A familiar restaurant in a shopping mall or neighbourhood plaza can disappear surprisingly quickly, and one of Canada’s largest restaurant operators is now reporting a significant wave of closures.
Montreal-based MTY Food Group, the company behind recognizable brands including Thai Express, Mucho Burrito, Cold Stone Creamery and Papa Murphy’s, announced on October 9 that 146 restaurants across its global network closed during its latest financial quarter.
The results reveal a growing divide between the company’s Canadian and American operations. While comparable restaurant sales in Canada remained relatively stable, U.S. locations experienced a noticeably sharper decline.
The closures come as MTY confronts weaker consumer spending, rising operating costs and disappointing profitability at some company-owned restaurants. Yet alongside the troubling numbers, the company announced a substantial dividend increase and a new strategy aimed at improving its long-term financial performance.
The 146 Restaurant Closures Represent a Sharp Reversal
MTY Food Group closed 146 restaurants during the 13-week period ending August 30, 2026, compared with 81 closures during the equivalent period last year. The company also opened 72 locations, meaning its overall network shrank by 74 restaurants rather than the full 146. By the end of the quarter, MTY operated or franchised 6,966 locations worldwide. That represents a notable change from the same quarter in 2025, when 96 openings and 81 closures produced a net increase of 15 restaurants.
The figures demonstrate how quickly expansion plans can change when restaurant economics deteriorate. New openings continued, but they were no longer sufficient to replace locations leaving the network. Importantly, the closures occurred across MTY’s international restaurant portfolio and should not be interpreted as 146 Canadian restaurants shutting down. Some were deliberately targeted by management, while others formed part of the company’s broader restaurant network turnover. For customers, an individual closure may mean losing a favourite lunch destination. For the company, the challenge is determining whether a smaller network can become more profitable without sacrificing future growth opportunities.
U.S. Restaurant Sales Fall Considerably Faster Than Canada’s
The most significant geographical difference in MTY’s latest results involved comparable restaurant sales. Same-store sales across the company’s network declined 1.9% compared with the previous year. In Canada, the decline was just 0.2%, suggesting that established Canadian locations were holding relatively steady. American restaurants experienced a much steeper 2.7% decrease, while international locations outside Canada and the United States recorded a 9.1% drop. These figures compare sales at established restaurants rather than including every newly opened or recently closed location.
The American weakness matters because approximately 57% of MTY’s restaurants are located in the United States, compared with 35% in Canada and 8% in other international markets. The latest figures also show a changing pattern from the second quarter, when Canadian same-store sales declined 1.8% and American sales decreased 2.2%. Canada’s performance improved substantially in the third quarter, while the American decline deepened slightly. That contrast suggests MTY’s difficulties are not evenly distributed across its markets. However, the numbers alone do not establish that American consumers generally are spending less than Canadians; differences in restaurant brands, pricing and local competition can also affect performance.
Fifty Closures Were Part of a Larger Plan to Remove Unprofitable Restaurants
Not every closure came as a surprise to MTY’s management. In July, the company announced that it intended to close 68 underperforming corporate-owned restaurants following a detailed evaluation of their financial prospects. Fifty of those planned closures were completed during the third quarter, with management expecting the remainder to close during the fourth quarter. The restructuring represents an intentional effort to eliminate locations that management believes have limited prospects for a sustainable turnaround.
During MTY’s July earnings conference call, chief executive Eric Lefebvre explained that the 68 restaurants selected for closure had collectively generated more than C$10 million in operating losses over the preceding 12 months. The company estimated that closing the restaurants and terminating their leases could cost between C$10 million and C$12 million. Lefebvre identified Papa Murphy’s as a substantial part of the planned closures, although the latest results do not establish that every restaurant closed during the third quarter belonged to that brand. The financial logic is straightforward: closing persistently unprofitable restaurants can eventually improve earnings. However, the immediate consequences can include disrupted employment, vacant retail spaces and lost business for suppliers and surrounding establishments.
The Company’s Familiar Brands Stretch Far Beyond Canada
Although MTY Food Group may not be a household name, many of its restaurant banners are familiar to Canadian and American consumers. Its portfolio contains more than 80 restaurant concepts, ranging from mall food-court favourites such as Thai Express and Manchu Wok to businesses including Mr. Sub, Mucho Burrito, Cold Stone Creamery, Wetzel’s Pretzels and Famous Dave’s. The collection spans quick-service restaurants, fast-casual establishments and traditional sit-down dining.
