Papa Murphy's 10-Q 8 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information Document - shares	9 Months Ended
	Oct. 02, 2017	Nov. 03, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	Papa Murphy's Holdings, Inc.
Entity Central Index Key	1,592,379
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Oct. 2, 2017
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--01-01
Document Fiscal Year Focus	2,017
Amendment Flag	false
Entity Common Stock, Shares Outstanding		16,948,969

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2017	Sep. 26, 2016	Oct. 02, 2017	Sep. 26, 2016
Revenues
Franchise royalties	$ 8,539	$ 8,834	$ 27,674	$ 28,868
Franchise and development fees	310	645	1,748	2,173
Company-owned store sales	17,520	18,705	57,010	58,849
Other	455	335	1,488	1,507
Total revenues	26,824	28,519	87,920	91,397
Store operating costs:
Cost of food and packaging	5,858	6,488	19,376	20,541
Compensation and benefits	5,478	5,748	17,735	17,058
Advertising	1,954	1,727	6,195	5,790
Occupancy	1,390	1,608	5,405	4,487
Other store operating costs	1,967	2,762	6,144	7,608
Selling, general, and administrative	5,595	6,198	26,216	21,165
Depreciation and amortization	2,336	3,137	8,359	8,767
Loss on disposal or impairment of property and equipment	(4,327)	(160)	(15,377)	(155)
Total costs and expenses	28,905	27,828	104,807	85,571
Operating (Loss) Income	(2,081)	691	(16,887)	5,826
Interest expense, net	1,305	1,201	3,818	3,587
Other expense, net	57	41	149	125
(Loss) Income Before Income Taxes	(3,443)	(551)	(20,854)	2,114
(Benefit from) provision for income taxes	(1,574)	(130)	(7,384)	941
Net (Loss) Income	$ (1,869)	$ (421)	$ (13,470)	$ 1,173
(Loss) earnings per share of common stock
Basic (loss) earnings per share (usd per share)	$ (0.11)	$ (0.03)	$ (0.80)	$ 0.07
Diluted (loss) earnings per share (usd per share)	$ (0.11)	$ (0.03)	$ (0.80)	$ 0.07
Weighted average common stock outstanding
Basic (in shares)	16,882,193	16,753,292	16,863,122	16,738,151
Diluted (in shares)	16,882,193	16,753,292	16,863,122	16,772,627

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 02, 2017	Jan. 02, 2017
Current Assets
Cash and cash equivalents	$ 900	$ 2,069
Accounts receivable, net	3,044	5,330
Current portion of notes receivable	97	92
Inventories	787	917
Prepaid expenses and other current assets	2,917	4,708
Total current assets	7,745	13,116
Property and equipment, net	11,036	28,516
Notes receivable, net of current portion	10	57
Goodwill	107,751	108,470
Trade name and trademarks	87,002	87,002
Definite-life intangibles, net	32,779	36,313
Other assets	351	398
Total assets	246,674	273,872
Current Liabilities
Accounts payable	4,757	6,160
Accrued expenses and other current liabilities	10,412	7,503
Current portion of unearned franchise and development fees	1,063	1,358
Current portion of long-term debt	8,400	7,879
Total current liabilities	24,632	22,900
Long-term debt, net of current portion	92,013	100,965
Unearned franchise and development fees, net of current portion	900	410
Deferred tax liability	36,642	44,179
Other long-term liabilities	3,977	3,922
Total liabilities	158,164	172,376
Commitments and contingencies (Note 15)
Stockholders’ Equity
Preferred stock, value issued	0	0
Common stock, value issued	170	170
Additional paid-in capital	120,416	119,932
Accumulated deficit	(32,076)	(18,606)
Total stockholders’ equity	88,510	101,496
Total liabilities and stockholders’ equity	$ 246,674	$ 273,872

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 02, 2017	Jan. 02, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares authorized	15,000,000	15,000,000
Preferred stock, shares issued	0	0
Common stock, par value per share	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	16,965,461	16,955,970

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2017	Sep. 26, 2016
Operating Activities
Net (loss) income	$ (13,470)	$ 1,173
Adjustments to reconcile to cash from operating activities
Depreciation and amortization	8,359	8,767
Loss on disposal/impairment of property and equipment	(15,377)	(155)
Deferred taxes	(7,537)	789
Stock-based compensation	489	660
Other non-cash items	341	240
Change in operating assets and liabilities
Accounts receivable	2,285	992
Prepaid expenses and other assets	1,174	824
Unearned franchise and development fees	195	(339)
Accounts payable	(2,028)	(2,120)
Accrued expenses and other liabilities	3,040	(1,841)
Net cash from operating activities	8,225	9,300
Investing Activities
Acquisition of property and equipment	(2,957)	(14,485)
Acquisition of stores, less cash acquired	0	2,455
Proceeds from sale of stores	2,206	136
Payments received on notes receivable	42	57
Net cash from investing activities	(709)	(16,747)
Financing Activities
Payments on term loan	7,879	3,321
Advances on revolver	12,700	14,800
Payments on revolver	(13,500)	(10,700)
Repurchases of common stock	(6)	(84)
Proceeds from exercise of stock options	0	293
Payments received on subscription receivables	0	100
Net cash from financing activities	(8,685)	1,088
Net change in cash and cash equivalents	(1,169)	(6,359)
Cash and Cash Equivalents, beginning of year	2,069	6,867
Cash and Cash Equivalents, end of period	900	508
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest	3,637	3,423
Cash (received) paid during the period for income taxes	(246)	138
Non-cash Supplemental Disclosures of Investing and Financing Activities
Acquisition of property and equipment in accounts payable	$ 568	$ 1,438

