MTY Food Group's Strategic Sale Process and Its Implications for Franchise-Driven Restaurant Investments

Market Volatility and Strategic Uncertainty

MTY's stock price has experienced notable turbulence in 2025, closing at $34.35 in recent trading sessions after a year-to-date decline of 25.2%. This volatility reflects investor skepticism about the company's ability to navigate a challenging quick-service restaurant (QSR) environment, where consumer spending on dining out has waned. Despite this, the company's announcement of a formal sale process triggered a 13% stock rally, pushing its market capitalization to approximately $874 million. This reaction underscores the market's recognition of MTY's potential as a takeover target, particularly in a sector where private equity buyers are increasingly drawn to recurring royalty revenue streams.

Private Equity Appetite for Franchise Models

Private equity firms have historically favored franchise-driven assets for their scalability, low capital intensity, and predictable cash flows. In 2025, this interest has intensified as sponsors seek opportunities in sectors insulated from macroeconomic headwinds. According to a report by McKinsey, private equity's global private markets report highlights a rebound in dealmaking for large transactions exceeding $500 million in enterprise value, driven by improved financing costs and higher entry multiples. Franchise operators with 200+ units and disciplined unit economics-such as MTY-are particularly attractive, as they align with private equity's preference for repeatable, scalable models.

For context, the broader hospitality and service-based sectors in 2025 trade at EBITDA multiples ranging from 9.1x to 12.3x for companies in the $3–10 million range according to industry analysis. While MTY's specific 2025 EBITDA figures remain undisclosed, its market capitalization of $550 million suggests a potential undervaluation if it commands a premium closer to these industry benchmarks. A strategic sale could thus represent a value-creation opportunity, especially if a private equity buyer applies a higher multiple to MTY's recurring royalty income.

Challenges and Risks

MTY's third-quarter 2025 results, however, highlight structural challenges. Sales and profits declined year-over-year, and the company's share price has underperformed despite maintaining its dividend policy. These trends reflect broader QSR sector pressures, including shifting consumer preferences and inflationary costs. A potential acquirer would need to address these operational headwinds while leveraging MTY's portfolio of 80+ brands to drive growth.

Strategic Implications for Investors

The sale process introduces both risks and opportunities. On one hand, prolonged uncertainty could further depress MTY's valuation. On the other, a well-structured transaction-whether a full sale or strategic divestiture of underperforming brands-could catalyze a re-rating of the company's intrinsic value. For private equity firms, MTY's asset-light structure and geographic diversification (with over 1,000 locations across North America) present a compelling case for value creation through operational optimization and brand revitalization.

Conclusion

MTY Food Group's strategic sale process encapsulates the broader dynamics shaping franchise-driven restaurant investments in 2025. While the company faces near-term challenges, its alignment with private equity's preference for scalable, cash-generative models positions it as a potential catalyst for value unlocking. Investors should closely monitor developments in the sale process, as well as the sector's evolving EBITDA multiples, to gauge whether MTY's current valuation reflects its long-term potential.