Its ownership structure is equally important to understanding the closures. At the end of August, 6,782 MTY locations were franchised or operated under agreements, while just 184 were directly owned by the company. That means corporate restaurants represented approximately 2.6% of the overall network, down from 3.6% a year earlier. At a franchised restaurant, the local operator generally handles day-to-day business expenses while the parent company receives revenue through franchise-related arrangements. A corporate-owned restaurant exposes MTY more directly to payroll, rent and operating losses. Consequently, the decision to close poorly performing company-owned restaurants is part of a broader effort to shift financial risk and simplify operations while maintaining the reach of its restaurant brands.
Network Sales Remain Near $1.5 Billion Despite Weaker Demand
One seemingly reassuring figure in MTY’s earnings release was total system sales, which remained at approximately C$1.5 billion during the quarter. The more precise reported figure was C$1.455 billion, essentially unchanged from the equivalent period in 2025. However, the headline masks softer underlying business activity. After excluding foreign-exchange movements, organic system sales declined 1.5%. Canada recorded a 0.7% increase on that measure, while the United States experienced a 2.5% decline.
MTY explained that several timing-related factors also affected the comparison, including the quarter ending on August 30 rather than August 31 and the later timing of the Labour Day weekend. Closures of certain corporate restaurants also reduced sales. Another important distinction is that system sales are not the same as revenue recognized by MTY itself. When someone buys lunch from a franchised Thai Express, the entire purchase contributes to system sales, but MTY generally records only the revenue it earns through its applicable franchise arrangements. This difference helps explain why a restaurant company can oversee billions in customer purchases while reporting substantially smaller corporate revenue. The flat system-sales number therefore should not be mistaken for evidence that consumer demand was completely stable.
Revenue and Profits Decline Despite Some Financial Improvements
MTY’s directly reported revenue fell to C$277.7 million in the third quarter, representing a 7.1% decline from approximately C$299 million one year earlier. Net income attributable to shareholders decreased to C$24.8 million from C$27.9 million. That translated into earnings of C$1.08 per diluted share, compared with C$1.22 during the previous year’s quarter. The company attributed the weaker results partly to reduced profitability at corporate-owned restaurants, lower retail sales and foreign-exchange effects.
A separate measure of operating performance also weakened. Normalized adjusted earnings before interest, taxes, depreciation and amortization, commonly called EBITDA, declined to C$60.8 million from approximately C$74 million. The company additionally recorded a C$4.5 million foreign-exchange loss, compared with a C$0.7 million gain one year earlier. Yet adjusted earnings per share, which remove certain items under MTY’s reporting methodology, improved to C$1.26 from C$1.19. The contrast demonstrates why investors examine multiple financial indicators. Adjusted figures can help isolate particular operating effects, but they are not interchangeable with net income under standard accounting rules. For MTY, the broader picture is a profitable business confronting a meaningful decline in operating performance.
Franchise Operations Hold Up Better Than Company-Owned Restaurants
One of the clearest differences in MTY’s financial results came from its two principal restaurant operating models. The franchising segment generated C$55.4 million in normalized adjusted EBITDA during the third quarter, slightly above the C$54.9 million recorded one year earlier. Its normalized EBITDA margin remained stable at approximately 54%. This relative resilience helped protect the company from the full impact of weaker sales and higher costs elsewhere in the business.
Company-owned restaurants presented a dramatically different picture. Their normalized adjusted EBITDA fell to approximately C$900,000 from C$14.2 million a year earlier, while the segment’s margin declined to 1% from 12%. Revenue from company-owned restaurants fell 15% to C$100.7 million, partly reflecting the shrinking number of directly operated locations. These figures help explain management’s determination to reduce its corporate restaurant portfolio. A franchisor can remain financially successful through royalties and related services even when particular restaurants face challenges, whereas operating unprofitable restaurants directly can quickly erode group earnings. Nevertheless, the stability of MTY’s franchise income does not mean that every individual franchisee is profitable. Local operators still face their own costs, debt obligations and customer traffic pressures.