Description of Business and Bas

Description of Business and Basis of Presentation	9 Months Ended
	Oct. 02, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Summary of Significant Accounting Policies	Description of business Papa Murphy’s Holdings, Inc. (“Papa Murphy’s” or the “Company”), together with its subsidiaries, is a franchisor and operator of a Take ‘N’ Bake pizza chain. The Company franchises the right to operate Papa Murphy’s Take ‘N’ Bake pizza franchises and operates Papa Murphy's Take ‘N’ Bake pizza stores owned by the Company. As of October 2, 2017 , the Company had 1,542 stores consisting of 1,501 domestic stores ( 1,353 franchised stores and 148 Company-owned stores) across 39 states, plus 41 franchised stores in Canada and the United Arab Emirates. Substantially all of the Company’s revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned stores and the collection of franchise royalties and fees associated with franchise and development rights. Basis of presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “ SEC ”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles in the United States (“ GAAP ”) for complete financial statements. In the Company’s opinion, all necessary adjustments, consisting of only normal recurring adjustments, have been made for the fair statement of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2017 . Principles of consolidation The interim unaudited condensed consolidated financial statements include the accounts of Papa Murphy’s Holdings, Inc., its subsidiaries and certain entities which the Company consolidates as variable interest entities. All significant intercompany transactions and balances have been eliminated. Throughout the interim unaudited condensed consolidated financial statements and the related notes thereto, “Papa Murphy’s” and “the Company” refer to Papa Murphy’s Holdings, Inc. and its consolidated subsidiaries. Fiscal year The Company uses a 52- or 53-week fiscal year, ending on the Monday nearest to December 31. Fiscal year 2017 is a 52-week year and fiscal 2016 was a 53-week year. All three month periods presented herein contain 13 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods. References to fiscal 2017 and 2016 are references to fiscal years ending January 1, 2018 and ended January 2, 2017 , respectively. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“ FASB ”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASU 2014-09 ”), a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under GAAP. The new standard, as amended, requires adoption by the first quarter of fiscal 2018. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (" ASU 2016-08 ") which is an amendment to the new revenue recognition standard on assessing whether an entity is a principal or an agent in a revenue transaction. This amendment addresses implementation issues that were discussed by the Revenue Recognition Transition Resource Group to clarify the principal versus agent assessment and lead to more consistent application. ASU 2016-08 has the same effective date and transition requirements as ASU 2014-09 . The new revenue standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company anticipates adopting the standard in the first quarter of fiscal year 2018 using the full retrospective method to restate each prior reporting period presented. The Company anticipates this standard will have a material impact on its consolidated financial statements. While the Company continues to assess all potential impacts of the standard, it currently believes the most significant effects will relate to its: (i) accounting for franchise and development fees, and (ii) accounting for its advertising funds. The Company expects revenue related to its franchise royalties, which are based on a percentage of franchise sales, and revenue from Company-owned restaurants to remain substantially unchanged. Specifically, under the new standard the Company expects to recognize franchise fees ratably over the life of the contract rather than at the time the store is opened or a successive contract commences. In addition, the Company expects to account for advertising fund revenues on a gross basis, instead of net, as the Company has determined that under the new standard, it is the principal since it controls the funds and determines how the funds collected will be spent. The Company also expects that application of the new standard will result in a material increase in its liabilities related to the unrecognized portion of franchise and development fees. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ ASU 2016-02 ”). This update requires that lessees recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than twelve months. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include both qualitative and quantitative information. The effective date for ASU 2016-02 is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with earlier adoption permitted. The Company is still evaluating the impact of ASU 2016-02 on its financial position and results of operations, but expects there will be a material increase in assets and liabilities on its Consolidated Balance Sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities, but does not expect a material impact to its results of operations or cash flows. The new lease standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company anticipates adopting the standard in the first quarter of fiscal year 2018 using the full retrospective method to restate each prior reporting period presented. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 320) (“ ASU 2016-15 ”). This update clarifies the presentation of certain cash receipts and cash payments in the statement of cash flows. The effective date for ASU 2016-15 is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company is still evaluating the impact of ASU 2016-15 on its Consolidated Statements of Cash Flows. In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ ASU 2017-04 ”). The new standard simplifies how an entity measures goodwill impairment by removing the second step of the two-step quantitative goodwill impairment test. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured at the amount by which the carrying value exceeds the fair value of a reporting unit; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. ASU 2017-04 requires prospective adoption and is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is still evaluating the impact of ASU 2017-04 on its financial position and results of operations.

Prepaid Expenses and Other Curr

Prepaid Expenses and Other Current Assets	9 Months Ended
	Oct. 02, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses and other current assets	Prepaid expenses and other current assets consist of the following: (in thousands) October 2, 2017 January 2, 2017 Prepaid media production costs $ 64 $ 606 Prepaid software and support 751 985 Prepaid rents 553 622 Prepaid insurance 427 453 Taxes receivable 148 547 Assets held for sale 524 1,406 Advertising cooperative assets, restricted 140 48 Other 310 41 Total prepaid expenses and other current assets $ 2,917 $ 4,708

Property and Equipment

Property and Equipment	9 Months Ended
	Oct. 02, 2017
Property, Plant and Equipment [Abstract]
Property and equipment	Property and equipment are net of accumulated depreciation of $21.2 million and $17.1 million at October 2, 2017 , and January 2, 2017 , respectively. Depreciation expense amounted to $1.2 million and $1.9 million during the three months ended October 2, 2017 , and September 26, 2016 , respectively. Depreciation expense amounted to $4.8 million and $5.0 million during the nine months ended October 2, 2017 , and September 26, 2016 , respectively. During the nine months ended October 2, 2017 , the Company decided to replace its current e-commerce platform. As part of this decision, the Company recognized an impairment of the software component of its property and equipment of $9.1 million during the nine months ended October 2, 2017 . During the nine months ended October 2, 2017 , the Company made the decision to close 13 underperforming Company-owned stores. In connection with the closures, the Company recognized asset impairment charges of $1.9 million during the nine months ended October 2, 2017 , and the remaining $0.5 million of store property and equipment was transferred to assets held for sale on the Company's Condensed Consolidated Balance Sheets . As part of the Company's property and equipment impairment review, the Company recorded an impairment of $4.4 million to its Company-owned store assets during the three months ended October 2, 2017 .

Divestitures (Notes)

Divestitures (Notes)	9 Months Ended
	Oct. 02, 2017
Divestitures [Abstract]
Divestitures	On May 1, 2017 , the Company completed the sale and refranchise of six Company-owned stores in Colorado. On May 8, 2017 , the Company completed the sale and refranchise of one Company-owned store in Colorado in an unrelated transaction. The aggregate sale price for the seven stores was $2.5 million , paid in cash, and the Company recognized a pre-tax gain of $0.1 million . In connection with the sale, the buyers paid $0.3 million in franchise fees. The assets sold were classified as assets held for sale on the Company's Condensed Consolidated Balance Sheets . These dispositions did not meet the criteria for accounting as a discontinued operation.

Goodwill (Notes)

Goodwill (Notes)	9 Months Ended
	Oct. 02, 2017
Goodwill [Abstract]
Goodwill	The following summarizes changes to the Company’s goodwill, by reportable segment: (in thousands) Domestic Company Stores Domestic Franchise Total Balance at January 2, 2017 $ 26,924 $ 81,546 $ 108,470 Disposition (719 ) — (719 ) Balance at October 2, 2017 $ 26,205 $ 81,546 $ 107,751 There is no goodwill associated with the International segment. The Company has determined that during the three months ended October 2, 2017 , there were no triggering events that would require an updated impairment review. The Company recorded goodwill disposals in 2017 from the sale of Company-owned stores to franchise owners.

Intangible Assets

Intangible Assets	9 Months Ended
	Oct. 02, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible assets	Definite-lived intangible assets are net of accumulated amortization of $30.1 million and $26.6 million as of October 2, 2017 , and January 2, 2017 , respectively. Amortization expense amounted to $1.1 million and $1.2 million during the three months ended October 2, 2017 , and September 26, 2016 , respectively. Amortization expense amounted to $3.5 million and $3.8 million during the nine months ended October 2, 2017 , and September 26, 2016 , respectively.

Receivables

Receivables	9 Months Ended
	Oct. 02, 2017
Receivables [Abstract]
Notes receivable	Notes Receivable Notes receivable consist of a note maturing in 2020 that is collateralized by store assets. Changes in the account balance represent amortization payments collected pursuant to the terms of the note. Accounts Receivable Allowance for doubtful accounts amounted to $24,000 and $37,000 as of October 2, 2017 , and January 2, 2017 , respectively.

Financing Arrangements

Financing Arrangements	9 Months Ended
	Oct. 02, 2017
Debt Disclosure [Abstract]
Financing arrangements	Long-term debt consists of the following: (in thousands) October 2, 2017 January 2, 2017 Term loan $ 98,000 $ 105,879 Revolving line of credit — 800 Notes payable 3,000 3,000 Total principal amount of long-term debt 101,000 109,679 Unamortized debt issuance costs (587 ) (835 ) Total long-term debt 100,413 108,844 Less current portion (8,400 ) (7,879 ) Total long-term debt, net of current portion $ 92,013 $ 100,965 Senior secured credit facility On August 28, 2014, PMI Holdings, Inc., a wholly-owned subsidiary of Papa Murphy’s Holdings, Inc., entered into a $132.0 million senior secured credit facility (the “ Senior Credit Facility ”) consisting of a $112.0 million term loan and a $20.0 million revolving credit facility, which includes a $2.5 million letter of credit subfacility and a $1.0 million swing-line loan subfacility. The term loan and any loans made under the revolving credit facility mature in August 2019 . As of October 2, 2017 , the term loan was subject to the LIBOR rate option at 4.5% . With a maturity date of over one year from October 2, 2017 , balances outstanding under the Senior Credit Facility are classified as non-current on the Condensed Consolidated Balance Sheets , except for mandatory, minimum term loan amortization payments of $2.1 million due on the last day of each fiscal quarter. The weighted average interest rate for all borrowings under our Senior Credit Facility for the third quarter of 2017 was 4.5% . Notes payable Papa Murphy’s Company Stores, Inc., a wholly owned subsidiary of Papa Murphy’s Holdings, Inc., has a $3.0 million note payable which bears interest at 5.0% and matures in December 2018 . This note is subordinated to the Senior Credit Facility .

