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1. Company Snapshot

1.a. Company Description

MTY Food Group Inc.franchises and operates quick-service, fast-casual, and casual dining restaurants in Canada, the United States, and internationally.The company also sells retail products under a multitude of banners.


As of November 30, 2021, the company had 6,719 locations comprising 6,603 franchised, 23 joint ventures, and 93 corporate locations.The company was formerly known as iNsu Innovations Group Inc.and changed its name to MTY Food Group Inc.


in July 2003.MTY Food Group Inc.was founded in 1979 and is headquartered in Saint-Laurent, Canada.

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1.b. Last Insights on MTY

MTY Food Group's recent performance was positively driven by steady adjusted net income and slight revenue growth in Q3. The company's segment profits increased by 2% to $73.2 million. Additionally, its fundamentals appear strong, potentially undervalued by the market. A $1.22 per diluted share net income was reported, amidst a challenging environment. The company continues to reward investors with a quarterly dividend payout. Its cash flows provided by operating activities stood at $39.0 million.

1.c. Company Highlights

2. MTY Food Group's Q3 2025 Earnings: A Mixed Bag

MTY Food Group reported a net income attributable to owners of $27.9 million, or $1.19 per diluted share, beating analyst estimates of $0.83. System sales remained stable at $1.5 billion, while same-store sales did not reach expected levels, but showed sequential improvement in the U.S. driven by Cold Stone and SweetFrog. Normalized adjusted EBITDA came in at $74 million for Q3, up 3% year-over-year, aided by a $5.8 million employee retention credit. Excluding this credit, normalized adjusted EBITDA would have shown a modest year-over-year decline.

Publication Date: Oct -28

📋 Highlights
  • Unit Growth and Pipeline:: Achieved a net gain of 15 locations in Q3 2025, with over 100 locations under construction and 96 openings in the quarter.
  • EBITDA Performance:: Normalized adjusted EBITDA reached $74 million (up 3% YoY), driven by a $5.8 million employee retention credit; corporate store EBITDA rose $3.8 million to $13.1 million.
  • System Sales and Digital Growth:: System sales held stable at $1.5 billion; digital sales grew 1% to 19% of total sales, despite a 1% decline in Papa Murphy's system sales.
  • Franchisee Profitability and M&A:: Tools like Crunchtime and ProfitKeeper enhance franchisee visibility; strong free cash flow ($120M trailing) supports M&A and debt repayment, with a debt-to-EBITDA ratio of 2.3x.
  • Papa Murphy's Turnaround:: Brand restructuring includes closure of underperforming units, new loyalty programs, and menu optimization to stabilize performance and drive long-term growth.

Segment Performance

The company's franchising segment delivered results in line with overall business performance, with a 2% decline in same-store sales and stable margins. The corporate store segment's normalized adjusted EBITDA was $13.1 million, up $3.8 million from last year, but softer after normalizing for the employee retention credit. Papa Murphy's, a key brand, struggled, but the relaunch of its loyalty program and new marketing initiatives are expected to improve performance.

Digital Sales and Innovation

Digital sales grew 1% in Q3, representing 19% of total sales, with a slight moderation in growth due to Papa Murphy's system sales decline. The company sees significant opportunity to increase digital penetration and is investing in people, infrastructure, and technologies to enhance the off-premise guest experience. Innovation is key to MTY's strategy, with a focus on finding smarter ways to engage guests, streamline operations, and drive incremental traffic.

Valuation and Outlook

With a P/E Ratio of 20.71 and an EV/EBITDA of 10.6, the market is pricing in moderate growth expectations. Analysts estimate next year's revenue growth at -0.5%. MTY's asset-light model continues to generate strong free cash flows, with cash flows from operations at $39 million and free cash flow net of lease payments at $120 million over the trailing 12 months. The company's focus on driving efficiency, accelerating store development, and investing in areas with strong returns is expected to deliver sustainable growth and long-term value to shareholders.

Debt and Capital Allocation

MTY ended the quarter with net debt of approximately $602 million and a debt-to-EBITDA ratio of 2.3x. The company is pleased with its leverage and will consider share buybacks, but it is not a top priority, with a focus on investing in the business and pursuing M&A opportunities. The company has visibility into franchisee profitability for some brands and is optimistic about growing franchisee profitability, with initiatives to reduce costs within 4-wall operations.

3. NewsRoom

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Are Investors Undervaluing MTY Food Group Inc. (TSE:MTY) By 41%?

Nov -27

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Papa Murphy’s parent company under strategic review

Nov -18

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TSX Down 100 Points at Midday With Most Sectors Lower

Nov -18

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Canada’s MTY Food Group considers sale

Nov -18

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MTY Food Group considering full, partial sale

Nov -18

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MTY Food Group Responds to Recent Statements in the Media

Nov -17

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MTY Food Group Inc.'s (TSE:MTY) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock?

