What MTY Food Group (MTY) Said on Its Q3 Earnings Call

Key Points

• MTY reported mixed Q3 results: Canadian same-store sales were essentially flat, while U.S. same-store sales declined 2.7%. Normalized adjusted EBITDA fell to CAD 60.8 million, although franchise-segment revenue increased 1.6% and adjusted EPS rose 5.9% to CAD 1.26.
• The company identified 75 underperforming corporate restaurants for closure, with 50 already closed, and plans to accelerate refranchising as it shifts back toward a more asset-light business model.
• Following its strategic review, MTY plans to raise its quarterly dividend to CAD 0.50, restore its normal-course issuer bid and evaluate a potential substantial issuer bid, prioritizing shareholder returns over acquisitions in the near term.

MTY Food Group TSE: MTY reported mixed third-quarter results as Canadian same-store sales improved sequentially while U.S. sales remained softer, and the company outlined plans to return to a more asset-light franchising model following the conclusion of its strategic review.

Chief Executive Officer Eric Lefebvre said Canadian same-store sales were essentially flat during the quarter, while U.S. same-store sales declined 2.7%. He said results reflected persistent consumer caution and the timing of Labor Day, which moved a key long weekend into the fourth quarter.

“In the current environment, we remain focused on driving compelling guest experiences, exciting menu innovation, and leveraging the power of digital sales to drive our banners,” Lefebvre said.

Quarterly financial performance

Chief Financial Officer Renée St-Onge said normalized adjusted EBITDA was CAD 60.8 million for the 13-week quarter, down CAD 13.2 million from the prior year. The decline primarily reflected lower profitability in the Corporate Store segment.

Corporate Store results were affected by weaker sales, a CAD 4.6 million year-over-year change in non-recurring employee retention credits received in the prior year, and CAD 0.5 million in lease-exit costs, St-Onge said.

The Franchise segment remained the company’s largest profit contributor. Segment revenue increased 1.6% to CAD 102.4 million, supported by growth in U.S. and international recurring revenue streams and higher gift-card program sales. Normalized adjusted EBITDA for the segment rose 1%, while its margin remained at 54% as the company offset wage inflation through controllable-expense efficiencies.

Revenue in the Food Processing, Distribution and Retail segment fell 12.6% to CAD 41.6 million, which St-Onge attributed primarily to delays in promotional activities. Segment normalized adjusted EBITDA declined CAD 0.7 million, although the adjusted EBITDA margin improved to 11% from 10% a year earlier. Management said it expects sales momentum in the segment to recover by next year following new product launches.

• Adjusted earnings per share increased 5.9% to CAD 1.26, primarily due to foreign exchange and lower income-tax expense.
• Digital sales totaled CAD 279.2 million, up 0.5% excluding foreign exchange, and represented 19.8% of total sales, compared with 19.3% a year earlier.
• Free cash flow net of lease payments increased 10.3%, aided by lower taxes paid, improved working-capital movement and higher proceeds from corporate-store disposals.
• Net debt stood at CAD 515.1 million at quarter-end. St-Onge said the company had repaid more than CAD 20 million early in the fourth quarter, bringing its net debt-to-EBITDA ratio to about 1.9 times.

Corporate-store closures and refranchising

MTY is proceeding with the closure of underperforming corporate restaurants and has identified 75 locations for closure, up from the previously announced 68. The company said it had closed 50 of those locations by the end of the third quarter.

Lefebvre said most of the closure-related costs are expected over the next two quarters, with benefits beginning to emerge next quarter and becoming more meaningful in 2027. St-Onge estimated that the closures should provide a CAD 2.5 million direct benefit next year.

Management said stores identified for closure lost approximately CAD 2.5 million during the quarter, in addition to exit costs. Lefebvre said most of the locations being closed had been repossessed from franchisees, though a smaller number resulted from acquisitions.

The company also plans to continue refranchising corporate locations. Lefebvre said MTY has already franchised its first two Sauce locations and expects the pace of refranchising to accelerate, though the process requires asset-purchase agreements, franchise agreements and disclosure documentation in applicable jurisdictions.

Strategic review concludes with shareholder-return focus

Following a strategic review announced in November 2025, MTY’s special committee of independent directors and board unanimously concluded that accelerating the company’s existing strategic plan was the best path to maximize shareholder value.

The near-term plan includes increasing the quarterly dividend to CAD 0.50, restoring the normal course issuer bid and evaluating a potential substantial issuer bid. Lefebvre said the company is motivated to pursue a substantial issuer bid, subject to regulatory processes, and described such a transaction as “more likely than not.”

Management intends to optimize its portfolio of brands, streamline functions and return MTY to an asset-light franchise model with minimal corporate-store ownership. Lefebvre said the company will evaluate brands based on their growth potential and whether MTY can create value from them, though he emphasized the company does not intend to conduct a “fire sale” of strong brands.

“The board of directors believes the best opportunity available today is MTY itself,” Lefebvre said, adding that the company plans to focus on returning capital through share repurchases and the higher dividend rather than pursuing acquisitions in the near term.

Sales trends and development pipeline

Lefebvre said Canadian consumers have remained relatively resilient, although traffic continues to be a challenge across many brands. Average basket size has risen for many concepts, he said, while Canadian mall concepts, breakfast restaurants and sushi brands performed well during the quarter.

In the U.S., management described sales patterns as more volatile and said the majority of its brands had a difficult third quarter. Early fourth-quarter trends were broadly similar: Canada benefited from a strong Labor Day period and a solid September, while the last two weeks of September were more difficult in the U.S.

MTY reported negative net store openings in the third quarter after 27 openings expected during the period were delayed into the fourth quarter. Lefebvre said permits and pre-opening inspections remain constraints, but the delayed openings support expectations for what could be the company’s strongest quarter for new store openings.

Management said the development pipeline remains strong, with more than half of planned locations involving existing franchisees reinvesting in MTY brands. Lefebvre said the company has identified most locations expected to open in 2027 and remains bullish on development activity despite a complicated operating environment.

About MTY Food Group (TSE:MTY)

MTY Group franchises and operates quick-service, fast casual and casual dining restaurants over 80 different banners in Canada, the US and Internationally. Based in Montreal, MTY is a family whose heart beats to the rhythm of its brands, the very soul of its multi-branded strategy. For over 45 years, it has been increasing its presence by delivering new concepts of restaurants, making acquisitions, and forging strategic alliances, which have allowed it to reach new heights year after year. By combining new trends with operational know-how, the brands forming the MTY Group now touch the lives of millions of people every year.

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