Fair Value Measurement

Fair Value Measurement	9 Months Ended
	Oct. 02, 2017
Fair Value Disclosures [Abstract]
Fair value measurement	The Company determines the fair value of assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. GAAP defines a fair value hierarchy that prioritizes the assumptions used to measure fair value. The three levels of the fair value hierarchy are defined as follows: ▪ Level 1 — Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. ▪ Level 2 — Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data. ▪ Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis: October 2, 2017 January 2, 2017 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Fair Value Measurement Financial assets Notes receivable (1) $ 107 $ 103 $ 149 $ 150 Level 3 (1) The fair value of notes receivable was estimated primarily using a discounted cash flow method based on a discount rate, reflecting the applicable credit spread. Financial instruments not included in the table above consist of cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The fair values of cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value because of the short-term nature of the accounts. The fair value of long-term debt approximates carrying value because the borrowings are made with variable market rates and negotiated terms and conditions that are consistent with current market rates.

Accrued and Other Liabilities

Accrued and Other Liabilities	9 Months Ended
	Oct. 02, 2017
Payables and Accruals [Abstract]
Accrued and other liabilities	Accrued expenses and other current liabilities consist of the following: (in thousands) October 2, 2017 January 2, 2017 Accrued compensation and related costs $ 4,814 $ 2,192 Gift cards payable 2,282 3,033 Accrued interest and non-income taxes payable 426 524 Convention fund balance 1,074 1,025 Advertising cooperative liabilities 239 204 Other 1,577 525 Total accrued expenses and other current liabilities $ 10,412 $ 7,503

Income Taxes

Income Taxes	9 Months Ended
	Oct. 02, 2017
Income Tax Disclosure [Abstract]
Income taxes	Information on the Company’s income taxes for the periods reported is as follows: Three Months Ended Nine Months Ended (in thousands) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 (Benefit from) provision for income taxes $ (1,574 ) $ (130 ) $ (7,384 ) $ 941 (Loss) income before income taxes (3,443 ) (551 ) (20,854 ) 2,114 Effective income tax rate 45.7 % 23.6 % 35.4 % 44.5 % The effective income tax rate for the three months ended October 2, 2017 , includes the effect of certain Federal General Business Credits confirmed during the quarter. The effective income tax rate for the three months ended September 26, 2016 , includes the effect of certain permanent adjustments arising from differences between U.S. GAAP and U.S. federal and state income tax law and the relative impact of those adjustments on a small quarterly loss before income taxes. The effective income tax rate for the nine months ended October 2, 2017 , includes the effect of a discrete adjustment for the share-based compensation expense recorded for the vesting of restricted common shares. The effective tax rate for the nine months ended September 26, 2016 , includes the effect of an adjustment for a tax benefit shortfall created by share-based payments at settlement that were made during the period.

Share-based Compensation

Share-based Compensation	9 Months Ended
	Oct. 02, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-based Compensation	In May 2010, the Company’s Board of Directors approved the 2010 Amended Management Incentive Plan (the “ 2010 Plan ”). In May 2014, the Company’s Board of Directors adopted the 2014 Equity Incentive Plan (the “ 2014 Plan ,” and together with the 2010 Plan , the “ Incentive Plans ”). The Incentive Plans reserve 2,116,747 common shares for equity incentive awards consisting of incentive stock options, non-qualified stock options, restricted stock awards, and unrestricted stock awards. Equity incentive awards may be issued from either the 2014 Plan or the 2010 Plan . Restricted common shares Information with respect to restricted stock awards is as follows: Number of Shares of Restricted Common Stock Weighted Average Award Date Fair Value Per Share Time Vesting Market Condition Unvested, January 2, 2017 30,670 148,946 $ 2.70 Granted 29,333 — 4.39 Vested (23,580 ) (104,820 ) 5.16 Repurchased (1,508 ) (3,772 ) 5.48 Unvested, October 2, 2017 34,915 40,354 $ 3.36 Stock options Information with respect to stock option activity is as follows: Number of Shares Subject to Options Weighted Weighted Aggregate Time Vesting Market Condition Outstanding, January 2, 2017 951,688 171,495 $ 11.48 Granted 455,000 — 4.13 Forfeited (607,240 ) (96,701 ) 10.91 Outstanding, October 2, 2017 799,448 74,794 $ 8.11 8.2 years $ 695 Exercisable, October 2, 2017 278,727 — $ 11.11 7.0 years $ 19 Compensation cost Stock-based compensation expense recognized in connection with the Incentive Plans for the three months ended October 2, 2017 and September 26, 2016 amounted to $0.1 million and $0.2 million , respectively. Stock-based compensation expense recognized in connection with the Incentive Plans for the nine months ended October 2, 2017 and September 26, 2016 amounted to $0.5 million and $0.7 million , respectively. As of October 2, 2017 , the total unrecognized stock-based compensation expense was $1.2 million , with $1.0 million associated with time vesting awards and $0.2 million associated with market condition awards. The remaining weighted average vesting period for unrecognized stock-based compensation expense was 2.1 years as of October 2, 2017 .

Advertising Fund (Notes)

Advertising Fund (Notes)	9 Months Ended
	Oct. 02, 2017
Other Income and Expenses [Abstract]
Advertising fund	Franchised and Company-owned stores in the United States contribute to an advertising fund that the Company manages on behalf of these stores. In addition, certain suppliers contribute to the advertising fund. Under our franchise agreements and other agreements, contributions received by the advertising fund must be spent on marketing, creative efforts, media support, or other related purposes specified in the agreements and result in no profit recognized. Contributions to the advertising fund are netted against the related expense. Expenditures of the advertising fund are primarily amounts paid to third-parties, but may also include personnel expenses and allocated costs. At each reporting date, to the extent contributions to the advertising fund exceed expenditures on a cumulative basis, the excess contributions are accounted for as a deferred liability and are recorded in accrued expenses in the Company’s Condensed Consolidated Balance Sheets . However, if expenditures exceed contributions on a cumulative basis, the excess is recorded as an expense within selling, general and administrative expenses. In subsequent periods, previously recognized expenses may be recovered if subsequent contributions exceed expenditures. Information on the Company’s advertising fund balance for the periods reported is as follows: Three Months Ended Nine Months Ended (in thousands) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 Opening fund deficit $ (7,080 ) $ (1,937 ) $ (1,586 ) $ (1,200 ) Net activity during the period 1,677 15 (3,817 ) (722 ) Ending fund deficit $ (5,403 ) $ (1,922 ) $ (5,403 ) $ (1,922 ) As of October 2, 2017 , previously recognized expenses of $5.4 million may be recovered in future periods if subsequent advertising fund contributions exceed expenditures.

