Papa Murphy's 10-Q 1 Aug 18 2018 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information Document - shares	6 Months Ended
	Jul. 02, 2018	Jul. 27, 2018
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	Jul. 2, 2018
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2,018
Amendment Flag	false
Entity Common Stock, Shares Outstanding		17,032,461

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Revenues
Franchise related	$ 14,814	$ 17,392	$ 31,004	$ 36,790
Company-owned stores	15,979	18,715	34,561	39,490
Total revenues	30,793	36,107	65,565	76,280
Store operating costs:
Cost of food and packaging	5,315	6,303	11,441	13,518
Compensation and benefits	5,211	5,924	10,842	12,257
Advertising	1,301	1,739	2,553	3,451
Occupancy and other store operating costs	3,102	3,541	6,205	7,243
Selling, general, and administrative	11,423	10,823	24,436	36,525
Depreciation and amortization	1,874	2,906	4,015	6,023
(Gain) loss on disposal or impairment of property and equipment	715	(11,568)	713	(11,577)
Total costs and expenses	27,511	42,804	58,779	90,594
Operating Income (Loss)	3,282	(6,697)	6,786	(14,314)
Interest expense, net	1,296	1,286	2,588	2,513
Other expense, net	52	49	103	92
Income (Loss) Before Income Taxes	1,934	(8,032)	4,095	(16,919)
Provision for (benefit from) income taxes	548	(1,947)	1,129	(5,627)
Net Income (Loss)	$ 1,386	$ (6,085)	$ 2,966	$ (11,292)
Earnings (loss) per share of common stock
Basic earnings (loss) per share (usd per share)	$ 0.08	$ (0.36)	$ 0.18	$ (0.67)
Diluted earnings (loss) per share (usd per share)	$ 0.08	$ (0.36)	$ 0.17	$ (0.67)
Weighted average common stock outstanding
Basic (in shares)	16,921,597	16,867,929	16,913,668	16,853,587
Diluted (in shares)	16,960,265	16,867,929	16,953,077	16,853,587

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 02, 2018	Jan. 01, 2018
Current Assets
Cash and cash equivalents	$ 1,689	$ 2,174
Accounts receivable, net	2,768	3,788
Inventories	621	719
Prepaid expenses and other current assets	2,002	2,281
Total current assets	7,080	8,962
Property and equipment, net	7,279	10,064
Operating lease right of use assets	12,734	16,331
Goodwill	102,596	107,751
Trade name and trademarks	87,002	87,002
Definite-life intangibles, net	29,449	31,655
Other assets	306	350
Total assets	246,446	262,115
Current Liabilities
Accounts payable	3,472	5,389
Accrued expenses and other current liabilities	9,852	12,382
Current portion of lease liabilities	3,004	3,382
Current portion of unearned franchise and development fees	1,764	1,564
Current portion of long-term debt	3,000	8,400
Total current liabilities	21,092	31,117
Long-term debt, net of current portion	81,454	86,994
Lease liabilities, net of current portion	12,500	16,296
Unearned franchise and development fees, net of current portion	9,237	10,037
Deferred tax liability	22,869	21,825
Other long-term liabilities	1,739	1,704
Total liabilities	148,891	167,973
Commitments and contingencies (Note 16)
Stockholders’ Equity
Preferred stock, value issued	0	0
Common stock, value issued	170	170
Additional paid-in capital	121,061	120,614
Accumulated deficit	(23,676)	(26,642)
Total stockholders’ equity	97,555	94,142
Total liabilities and stockholders’ equity	$ 246,446	$ 262,115

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jul. 02, 2018	Jan. 01, 2018
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	17,011,461	16,971,461

