Historically, Papa
Murphy’s has stood out in the crowded pizza market with its unique
take-and-bake model, offering customers fresh, uncooked pizzas they could bake
at home. However, in recent years, the brand has faced significant headwinds,
threatening its market share and stifling store-level volumes, according to Steven Johnson Grocerant Guru®
at Tacoma, WA based Foodservice Solutions®.
While the company is a major player in the pizza sector,
accounting for one out of every seven restaurants in the MTY Food Group
portfolio, its struggles reflect broader challenges in the quick-service and
pizza industries.
A History of Value: From Convenience
to Cost Concerns
Papa Murphy’s
grew on a simple value proposition—offering a fresh, customizable pizza
experience at a competitive price, without the additional costs associated with
dine-in service or delivery. Historically, this model appealed to families and
time-strapped individuals looking for a convenient meal option they could
prepare at home.
Yet in 2024, this once-advantageous business model has
started to show cracks. As inflation continues to rise, the cost of ingredients
like cheese and flour has surged, along with labor expenses. These
macroeconomic pressures have forced many Papa Murphy’s franchisees to raise
prices, pushing the brand’s once-affordable pizza closer to the premium price
range of delivery and dine-in competitors like Domino’s and Pizza Hut.
While these increases have been necessary to offset growing
costs, they’ve also stifled store-level volumes. In a market where consumers
are increasingly looking for value, Papa Murphy’s higher prices are driving
some customers toward cheaper alternatives, leading to an erosion of its core
value proposition. The result? A string of store closures that threatens to
undermine the brand’s presence in key markets.
Store Closures and Market Share Losses
According to MTY Food Group, Papa Murphy’s closed a net of 43
locations in 2023, and the trend has continued into 2024. CEO Eric Lefebvre
recently acknowledged that certain markets have become "troubled,"
with specific clusters of stores closing due to low sales and profitability.
This wave of closures is concerning, particularly because Papa Murphy’s remains
the largest brand within the MTY portfolio.
While MTY has not broken down the specific performance
numbers by brand, its overall portfolio reported a 2% decline in same-store
sales in 2024. Store closures are disproportionately affecting Papa Murphy’s,
dragging down MTY’s total location count. Lefebvre noted that some closures
occurred because the company lacked the infrastructure to keep locations open
while finding a buyer for struggling franchisees.
Historically, Papa Murphy’s was seen as an asset in the
pizza market due to its low overhead, compared to traditional pizza delivery
chains. However, as customers balk at higher prices, the once-steady flow of
traffic has slowed, leaving operators struggling to justify staying open. For
some franchisees, the margins are simply no longer there.
Market Competition and the Future of
Take-and-Bake
One of the most significant threats to Papa Murphy’s market share is the
changing landscape of the pizza market itself. Competitors like Domino’s and
Little Caesars have doubled down on aggressive pricing strategies, offering
value deals, meal bundles, and delivery options that appeal to cost-conscious
consumers. Moreover, frozen pizza brands have improved product quality, making
it harder for Papa Murphy’s to maintain its niche as a premium take-and-bake
provider.
While Lefebvre mentioned that some of Papa Murphy’s
promotions have gained traction, leading to slight improvements in same-store
sales, the brand is still struggling to keep pace. The combination of higher
prices and shrinking consumer spending power has created a challenging
environment for the brand, forcing operators to close stores even as MTY
attempts to revitalize the chain with new promotions.
The Path Forward: Reinventing Value
If Papa Murphy’s hopes to recover its lost market share and
return to growth, the company must find ways to re-establish itself as a value
leader in the pizza market. Historically, Papa Murphy’s thrived on offering a
high-quality, affordable product that customers could enjoy at home. To regain
this position, the brand needs to carefully balance pricing with promotions
that drive traffic and encourage repeat visits.
One potential strategy could be to focus on the family meal
bundle—packaging pizzas with sides like salads and desserts at a price point
that competes with both delivery chains and grocery store alternatives.
Additionally, Papa Murphy’s could explore new convenience-driven innovations,
such as curbside pickup or partnership with third-party delivery services, to
widen its appeal to busy consumers.
Ultimately, Papa Murphy’s must address its pricing dilemma
if it hopes to stop the closure trend and recapture the loyalty of its
once-solid customer base. Otherwise, it risks losing even more ground to
aggressive competitors, further shrinking its slice of the pizza market pie.
Think About This
In the current economic climate, even established brands
like Papa Murphy’s are not immune to the pressures of inflation and shifting
consumer preferences. The rising price of its products, combined with increased
competition and the closure of underperforming stores, has put the brand in a
precarious position. To ensure its long-term survival, Papa Murphy’s must find
a way to lower costs or increase perceived value—before it loses its place in
the competitive pizza market for good.
For
international corporate presentations, regional chain presentations,
educational forums, or keynotes contact: Steven Johnson Grocerant Guru® at Tacoma, WA
based Foodservice Solutions. His
extensive experience as a multi-unit restaurant operator, consultant, brand /
product positioning expert, and public speaking will leave success clues for
all. For more information visit GrocerantGuru.com, FoodserviceSolutions.US or call
1-253-759-7869
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