Papa Gino's, Papa John's and Papa Murphy's now have something else in common.
Earlier this week, Massachusetts-based Papa Gino's Pizzeria closed dozens of its sites without warning or reason. Customers, employees - many who tried to show up to work - and communities across New England were left outraged, reported The Boston Herald (Nov. 5).
We later found out that the pizzeria's parent company, PGHC, reached an agreement in principle to sell its fast food chains to a portfolio company and filed for Chapter 11 bankruptcy protection. It has a deal with Wynnchurch Capital to sell itself for $20 million, reported The Lowell Sun (Nov. 5).
According to the company, the 95 closures followed a "careful review and analysis" of under-performing locations. It believes focusing resources on a core of best-performing restaurants is the responsible approach.
One hundred Papa Gino's restaurants will continue to operate and remain open for business. PGHC said it hopes to move as many employees as possible to other locations.
PGHC, which also owns D'Angelo Grilled Sandwiches, blames debt, rising minimum wages and competition for its bankruptcy, according to Restaurant Business Online (Nov. 5).
CFO Corey Wendland said in a filing that consumer preferences "shifted from in-restaurant dining to delivery and carryout ordering." He claims this requires fewer and smaller restaurants to serve the same areas, which in turn required the company to close a lot of restaurants.
Wendland attributes some financial pressure to rising the minimum wage in the New England market, particularly higher benefit costs such as health insurance.
Papa Gino's also blamed competition from "national chains that have increased their footprint" in the chains' core New England markets. Those chains have put pressure on restaurants such as Papa Gino's to lower prices.
Meanwhile, larger pizza chain Papa John's is still struggling itself after its founder's departure. North American same-store sales were down 9.8% in its third quarter ended Sept. 30. It was the fourth straight quarter of declines in the region, which houses most of the company's restaurants. International same-store sales also fell, reported The Washington Times (Nov. 6).
In September, Reuters (Sept. 26) reported that Papa John's sent out information about an auction to sell itself to other companies and private equity firms. It then reported that Bain Capital and CVC Capital Partners are among the private equity firms competing to acquire the company (Oct. 30).
Several days after the Papa Gino's closings, Papa Murphy's said it is exploring financial and strategic alternatives that may include a possible sale, reported Market Watch (Nov. 7).
Papa Murphy's reported its third-quarter earnings, reporting revenue of $28.8 million, compared to $33.7 million in the third quarter of 2017. Same-store sales decreased 2.1% compared to the year-earlier period. The company expects full-year system-wide same-store sales to decline at a low single digit rate.
Papa Murphy's has no timetable for possible transactions or any transaction candidates at the moment, and it does not intend to comment regarding the process yet.
On an earnings call, CEO Weldon Spangler said that though the same-store sales percentage was negative, the results represented the company's best percentage change in same-store sales in 12 quarters.
He attributes some of the improving performance to making Papa Murphy's a convenient option for consumers, such as using digital tools to meet consumers where they want to be engaged.
[Editor's note: OFW Law Principal Attorney Michael J. O'Flaherty provided this blog piece regarding the need for federal oversight regarding the ongoing trend of class action lawsuits filed against food companies regarding product labeling.]read more
Victoria writes for the weekly Food Institute Report and the daily news update, Today in Food. Victoria graduated from Montclair State University with a B.A in Journalism and has a background in Nutrition and Food Science. She can be reached through her email at Victoria.email@example.com.
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