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017
Operating Activities
Net income (loss)	$ 2,966	$ (11,292)
Adjustments to reconcile to cash from operating activities
Depreciation and amortization	4,015	6,023
(Gain) loss on disposal or impairment of property and equipment	713	(11,578)
Deferred taxes	1,044	(5,974)
Stock-based compensation	367	405
Other non-cash items	177	259
Change in operating assets and liabilities
Accounts receivable	1,155	2,373
Prepaid expenses and other assets	1,459	3,835
Unearned franchise and development fees	(601)	(326)
Accounts payable	(2,133)	(1,630)
Accrued expenses and other liabilities	(4,351)	(1,736)
Net cash from operating activities	3,385	3,515
Investing Activities
Acquisition of property and equipment	(297)	(2,110)
Proceeds from sale of property and equipment	7,447	2,206
Payments received on notes receivable	0	42
Net cash from investing activities	7,150	138
Financing Activities
Payments on term loan	11,100	5,779
Advances on revolver	4,500	10,500
Payments on revolver	(4,500)	(8,900)
Repurchases of common stock	0	(4)
Proceeds from exercise of stock options	80	0
Net cash from financing activities	(11,020)	(4,183)
Net change in cash and cash equivalents	(485)	(530)
Cash and Cash Equivalents, beginning of period	2,174	2,069
Cash and Cash Equivalents, end of period	1,689
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest	2,470	2,389
Cash paid (received) during the period for income taxes	$ 91	$ (330)

