NEWSLETTER FEBRUARY 2014

PMI
BOARD UPDATE
SUNDAY, MAY 4, 2014
THRU
TUESDAY, MAY 6, 2014
@
DALLAS/FORT WORTH
AIRPORT MARRIOTT

More Information Enclosed
PMFA 2014
CONVENTION
Fellow Franchisees,

Hopefully everyone had a great holiday season and is setting
their sights on a year of great sales and hopefully better prof-
its. Just before Christmas all of you should have received the
results from the survey. We asked you to complete the sur-
vey to insure the PMFA Board of Directors direction is in align-
ment with the vast majority of the franchisee community and
secondly to see if the franchisees were in agreement with ask-
ing Terry Collins to take a lead position in future discussions
with management. We received 362 franchisee responses
representing over 1,000 stores. There was overwhelming fran-
chisee agreement with the areas we have been focused on for
the past two years. Almost all responses supported our priori-
ties in the 80-90% range. Having Terry Collins take a lead
position in representing us was supported by 91%.

What surprised us the most was the comments that you in-
cluded. We dont know how anyone who read through all of
them could not come away with a clear understanding of just
how much these problems are not only affecting their busi-
nesses but their families and their futures. We provided PMI
management a copy of the survey results and the comments.

Last March a two day meeting between the PMFA Board and
management did not lead to any responsive action by
PMI. The PMFA membership met with Ken and his team at
our July meeting and again did not lead to any action. The
FAB and subcommittees have been in place during these past
two years and discussed many of these issues. If any of
these larger group meetings actually brought about change
we would not have seen the results and the comments that
came from our survey. As a result we asked that we set a
meeting of just four people to start working on answers to
those questions. Ken Calwell, John Barr, Terry Collins (a food
service executive with experience that included being in
charge of all the Pizza Huts and Taco Bells worldwide, found-
er and former owner of Papa Murphys International) and Lar-
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2

- BOARD UPDATE CONTINUED -
ry Hodge (a former food service executive with companies like McDonalds and Pepsico, PMFA President for
the past seven years and a former FAB member for 20 years) would meet to try to pave the way for some
meaningful discussions and changes. Management has come back and wants to have another larger meet-
ing that would include some PMFA Board members, FAB members and management team. Our Board
strongly believes those types of meetings will not provide the timely and substantive changes needed to af-
fect the lives of those that were crying out for help in the survey.

The information we have indicates that last year that there were approximately 430 stores that averaged
under $8,000 AWS. In the Eastern Division 241 of their 387 stores (63%) averaged under $8,000 AWS. The
Southwest Division had 114 of their 462 stores (25%) under $8K. The 52 new stores in the Eastern Division
averaged just $6,300. It doesnt take a CPA to figure out that these franchisees cant sustain their business
very long without some significant help.

The break-even point for a new store with a manager is just under $8,000 AWS. For a store with a manag-
er and $175K debt service the break even is approximately $10,800. Again, at that point there isnt any
profit or return on investment. So how does a store doing $5-6K AWS get to break even? There arent any
easy solutions or the problems would not be continuing. You can always do more LSM. You can always
make improvements in your operations through better training practices. A free print drop will help and be
appreciated. Over time these things will help the franchisees situation. But many of these franchisees are
running out of both time and money. They need help now.

We believe we need to offer immediate and significant help to those most in need. We also believe we need
to be exploring bigger and bolder ideas to change our business model to a system where growth is profitable
for both the franchisor and the franchisee. What kind of ideas? Here are just a few to consider.

1. Move 50% of the ADF to supporting the stores and markets below $8K AWS. That provides
25% for overhead, 25% for production and the rest to markets that need the help the most.

2. Royalty relief on a sliding scale up to $8K AWS. PMI receives fees and royalties on stores we
are opening at $6,300 AWS and losing money every day. They need to put some of their skin in the
game and give up some of their EBITAD just like they ask franchisee to do.

3. In these troubled markets we need a new store program like Papa Johns promotes (see at-
tached) to encourage franchisees to take the financial risk and fill out their markets.

4. Noble Roman is opening up take n bake shops for $150K. If they (or someone else who
comes up with a better product) can open stores for half our cost, their break-evens will put them in
a position to price and promote more aggressively than we can. Unless the new $300K Create design
can generate some very big numbers shouldnt our focus be on a $150-200K model? Has anyone
heard what sales and profit numbers the new Create stores that opened this year are actually gener-
ating?