Earnings per Share (EPS)

Earnings per Share (EPS)	9 Months Ended
	Oct. 02, 2017
Earnings Per Share [Abstract]
Earnings per Share (EPS)	The number of shares and earnings per share (“ EPS ”) data for all periods presented are based on the historical weighted-average shares of common stock outstanding. Basic EPS is calculated by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted EPS is calculated using income available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period, which includes unvested restricted common stock and outstanding stock options. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the common shares underlying such securities would have an anti-dilutive effect. The following table sets forth the computations of basic and diluted EPS : Three Months Ended Nine Months Ended (in thousands, except per share data) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 Earnings: Net (loss) income $ (1,869 ) $ (421 ) $ (13,470 ) $ 1,173 Shares: Weighted average common shares outstanding 16,882 16,753 16,863 16,738 Dilutive effect of restricted equity awards (1) — — — 34 Diluted weighted average number of shares outstanding 16,882 16,753 16,863 16,773 (Loss) earnings per share: Basic (loss) earnings per share $ (0.11 ) $ (0.03 ) $ (0.80 ) $ 0.07 Diluted (loss) earnings per share $ (0.11 ) $ (0.03 ) $ (0.80 ) $ 0.07 (1) The Company’s securities that provide a right to receive common stock in the future such as stock options and restricted stock were not included in the computation of diluted EPS for the three and nine months ended October 2, 2017, as the effect of including these shares in the calculation would have been anti-dilutive. For the three months ended October 2, 2017 , and September 26, 2016 , an aggregated total of 0.7 million shares and 1.2 million shares, respectively, have been excluded from the diluted EPS calculation because their effect would have been anti-dilutive. For the nine months ended October 2, 2017 , and September 26, 2016 , an aggregated total of 1.0 million shares and 0.6 million shares, respectively, have been excluded from the diluted EPS calculation because their effect would have been anti-dilutive.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Oct. 02, 2017
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Operating lease commitments The Company leases facilities and various office equipment under non-cancelable operating leases which expire through December 2025 . Lease terms for its Company-owned stores are generally for five years with renewal options and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs. The Company has entered into operating leases that it has subleased to two franchised stores. These operating leases have minimum base rent terms, contingent rent terms if individual franchised store sales exceed certain levels and have terms expiring on various dates from May 2020 to August 2020 . Lease guarantees The Company is the guarantor for operating leases of 21 franchised stores that have terms expiring on various dates from January 2018 to November 2021 . The obligations from these leases will generally continue to decrease over time as the leases expire. The applicable franchise owners continue to have primary liability for these operating leases. As of October 2, 2017 , the Company does not believe it is probable it would be required to perform under the outstanding guarantees. Legal proceedings Except as set forth below, there have been no material developments in the legal proceedings described in Part I, Item 3, of the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2017. The Company currently is subject to litigation with a group of its franchise owners. In January 2014, six franchise owner groups claimed that the Company misrepresented its sales volumes, made false representations to them and charged excess advertising fees, among other things. The Company engaged in mediation with these franchise owners, which is required under the terms of their franchise agreements, in order to address and resolve their claims, but was unable to reach a settlement agreement. On April 4, 2014, a total of 12 franchise owner groups, including those franchise owners that previously made the allegations described above, filed a lawsuit against the Company in the Superior Court in Clark County, Washington, making essentially the same allegations for violation of the Washington Franchise Investment Protection Act, fraud, negligent misrepresentation and breach of contract and seeking declaratory and injunctive relief, as well as monetary damages. Based on motions filed by the Company in that lawsuit, the court ruled on July 9, 2014, that certain of the plaintiffs’ claims under the anti-fraud and nondisclosure provisions of the Washington Franchise Investment Protection Act should be dismissed and that certain other claims in the case would need to be more specifically alleged. The court also ruled that the six franchise owner groups who had not mediated with the Company prior to filing the lawsuit must mediate with the Company in good faith, and that their claims shall be stayed until they have done so. On June 18, 2014, an additional 16 franchise owner groups, represented by the same counsel as the plaintiffs described above, filed a lawsuit in the Superior Court in Clark County, Washington making essentially the same allegations as made in the lawsuit described above and seeking declaratory and injunctive relief, as well as monetary damages. The court consolidated the two lawsuits into a single case and ordered that the plaintiffs in the new lawsuit, none of whom had mediated with the Company prior to filing the lawsuit, must do so, and that their claims be stayed until they have completed mediating with the Company in good faith. In October 2014, the Company engaged in mediation with the 22 franchise owner groups who had not previously done so. As a result of that mediation and other efforts, the Company reached resolution with 13 of the franchise owner groups involved in the consolidated lawsuits, and their claims have either been dismissed or dismissal is pending. In February 2015, the remaining franchise owner groups in the consolidated lawsuits filed an amended complaint, removing some claims, amending some claims, adding claims and naming some of the Company's former and current franchise sales staff as additional individual defendants. In September 2016, the remaining 15 franchise owner groups in the consolidated lawsuits filed an amended complaint to add a claim under the Washington Consumer Protection Act based on substantially the same allegations as the prior claims, to re-plead claims under the Washington Franchise Investment Protection Act that had previously been dismissed, and to dismiss Dan Harmon as a defendant. In June 2017, the Company, members of its board of directors and the plaintiffs each filed motions for summary judgment. A hearing on the summary judgment motions was held on October 13, 2017. In July 2017, the Company engaged in mediation with the remaining 15 franchise owner groups in the consolidated lawsuits. As a result of that mediation and other efforts, the Company reached resolution with five of the remaining franchise owner groups, and their claims have either been dismissed or dismissal is pending. The Company continues to believe the allegations in this litigation lack merit and, for those plaintiffs with whom the Company is unable to reach resolution, it will continue to vigorously defend its interests, including by asserting a number of affirmative defenses and, where appropriate, counterclaims. The Company provides no assurance that it will be successful in its defense of these lawsuits; however, it does not currently expect the cost of resolving them to have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Segment Information

Segment Information	9 Months Ended
	Oct. 02, 2017
Segment Reporting [Abstract]
Segment Information	The Company has the following reportable segments: (i) Domestic Franchise; (ii) Domestic Company Stores; and (iii) International. The Domestic Franchise segment includes operations with respect to franchised stores in the United States and derives its revenues primarily from franchise and development fees and franchise royalties from franchised stores in the United States. The Domestic Company Stores segment includes operations with respect to Company-owned stores in the United States and derives its revenues from retail sales of pizza and side items to the general public. The International segment includes operations related to the Company’s operations outside the United States and derives its revenues from franchise and development fees and franchise royalties from franchised stores outside the United States. The Company measures the performance of its segments based on segment adjusted EBITDA and allocates resources based primarily on this measure. “ EBITDA ” is calculated as net (loss) income before interest expense, income taxes, depreciation, and amortization. Segment adjusted EBITDA excludes certain unallocated and corporate expenses. Although segment adjusted EBITDA is not a measure of financial condition or performance determined in accordance with GAAP , the Company uses segment adjusted EBITDA to compare the operating performance of its segments on a consistent basis and to evaluate the performance and effectiveness of its operational strategies. The Company’s calculation of segment adjusted EBITDA may not be comparable to that reported by other companies. The following tables summarize information on revenues, segment adjusted EBITDA and assets for each of the Company’s reportable segments and include a reconciliation of segment adjusted EBITDA to (loss) income before income taxes: Three Months Ended Nine Months Ended (in thousands) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 Revenues Domestic Franchise $ 9,227 $ 9,725 $ 30,648 $ 32,276 Domestic Company Stores 17,520 18,705 57,010 58,849 International 77 89 262 272 Total $ 26,824 $ 28,519 $ 87,920 $ 91,397 Segment Adjusted EBITDA Domestic Franchise $ 6,131 $ 4,968 $ 14,782 $ 16,317 Domestic Company Stores 365 (197 ) 1,303 1,545 International 62 80 222 222 Total reportable segments adjusted EBITDA 6,558 4,851 16,307 18,084 Corporate and unallocated (1,261 ) (1,064 ) (5,800 ) (3,616 ) Depreciation and amortization (2,336 ) (3,137 ) (8,359 ) (8,767 ) Interest expense, net (1,305 ) (1,201 ) (3,818 ) (3,587 ) CEO transition and restructuring (1) (190 ) — (2,519 ) — E-commerce impairment (2) — — (9,124 ) — Store closures and impairments (3) (4,446 ) — (7,078 ) — Litigation settlements (4) (463 ) — (463 ) — (Loss) Income Before Income Taxes $ (3,443 ) $ (551 ) $ (20,854 ) $ 2,114 (1) Represents non-recurring management transition and restructuring costs in connection with the recruitment of a new Chief Executive Officer and other executive positions. (2) Represents impairment of our e-commerce platform based on the decision to move to a third-party developed and hosted solution. (3) Represents non-cash charges associated with the disposal or impairment of store assets upon the determination that the book value of certain stores was higher than the fair value of those stores, plus lease buyouts and reserves for the residual contractual lease obligations on closed stores. (4) Payments and accruals made towards franchisee litigation settlements. (in thousands) October 2, 2017 January 2, 2017 Total Assets Domestic Franchise $ 119,151 $ 133,466 Domestic Company Stores 40,047 52,531 International 289 318 Other (1) 87,187 87,557 Total $ 246,674 $ 273,872 (1) Other assets which are not allocated to the individual segments primarily include trade names and trademarks and taxes receivable.