Nov -02

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Papa Murphy’s shutters underperforming stores

Oct -14

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (-1.31%)

6. Segments

Corporate Stores

Expected Growth: -2%

Decline in corporate stores for MTY Food Group Inc. is driven by increased competition, cannibalization from own brands, and declining same-store sales. Additionally, high labor costs, menu pricing pressures, and inefficient store operations contribute to the -2% growth rate.

Franchising

Expected Growth: -1%

MTY Food Group Inc.'s franchising growth decline of -1% is driven by increased competition in the QSR industry, cannibalization of sales from existing locations, and high royalty fees. Additionally, rising labor costs, food inflation, and declining consumer spending power have negatively impacted franchisee profitability, leading to a decrease in new franchise openings and existing location closures.

Processing, Distribution and Retail

Expected Growth: -1%

MTY Food Group Inc.'s -1% growth is driven by declining same-store sales in Processing (-2%) due to reduced demand from foodservice clients, Distribution (-1.5%) affected by supply chain disruptions, and Retail (-0.5%) impacted by intense competition and changing consumer preferences.

Promotional Funds

Expected Growth: 0%

MTY Food Group Inc.'s Promotional Funds growth is stagnant at 0%. This is likely due to intense competition in the quick-service restaurant industry, limited marketing budget allocation, and ineffective promotional strategies. Additionally, changing consumer preferences and behavior may have also contributed to the lack of growth.

Intercompany

Expected Growth: 0%

No growth in intercompany sales from MTY Food Group Inc. is attributed to lack of diversification, stagnant market share, and absence of innovative products or services, resulting in flat revenue.

7. Detailed Products

Casual Dining

MTY Food Group Inc. offers a range of casual dining restaurants that provide a relaxed atmosphere and a variety of menu options.

Quick Service

MTY Food Group Inc. operates quick service restaurants that offer convenient and affordable meals on-the-go.

Franchising

MTY Food Group Inc. offers franchising opportunities for entrepreneurs to own and operate their own restaurants.

Food Processing

MTY Food Group Inc. provides food processing services, including meat processing and bakery products.

Cafeterias and Institutional Food Services

MTY Food Group Inc. offers cafeteria and institutional food services to businesses, schools, and other institutions.

Retail

MTY Food Group Inc. operates retail stores that offer a range of food products and services.

8. MTY Food Group Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

MTY Food Group Inc. operates in the quick-service restaurant industry, where substitutes are readily available. However, the company's diverse brand portfolio and strong brand recognition mitigate the threat of substitutes.

Bargaining Power Of Customers

MTY Food Group Inc. has a large customer base, which reduces the bargaining power of individual customers. Additionally, the company's brands are well-established, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

MTY Food Group Inc. relies on a network of suppliers for ingredients and materials. While the company has some bargaining power due to its size, suppliers can still exert some pressure on prices and quality.

Threat Of New Entrants

The quick-service restaurant industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This limits the threat of new entrants and allows MTY Food Group Inc. to maintain its market position.

Intensity Of Rivalry

The quick-service restaurant industry is highly competitive, with many established players competing for market share. MTY Food Group Inc. faces intense rivalry from competitors, which can lead to pricing pressure and marketing expenses.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 52.02%
Debt Cost 5.13%
Equity Weight 47.98%
Equity Cost 13.82%
WACC 9.30%
Leverage 108.43%

11. Quality Control: MTY Food Group Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Nathan's Famous

A-Score: 6.4/10

Value: 4.9

Growth: 6.6

Quality: 7.0

Yield: 4.0

Momentum: 9.0

Volatility: 7.0

1-Year Total Return ->

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Dine Brands

A-Score: 5.6/10

Value: 8.8

Growth: 3.3

Quality: 5.1

Yield: 9.0

Momentum: 3.0

Volatility: 4.3

1-Year Total Return ->

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MTY Food Group

A-Score: 5.5/10

Value: 7.1

Growth: 6.1

Quality: 4.2

Yield: 5.0

Momentum: 3.0

Volatility: 7.3

1-Year Total Return ->

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FAT Brands

A-Score: 5.3/10

Value: 10.0

Growth: 3.3

Quality: 5.6

Yield: 10.0

Momentum: 0.0

Volatility: 2.7

1-Year Total Return ->

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Papa John's

A-Score: 4.9/10

Value: 5.7

Growth: 4.6

Quality: 4.5

Yield: 6.0

Momentum: 4.5

Volatility: 4.0

1-Year Total Return ->

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El Pollo Loco

A-Score: 4.3/10

Value: 7.0

Growth: 4.7

Quality: 4.0

Yield: 3.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

38.0$

Current Price

38$

Potential

-0.00%

Expected Cash-Flows