5. We need to spend some significant money on research to figure out why Papa Murphys stores
cant open in new markets with AWS that at least can break them even within the first 12 months.

The survey made it clear that the franchisees are fully behind Terry Collins taking a lead role with
PMFA. Our Board feels strongly that a meeting between Ken Calwell, John Barr, Terry Collins and Larry
Hodge on down store assistance and the other issues that were part of the survey results could provide a
blueprint of how both the franchisee and the franchisor can achieve mutual success and profitability.
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3

Papa Murphy's Franchisees,

Last October the PMFA Board asked me to consider taking a lead position in their discussions with
PMI management on franchisee concerns. They felt management was not taking them seriously. I told
them I would agree but only if there was overwhelming support from the franchisee community on their
positions and their desire for me to work on their behalf. When the survey results of 362 franchisees rep-
resenting over 1,000 stores came back, the 91% who supported my involvement and the 83% who agreed
with PMFA on the issues they surveyed eliminated both concerns. But it was the comments of many of the
362 franchisees that responded that moved me to commit.

The survey was an opportunity for 362 franchisees to speak for themselves on the issues without the fear
of retribution. They couldn't have been any clearer. If the charter of both the PMFA Board and the Fran-
chise Advisory Board is to represent all of the franchisees, then the process of identifying the issues has
been completed. Some might disagree with the design of the questions but you cant avoid the stark reali-
ty of the comments. The longer these issues go the greater the impact on many of the franchisees busi-
nesses, families and futures.

Many of you may have just looked at the scoring when the survey results came out. I encourage manage-
ment, franchisees, the FAB and PMFA to read them. [If you dont have a copy contact kat-
barr@pacific.net] Read all of them. I dont believe you will fully understand the importance of addressing
and resolving these issues until you do. I know I didnt.

PMFA believes the survey results boiled down to seven key areas that we should focus on and hopefully
find answers to.

How do we identify and help franchisees who are barely hanging on?
Franchisee/Franchisor profits
Franchisee/Franchisor relationship
Remodels/POS
Intrusion
Energizing new store development
Co-op independence

Despite all of the communications and meetings that have come out of corporate over the past couple of
months can anyone honestly say these problems have been addressed and real significant solutions pro-
vided? For over a month PMFA has tried to set up a meeting with PMI top management to discuss these
issues. Ken Calwell has made it clear he only wants to meet with PMFA Board, a full FAB, and his
staff. Its just far too many people and nothing will get done.

Why wouldnt PMI want to meet in a small group where meaningful decisions and improvements might be
made? What is PMI afraid of? Papa Murphys Franchisee Association WILL move forward improving the
franchisees position on the above issues with or without PMI working with us as offered, but it would be a
lot better if we could all work together. I believe we could end up with a better, faster growing system.

Recent meetings in 4 markets were a step in the right direction. But we need to run to solutions. Not fill-
ing out an application for help with 27 questions to be considered while each day the desperate are further
pushed into closure by ACH of royalties right off the top. There needs to be a lot more urgency on all
these issues.

Ive long felt things have to be good for the franchisees for it to be good for the franchisor. With the store
closures that took place last year and the likelihood of that number dramatically increasing this year, the
rumblings many of you have heard about law suits could become a reality. The odds of these problems
(Continued on page 4)
- MESSAGE FROM TERRY COLLINS -
4

hitting the press instead of being discussed and dealt with internally will only grow. PMFA isnt promoting
either approach. Actually, it is just the opposite. Nobody wants to see any of that happen. It isnt in the
best interest of the franchisor or the franchisees. We should be able to work this out together.

PMFA would prefer a four-man meeting take place. But in the interest of moving the process forward Chris
Copp, a long-time Portland franchisee and member of both the PMFA Board and the FAB, sent an e-mail to
Ken Calwell suggesting a meeting with just four top management representatives, four FAB representatives
that the FAB would choose and four PMFA representatives. The meeting would have no presentations. Just
12 concerned parties sitting down and trying to find solutions to the very significant issues we outlined. I
am told the FAB has already recognized that a smaller meeting would be more productive.

