MTY Food Group TSE: MTY reported first-quarter 2026 results against what management described as a challenging macroeconomic backdrop, with weak consumer confidence weighing on traffic and same-store sales. CEO Eric Lefebvre said early second-quarter trends have improved sequentially, providing “cautious optimism” despite broader global uncertainty.
Same-store sales decline; Canada outperforms the U.S.
Lefebvre said overall same-store sales declined 2.5% in the quarter, with Canada down 0.8% and the U.S. down 3.6%. He attributed part of the Canadian comparison to the impact of last year’s “non-recurring sales tax holiday” in most provinces. Some seasonal brands had a soft quarter, and Lefebvre also pointed to actions taken late in 2025 that “hurt us in the short term,” including interrupting gift card sales at Costco for certain brands, which reduced visits after the holiday period.
During the question-and-answer session, Lefebvre said sales improved in March and remained strong into April. He cited mid-March snow and ice storms that affected both Canada and the U.S., but said otherwise “March and April are pretty strong.” Asked about whether the start of a war affected consumer sentiment, Lefebvre said it was “hard to find any correlations now” and “too early,” adding that so far the company’s data suggests “our consumers are resilient and showing up to our stores.”
Digital sales steady at 23% as MTY invests in guest experience tools
Digital sales represented 23% of total sales in the quarter, Lefebvre said. Excluding foreign exchange, digital sales rose 3% year over year, with Canada up 13% and the U.S. flat, as gains across many U.S. brands were offset by weakness at one brand.
Management emphasized ongoing investments aimed at improving the digital guest experience and making marketing more personalized. Lefebvre said new tools are being deployed in the U.S., while Canada “is finally catching up” and is expected to begin deploying similar solutions in the second quarter.
Asked about funding and whether the investments would show up in capital spending, Lefebvre said “there’s no CapEx,” noting that most funding comes from brand advertising funds. He also said the company’s internal data science team has grown and is funded by MTY, but that the team is already on payroll, so investors should not expect an increase in operating expenses tied to these projects.
On strategy, Lefebvre said MTY will continue on a brand-by-brand approach rather than pursuing a common app. “We’ve tried the common app in the past, and it took us two years to be able to detangle everything,” he said, explaining that different brands require different promotions and consumer strategies. He described building a shared platform and connectors while keeping execution specific to each brand.
Lefebvre also addressed franchise economics for digital orders. He said first-party digital orders can be “better for the franchisee economically,” citing slightly larger orders and the example of Papa Murphy’s, where “almost 100%” of digital sales are through the brand’s first-party app. Third-party delivery can be profitable if orders are incremental, he said, but substitution from in-store to third-party orders can pressure economics due to commissions and higher packaging costs.
Store count declines in Q1, but pipeline expands
MTY opened 52 locations and closed 90 in the quarter, which Lefebvre said was anticipated given that the first quarter is typically seasonally weaker for openings. The company also ended its master agreement with TCBY, eliminating eight stores.
Despite the net decline, Lefebvre reiterated confidence in positive net unit growth for 2026. He said the company has “a large number of stores in the pipeline,” with “just under 200 locations under construction,” and characterized the pipeline as “among the strongest we’ve ever seen at MTY.” A growing share of development is coming from existing franchise operators, which management described as a lower-risk expansion profile.
In response to an analyst question about higher net closures year over year, Lefebvre said he was “disappointed by the Q1 numbers” and acknowledged closures and openings were slightly worse than anticipated. He said there were no major one-time items beyond the TCBY termination, adding that “the cards fell this way for Q1,” but that management remains “very bullish about 2026.”
Financial results include U.S. Employee Retention Credit benefit
CFO Renee St-Onge said MTY has transitioned to a 52-week reporting basis, with the quarter reflecting the 13-week period ending March 1, 2026. Normalized Adjusted EBITDA totaled CAD 60.1 million, in line with the prior year period, and included a CAD 5.5 million Employee Retention Credit (ERC) related to 2020-2022 received from the U.S. government.
