IPO Report: Papa Murphys Holdings (FRSH)

Francis Gaskins  |

Papa Murphys Holdings ($FRSH) a pizza chain that also allows customers to take pizzas home for baking headquartered in Vancouver, WA.

Three other companies are scheduled for the week of April 28, 2014. The complete IPO calendar is available at IPOpremium.

The manager and joint managers are Jefferies & Co., Baird, and Wells Fargo Securities

The co-managers are William Blair Co, Raymond James, and Stephens Inc.

FRSH scheduled a $70 million IPO on the Nasdaq with a market capitalization of $204 million at a price range midpoint of $12 for Friday, May 2, 2014. SEC fililngs


FRSH is a pizza chain that also allows customers to take pizzas home for baking. FRSH has positive operating earnings from its franchise operations but has operating losses from its company-owned stores. 

Formed in 1981 it looks like FRSH has maxed out its growth potential in the US, with 1327 domestic franchisees.

System-wide comparable store growth was only 2.8% in 2013 vs 2012. The company has lost money the last three years, although adjusting for early debt retirement costs FRSH showed a marginal profit for 2012 and 2013.

The per share dilution to IPO investors is -$20.21, which is high relative to the mid-range price of $12. FRSH's price-to-tangible book value is -1.5, which is very low and generally happens when private equity owners have sucked out as much cash as possible to pay themselves dividends.

Three financial metrics declined for 2013 vs 2012:  operating income % of revenue, cash flow % of revenue, and EBITDA % of revenue. 



Valuation Ratios


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Neutral to negative


FRSH is a high-growth franchisor and operator of the largest Take ‘N’ Bake pizza chain in the United States. Take ‘N’ Bake pizza restaurants sell uncooked pizzas that customers bake at home.

FRSH was founded in 1981 and has grown its footprint to a total of 1,418 franchise and company-owned stores (collectively “system-wide stores”) as of December 30, 2013, more than 20 times the stores of its nearest Take ‘N’ Bake pizza restaurant competitor. The Papa Murphy’s experience is different from traditional pizza restaurants. FRSH’s customers:




CREATE their fresh, customized pizza with high-quality ingredients in its stores or online;





TAKE their fresh pizza home; and





BAKE their pizza fresh in their ovens, at their convenience, for a home-cooked meal served hot.

FRSH has been repeatedly rated the #1 pizza chain in the United States by multiple third-party consumer studies.

In 2014, 2013, 2012 and 2011, FRSH was rated the #1 pizza chain overall by Nation’s Restaurant News, and in 2012, 2011 and 2010, FRSH was rated the #1 pizza chain by Zagat.

Compared to broader restaurant chain competition, FRSH was also recognized by Technomic in 2013 as the #1 chain overall among all restaurants and all food categories, by Nation’s Restaurant News in 2013 and 2012 as one of the Top 5 Overall limited service restaurant chains across all food categories, and by Zagat in 2012 as one of the Top 5 Overall fast food chains across all food categories.

For fiscal years 2013 and 2012 FRSH had total revenues of $80.5 million and $66.9 million, respectively, net losses of $(2.6) million and $(2.1) million, respectively, respectively, and Adjusted EBITDA of $24.4 million and $22.1 million, respectively.

FRSH believes its leading consumer ratings are due to the broad appeal of its concept. However, FRSH actively target mothers and families looking to solve the “dinnertime dilemma” of providing their family with a high-quality, home-cooked meal, without investing significant time or money.

Dividend Policy

No dividends are planned are planned on common stock.

Intellectual Property

FRSH regards the Papa Murphy’s brand name and associated trademarks as valuable assets. FRSH has a portfolio of 24 trademarks registered, and several pending trademark registrations with the United States Patent and Trademark Office.

FRSH has also secured trademark registrations for its brand name in Canada, Mexico, New Zealand, and Australia; and it has applied for trademark registrations in several Middle Eastern countries as well as for a community mark in the United Kingdom. All of the marks owned by FRSH cover store-related services and/or food products.


Take ‘N’ Bake plus traditional pizza chains such as Papa Johns, Pizza Hut, Dominos, and Little Caesars.

5% stockholders

Lee Equity     61.7%

Thrivent White Rose Fund      13.1%

AI PM Holdings LP     8.8%

Use of proceeds

FRSH expects to net $62 million from its IPO. Proceeds are allocated as follows:

to repay $60.4 million in aggregate principal amount of indebtedness under its new senior secured credit facilities, to pay a $1.5 million termination fee associated with its advisory services and monitoring agreement with Lee Equity and to use the remainder for general corporate purposes.

FRSH’s new senior secured credit facilities bear interest at a variable interest rate of LIBOR plus 5.75%, as calculated pursuant to the agreement governing its new senior secured credit facilities, and mature on October 25, 2018.

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