This approach would seem to be a good-faith compromise that could lead to helping move Papa Murphys
past all this and toward making Papa Murphys stronger and profitable for everyone. Unfortunately, Ken
Calwell quickly turned it down and continues to insist on a larger meeting with over twice the number of
people. WITH OR WITHOUT a meeting PMFA will maintain its focus and continue to push for finding solu-
tions that are right and fair for both the franchisee and the franchisor.

As a founder of PMI and a family member of franchisees owning 26 stores, I care a great deal and want to
see both the franchisees and franchisor prosper and move forward.

Terry Collins
- MESSAGE FROM TERRY COLLINS CONTINUED -
PMFA THANKS OUR SPONSORS OF THE 2013 CONVENTION
GOLD SPONSORS
ASAP Printing
Burke
Curtis Restaurant Equipment
Distribution Market Advantage
Fontanini Sausage
Hormel Foods
InLine Media
Mercury Werks
NCR
Pendleton Flour Mill
Pepsico
Pizza Blends
Sygma/Sysco

SILVER SPONSORS
AdArt Sign Co.
Aramark Crest Uniform
Bell Carter Lindsay Olives
The Clorox Company
Directed Equity
Handgards
Horne Group Accounting
KD Kanopy
Kens Foods Inc
Litehouse Foods
MindShare
Mitchell Restaurant Info
Ruth Burke & Associates
S& S Insurance
Secure Connect
Tyson
Valassis
Wasserstrom Equipment



BRONZE SPONSORS

John Soules Foods
Phizzle


Please support these vendors who support our association
enabling us to put on our conventions.
We thank them for their support!
5

Insurance Program for PMFA Members
PMFA members have access to an exclusive insurance package for their property, liability,
workers compensation, business auto and umbrella coverage's. The Hartford Insurance Company
offers members aggressive pricing and added coverage's, subject to their normal underwriting
guidelines. The program is being managed by agents that have been insuring Papa Murphys
locations for several years. We encourage you to obtain a quote. Contact the agents by email at:
papam@ssinsurance.net or call Christy or Brenda toll-free at; 877-823-7234.
You may also contact PMFA Board Member Rob Dickerson at 417-848-3276 if you
have any questions or would like additional information.
CHEESE DISASTER
The cheese market has just exploded. While PMI has issued lots of marketing ideas and has taken control
of our ability to price our products they have yet to talk about the effect this never before seen cheese
pricing is going to have on our profitability.
The price of block cheese has gone from $1.65 a pound January 2013 to $2.34 (1-29-14); the effect on
this is huge in the cost of our pizzas. Under our current cheese contract you need to add approximately
$.16 to $.20 a pound to the block price to get the delivered price depending on where you are. You can
monitor the cheese pricing at http://www.cheesereporter.com/prices.htm.
It is crucial that we are paying attention to our discounting strategy, as food costs are going up. I would
highly recommend checking the accuracy of your scales daily, shredder plates need to be sharp, and not
over ordering. I am also watching the cheese itself as with most products as the price goes up the quality
comes down. Moisture is a big factor on cheese yield and the quality of the final product.
A couple of examples of IFC with some of our upcoming promotions with cheese at $2.50 delivered:
$5.00 Faves IFC for a one topping is $1.98 or 39.6%
The new pan one topping IFC $3.82 or 47.75% for those that are selling it at $8.00
There are two sheets to help you look at gross profit after IFC for all of our pizzas; one on dollars & one
on percentages. [Contact katbarr@pacific.net if you do not have copies]. You may remember these charts
from a few conventions ago when Larry presented it. To use these charts find either the pizza or the price
point you would like to promote and find the intersection. Again this is with cheese at $2.50 delivered. For
Pan Pizzas add $.48 to any pizza since there is no IFC chart for this product as of yet. We will be making
the charts available to our members on a monthly basis.
As an FAB member for many years I have always had a passion for our supply chain. The quality, pricing
and the way we receive our products are crucial to our business. I, like I am sure a lot of you, do watch
the cheese price almost daily. For many years I served on the Supply Chain Committee with different VPs
of purchasing from Bob Graham to the current VP Jeff McNally. We had been very interactive and secured
many contracts for not only cheese but all of our products. One of the things we had discussed back then
was eliminating the convention and ad fund money from our cheese purchases when cheese crossed the
$1.80 threshold. While this is or was at the time about $.05 a pound, those nickels add up. In 2010 the
supply chain committee was disbanded and was replaced with a store contribution committee that has
since been eliminated. The FAB has for the past two years asked that this committee be put back together
and you may recall that in a letter from Ken Calwell last spring he mentioned there would be two FAB
members on this committee. As of today it is not been formed.
I believe that PMI should stop collecting the funds ASAP and put a committee together so we the Franchise
Owners can be aware of all the purchasing contracts we are committed to.

