As you’ve probably heard, Papa Murphy’s was acquired by a private investment firm for $180 million, about $150,000 per store. I think it will turn out to be a good acquisition even with the steep price. Papa Murphy’s has a combination of economic advantages that no other pizza chain has – 1) it doesn’t have the overhead and capital costs of in-store baking, AND 2) it is gaining strong penetration in grocery stores.
I admit, from the consumer’s stand point, a take and bake concept is a little confusing at first. “You mean I have to bake my own pizza?” But that impression soon fades. The pizza in its raw form looks fresh and the final product cooked in the home oven is as good as pizza delivery. One hurdle overcome by the industry was the difficulty of using a home oven to cook a pizza because it doesn’t brown up well with the ordinary pizza dough recipe. To solve this, chains like Papa Murphy’s increase browning by increasing the sugar percentage and providing a disposable reflective baking tray.
Another potential acquisition target is Homemade Pizza, a regional 25 unit chain in IL, MN and DC of classy take-and-bake stores where the average price of an “unbaked” large pizza is almost $20. It seems to be doing well and has great branding. Homemade Pizza pizzas are still priced on the high end because it is made with fresh and local ingredients. The dough is prepared in a commissary to simplify store operations and reduce size requirements.
Update: Below is more interesting history on Papa Murphy’s from a November 2009 article in Portland Business Journal. Average store sales are about $535k.
Papa Murphy’s is a holding of Charlesbank’s Equity Fund V, a $590 million private equity fund that holds several other food-related concerns, including Captain D’s Seafood and Del Taco.
Charlesbank teamed with Papa Murphy’s current president, John Barr, and company management, to recapitalize the pizza chain in a deal announced July 7, 2004. As part of the transaction, Wells Fargo Bank provided a revolving line of credit.
Terry Collins formed Papa Murphy’s in 1995 by merging Petaluma, Calif.-based Murphy’s Pizza with Hillsboro-based Papa Aldo’s. Together, the two chains had 140 locations.
By the time it partnered with Charlesbank, Papa Murphy’s had grown to about 800 stores in 24 states.
In late 2009, it has 1,153 locations in 32 states and two Canadian provinces. It has expanded largely by franchising its concept.
The company owns about 50 stores. The balance are operated by a network of more than 450 franchisees
More than half its franchisees own only one or two stores.
It is the nation’s fifth-largest pizza company. The chain ranked No. 3 in same-store sales growth nationwide last year, according to Nation’s Restaurant News. Only Subway and Taco Bell ranked higher.
Same-store sales increased 7.74 percent in Papa Murphy’s stores in 2008 to $534,000 per store. It was the fifth consecutive year Papa Murphy’s reported growth in same-store sales.