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MTY Food Group posts higher sales as it contends with labour shortage, inflation

The company aims to grow both organically and through acquisitions.

MONTREAL - Canadian restaurant franchisor and operator MTY Food Group Inc. is seeing a rebound in sales and traffic even as it grapples with inflation, supply chain snags and ongoing labour shortages.

The Montreal-based company said Friday sales are back to pre-pandemic levels for most of its brands as restrictions are lifted and economies reopen from COVID-19 shutdowns.

Yet Eric Lefebvre, chief executive of MTY, said a worker shortage is forcing some of its restaurants to curtail operating hours.

"Restaurants that, for example, operated breakfast, lunch and dinner have now removed breakfast,'' he said during a call with investors.

"As a franchisor, because we take a percentage of the top line, obviously it's not ideal for us. But we understand that our franchisees profitability and ... operations need to be the primary factor.''

His comments came as the company reported its second-quarter profit and revenue rose compared with a year ago, helped by a lifting of pandemic restrictions in Canada.

During the quarter, MTY said its restaurants contended with higher input costs.

The company is managing price increases based on both the restaurant brand and location in order to maintain margins and customer traffic, Lefebvre said.

"Not all brands are equal,'' he said. "We have some brands that are extremely resilient and will take a lot of price increases and some other brands where it's a little bit more sensitive and we need to be careful if we don't want to cause a massive decline in traffic.''

He added: "It's really an art and we need to go almost store by store to get the right pricing strategy.''

Meanwhile, MTY said the opening of new locations, which reached 47 restaurants during the quarter, continues to be under pressure due to ongoing supply chain and construction issues.

"There's a number of buildings that were supposed to be delivered to us that are late,'' Lefebvre said.

The company saw 91 restaurants close in the quarter, the lowest number in the last 16 quarters despite one Canadian franchisee closing 22 frozen yogurt locations.

"We had the 22 closures from one partner in movie theatres,'' Lefebvre said. "Obviously we don't like to see 22 locations go this way but it's a one-off.''

MTY is behind more than 80 brands including Thai Express, Tiki-Ming, Tutti Frutti, Mmmuffins, Pinkberry and Cold Stone Creamery. It had 6,660 locations in operation at the end of the quarter, of which 89 were corporate and 6,571 were franchised.

The company aims to grow both organically and through acquisitions, and Lefebvre said the "deal flow'' has gradually become more active as the economy reopens.

The restaurant franchisor and operator said its net income attributable to owners totalled $28.6 million or $1.17 per diluted share for the quarter ended May 31.

The result compared with a profit of $23.0 million or 93 cents per diluted share in the same quarter last year.

Revenue for the quarter totalled $162.5 million, up from $135.9 million a year earlier.

MTY said revenue in Canada grew 42% in the second quarter of 2022 as government-imposed restrictions related to the pandemic were mostly lifted. Revenue in the company's U.S. and International segment declined by 1%.

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