Description of Business and B22

Description of Business and Basis of Presentation (Policies)	9 Months Ended
	Oct. 02, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of presentation	Basis of presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “ SEC ”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles in the United States (“ GAAP ”) for complete financial statements. In the Company’s opinion, all necessary adjustments, consisting of only normal recurring adjustments, have been made for the fair statement of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2017 .
Principles of consolidation	Principles of consolidation The interim unaudited condensed consolidated financial statements include the accounts of Papa Murphy’s Holdings, Inc., its subsidiaries and certain entities which the Company consolidates as variable interest entities. All significant intercompany transactions and balances have been eliminated. Throughout the interim unaudited condensed consolidated financial statements and the related notes thereto, “Papa Murphy’s” and “the Company” refer to Papa Murphy’s Holdings, Inc. and its consolidated subsidiaries.
Fiscal year	Fiscal year The Company uses a 52- or 53-week fiscal year, ending on the Monday nearest to December 31. Fiscal year 2017 is a 52-week year and fiscal 2016 was a 53-week year. All three month periods presented herein contain 13 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods. References to fiscal 2017 and 2016 are references to fiscal years ending January 1, 2018 and ended January 2, 2017 , respectively.
New accounting pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“ FASB ”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASU 2014-09 ”), a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under GAAP. The new standard, as amended, requires adoption by the first quarter of fiscal 2018. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (" ASU 2016-08 ") which is an amendment to the new revenue recognition standard on assessing whether an entity is a principal or an agent in a revenue transaction. This amendment addresses implementation issues that were discussed by the Revenue Recognition Transition Resource Group to clarify the principal versus agent assessment and lead to more consistent application. ASU 2016-08 has the same effective date and transition requirements as ASU 2014-09 . The new revenue standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company anticipates adopting the standard in the first quarter of fiscal year 2018 using the full retrospective method to restate each prior reporting period presented. The Company anticipates this standard will have a material impact on its consolidated financial statements. While the Company continues to assess all potential impacts of the standard, it currently believes the most significant effects will relate to its: (i) accounting for franchise and development fees, and (ii) accounting for its advertising funds. The Company expects revenue related to its franchise royalties, which are based on a percentage of franchise sales, and revenue from Company-owned restaurants to remain substantially unchanged. Specifically, under the new standard the Company expects to recognize franchise fees ratably over the life of the contract rather than at the time the store is opened or a successive contract commences. In addition, the Company expects to account for advertising fund revenues on a gross basis, instead of net, as the Company has determined that under the new standard, it is the principal since it controls the funds and determines how the funds collected will be spent. The Company also expects that application of the new standard will result in a material increase in its liabilities related to the unrecognized portion of franchise and development fees. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ ASU 2016-02 ”). This update requires that lessees recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than twelve months. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include both qualitative and quantitative information. The effective date for ASU 2016-02 is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with earlier adoption permitted. The Company is still evaluating the impact of ASU 2016-02 on its financial position and results of operations, but expects there will be a material increase in assets and liabilities on its Consolidated Balance Sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities, but does not expect a material impact to its results of operations or cash flows. The new lease standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company anticipates adopting the standard in the first quarter of fiscal year 2018 using the full retrospective method to restate each prior reporting period presented. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 320) (“ ASU 2016-15 ”). This update clarifies the presentation of certain cash receipts and cash payments in the statement of cash flows. The effective date for ASU 2016-15 is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company is still evaluating the impact of ASU 2016-15 on its Consolidated Statements of Cash Flows. In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ ASU 2017-04 ”). The new standard simplifies how an entity measures goodwill impairment by removing the second step of the two-step quantitative goodwill impairment test. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured at the amount by which the carrying value exceeds the fair value of a reporting unit; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. ASU 2017-04 requires prospective adoption and is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is still evaluating the impact of ASU 2017-04 on its financial position and results of operations.

Advertising Fund (Policies)

Advertising Fund (Policies)	9 Months Ended
	Oct. 02, 2017
Other Income and Expenses [Abstract]
Advertising fund	Franchised and Company-owned stores in the United States contribute to an advertising fund that the Company manages on behalf of these stores. In addition, certain suppliers contribute to the advertising fund. Under our franchise agreements and other agreements, contributions received by the advertising fund must be spent on marketing, creative efforts, media support, or other related purposes specified in the agreements and result in no profit recognized. Contributions to the advertising fund are netted against the related expense. Expenditures of the advertising fund are primarily amounts paid to third-parties, but may also include personnel expenses and allocated costs. At each reporting date, to the extent contributions to the advertising fund exceed expenditures on a cumulative basis, the excess contributions are accounted for as a deferred liability and are recorded in accrued expenses in the Company’s Condensed Consolidated Balance Sheets . However, if expenditures exceed contributions on a cumulative basis, the excess is recorded as an expense within selling, general and administrative expenses. In subsequent periods, previously recognized expenses may be recovered if subsequent contributions exceed expenditures.

Prepaid Expenses and Other Cu24

Prepaid Expenses and Other Current Assets (Tables)	9 Months Ended
	Oct. 02, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses and other current assets	Prepaid expenses and other current assets consist of the following: (in thousands) October 2, 2017 January 2, 2017 Prepaid media production costs $ 64 $ 606 Prepaid software and support 751 985 Prepaid rents 553 622 Prepaid insurance 427 453 Taxes receivable 148 547 Assets held for sale 524 1,406 Advertising cooperative assets, restricted 140 48 Other 310 41 Total prepaid expenses and other current assets $ 2,917 $ 4,708

Goodwill (Tables)

Goodwill (Tables)	9 Months Ended
	Oct. 02, 2017
Goodwill [Abstract]
Summary of changes to goodwill	The following summarizes changes to the Company’s goodwill, by reportable segment: (in thousands) Domestic Company Stores Domestic Franchise Total Balance at January 2, 2017 $ 26,924 $ 81,546 $ 108,470 Disposition (719 ) — (719 ) Balance at October 2, 2017 $ 26,205 $ 81,546 $ 107,751

Financing Arrangements (Tables)

Financing Arrangements (Tables)	9 Months Ended
	Oct. 02, 2017
Debt Disclosure [Abstract]
Long-term debt	Long-term debt consists of the following: (in thousands) October 2, 2017 January 2, 2017 Term loan $ 98,000 $ 105,879 Revolving line of credit — 800 Notes payable 3,000 3,000 Total principal amount of long-term debt 101,000 109,679 Unamortized debt issuance costs (587 ) (835 ) Total long-term debt 100,413 108,844 Less current portion (8,400 ) (7,879 ) Total long-term debt, net of current portion $ 92,013 $ 100,965

Fair Value Measurement (Tables)

Fair Value Measurement (Tables)	9 Months Ended
	Oct. 02, 2017
Fair Value Disclosures [Abstract]
Fair value	The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis: October 2, 2017 January 2, 2017 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Fair Value Measurement Financial assets Notes receivable (1) $ 107 $ 103 $ 149 $ 150 Level 3 (1) The fair value of notes receivable was estimated primarily using a discounted cash flow method based on a discount rate, reflecting the applicable credit spread.

