WE’VE POSTED TWO NEW ARTICLES TO OUR WEBSITE DESIGNED TO WARN FRANCHISE INVESTORS OF THE RISK OF BUYING AN MTY FRANCHISE. THE FIRST IS TITLED “UNPROFITABLE FRANCHISES”. IT DISCUSSES MTY CEO ERIC LEFEBVRE’S RECENT ADMISSION THAT, NEARLY TWO YEARS AFTER HE COMMITTED TO ADDRESSING THE COMPANY’S CLOSURE AND FRANCHISEE PROFITABILITY ISSUES, BOTH RAGE ON. HE ALSO ADMITS THE COMPANY STRUGGLES TO CONVINCE FRANCHISEES TO RENEW DUE TO THE FRANCHISEE PROFITABILITY ISSUE. IT ALSO DISCUSSES THE DEVASTATING AND LASTING IMPACT THAT 2,594 CLOSURES IN FIVE YEARS CAN HAVE ON THE FRANCHISE FAMILIES THAT INVESTED AS MUCH AS $1M+ TO START THEIR BUSINESSES. THE ARTICLE IS AVAILABLE HERE.

THE SECOND ARTICLE IS TITLED “SUBSTANTIAL RISK OF FAILURE”. IT LISTS SEVERAL WARNINGS CONTAINED IN MTY’S FEDERAL DISCLOSURES. THIS INCLUDES A WARNING REQUIRED BY THE STATE OF MARYLAND APPARENTLY DUE TO THE COMPANY’S “FINANCIAL CONDITION”. GIVEN MTY’S KICKBACKS, CLOSURES AND STANLEY MA’S ELABORATE $214M MONEY-MAKING SCHEME, THESE WARNINGS SHOULD BE GIVEN CAREFUL CONSIDERATION BY POTENTIAL FRANCHISE INVESTORS. THE ARTICLE IS AVAILABLE HERE.

MTY is in the Kickback Business, Not the Restaurant Business

Updated January 13, 2022

On our “Kickbacks” webpage, we discuss what kickbacks are and how MTY cloaks and sanitizes them in their disclosures. On our “High Failure Rate” webpage, we discuss how kickbacks are causing MTY’s franchise network to collapse, just as with other large franchise networks.

MTY’s closure rate has an effect on the company’s underlying economics. As MTY closes locations, those units no longer generate restaurant service revenue for the company. Because MTY is a public company, it either has to suffer a decline in its stock price for failing to meet expectation or find other sources of revenue to make securities investors believe the company is performing so that its stock price can rise. If MTY were to report its restaurant service revenue without subsidizing its revenue with kickbacks, investors would be willing to pay only a small fraction of MTY’s current stock price. Thus, as MTY’s earnings have fallen year-after-year, the company has become increasingly reliant on kickbacks.

As a result of MTY’s declining economics and its use of kickbacks to plug its ailing financial position, the company’s kickbacks have grown to the point that they make up substantially more of the company’s earnings than its earnings attributable to restaurant services. This was the case even well before the pandemic.

For example, MTY’s 2018 kickbacks totaling $55.5M (PDF pg. 90), increased 15% in 2019 to $63.7M (PDF pg. 107). However, the company’s 2019 earnings totaled just $77.7M. Thus, kickbacks made up 82% of MTY’s earning during 2019 and only 18% of its earnings were derived from restaurant services.

Due to the strain on the franchisees and Lefebvre’s earlier promise to address franchisee profitability, one might have expected that MTY would suspended kickbacks during the pandemic. However, MTY’s Q3, 2021 trailing earnings totaled $80.8M (PDF pg. 2 and PDF pg. 2). The company also reported kickbacks for the 12-month trailing period totaling $53.6M (see “Other franchising revenue”, PDF pgs. 19, 57, 22, 22, and 21). Thus, kickbacks comprise 66% of MTY’s earnings during Q3, 2021, in the midst of the pandemic.

MTY is no longer in the restaurant service business. Instead, its own financials prove the company is overwhelmingly in the kickback business. MTY is in the business of taking money from the pockets of hardworking franchise families while knowing this is depleting their savings, putting many of them out of business and forcing them into bankruptcy.

So, then who’s pocket is the money going into?

Read our “Stanley Ma Ethics” webpage to learn how kickbacks, false statements by MTY’s board members, a cover-up and stock manipulation has increased Chairman Stanley Ma’s already substantial wealth by as much as $214M during the pandemic.

Like Quiznos, MTY has proven it can’t win with kickbacks and it can’t win without them!

MTY Food Group Executives & Other Photos