DJ Cavanaugh
Check out this article from USA TODAY: YoungMoney: More cheese, please
http://usat.ly/1eByWin
6

Rooms are $119/night and include:
complimentary shuttle to/from
Airport just minutes away;
In-room WiFi;
fitness center;
Indoor & Outdoor Pools
HOTEL INFORMATION
To make reservations call Marriott reservations at 1 (800) 228-9290 or (817) 358-1700
and mention "Papa Murphy's"
before April 17, 2014 to insure the rate.

Please note that if you choose to stay at a different resort you will be charged a convention fee of $ 100.00.
Our convention costs are tied to the number of rooms we book. It is more fun to be with the group!
MAKE YOUR RESERVATION BEFORE APRIL 14 th
TO BE INCLUDED IN DRAWINGS FOR FREE NIGHTS
JOIN US AT THE PMFA
2014 CONVENTION
MAY 4TH 6TH
AT THE
DALLAS/FORT WORTH
AIRPORT MARRIOTT

BE SURE TO MAKE YOUR
RESERVATIONS SOON
Dont forget to check out Fort Worth!

For its pedestrian-friendly downtown area, gourmet
restaurants and attractions.

Discover unique shops, colorful galleries,
fun nightspots, fabulous performance
As an added value for all PMFA Convention attendees, American Airlines is offering a 5% discount
off of your airfare Electronic ticketing is required, otherwise a paper ticket charge will apply. Go on
the internet to aa.com, select your flights and during the transaction, it will ask for a promotion
code, which is 9354DB and the 5% discount will be ap-
plied. The discount may be used for flights anytime
beginning May 1st through May 9, 2014.
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2014 PMFA MEMBERSHIP APPLICATION
2014 PMFA CONVENTION
REGISTRATION (PMFA MEMBERSHIP REQUIRED)

NAME(S) ATTENDING:

____________________________________________

____________________________________________

____________________________________________

Convention attendance for two (2) people is free for each membership.
Additional attendees will be charged a $50 convention fee.

Staying at the MARRIOTT Yes or No
($100 fee if not staying at the Marriott)

Mail to: 1380 Sequoia Plaza, Ukiah CA 95482
or
Fax to: 707-462-3677
or
Email with info to: katbarr@pacific.net
Dues for 2014 are based on the number of stores owned. All Papa Murphy's franchisees are eligible for membership.
Membership is limited to individuals regardless of the form of store ownership.

OWNER(S) Name: _______________________________________________

Address: _________________________________________________________________________________________

Phone No. _______________________________________________

Email _______________________________________________ No of Stores ___________

$75 per store up to $375
NEW MEMBERS GET FIRST YEAR FREE

Amount enclosed or to be charged: __________

Pay by check made out to PMFA & Mail to: Kathleen Barr, 1380 Sequoia Plz, Ukiah CA 95482

or VISA or MASTERCARD:
Number: ________________________________________________ Exp Date: ____/_____

Name on Card: ________________________________________________

Billing Address: ________________________________________________

Mail to address above, fax to 707 462 3677 or email to katbarr@pacific.net

Minority Owners: ______________________________________________

The PMFA Board of Directors is authorized to represent the membership of the PMFA
and has the full support of the membership.
8

Remember ~
Only as a team can we be effective.
It's so critical for the franchisees to
have a collective voice
President Larry Hodge, 707-845-4421, larry@brencam.com
Vice President Chris Copp, 503-281-8435, chris@papacopp.com
Secretary DJ Cavanaugh, 208-660-7232, dj@papamurphyscda.com
Treasurer Kathleen Barr, 707-621-0997, katbarr@pacific.net

Director Rob Dickerson, 417-848-3276, robdickerson@aol.com
Director Mark Hamlin, 541-754-1248, markandbethhamlin@gmail.com
Director Mike Niver, 414-333-2169, mlniv@charter.net
Director Brian Watson, 214-729-6889, bcwatson101@yahoo.com
Consultant Terry Collins, terrycpapa@hotmail.com



PMFA BOARD OF DIRECTORS
1380 SEQUOIA PL, UKIAH CA 95482