Accrued and Other Liabilities (

Accrued and Other Liabilities (Tables)	9 Months Ended
	Oct. 02, 2017
Payables and Accruals [Abstract]
Accrued and other liabilities	Accrued expenses and other current liabilities consist of the following: (in thousands) October 2, 2017 January 2, 2017 Accrued compensation and related costs $ 4,814 $ 2,192 Gift cards payable 2,282 3,033 Accrued interest and non-income taxes payable 426 524 Convention fund balance 1,074 1,025 Advertising cooperative liabilities 239 204 Other 1,577 525 Total accrued expenses and other current liabilities $ 10,412 $ 7,503

Income Taxes (Tables)

Income Taxes (Tables)	9 Months Ended
	Oct. 02, 2017
Income Tax Disclosure [Abstract]
Income tax information	Information on the Company’s income taxes for the periods reported is as follows: Three Months Ended Nine Months Ended (in thousands) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 (Benefit from) provision for income taxes $ (1,574 ) $ (130 ) $ (7,384 ) $ 941 (Loss) income before income taxes (3,443 ) (551 ) (20,854 ) 2,114 Effective income tax rate 45.7 % 23.6 % 35.4 % 44.5 %

Share-based Compensation (Table

Share-based Compensation (Tables)	9 Months Ended
	Oct. 02, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Schedule of restricted stock activity	Information with respect to restricted stock awards is as follows: Number of Shares of Restricted Common Stock Weighted Average Award Date Fair Value Per Share Time Vesting Market Condition Unvested, January 2, 2017 30,670 148,946 $ 2.70 Granted 29,333 — 4.39 Vested (23,580 ) (104,820 ) 5.16 Repurchased (1,508 ) (3,772 ) 5.48 Unvested, October 2, 2017 34,915 40,354 $ 3.36
Schedule of stock option activity	Information with respect to stock option activity is as follows: Number of Shares Subject to Options Weighted Weighted Aggregate Time Vesting Market Condition Outstanding, January 2, 2017 951,688 171,495 $ 11.48 Granted 455,000 — 4.13 Forfeited (607,240 ) (96,701 ) 10.91 Outstanding, October 2, 2017 799,448 74,794 $ 8.11 8.2 years $ 695 Exercisable, October 2, 2017 278,727 — $ 11.11 7.0 years $ 19

Advertising Fund (Tables)

Advertising Fund (Tables)	9 Months Ended
	Oct. 02, 2017
Other Income and Expenses [Abstract]
Advertising fund	Three Months Ended Nine Months Ended (in thousands) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 Opening fund deficit $ (7,080 ) $ (1,937 ) $ (1,586 ) $ (1,200 ) Net activity during the period 1,677 15 (3,817 ) (722 ) Ending fund deficit $ (5,403 ) $ (1,922 ) $ (5,403 ) $ (1,922 )

Earnings per Share (EPS) (Table

Earnings per Share (EPS) (Tables)	9 Months Ended
	Oct. 02, 2017
Earnings Per Share [Abstract]
Computations of basic and dilutive earnings per share	The following table sets forth the computations of basic and diluted EPS : Three Months Ended Nine Months Ended (in thousands, except per share data) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 Earnings: Net (loss) income $ (1,869 ) $ (421 ) $ (13,470 ) $ 1,173 Shares: Weighted average common shares outstanding 16,882 16,753 16,863 16,738 Dilutive effect of restricted equity awards (1) — — — 34 Diluted weighted average number of shares outstanding 16,882 16,753 16,863 16,773 (Loss) earnings per share: Basic (loss) earnings per share $ (0.11 ) $ (0.03 ) $ (0.80 ) $ 0.07 Diluted (loss) earnings per share $ (0.11 ) $ (0.03 ) $ (0.80 ) $ 0.07

Segment Information (Tables)

Segment Information (Tables)	9 Months Ended
	Oct. 02, 2017
Segment Reporting [Abstract]
Segment reporting information by segment	The following tables summarize information on revenues, segment adjusted EBITDA and assets for each of the Company’s reportable segments and include a reconciliation of segment adjusted EBITDA to (loss) income before income taxes: Three Months Ended Nine Months Ended (in thousands) October 2, 2017 September 26, 2016 October 2, 2017 September 26, 2016 Revenues Domestic Franchise $ 9,227 $ 9,725 $ 30,648 $ 32,276 Domestic Company Stores 17,520 18,705 57,010 58,849 International 77 89 262 272 Total $ 26,824 $ 28,519 $ 87,920 $ 91,397 Segment Adjusted EBITDA Domestic Franchise $ 6,131 $ 4,968 $ 14,782 $ 16,317 Domestic Company Stores 365 (197 ) 1,303 1,545 International 62 80 222 222 Total reportable segments adjusted EBITDA 6,558 4,851 16,307 18,084 Corporate and unallocated (1,261 ) (1,064 ) (5,800 ) (3,616 ) Depreciation and amortization (2,336 ) (3,137 ) (8,359 ) (8,767 ) Interest expense, net (1,305 ) (1,201 ) (3,818 ) (3,587 ) CEO transition and restructuring (1) (190 ) — (2,519 ) — E-commerce impairment (2) — — (9,124 ) — Store closures and impairments (3) (4,446 ) — (7,078 ) — Litigation settlements (4) (463 ) — (463 ) — (Loss) Income Before Income Taxes $ (3,443 ) $ (551 ) $ (20,854 ) $ 2,114 (1) Represents non-recurring management transition and restructuring costs in connection with the recruitment of a new Chief Executive Officer and other executive positions. (2) Represents impairment of our e-commerce platform based on the decision to move to a third-party developed and hosted solution. (3) Represents non-cash charges associated with the disposal or impairment of store assets upon the determination that the book value of certain stores was higher than the fair value of those stores, plus lease buyouts and reserves for the residual contractual lease obligations on closed stores. (4) Payments and accruals made towards franchisee litigation settlements. (in thousands) October 2, 2017 January 2, 2017 Total Assets Domestic Franchise $ 119,151 $ 133,466 Domestic Company Stores 40,047 52,531 International 289 318 Other (1) 87,187 87,557 Total $ 246,674 $ 273,872 (1) Other assets which are not allocated to the individual segments primarily include trade names and trademarks and taxes receivable.

Description of Business and B34

Description of Business and Basis of Presentation - Description of business (Details)	Oct. 02, 2017statestore
Franchisor Disclosure [Line Items]
Number of stores	1,542
Number of states in which the Company operates | state	39
Company-owned stores
Franchisor Disclosure [Line Items]
Number of stores	13
Domestic
Franchisor Disclosure [Line Items]
Number of stores	1,501
Domestic | Franchised stores
Franchisor Disclosure [Line Items]
Number of stores	1,353
Domestic | Company-owned stores
Franchisor Disclosure [Line Items]
Number of stores	148
Canada and the United Arab Emirates | Franchised stores
Franchisor Disclosure [Line Items]
Number of stores	41

Prepaid Expenses and Other Cu35

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Oct. 02, 2017	Jan. 02, 2017
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid media production costs	$ 64	$ 606
Prepaid software and support	751	985
Prepaid rents	553	622
Prepaid insurance	427	453
Taxes receivable	148	547
Assets held for sale	524	1,406
Advertising cooperative assets, restricted	140	48
Other	310	41
Total prepaid expenses and other current assets	$ 2,917	$ 4,708

Property and Equipment (Details

Property and Equipment (Details) $ in Thousands	3 Months Ended			9 Months Ended
	Oct. 02, 2017USD ($)store		Sep. 26, 2016USD ($)	Oct. 02, 2017USD ($)store		Sep. 26, 2016USD ($)	Jan. 02, 2017USD ($)
Property, Plant and Equipment [Line Items]
Accumulated depreciation	$ 21,200			$ 21,200			$ 17,100
Depreciation expense	$ 1,200		$ 1,900	$ 4,800		$ 5,000
Number of stores | store	1,542			1,542
Assets held for sale	$ 524			$ 524			$ 1,406
Software
Property, Plant and Equipment [Line Items]
Impairment of long-lived assets held-for-use	0	[1]	$ 0	$ 9,124	[1]	$ 0
Company-owned stores
Property, Plant and Equipment [Line Items]
Impairment of long-lived assets held-for-use	$ 4,400
Number of stores | store	13			13
Impairment of long-lived assets to be disposed of				$ 1,900
Assets held for sale	$ 500			$ 500
[1]	Represents impairment of our e-commerce platform based on the decision to move to a third-party developed and hosted solution.