Franchise Normalized Adjusted EBITDA was CAD 43.2 million, down slightly from CAD 44.0 million a year earlier. Franchise revenue fell to CAD 90.7 million from CAD 92.9 million, which St-Onge said reflected foreign exchange impacts from a weaker U.S. dollar and lower system sales. Franchise normalized operating expenses declined to CAD 47.5 million from CAD 48.9 million, driven by foreign exchange and lower gift card program costs. Franchise normalized EBITDA margin improved to 48% from 47%.
Corporate Store segment normalized adjusted EBITDA rose 8% to CAD 13.2 million, though St-Onge noted this included the CAD 5.5 million ERC. Excluding the credit, corporate segment margins were 7% versus 10% a year earlier. She said corporate revenue and expenses were closely tied to lower system sales and fewer corporate-owned locations in the U.S., and that MTY aims to drive improvement as macroeconomic trends improve and system sales accelerate.
In Food Processing, Distribution and Retail, segment normalized adjusted EBITDA was CAD 3.7 million on revenue of CAD 40.8 million, versus CAD 4.0 million on CAD 38.2 million a year earlier, as margins slipped to 9% due to higher supply chain costs. St-Onge said management sees opportunities to expand revenue and margins in retail channels as scale builds in under-penetrated markets.
Net income attributable to owners was CAD 36.9 million, or CAD 1.62 per diluted share, compared to CAD 1.7 million, or CAD 0.07 per diluted share, in the prior year.
Capital allocation, corporate store mix, and strategic review
MTY ended the quarter with approximately CAD 549 million in net debt. St-Onge said net leverage was about 1.9x debt-to-EBITDA, which she said provides “significant optionality” to reduce debt, invest, and return capital to shareholders.
Cash flow from operations was CAD 40.9 million versus CAD 64.6 million a year earlier, while free cash flow net of lease repayments was CAD 29.0 million versus CAD 49.3 million. St-Onge attributed the change primarily to working capital and income taxes paid, partly offset by lower interest paid. She added that excluding changes in non-cash working capital, taxes, and interest, cash flows from operations were CAD 59.9 million compared with CAD 58.6 million in the prior year.
Lefebvre said the company continues to evaluate M&A opportunities and has “NCIB or SIB” options available, adding that “everything’s on the table.” He also said MTY is “a little bit heavy on corporate right now” and is working to reduce corporate store count by selling some locations to franchisees, emphasizing it is not pursuing a “fire sale.”
On costs and inflation risk, Lefebvre pointed to shipping complexity and rising fuel costs, saying the company is seeing more fuel surcharges across its network. “There is inflation there that’s coming if only from fuel charges,” he said, adding uncertainty about how long the issues may persist.
MTY also discussed its Papa Murphy’s business. Lefebvre said the brand is facing headwinds and that improvements from new customer-facing technologies and marketing changes are expected to take time. He said a Detroit pizza product launch “seems to be doing a reasonable job” in generating some excitement. On a group of roughly 50 underperforming locations MTY took ownership of last year, Lefebvre said the turnaround has been “more complicated than anticipated” and that the company is currently “suffering losses” at those restaurants, with only a few refranchised so far.
Finally, Lefebvre noted a strategic review is underway but said he could not comment on the process, timeline, or outcome, adding that the company will provide updates “as appropriate or as required by law” and is continuing to run the business with its usual discipline and long-term focus.
About MTY Food Group TSE: MTY
MTY Food Group Inc is a franchisor in the quick service and casual dining food industry. Its activities consist of franchising and operating corporate-owned locations as well as the sale of retail products under a multitude of banners. The company's operating segment is based on geographical regions namely Canada and US and International. It generates maximum revenue from Canada. The company brands include Big Smoke Burger, Cafe Depot, Country Style, Croissant Plus, Cultures, Extremepita, Fabrika, Jus Jugo Juice, Koya Japan, ManchuWok, Muffin plus, Valentine, Van Houtte, Shushiman and others.
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