MTY Food Group reports Q2 2026 results, plans to close underperforming stores
MTY Food Group Inc. one of the world's largest franchisors and operators of multiple restaurant concepts, has released its financial results for the second quarter of 2026.
Faced with ongoing pressures on consumer spending, MTY Food group reported a decline in net income and revenue for the 13-week period ended May 31, 2026. However, the company achieved a 25% increase in cash flows from operating activities and announced a major restructuring plan.
MTY plans to close 68 locations
To address underperforming assets and improve profitability, MTY Group has decided to close 68 of its corporate-owned locations over the next six to nine months.
According to the company, these underperforming stores generated combined losses of more than $10 million over the last 12 months.
"We are taking decisive action to improve the quality and profitability of our corporate store portfolio," said Eric Lefebvre, chief executive officer of MTY. "Following a detailed store-by-store review, we have made the decision to close 68 underperforming corporate-owned locations over the next nine months...while this action will reduce our store count in the near term, we believe it will strengthen the business over the long term."
Financial impact of closures
MTY recorded a $7.5 million impairment charge on right-of-use assets during the quarter due to the planned closures.
The company expects the total cost of lease buyout negotiations and closures to range between $10 million and $12 million, which will impact short-term free cash flows.
Q2 2026 financial highlights
MTY's second-quarter performance reflected a challenging economic environment, with declines in system sales, revenue and net income.
MTY Food Group experienced a challenging second quarter in 2026, with key financial metrics trending downward compared to the same period in 2025. Revenue fell 8.2% to $279.9 million, while net income dropped significantly to $15.4 million, down from $57.3 million the previous year. This performance was largely affected by a decline in system-wide sales, which dipped 3.5% to $1.4 billion and a decrease in same-store sales of 2.1%. Additionally, the company's profitability, measured by normalized adjusted EBITDA, fell 14% to $60.2 million as the business grappled with a softer operating environment.
Despite these earnings headwinds, the company maintained a strong cash position and continued to prioritize its operational health. Cash flows from operating activities grew by over 25%, reaching $43.0 million; MTY generated $32.2 million in free cash flows net of lease payments. While digital sales saw a slight dip to $284.2 million, they remained a steady part of the business, representing 20.7% of total system sales. These results highlight a transition period as management continues to execute its strategy amidst broader economic pressures.
Key takeaways from the financial performance
The 8.2% decline in revenue was mostly driven by a decrease in the number of corporate-owned stores, lower revenues from Canadian turnkey projects and foreign exchange impacts.
Net income dropped to $15.4 million ($0.67 per diluted share), down from $57.3 million ($2.49 per diluted share) in Q2 2025. This decrease was primarily due to lower adjusted EBITDA, a stronger Canadian dollar relative to the US dollar (causing a $7.6 million exchange loss compared to a $35.0 million gain in Q2 2025), and the $7.5 million corporate store impairment charge.
Cash flows from operating activities grew to $43.0 million, fuelled by lower interest paid and positive working capital fluctuations.
Network and same-store sales performance
At the end of Q2 2026, MTY's global footprint consisted of 7,040 locations (6,808 franchised/operator-agreement locations and 232 corporate-owned).
MTY opened 84 locations and closed 78 during the quarter, resulting in a net positive store growth of 6 locations (compared to a net loss of 1 store in Q2 2025).
System-wide same-store sales decreased by 2.1% overall. Regionally, Canada decreased by 1.8%, the US decreased by 2.2% and International locations dropped by 5.2%.
Digital sales reached $284.2 million, accounting for 21% of total sales (remaining stable at 20.7% of system sales compared to 20.8% in Q2 2025).
Segment performance breakdown
Franchise revenues fell 4% to $98.6 million, largely due to foreign exchange shifts, fewer turnkey projects in Canada and lower US gift card revenues. Segment profit stood at $50.6 million (51% margin).
Corporate store revenues fell 15% to $111.7 million, matching the decrease in corporate store units. Segment profit dropped by $5.6 million to $5.7 million (5% margin), pressured by softer system sales and the absence of the employee retention credit recognized in 2025.
Segment revenues slipped 2% to $39.3 million, led by a 6% drop in retail sales. Segment profit was $3.6 million.
Liquidity, debt and dividend declarations
MTY continues to manage its debt actively, making $15.7 million in long-term debt repayments in Q2 2026, bringing net repayments since Q2 2025 to $77.5 million.
- Cash on Hand: $63.0 million.
- Long-Term Debt: $594.1 million, primarily in bank facilities.
- Credit Facility: The company holds a $900.0 million revolving credit facility, with CAD $248.0 million and US $252.0 million drawn down.
- Dividend declared: MTY announced a quarterly dividend of $0.37 per common share, to be paid on August 14, 2026, to shareholders registered as of August 4, 2026.
The strategic review process, first announced on November 17, 2025, to evaluate strategic options to enhance shareholder value, remains ongoing. The company has not provided a specific timeline for its completion.
Market outlook
Looking ahead, MTY management plans to navigate economic headwinds with several strategic actions, including menu innovation, leveraging data and AI to connect with customers and defending its value proposition.
Management notes that rising oil and gas prices have impacted consumer spending in restaurants and increased supply chain costs. However, because MTY primarily sources products domestically in both the US and Canada, it expects to limit its exposure to potential international tariffs. To protect margins, the company intends to leverage its strong supply chain capabilities, execute strategic menu adjustments and apply selective pricing actions when necessary.