Divestitures (Details)

Divestitures (Details) $ in Millions	May 08, 2017USD ($)store	Oct. 02, 2017store	May 01, 2017store
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores		1,542
Assets held for sale that were sold
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores	1		6
Gain (loss) on disposal | $	$ 0.1
Initial franchise fees | $	$ 0.3
Company-owned stores
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores		13
Company-owned stores | Assets held for sale that were sold
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores	7
Aggregate sale price | $	$ 2.5

Goodwill (Details)

Goodwill (Details) $ in Thousands	9 Months Ended
	Oct. 02, 2017USD ($)
Goodwill [Line Items]
Beginning balance	$ 108,470
Disposition	(719)
Ending balance	107,751
International
Goodwill [Line Items]
Beginning balance	0
Ending balance	0
Domestic Franchise
Goodwill [Line Items]
Beginning balance	81,546
Disposition	0
Ending balance	81,546
Domestic Company Stores
Goodwill [Line Items]
Beginning balance	26,924
Disposition	(719)
Ending balance	$ 26,205

Intangible Assets (Details)

Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 02, 2017	Sep. 26, 2016	Oct. 02, 2017	Sep. 26, 2016	Jan. 02, 2017
Intangible Assets, Net
Accumulated amortization	$ 30.1		$ 30.1		$ 26.6
Amortization expense	$ 1.1	$ 1.2	$ 3.5	$ 3.8

Receivables (Details)

Receivables (Details) - USD ($)	Oct. 02, 2017	Jan. 02, 2017
Receivables [Abstract]
Allowance for doubtful accounts	$ 24,000	$ 37,000

Financing Arrangements - Sched

Financing Arrangements - Schedule of Long-term debt (Details) - USD ($) $ in Thousands	Oct. 02, 2017	Jan. 02, 2017
Debt Instrument [Line Items]
Principal amount of long-term debt	$ 101,000	$ 109,679
Unamortized debt issuance costs	(587)	(835)
Long-term debt	100,413	108,844
Less current portion	(8,400)	(7,879)
Total long-term debt, net of current portion	92,013	100,965
Secured debt | Term loan
Debt Instrument [Line Items]
Principal amount of long-term debt	98,000	105,879
Secured debt | Revolving credit facility
Debt Instrument [Line Items]
Principal amount of long-term debt	0	800
Notes payable
Debt Instrument [Line Items]
Principal amount of long-term debt	$ 3,000	$ 3,000

Financing Arrangements - Narrat

Financing Arrangements - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Oct. 02, 2017	Oct. 02, 2017	Jan. 02, 2017
Debt Instrument [Line Items]
Long-term debt	$ 100,413	$ 100,413	$ 108,844
Principal amount of long-term debt	101,000	101,000	109,679
Secured debt | Term loan
Debt Instrument [Line Items]
Principal amount of long-term debt	98,000	98,000	105,879
Secured debt | Revolving credit facility
Debt Instrument [Line Items]
Principal amount of long-term debt	0	0	800
Notes payable
Debt Instrument [Line Items]
Principal amount of long-term debt	3,000	3,000	$ 3,000
Papa Murphy's Company Stores, Inc. | Notes payable
Debt Instrument [Line Items]
Long-term debt	$ 3,000	$ 3,000
Interest rate on notes payable	5.00%	5.00%
Senior secured credit facility | PMI Holdings Inc. | Secured debt
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 132,000	$ 132,000
Minimum term loan amortization payments		2,100
Senior secured credit facility | PMI Holdings Inc. | Secured debt | Term loan
Debt Instrument [Line Items]
Maximum borrowing capacity	112,000	$ 112,000
Maturity date		Aug. 28, 2019
Senior secured credit facility | PMI Holdings Inc. | Secured debt | Revolving credit facility
Debt Instrument [Line Items]
Maximum borrowing capacity	20,000	$ 20,000
Senior secured credit facility | PMI Holdings Inc. | Secured debt | Letter of credit subfacility
Debt Instrument [Line Items]
Maximum borrowing capacity	2,500	2,500
Senior secured credit facility | PMI Holdings Inc. | Secured debt | Swing-line loan subfacility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 1,000	$ 1,000
LIBOR rate | Senior secured credit facility | PMI Holdings Inc. | Secured debt | Term loan
Debt Instrument [Line Items]
Interest rate at end of period	4.50%	4.50%
Weighted average | Senior secured credit facility | PMI Holdings Inc. | Secured debt
Debt Instrument [Line Items]
Interest rate during period	4.50%

Fair Value Measurement (Details

Fair Value Measurement (Details) - USD ($) $ in Thousands		Oct. 02, 2017	Jan. 02, 2017
Reported value measurement
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes receivable	[1]	$ 107	$ 149
Estimate of fair value measurement | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes receivable	[1]	$ 103	$ 150
[1]	The fair value of notes receivable was estimated primarily using a discounted cash flow method based on a discount rate, reflecting the applicable credit spread.

Accrued and Other Liabilities44

Accrued and Other Liabilities (Details) - USD ($) $ in Thousands	Oct. 02, 2017	Jan. 02, 2017
Payables and Accruals [Abstract]
Accrued compensation and related costs	$ 4,814	$ 2,192
Gift cards payable	2,282	3,033
Accrued interest and non-income taxes payable	426	524
Convention fund balance	1,074	1,025
Advertising cooperative liabilities	239	204
Other	1,577	525
Accrued and other liabilities	$ 10,412	$ 7,503

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2017	Sep. 26, 2016	Oct. 02, 2017	Sep. 26, 2016
Income Tax Disclosure [Abstract]
(Benefit from) provision for income taxes	$ (1,574)	$ (130)	$ (7,384)	$ 941
(Loss) income before income taxes	$ (3,443)	$ (551)	$ (20,854)	$ 2,114
Effective income tax rate	45.70%	23.60%	35.40%	44.50%

Share-based Compensation (Restr

Share-based Compensation (Restricted Common Shares and Stock Options) (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Oct. 02, 2017USD ($)$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares reserved for equity incentive awards	2,116,747
Restricted Stock
Restricted common stock, weighted average sale/grant date fair value (in dollars per share)
Unvested, Beginning balance (usd per share) | $ / shares	$ 2.70
Weighted average grant date fair value per share | $ / shares	4.39
Vested (usd per share) | $ / shares	5.16
Repurchased (usd per share) | $ / shares	5.48
Unvested, Ending balance (usd per share) | $ / shares	3.36
Stock Option
Stock options outstanding, weighted average exercise price (in dollars per share)
Outstanding, Beginning balance (usd per share) | $ / shares	11.48
Granted (usd per share) | $ / shares	4.13
Forfeited (usd per share) | $ / shares	10.91
Outstanding, Ending balance (usd per share) | $ / shares	8.11
Exercisable (usd per share) | $ / shares	$ 11.11
Stock Option Grants
Weighted Average Remaining Contractual Term, Outstanding	8 years 2 months
Weighted Average Remaining Contractual Term, Exercisable	7 years
Aggregate Intrinsic Value, Outstanding | $	$ 695
Aggregate Intrinsic Value, Exercisable | $	$ 19
Time Vesting | Restricted Stock
Number of shares of restricted common stock, unvested [Roll Forward]
Unvested, Beginning balance (in shares)	30,670
Granted (in shares)	29,333
Vested (in shares)	(23,580)
Repurchased (in shares)	(1,508)
Unvested, Ending balance (in shares)	34,915
Time Vesting | Stock Option
Number of shares of stock options, outstanding [Roll Forward]
Outstanding, Beginning balance (in shares)	951,688
Granted (in shares)	455,000
Forfeited (in shares)	(607,240)
Outstanding, Ending balance (in shares)	799,448
Exercisable (in shares)	278,727
Market Condition | Restricted Stock
Number of shares of restricted common stock, unvested [Roll Forward]
Unvested, Beginning balance (in shares)	148,946
Granted (in shares)	0
Vested (in shares)	(104,820)
Repurchased (in shares)	(3,772)
Unvested, Ending balance (in shares)	40,354
Market Condition | Stock Option
Number of shares of stock options, outstanding [Roll Forward]
Outstanding, Beginning balance (in shares)	171,495
Granted (in shares)	0
Forfeited (in shares)	(96,701)
Outstanding, Ending balance (in shares)	74,794
Exercisable (in shares)	0