Description of Business and Bas

Description of Business and Basis of Presentation	6 Months Ended
	Jul. 02, 2018
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 July 2, 2018 , the Company had 1,477 stores consisting of 1,438 domestic stores ( 1,316 franchised stores and 122 Company-owned stores) across 37 states, plus 39 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 1, 2018 . 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 years 2018 and 2017 are 52-week years. 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 2018 and 2017 are references to fiscal years ending December 31, 2018 and ended January 1, 2018 , respectively. Recently Issued Accounting Standards Recently Adopted Accounting Standards Revenue from Contracts with Customers The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASU 2014-09 ”) as of January 2, 2018. The Company adopted the new standard using the full retrospective method and elected applicable practical expedients on adoption. Accordingly, previously reported financial information has been restated to reflect the application of the new standard to all comparative periods presented. Adoption of ASU 2014-09 had a material impact on the Company’s interim unaudited condensed consolidated financial statements . The most significant impacts relate to the: (i) accounting for franchise and development fees, and (ii) accounting for the Company’s advertising fund (the "Brand Marketing Fund" or " BMF ") and Convention Fund (with the BMF , the “ Brand Funds ”). Specifically, under the new standard the Company recognizes franchise fees ratably over the life of the contract rather than at the time the store is opened or a successive contract commences. Revenue related to the Company’s franchise royalties, which are based on a percentage of franchise sales, and revenue from Company-owned stores remain substantially unchanged. The Company has determined that ASU 2014-09 requires a gross presentation on the Company’s Condensed Consolidated Statements of Operations for revenues and related expenses of the BMF and Convention Fund, or Brand Funds . These funds exist solely for the purpose of promoting the Papa Murphy’s brand in the U.S. While this change will materially affect the gross amount of reported revenues and expenses, the effect will generally be an offsetting increase to both revenues and expenses with no net effect on previously reported Operating Income (Loss) and Net Income (Loss) . Refer to Impacts to Reported Results below for more detailed effects of adoption on the Company’s financial statements and refer to Note 10 — Revenue for more information on our accounting for revenue. Leases The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ ASU 2016-02 ”) as of January 2, 2018, concurrent with the adoption of the new revenue standard. The Company adopted this standard using the modified retrospective approach and elected the available practical expedients on adoption. Accordingly, previously reported financial information has been restated to reflect the application of the new standard to all comparative periods presented. Adoption of the new standard had a material impact on the Company’s interim unaudited condensed consolidated financial statements . The most significant impacts related to the (i) recognition of right-of-use (" ROU ") assets and lease liabilities for operating leases, and (ii) changes in occupancy costs and impairment losses related to prior year store closures and impairments. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. A loss is recognized when the ROU asset is impaired in connection with the impairment of a store’s assets due to economic or other factors. Refer to Impacts to Reported Results below for more detailed effects of adoption on the Company’s financial statements and refer to Note 11 — Leases for more information on our accounting for leases. Other standards adopted In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 320) (“ ASU 2016-15 ”), which clarifies the presentation of certain cash receipts and cash payments in the statement of cash flows. The Company adopted the standard on January 2, 2018. Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements. In preparation for the adoption of the above standards, the Company implemented internal controls and key system functionality to enable the preparation of financial information in accordance with the standards. Recent Accounting Pronouncements Not Yet Adopted 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. Impacts to Reported Results Adoption of the standards related to revenue recognition and leases affected the Company’s previously reported results as follows: Statement of Operations Three Months Ended July 3, 2017 (unaudited) (in thousands, except earnings per share) As Reported New Revenue Standard Adjustment New Lease Standard Adjustment As Adjusted Total revenues (1) $ 29,102 $ 7,005 $ — $ 36,107 Store operating costs 18,608 (382 ) (719 ) 17,507 Selling, general, and administrative (1) 3,408 7,423 (8 ) 10,823 Loss on disposal or impairment of property and equipment 11,041 — 527 11,568 (Benefit from) provision for income taxes (2,008 ) (13 ) 74 (1,947 ) Net (loss) income (6,187 ) (23 ) 125 (6,085 ) Diluted (loss) earnings per share (0.37 ) 0.00 0.01 (0.36 ) (1) Recognition of advertising revenue and expense on a gross basis instead of a net basis by the Brand Funds comprised $7.1 million of the revenue adjustment and $7.4 million of the expense adjustment under the revenue standard. The revenue adjustment due to the change in method of recognizing franchise and development fees was $(0.1) million . Statement of Operations Six Months Ended July 3, 2017 (unaudited) (in thousands, except earnings per share) As Reported New Revenue Standard Adjustment New Lease Standard Adjustment As Adjusted Total revenues (1) $ 61,096 $ 15,184 $ — $ 76,280 Store operating costs 38,208 (807 ) (932 ) 36,469 Selling, general, and administrative (1) 20,621 15,930 (26 ) 36,525 Loss on disposal or impairment of property and equipment 11,050 — 527 11,577 (Benefit from) provision for income taxes (5,810 ) 23 160 (5,627 ) Net (loss) income (11,601 ) 38 271 (11,292 ) Diluted (loss) earnings per share (0.69 ) 0.00 0.02 (0.67 ) (1) Recognition of advertising revenue and expense on a gross basis instead of a net basis by the Brand Funds comprised $15.1 million of the revenue adjustment and $15.9 million of the expense adjustment under the revenue standard. The revenue adjustment due to the change in method of recognizing franchise and development fees was $0.1 million . Balance Sheet January 1, 2018 (in thousands) As Reported New Revenue Standard Adjustment New Lease Standard Adjustment As Adjusted Prepaid expenses and other current assets $ 2,671 $ — $ (390 ) $ 2,281 Operating lease right of use assets — — 16,331 16,331 Unearned franchise and development fees 1,702 9,899 — 11,601 Accrued expenses and other current liabilities 13,139 (507 ) (250 ) 12,382 Lease liabilities — — 19,678 19,678 Deferred tax liability, net 24,457 (2,319 ) (313 ) 21,825 Other long-term liabilities 3,922 — (2,218 ) 1,704 Accumulated deficit (18,613 ) (7,073 ) (956 ) (26,642 ) Adoption of the revenue recognition and lease standards did not materially affect cash from or used in operating, financing, or investing cash flows on the Company’s Condensed Consolidated Statements of Cash Flows . Segment Definitions As a result of changes in the Company’s executive management responsibilities, effective January 2, 2018, the Company changed its reportable segments by combining its domestic and international franchise business into a single Franchise segment and separating its Brand Funds into a separate reportable segment. No changes were made to the Company’s Company Stores segment. Management believes this change better reflects the priorities and decision making analysis around the allocation of the Company’s resources. Prior period results for the affected segments have been retrospectively revised to reflect this change. See Note 17 — Segment Information for additional information.