Higher Restaurant Prices Continue to Test Consumer Budgets
MTY’s struggles are unfolding against a difficult affordability backdrop for restaurant customers. According to the U.S. Bureau of Labor Statistics, prices for food purchased away from home increased 3.4% in August 2026 compared with August 2025. In Canada, Statistics Canada reported that prices for food purchased from restaurants rose 3.1% over the same period. These increases may seem modest individually, but they build upon previous years of price growth and can influence decisions about how frequently households eat outside the home.
The broader industry picture is more complicated than declining sales at one company. Statistics Canada reported that food-service and drinking-place sales increased 0.8% in July to C$8.9 billion, marking a seventh consecutive monthly increase. Those figures are measured in current dollars, meaning higher prices can contribute to sales growth even without comparable growth in customer visits. In the United States, the National Restaurant Association’s 2026 industry outlook projected C$-independent U.S.-dollar restaurant sales of US$1.55 trillion for the year, while warning about rising costs and uneven customer traffic. For individual MTY restaurants, the challenge remains attracting customers who increasingly compare menu prices, promotions and convenience before deciding where to spend.
Digital Ordering Offers a Bright Spot Amid Restaurant Closures
Despite weaker sales across the broader network, MTY’s digital business continued to grow. The company reported C$279.2 million in digital sales during the third quarter, an increase of approximately 2% compared with the previous year. MTY also reported that digital transactions represented 19.8% of system sales under its reporting methodology, compared with 19.3% during the equivalent quarter in 2025. The results suggest that online ordering remained an important customer channel even as some physical restaurants struggled.
For a restaurant operator managing dozens of different concepts, digital ordering offers opportunities that extend beyond convenience. Customers may order through a brand’s website, mobile platform or third-party delivery service rather than standing in line at a food court. Digital systems can also support promotions and help restaurant managers understand purchasing patterns. MTY has invested in upgrading its business technology, including a new enterprise resource planning system that management says was delivered on time and within budget. However, digital growth does not automatically resolve the problems facing an unprofitable restaurant. Online orders still need to generate sufficient revenue after labour, ingredients, delivery-related expenses and other costs. The challenge is turning customer convenience into sustainable profitability rather than simply increasing digital transaction volume.
MTY Ends Its Strategic Review and Announces a 35% Dividend Increase
The October 9 earnings announcement contained another major development: MTY’s board concluded a strategic review that began in November 2025. That review examined options including a potential sale of all or part of the company. After considering alternatives and engaging with interested parties, the board unanimously determined that accelerating MTY’s existing business strategy offered the most compelling path forward. Instead of announcing a sale, management outlined plans to simplify operations, optimize its brand portfolio, strengthen its franchise-focused business model and potentially repurchase shares.
At the same time, MTY increased its quarterly dividend from C$0.37 to C$0.50 per share, representing an increase of approximately 35%. The new dividend is scheduled for payment on November 13, 2026, to shareholders of record on November 3. Management also expressed an intention to restore its normal course issuer bid and evaluate a potentially larger share-repurchase program, although these plans remain subject to further decisions. For investors, the announcement sends two different signals. Falling restaurant counts and weaker profits demonstrate real operating challenges, while the dividend increase suggests management believes the company can continue generating sufficient cash to reward shareholders. Whether that confidence proves justified will depend on how effectively its restructuring improves future results.
Strong Cash Generation Provides Some Protection, but Challenges Remain
MTY’s financial position provides an important counterbalance to its disappointing restaurant performance. Cash generated from operating activities reached C$37.6 million during the third quarter, down approximately 4% from C$39 million a year earlier. However, free cash flow after lease payments, as calculated by the company, increased to C$28.5 million from C$25.8 million. MTY also repaid C$14 million of long-term debt during the quarter, bringing net repayments since the third quarter of 2025 to C$61.2 million.
As of August 30, the company held C$70.6 million in cash and reported approximately C$585.7 million in long-term debt. Those figures suggest MTY retains meaningful financial resources, although significant debt obligations and continued operating pressures still require careful management. The next phase will involve completing the remaining planned corporate restaurant closures, improving profitability and determining whether American sales can recover. Franchise operators will be watching customer traffic and promotional effectiveness, while investors assess whether fewer corporate locations can produce stronger earnings. For the employees and communities affected by closures, the consequences are more immediate. The larger question is whether MTY can turn a period of contraction into a more sustainable business without losing the customer loyalty and local presence that made its restaurant brands successful.