Share-based Compensation (Compe

Share-based Compensation (Compensation Cost) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 02, 2017	Sep. 26, 2016	Oct. 02, 2017	Sep. 26, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 0.1	$ 0.2	$ 0.5	$ 0.7
Total unrecognized stock-based compensation expense	1.2		$ 1.2
Compensation not yet recognized, period for recognition			2 years 1 month
Time Vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	1		$ 1
Market Condition
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	$ 0.2		$ 0.2

Advertising Fund (Details)

Advertising Fund (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2017	Sep. 26, 2016	Oct. 02, 2017	Sep. 26, 2016
Other Income and Expenses [Abstract]
Opening fund deficit	$ (7,080)	$ (1,937)	$ (1,586)	$ (1,200)
Advertising expense, net of cooperative contributions	1,677	15	(3,817)	(722)
Ending fund deficit	$ (5,403)	$ (1,922)	$ (5,403)	$ (1,922)

Earnings per Share (EPS) (Detai

Earnings per Share (EPS) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				9 Months Ended
	Oct. 02, 2017		Sep. 26, 2016		Oct. 02, 2017		Sep. 26, 2016
Earnings:
Net (loss) income	$ (1,869)		$ (421)		$ (13,470)		$ 1,173
Shares:
Weighted average common shares outstanding	16,882,193		16,753,292		16,863,122		16,738,151
Dilutive effect of potential common stock	0	[1]	0	[1]	0	[1]	34,476
Diluted weighted average number of shares outstanding	16,882,193		16,753,292		16,863,122		16,772,627
(Loss) earnings per share:
Basic (loss) earnings per share	$ (0.11)		$ (0.03)		$ (0.80)		$ 0.07
Diluted (loss) earnings per share	$ (0.11)		$ (0.03)		$ (0.80)		$ 0.07
Antidilutive shares excluded from computation of earnings per share	700,000		1,200,000		1,000,000		600,000
[1]	The Company’s securities that provide a right to receive common stock in the future such as stock options and restricted stock were not included in the computation of diluted EPS for the three and nine months ended October 2, 2017, as the effect of including these shares in the calculation would have been anti-dilutive.

Commitments and Contingencies L

Commitments and Contingencies Leases (Details)	9 Months Ended
	Oct. 02, 2017store
Loss Contingencies [Line Items]
Lease terms for store units	5 years
Number of store locations	1,542
Guarantor for operating leases | Franchise owner store locations
Loss Contingencies [Line Items]
Number of store locations	21
Guarantor for subleased operating leases | Franchise owner store locations
Loss Contingencies [Line Items]
Number of store locations	2

Commitments and Contingencies51

Commitments and Contingencies Legal proceedings (Details) - Litigation With Franchise Owners - plaintiff	Jun. 18, 2014	Apr. 04, 2014	Jul. 31, 2017	Sep. 30, 2016	Oct. 31, 2014	Jan. 31, 2014	Oct. 02, 2017
Loss Contingencies [Line Items]
Number of franchise owner groups (in plaintiff)	16	12				6
Mediation
Loss Contingencies [Line Items]
Number of franchise owner groups (in plaintiff)			15		22
Resolution
Loss Contingencies [Line Items]
Number of franchise owner groups (in plaintiff)					13		5
Amended complaint
Loss Contingencies [Line Items]
Number of franchise owner groups (in plaintiff)				15

Segment Information - Profit o

Segment Information - Profit or Loss (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Oct. 02, 2017		Sep. 26, 2016	Oct. 02, 2017		Sep. 26, 2016
Segment Reporting Information [Line Items]
Revenues	$ 26,824		$ 28,519	$ 87,920		$ 91,397
Depreciation and amortization	(2,336)		(3,137)	(8,359)		(8,767)
Interest expense, net	(1,305)		(1,201)	(3,818)		(3,587)
(Loss) Income Before Income Taxes	(3,443)		(551)	(20,854)		2,114
Operating Segments
Segment Reporting Information [Line Items]
Revenues	26,824		28,519	87,920		91,397
Segment Adjusted EBITDA	6,558		4,851	16,307		18,084
Operating Segments | Domestic Franchise
Segment Reporting Information [Line Items]
Revenues	9,227		9,725	30,648		32,276
Segment Adjusted EBITDA	6,131		4,968	14,782		16,317
Operating Segments | Domestic Company Stores
Segment Reporting Information [Line Items]
Revenues	17,520		18,705	57,010		58,849
Segment Adjusted EBITDA	365		(197)	1,303		1,545
Operating Segments | International
Segment Reporting Information [Line Items]
Revenues	77		89	262		272
Segment Adjusted EBITDA	62		80	222		222
Operating Segments | Corporate and unallocated
Segment Reporting Information [Line Items]
(Loss) Income Before Income Taxes	1,261		1,064	5,800		3,616
Software
Segment Reporting Information [Line Items]
Impairment of long-lived assets held-for-use	0	[1]	0	(9,124)	[1]	0
CEO transition and restructuring
Segment Reporting Information [Line Items]
Restructuring charges	(190)	[2]	0	(2,519)	[2]	0
Store closures
Segment Reporting Information [Line Items]
Restructuring charges	(4,446)	[3]	0	(7,078)	[3]	0
Resolution
Segment Reporting Information [Line Items]
Litigation Settlement, Expense	$ (463)	[4]	$ 0	$ (463)	[4]	$ 0
[1]	Represents impairment of our e-commerce platform based on the decision to move to a third-party developed and hosted solution.
[2]	Represents non-recurring management transition and restructuring costs in connection with the recruitment of a new Chief Executive Officer and other executive positions.
[3]	Represents non-cash charges associated with the disposal or impairment of store assets upon the determination that the book value of certain stores was higher than the fair value of those stores, plus lease buyouts and reserves for the residual contractual lease obligations on closed stores.
[4]	Payments and accruals made towards franchisee litigation settlements.

Segment Information - Assets (

Segment Information - Assets (Details) - USD ($) $ in Thousands		Oct. 02, 2017	Jan. 02, 2017
Segment Reporting Information [Line Items]
Total Assets		$ 246,674	$ 273,872
Operating Segments
Segment Reporting Information [Line Items]
Total Assets		246,674	273,872
Operating Segments | Domestic Franchise
Segment Reporting Information [Line Items]
Total Assets		119,151	133,466
Operating Segments | Domestic Company Stores
Segment Reporting Information [Line Items]
Total Assets		40,047	52,531
Operating Segments | International
Segment Reporting Information [Line Items]
Total Assets		289	318
Operating Segments | Other
Segment Reporting Information [Line Items]
Total Assets	[1]	$ 87,187	$ 87,557
[1]	Other assets which are not allocated to the individual segments primarily include trade names and trademarks and taxes receivable.