Prepaid Expenses and Other Curr

Prepaid Expenses and Other Current Assets	6 Months Ended
	Jul. 02, 2018
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: July 2, 2018 January 1, 2018 (in thousands) (unaudited) (as adjusted) Prepaid media production costs $ 38 $ 376 Prepaid software and support 660 223 Prepaid occupancy related costs 271 159 Prepaid insurance 28 377 Taxes receivable 188 182 POS software licenses for resale 368 364 Assets held for sale 216 432 Advertising cooperative assets, restricted 56 4 Other 177 164 Total prepaid expenses and other current assets $ 2,002 $ 2,281

Property and Equipment

Property and Equipment	6 Months Ended
	Jul. 02, 2018
Property, Plant and Equipment [Abstract]
Property and equipment	Property and equipment are net of accumulated depreciation of $21.0 million and $21.9 million at July 2, 2018 , and January 1, 2018 , respectively. Depreciation expense amounted to $0.8 million and $1.7 million during the three months ended July 2, 2018 , and July 3, 2017 , respectively. Depreciation expense amounted to $1.8 million and $3.6 million during the six months ended July 2, 2018 , and July 3, 2017 , respectively.

Divestitures (Notes)

Divestitures (Notes)	6 Months Ended
	Jul. 02, 2018
Discontinued Operations and Disposal Groups [Abstract]
Divestitures	On April 23, 2018 , the Company completed the sale and refranchise of two Company-owned stores in Arkansas. On May 21, 2018 and June 25, 2018 , respectively, the Company completed the sale and refranchise of ten Company-owned stores in the Denver, Colorado area and ten stores in the Colorado Springs, Colorado area. The aggregate sale price for the 22 stores was $7.3 million , paid in cash, and the Company recognized a pre-tax gain of $0.7 million . In connection with the sale, the buyers paid $450,000 in franchise fees. This disposition did not meet the criteria for accounting as a discontinued operation.

Goodwill (Notes)

Goodwill (Notes)	6 Months Ended
	Jul. 02, 2018
Goodwill [Abstract]
Goodwill	The following summarizes changes to the Company’s goodwill, by reportable segment: (in thousands) Company Stores Franchise Total Balance at January 1, 2018 $ 26,205 $ 81,546 $ 107,751 Disposition (5,155 ) — (5,155 ) Balance at July 2, 2018 $ 21,050 $ 81,546 $ 102,596 There is no goodwill associated with the Brand Funds segment. The Company has determined that during the three months ended July 2, 2018 , there were no triggering events that would require an updated impairment review. The goodwill disposal is from the sale of Company-owned stores to franchise owners (see Note 4 — Divestitures ).

Intangible Assets

Intangible Assets	6 Months Ended
	Jul. 02, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible assets	Definite-lived intangible assets are net of accumulated amortization of $32.4 million and $30.2 million as of July 2, 2018 , and January 1, 2018 , respectively. Amortization expense amounted to $1.1 million and $1.2 million during the three months ended July 2, 2018 , and July 3, 2017 , respectively. Amortization expense amounted to $2.2 million and $2.4 million during the six months ended July 2, 2018 , and July 3, 2017 , respectively.

Financing Arrangements

Financing Arrangements	6 Months Ended
	Jul. 02, 2018
Debt Disclosure [Abstract]
Financing arrangements	Long-term debt consists of the following: (in thousands) July 2, 2018 January 1, 2018 Term loan $ 81,800 $ 92,900 Notes payable 3,000 3,000 Total principal amount of long-term debt 84,800 95,900 Unamortized debt issuance costs (346 ) (506 ) Total long-term debt 84,454 95,394 Less current portion (3,000 ) (8,400 ) Total long-term debt, net of current portion $ 81,454 $ 86,994 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 July 2, 2018 , the term loan bears interest at a rate of 5.3% per annum based on the LIBOR rate option plus the applicable margin. With a maturity date of over one year from July 2, 2018 , 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 the Senior Credit Facility for the second quarter of 2018 was 5.2% . 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 a rate of 5.0% per annum and matures in December 2018 . This note is subordinated to the Senior Credit Facility .

