre, marks a pivotal moment for the company as it seeks to insulate its portfolio from underperforming assets, with the Take ‘n’ Bake pizza chain, Papa Murphy’s, bearing the brunt of the restructuring.

While the closures represent only approximately 1% of MTY’s massive global store base, the strategic implications are far-reaching. The decision highlights a broader trend in the restaurant industry: a "flight to quality" where franchisors are aggressively shedding corporate-owned liabilities to focus on high-margin, high-growth opportunities.

Main Facts: A Surgical Strike on Underperformance

MTY Food Group’s decision to shutter locations is less a retreat and more a tactical reorganization. According to CEO Eric Lefebvre, the closures are designed to excise "significant weight" from the company’s Quick Service Restaurant (QSR) segment.

The Scope of the Closures

The closures will primarily target corporate-owned locations rather than franchised units. For a company like MTY, which operates on a 97% franchised or operator-agreement model, the corporate store portfolio is a small but intensive part of the business. By closing these units, MTY aims to:

• Reduce Operational Losses: Corporate stores that underperform hit the bottom line directly, unlike franchised units where the franchisor primarily collects royalties.
• Optimize Resource Allocation: Management bandwidth and capital will be redirected toward brands with "stronger return potential."
• Improve Portfolio Health: By removing the bottom-tier performers, the company’s average unit volume (AUV) and same-store sales (SSS) metrics are expected to stabilize.

The Papa Murphy’s Problem

The focal point of this retrenchment is Papa Murphy’s. Once a disruptor in the pizza space with its "Take ‘n’ Bake" model, the brand has struggled to maintain its footing in a post-pandemic economy dominated by third-party delivery and high-speed digital ordering. MTY’s recent filings reveal that Papa Murphy’s has been the primary laggard in the portfolio, prompting a near-total liquidation of its remaining corporate-owned units.

Chronology: The Erosion of a Pizza Giant

To understand MTY’s current predicament, one must look at the trajectory of Papa Murphy’s over the last several years. MTY acquired the chain in 2019 for approximately $190 million, hoping to leverage its unique niche in the U.S. market. However, the subsequent years have been characterized by a steady contraction.

• 2023: Papa Murphy’s maintained a relatively robust footprint of 1,168 locations across North America. Despite the large number, internal reports began to signal cracks in franchisee profitability and digital engagement.
• Late 2024: MTY began a "slow but gradual" disposal of certain stores, attempting to sell them to franchisees or close them if no buyer was found.
• 2025: The store count plummeted to 1,014 units. This period saw the closure of over 150 locations, the vast majority of which were franchised. This signaled a crisis of confidence among independent operators.
• July 2026: MTY reports a 2.1% decline in company-wide same-store sales for the second quarter.
• July 13, 2026: The first wave of systematic closures begins, focusing on the remaining 49 corporate-owned Papa Murphy’s locations.

Lefebvre emphasized that this process is "deliberate." The company is moving slowly to ensure that staff are protected, leases are negotiated properly with landlords, and distribution logistics are managed to avoid "fire sale" conditions.

Supporting Data: The Numbers Behind the Strategy

The financial health of MTY Food Group remains stable overall, but the "drag" from Papa Murphy’s is evident in the data.

Store Count and Composition

As of the end of Q2 2026, MTY Food Group’s total system consisted of 7,040 locations.

• Franchised/Licensed: ~6,828 units (97%).
• Corporate-Owned: ~212 units (3%).

The planned closures of roughly 70 stores (1% of the total base) represent a massive 33% reduction in the company’s corporate-owned portfolio. Specifically, because Papa Murphy’s had only 49 corporate units left at the start of 2026, the current initiative effectively signals the end of MTY’s experiment with owning and operating this specific brand directly.

Financial Performance Metrics

The Q2 2026 earnings release painted a picture of a company facing headwinds:

• Same-Store Sales (SSS): A system-wide decrease of 2.1%.
• Net Openings: Despite the closures, MTY managed six net store openings in Q2, indicating that while some brands are shrinking, others—likely in the "casual dining" or "snack" segments—are still expanding.
• Papa Murphy’s Decline: The brand’s footprint has shrunk by 13.2% since 2023.

