Papa Murphy's Files For $70 Million I P O

Papa Murphy's, the largest "take-n'-bake" pizza chain in the United States, last week through its parent holding company filed a registration statement with the Securities and Exchange Commission (SEC) to sell common stock in an initial public offering (IPO). Vancouver, Washington-based Papa Murphy's Holdings, Inc. made an initial, confidential filing with the SEC in mid-December 2013, which was amended in late January and late February before the latest filing was first disclosed on the SEC's website on March 11, 2014.

The company's filing indicates that it intends to raise a maximum of $70 million, but that only represents an estimate used solely for purposes of calculating the registration fee under the SEC's rules.

Net proceeds from the offering will be used to repay outstanding indebtedness under the company's new $177 million secured credit facility and to pay a $1.5 million fee to Lee Equity, a middle-market private equity firm that currently owns about 65% of the company's outstanding capital stock, to terminate an advisory services and monitoring agreement that was set to expire in December 2020. The balance of the net proceeds will be used for general corporate purposes.

In October 2013, the company entered into the secured credit facility in part to make a $31.5 million payment to its preferred shareholders. That followed a $36.1 million payment made in June 2012.

According to the company's registration statement, for fiscal 2012, its domestic franchise stores that had been open for at least one full year generated about $11,100 in average weekly sales and generated a store-level EBITDA margin in excess of 15 percent after royalties and advertising fees but before subtracting any manager/owner salary. The company's operating model requires a comparatively low initial investment of approximately $200,000 per store, largely because its "take-n'-bake" prototype does not require pizza ovens, venting hoods, freezers or dining areas and its stores average only 1,400 square feet in size.

As of December 30, 2013, the company's 1,396 store base was 95.1% franchised.

The company's shares will trade on the NASDAQ Global Select Market under the trading symbol "FRSH."

Because Papa Murphy's is a company that had less than $1.0 billion in revenues during its last fiscal year, it qualifies as an "emerging growth company" under the Jumpstart our Business Startups (JOBS) Act of 2012, a designation that permitted the company to make its initial filings confidential and to take advantage of certain reduced reporting and other regulatory requirements for up to five years that are otherwise generally applicable to public companies.


Mike Sheehan is a franchise consultant and attorney. He is the president of Focus Ventures (www.focusonfranchise.com) and formerly served as a securities attorney and as general counsel for a Fortune 100 financial services company.

Contact information:
Email: [email protected]
Office: 703.372.6241 (703.FRANCH1)
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This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only and you are urged to consult your own franchise attorney concerning your own situation and any specific legal questions you may have.

© 2014 Mike Sheehan. All rights reserved.

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