Fair Value Measurement

Fair Value Measurement	6 Months Ended
	Jul. 02, 2018
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: July 2, 2018 January 1, 2018 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Fair Value Measurement Financial assets Notes receivable (1) $ 97 $ 86 $ 97 $ 88 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	6 Months Ended
	Jul. 02, 2018
Payables and Accruals [Abstract]
Accrued and other liabilities	Accrued expenses and other current liabilities consist of the following: July 2, 2018 January 1, 2018 (in thousands) (unaudited) (as adjusted) Accrued compensation and related costs $ 2,818 $ 3,902 Accrued legal settlement costs 3,790 3,940 Gift cards payable 2,032 2,676 Accrued interest and non-income taxes payable 317 461 Convention fund balance 311 841 Advertising cooperative liabilities 99 60 Other 485 502 Total accrued expenses and other current liabilities $ 9,852 $ 12,382 Accrued legal settlement costs decreased since January 1, 2018 due to $1.8 million in payments to partially settle the TCPA class action lawsuit and $2.1 million in payments to settle franchise litigation claims that reduced the $3.7 million accrual for legal settlement costs related to the franchise litigation recorded in the current year. Both lawsuits are discussed in more detail in Note 16 — Commitments and Contingencies . Included in Accounts receivable, net is an insurance receivable equal to 75% of the anticipated settlement of the franchise owner lawsuit.

Revenue (Notes)

