MONTREAL – Canadian restaurant franchisor and operator MTY Food Group Inc. is seeing a rebound in sales and traffic even as it grapples with inflation, supply chain issues and labor shortages -persistent work.
The Montreal-based company said Friday that sales have returned to pre-pandemic levels for most of its brands as restrictions are lifted and economies reopen from COVID-19 shutdowns.
Still, MTY chief executive Eric Lefebvre said a labor shortage is forcing some of his restaurants to cut their hours.
“Restaurants that, for example, offered breakfast, lunch and dinner have now removed breakfast,” he said on a call with investors.
“As a franchisor, because we take a percentage of revenue, that’s obviously not ideal for us. But we understand that the profitability and…the operations of our franchisees have to be the primary factor.”
His comments came as the company announced that its second-quarter profit and revenue rose from a year ago, helped by the lifting of pandemic restrictions in Canada.
During the quarter, MTY said its restaurants faced higher input costs.
The company manages price increases based on both restaurant brand and location to maintain margins and goodwill, Lefebvre said.
“Not all brands are created equal,” he said. “We have some brands that are extremely resilient and will see a lot of price increases and other brands where it’s a bit more sensitive and we have to be careful if we don’t want to cause a massive drop in traffic.”
He added: “It really is an art and we have to go almost store by store to get the pricing strategy right.”
Meanwhile, MTY said new location openings, which reached 47 restaurants in the quarter, continue to be under pressure due to supply chain and construction issues.
“There are a number of buildings that were supposed to be delivered to us that are late,” Lefebvre said.
The company saw 91 restaurants close in the quarter, the lowest number in 16 quarters, despite a Canadian franchisee closing 22 frozen yogurt stores.
“We had the 22 closings of a partner in cinemas,” said Lefebvre. “Obviously we don’t like to see 22 sites go this route, but this is a unique case.”
MTY is behind more than 80 brands including Thai Express, Tiki-Ming, Tutti Frutti, Mmmuffins, Pinkberry and Cold Stone Creamery. It had 6,660 operating locations at the end of the quarter, of which 89 were businesses and 6,571 were franchises.
The company aims to grow both organically and through acquisitions, and Lefebvre said the “deal flow” has become progressively more active as the economy reopens.
The franchiser and restaurant operator said its net income attributable to owners was $28.6 million or $1.17 per diluted share for the quarter ended May 31.
The result compares with earnings of $23.0 million or 93 cents per diluted share in the same quarter last year.
Revenue for the quarter totaled $162.5 million, compared to $135.9 million a year earlier.
MTY said revenue in Canada rose 42% in the second quarter of 2022 as government-imposed restrictions related to the pandemic were mostly lifted. Revenue from the company’s US and international segment decreased 1%.
This report from The Canadian Press was first published on July 8, 2022.
Companies in this story: (TSX:MTY)