Papa Murphy’s Franchise Costs $451K (+ 2023 AUV & Profits)
This article was updated with the 2023 Franchise Disclosure Document
With 1,136 franchise restaurants in the US alone, Papa Murphy’s is one of the most popular pizza franchises. It’s also popular amongst franchisees and entrepreneurs because of its low cost ($451,000 on average), much lower than the average investment cost for fast food franchises.
But is this really a good business? How much profits can you generate with a Papa Murphy’s franchise? Should you invest in a Papa Murphy’s franchise restaurant?
In this article we’re looking at Papa Murphy’s and its Franchise Disclosure Document to find out how much sales and profits you can make with this business. Let’s find out!
Key stats
| Franchise fee | $25,000 |
| Royalty fee | 5.00% |
| Marketing fee | 7.00% |
| Investment (mid-point) | $519,000 |
| Average sales | $613,000 |
| Sales to investment ratio | 25.0x |
| Payback period | [franchise_value_investment_payback] |
| Minimum net worth | $275,000 |
| Minimum liquid capital | $125,000 |
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 | Papa Murphy's |
| FRANCHISE FEE | $25,000 |
| ROYALTY FEE | 5.00% |
| INITIAL INVESTMENT | $367,000 – $670,000 |
| AVERAGE REVENUE | $613,000 |
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About Papa Murphy’s
Headquartered in Vancouver, Washington, Papa Murphy’s is the largest American take-and-bake pizza chain, with more than 1,200 stores in the United States and the United Arab Emirates. In addition to their take-and-bake pizzas, Papa Murphy’s also offers salads, dessert items, and soft drinks in various sizes.
Papa Murphy’s was founded by Terry Collins. Its first store opened in 1981 under Papa Aldo’s Pizza before later merging with Murphy’s Pizza in 1995 to form Papa Murphy’s Pizza.
Its franchising journey began in 1983 with its first franchise in McMinnville. The company is now the fifth-largest pizza chain in the United States.
Papa Murphy’s franchise: pros and cons
Operating a Papa Murphy’s franchise has the following pros and cons:
The Pros:
- Brand popularity: Papa Murphy’s is not an ordinary name in the pizza industry. For over 40 years, the brand has served millions of customers, proving itself as a leading take-and-bake pizza chain in the US. Franchisees are assured of a large customer base that identifies with the brand and what it offers.
- Simple to operate: Since Papa Murphy’s franchise model is on a takeout basis, there are no ovens, freezers, or dine-in costs. This leaves the franchisees with the sole responsibility of perfecting the quality of the pizza they offer.
- Quality pizzas: The brand offers high-quality, non-frozen pizzas by utilizing freshly prepared ingredients, which are done in-house daily: hand-sliced fresh veggies, freshly grated mozzarella cheese, quality meat, and making their dough from scratch. This gives it a great competitive advantage over its competition.
- Training and support: The chain offers extensive training and support to equip franchisees with basic restaurant operations and management skills. Its team of real estate experts helps franchisees with site selection, design, and construction of the restaurants. Also, it has a launch and grand opening program in place to help with the launch of the store and design printed, and online advertising for the continuous promotion of the local store.
- No prior restaurant experience is needed: A Papa Murphy’s franchise is a good option for those who lack experience in the restaurant industry. It provides new franchisees with all the basics necessary for starting and running a successful take-and-bake pizza restaurant.
- Less labor and space: The franchise does not require an oven or freezers, so it does not require much space for its establishment. Additionally, it may also require less labor because the pizzas are baked outside the store.
Cons
- No financial assistance: The franchisor does not offer any financial assistance to its franchisees. New franchisees need to find ways of funding their restaurants, such as third-party financing.
- No exclusive territory protection: The franchisor does not guarantee its franchisees an exclusive territory of operation. Therefore, franchisees may face competition from other Papa Murphy’s restaurants or competitive brands controlled by the franchisor.
- No baked pizzas: The chain does not offer baked pizzas. Therefore, it is not a good option for those looking for a baked pizza dining experience. It also lacks a delivery system, leaving room for possible future competition should a rival arise.
How much does a Papa Murphy’s franchise cost?
You would invest around $451,000 to open a Papa Murphy’s restaurant franchise.
This amount is an average, so it can vary based on different factors (your location, market price of equipment, etc.). According to the latest FDD, the investment amount ranges from $324,00 to $578,000.
What do you are paying for? Well, this amount covers all the costs needed at the start of a restaurant business. In addition to the $25,000 franchise fee, the investment amount also covers:
- Formation costs: lease and utilities deposits, leasehold improvements, development service fees, signs, décor, cabinets, point-of-sale system, etc.
- Initial Marketing Fees: marketing fees and expenses for first 6 months.
- Operating expenses: inventory, bookkeeping/payroll service, insurance, materials and supplies, 3 months’ working rent, 3 months’ working capital, etc.
| Type of Expenditure | Investment amount |
|---|---|
| Initial franchise fee | $25,000 |
| Formation costs | $258,057 – $464,488 |
| Initial marketing fees | $15,000 |
| Operating expenses | $25,700 – $73,675 |
| Total | $323,757 – $578,163 |
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| Papa Murphy's |
| FRANCHISE FEE | $25,000 |
| ROYALTY FEE | 5.00% |
| INITIAL INVESTMENT | $367,000 – $670,000 |
| AVERAGE REVENUE | $613,000 |
How much can you make with a Papa Murphy’s franchise?
On average, a Papa Murphy’s franchise makes $594,000 in sales per year. This number is the annual net sales of 1,102 franchised restaurants operating in 2022.
When it comes to growth, Papa Murphy’s franchises’ average net revenue has been growing over the years.
| Year | Stores | Median net sales | Revenue growth |
|---|---|---|---|
| 2019 | 1,230 | $504,406 | – |
| 2020 | 1,193 | $526,855 | +4.45% |
| 2021 | 1,136 | $583,674 | +10.78% |
| 2022 | 1,102 | $593,609 | +1.70% |
How profitable is a Papa Murphy’s franchise?
On average, a Papa Murphy’s franchise makes $55,000 in profits per year (9% EBITDA margin as per our estimates).
Luckily, Papa Murphy’s does provide a lot of detailed cost information in its latest FDD, which we have summarized below.
| Profit and loss | Amount | % Sales |
|---|---|---|
| Sales | $593,609 | 100% |
| COGS | $(185,206) | 31% |
| Gross Profit | $408,403 | 69% |
| Labor | $(157,306) | 27% |
| Marketing and royalty costs | $(71,233) | 12% |
| Occupancy | $(53,425) | 9% |
| Other OpEx | $(71,233) | 12% |
| EBITDA | $55,206 | 9% |
Is a Papa Murphy’s franchise a good investment?
With a 9% EBITDA margin, should you invest in a Papa Murphy’s franchise?
When we compare profits to the initial investment of $451,000 you must pay for at the outset, we find that Papa Murphy’s franchises have a 8 years payback. So you would wait 8 years on average to reimburse your initial investment, which is in line with other franchises and satisfactory.
From that perspective, a Papa Murphy’s franchise is a good investment as you would reimburse your investment within 8 years.
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| Papa Murphy's |
| FRANCHISE FEE | $25,000 |
| ROYALTY FEE | 5.00% |
| INITIAL INVESTMENT | $367,000 – $670,000 |
| AVERAGE REVENUE | $613,000 |
Disclaimer
Disclaimer: This content has been made for informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, advertisement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.
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