Revenue (Notes)	6 Months Ended
	Jul. 02, 2018
Revenue from Contract with Customer [Abstract]
Revenue	The Company owns and franchises Papa Murphy’s Take ‘N’ Bake Pizza stores. Revenue is recognized upon the transfer of control of promised goods or services to customers in an amount that reflects the consideration the Company expects to receive for those goods or services. The following are the principal activities from which the Company earns revenue: Company-owned Stores Revenue Company-owned stores revenue consists of retail sales of food through Company-owned stores located in the United States. Company-owned stores revenue is recognized when the food items are delivered to or carried out by customers. Customer payments are generally collected at the time of sale. Sales taxes collected from customers are remitted to the appropriate taxing authority and are not recognized as revenue. Franchise Revenues The franchise arrangement between the Company and each franchise owner of a Papa Murphy’s Take ‘N’ Bake Pizza store is documented in the form of a franchise agreement and, in select cases, a development agreement. The franchise arrangement requires the Company as franchisor to perform various activities to support the Papa Murphy’s Take ‘N’ Bake Pizza brand and does not involve the direct transfer of goods and services to the franchise owner as a customer. Activities performed by the Company are highly interrelated with the franchise license and are considered to represent a single performance obligation, which is the transfer of the franchise license. The nature of the Company’s promise in granting the franchise license is to provide the franchise owner with access to the brand’s intellectual property over the term of the franchise arrangement. The transaction price in a standard franchise arrangement consists of (a) franchise/development fees; (b) continuing franchise fees (royalties); and (c) advertising fees. Since the Company considers the franchise license to be a single performance obligation, no allocation of the transaction price under a standard agreement is performed for revenue recognition purposes. However, if additional separate and distinct goods or services are included with a franchise arrangement and are deemed to be additional performance obligations, the total transaction price of the contract is allocated to each performance obligation based on the stand-alone selling price of each performance obligation. Franchise revenues are recognized by the Company from the following different sources: • Royalty revenues. Royalty revenues, which includes advertising fees from domestic franchise stores, are based on a percentage of sales and are recognized when the food items are delivered to or carried out by customers. Payments for domestic royalties and advertising fees are generally due and collected within seven days of the prior week end date. Payments for international royalties are due and collected within 30 days of month-end. • Franchise and development fees. Franchise and development fees are paid in advance of a store opening, typically when entering into a new franchise or development agreement. Fees allocated to the franchise license are recognized as revenue on a straight-line basis over the term of each respective franchise store agreement. Initial franchise agreement terms are typically ten years while successive agreement terms are typically five years. The Company has determined that these fees, which are paid in advance of when they are recognized as revenue, do not contain a significant financing component. • E-commerce fees. E-commerce fees include point-of-sale (“ POS ”) support fees and transaction fees for purchases made through the Company’s e-commerce platform. POS support fees are due quarterly in advance and recognized as revenue over the respective quarter. Transaction fees are recognized when the food items purchased from a store are delivered to or carried out by customers and are due and collected within seven days of the prior week end date. • Vendor payments. Vendor payments are received from vendors that supply franchised and Company-owned stores with products and are typically based on the volume of product purchased by the stores. Revenues from the sale of products are recognized when product is shipped from a distribution center to a store. Payments are due and collected within 30 days after month-end. • Marketing kits. The Company charges domestic stores for marketing materials shipped to stores one to three times per quarter. These products are sold at cost and the revenues from their sale are recognized when the product is shipped by the vendors producing the kits. Payments are due and collected within 30 days of shipment. The timing of revenue recognition may differ from the timing of payment from customers. We record a receivable when revenue is recognized in advance of payment, and a contract liability (“unearned revenue”), when revenue is recognized subsequent to payment. Unearned revenue consists mainly of franchise and development fees paid in advance. A refund liability is recorded when it is known that an amount previously received will be refunded instead of recognized as revenue. The Company does not incur a significant amount of contract acquisition costs in conducting its franchising activities and has not capitalized any such costs. Revenue by Category The following series of tables present revenue disaggregated by several categories for the periods reported. Revenues by contract type were as follows: Three Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 8,721 $ — $ 3,539 $ 12,260 Franchise fees 720 — — 720 Vendor payments — — 836 836 E-commerce fees 517 — — 517 Other franchise and brand 11 — 470 481 Company-owned stores — 15,979 — 15,979 Total revenues 9,969 15,979 4,845 30,793 Intersegment revenues 795 — 391 1,186 Reconciliation to business segment revenues $ 10,764 $ 15,979 $ 5,236 $ 31,979 Three Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 9,102 $ — $ 5,353 $ 14,455 Franchise fees 782 — — 782 Vendor payments — — 1,111 1,111 E-commerce fees 429 — — 429 Other franchise and brand 19 — 596 615 Company-owned stores — 18,715 — 18,715 Total revenues 10,332 18,715 7,060 36,107 Intersegment revenues 55 — 368 423 Reconciliation to business segment revenues $ 10,387 $ 18,715 $ 7,428 $ 36,530 Six Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 18,182 $ — $ 7,379 $ 25,561 Franchise fees 1,460 — — 1,460 Vendor payments — — 1,952 1,952 E-commerce fees 1,063 — — 1,063 Other franchise and brand 35 — 933 968 Company-owned stores — 34,561 — 34,561 Total revenues 20,740 34,561 10,264 65,565 Intersegment revenues 1,785 — 856 2,641 Reconciliation to business segment revenues $ 22,525 $ 34,561 $ 11,120 $ 68,206 Six Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 19,135 $ — $ 11,269 $ 30,404 Franchise fees 1,538 — — 1,538 Vendor payments — — 2,455 2,455 E-commerce fees 986 — — 986 Other franchise and brand 46 — 1,361 1,407 Company-owned stores — 39,490 — 39,490 Total revenues 21,705 39,490 15,085 76,280 Intersegment revenues 118 — 845 963 Reconciliation to business segment revenues $ 21,823 $ 39,490 $ 15,930 $ 77,243 Revenues by geographic location were as follows: Three Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total United States $ 9,888 $ 15,979 $ 4,845 $ 30,712 International 81 — — 81 Total revenues $ 9,969 $ 15,979 $ 4,845 $ 30,793 Three Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total United States $ 10,233 $ 18,715 $ 7,060 $ 36,008 International 99 — — 99 Total revenues $ 10,332 $ 18,715 $ 7,060 $ 36,107 Six Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total United States $ 20,580 $ 34,561 $ 10,264 $ 65,405 International 160 — — 160 Total revenues $ 20,740 $ 34,561 $ 10,264 $ 65,565 Six Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total United States $ 21,500 $ 39,490 $ 15,085 $ 76,075 International 205 — — 205 Total revenues $ 21,705 $ 39,490 $ 15,085 $ 76,280 Contract Balances Changes in the balances of contract liabilities (unearned revenue) during the periods reported were as follows: (in thousands) Contract Liabilities Balance at January 1, 2018 $ 11,151 Revenue recognized that was included in the balance at the beginning of the period (1,428 ) Cash received, net of amounts recognized as revenue during the period 1,059 Contract refunds (210 ) Balance at July 2, 2018 $ 10,572 The Company had a refund liability of $0.4 million and $0.5 million as of July 2, 2018 and January 1, 2018 , respectively. Receivables from contracts with customers included in Accounts receivable, net were $3.4 million as of July 2, 2018 and $3.8 million as of January 1, 2018 , respectively. The following table includes estimated franchise fee revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of July 2, 2018 (in thousands): Fiscal year 2018 $ 813 2019 1,576 2020 1,432 2021 1,265 2022 1,092 Thereafter 4,394 Total $ 10,572