The "Domino’s Effect"

The data suggests that the struggle isn’t universal across the pizza industry, but rather specific to those who cannot compete with the technological and logistical might of Domino’s. In the same period that Papa Murphy’s lost over 150 stores, Domino’s increased its market share significantly, leveraging its proprietary delivery fleet and "Fortress" expansion strategy to crowd out competitors like Pizza Hut, Papa Johns, and Papa Murphy’s.

Official Responses: Management’s Vision for the Future

CEO Eric Lefebvre has been candid about the necessity of these closures, framing them as a "long-term action" rather than a sign of systemic failure.

"The decision will reduce our store count in the near term, but we believe it is the right long-term action for the business," Lefebvre stated during the Q2 earnings call. "It will allow us to reduce losses, improve the quality of the corporate store portfolio, and focus our resources on locations and brands with stronger return potential."

Regarding the specific struggles of Papa Murphy’s, Lefebvre admitted, "Papa Murphy’s, certainly in the U.S., has been struggling more than our other brands as of recent. So that’s a significant weight on QSR. We have some other brands also that have been exposed… but nothing of the magnitude of the struggles we have with Papa Murphy’s."

Corrective Measures

MTY is not giving up on the brand entirely. Instead, they are pivoting to a support role for their remaining 1,000+ franchisees. Initiatives include:

1. Marketing Compliance: Working with franchisees to ensure they are contributing to the national marketing fund, a point of contention in previous years.
2. Digital Revitalization: A complete overhaul of the rewards program to boost declining digital sales.
3. Menu Optimization: Developing a new lineup of pizzas designed to drive foot traffic and appeal to a younger demographic that may be unfamiliar with the "Take ‘n’ Bake" concept.

Implications: A Shifting Landscape for QSRs

The retrenchment at MTY Food Group is a microcosm of the challenges facing the broader restaurant industry in 2026. Several key implications emerge from this move.

1. The Death of the "In-Between" Model

Papa Murphy’s occupies a strange middle ground: it provides a fresh product, but the consumer has to cook it themselves. In an era where "ultra-convenience" is the primary driver of consumer behavior, the "Take ‘n’ Bake" model is under fire. If a consumer has to drive to a store to pick up a pizza and then wait 20 minutes for their oven to preheat, they are increasingly choosing either a frozen grocery store pizza (cheaper) or a delivered, ready-to-eat Domino’s pizza (easier).

2. The Move to "Asset-Light"

MTY’s decision to exit corporate operations for struggling brands is a move toward an "asset-light" business model. By shedding the real estate and labor liabilities of corporate stores, MTY protects its stock price and dividend capacity. This is a trend seen across the industry, with companies like Wendy’s, Jack in the Box, and even Darden Restaurants evaluating their portfolios to ensure every unit is a profit center.

3. Consolidation and Market Share

The "Pizza Wars" of the mid-2020s are being won by those with the best data and the most efficient delivery. As Papa Murphy’s, Pizza Hut, and Papa Johns close underperforming units, the "Big Three" are becoming the "Big One" (Domino’s) plus everyone else. For MTY, the challenge will be to find a way to make Papa Murphy’s relevant again in a world that increasingly values time over the novelty of home-baking a professional pizza.

4. Impact on the Franchisee Ecosystem

The closure of corporate stores can be a double-edged sword for franchisees. On one hand, it shows the franchisor is serious about cutting "dead wood." On the other hand, it can signal a lack of confidence in the brand’s operational viability. MTY will need to work double-time to convince its 1,000 remaining Papa Murphy’s operators that the brand has a future.

Conclusion

MTY Food Group’s decision to prune its portfolio is a calculated gamble. By sacrificing 1% of its stores—specifically the "significant weight" of Papa Murphy’s corporate locations—the company is betting that a leaner, more focused operation will yield higher returns in the long run. As the first series of stores begins to close this July, the industry will be watching closely to see if MTY can successfully pivot its remaining brands toward growth or if this is merely the first wave of a larger contraction in the saturated QSR market.