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MTY Food Group battles labour shortages, supply chain constraints

Labour shortages are restricting opening hours and sales at some MTY Food Group Inc. restaurants as minimum wage increases push up costs, the company said Friday.

The operator and franchisor of restaurants like Cold Stone Creamery, Manchu Wok and Thai Express said its profit slipped in its most recent quarter despite revenue climbing.

Staffing shortages, combined with higher minimum wage rates in some areas, are expected to lead to increased overtime and labour costs while curbing some potential sales, the company said.

Some restaurants have reduced opening hours or eliminated a meal such as breakfast, while others have closed off a restaurant section due to staff shortages, said Eric Lefebvre, CEO of MTY.

"Sometimes our owners decide to consolidate their labour into fewer restaurants," he said during a call with analysts. "The overall labour market is stabilizing ... but I don't think we've found the right balance yet."

Widespread supply chain challenges have also slowed construction of some new locations, the Montreal-based company said.

"It takes longer to get access to the material. You're always missing something," Lefebvre said. "It takes longer to get permits ... it even takes longer even to get the stores inspected before you can open in some cities."

Despite setbacks, the company has more than 150 new stores under construction, he said.

"We do have a really good pipeline of stores for the future," Lefebvre said. "The environment seems to be stabilizing. It's certainly not perfect yet but we are trending in the right direction."

The company is also keeping a close eye on price sensitivity among consumers as inflation remains high.

"So far customers are still showing up. We're not seeing traffic declines," Lefebvre said. "Obviously, price sensitivity is something that we're looking at and following because we just don't want to cross that line where price becomes out of proportion."

Meanwhile, the company acquired BBQ Holdings Inc. on Sept. 27 for $284.2 million.

The deal adds brands like Famous Dave’s, Village Inn, Barrio Queen and Granite City to MTY's growing portfolio.

"Through the BBQ Holdings deal we're building additional scale in the U.S. and we're expanding our casual dining footprint," Lefebvre said.

MTY reported a net income attributable to owners of $22.4 million, or $0.92 per diluted share, for the quarter ended Aug. 31.

That's down from a profit of $24.3 million, or $0.98 per diluted share, in the same period last year.

Total revenue for the quarter totalled $171.5 million, up from $150.8 million a year earlier, with revenue from franchise locations in Canada increasing 15 per cent.

Revenue in the company's U.S. and International segment declined by one per cent.

This report by The Canadian Press was first published Oct.7, 2022.

Companies in this story: (TSX:MTY)

Brett Bundale, The Canadian Press

Note to readers: This is a corrected story. A previous version said profit was up.