Leases (Notes)

Leases (Notes)	6 Months Ended
	Jul. 02, 2018
Leases [Abstract]
Leases	The Company leases the property for its corporate headquarters, Company-owned stores, and certain office equipment. The Company is not a party to leases for franchise locations except for two locations that operate under a sublease and a few leases assigned to franchisees when stores were refranchised wherein it remains secondarily liable (see Lease guarantees below). The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets , current portion of operating lease liabilities , and operating lease liabilities in the Condensed Consolidated Balance Sheets . The Company currently has no finance leases. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating lease ROU assets also exclude lease incentives received. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For certain equipment leases, such as copiers, the Company accounts for the lease and non-lease components as a single lease component. Lease terms for Company-owned stores are generally five years with one or more five-year renewal options and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs in addition to a base or fixed rent. The Company’s leases have remaining lease terms of 1 to 10.4 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Economic performance of a store is the primary factor used to estimate whether an option to extend a lease term will be exercised or not. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense for the periods reported are as follows: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Operating lease cost $ 1,038 $ 1,298 $ 2,084 $ 2,459 Short-term lease cost 11 4 25 11 Variable lease cost 5 6 6 21 Sublease income (8 ) (16 ) (26 ) (37 ) Total lease cost $ 1,046 $ 1,292 $ 2,089 $ 2,454 Supplemental cash flow information related to leases for the periods reported is as follows: Six Months Ended (in thousands) July 2, 2018 July 3, 2017 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,424 $ 2,472 Right-of-use assets obtained in exchange for new operating lease liabilities — 213 Weighted-average remaining lease term of operating leases 5.5 years 6.6 years Weighted-average discount rate of operating leases 4.6 % 4.8 % Future minimum lease payments under non-cancelable leases as of July 2, 2018 are as follows (in thousands): Fiscal year 2018 $ 1,985 2019 4,581 2020 3,774 2021 2,586 2022 1,773 Thereafter 3,304 Total future minimum lease payments 18,003 Less imputed interest (2,499 ) Total Lease Liabilities $ 15,504 As of July 2, 2018 , the Company had no operating leases that had not yet commenced. Lease guarantees The Company is the guarantor for operating leases of 41 franchised stores that have terms expiring on various dates from August 2018 to April 2025 . 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. For the quarter ended July 2, 2018 , the Company was required to perform on one of these guarantees when a franchisee declared bankruptcy and defaulted on its obligations. As a result, the Company recorded a loss contingency of $170,000 for the three months ended July 2, 2018 . As of July 2, 2018 , the Company does not believe it probable that it would be required to perform under any of the remaining guarantees.

Income Taxes

Income Taxes	6 Months Ended
	Jul. 02, 2018
Income Tax Disclosure [Abstract]
Income taxes	Information on the Company’s income taxes for the periods reported is as follows: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Provision for (benefit from) income taxes $ 548 $ (1,947 ) $ 1,129 $ (5,627 ) Income (loss) before income taxes 1,934 (8,032 ) 4,095 (16,919 ) Effective income tax rate 28.3 % 24.2 % 27.6 % 33.3 % The effective income tax rate for the three months ended July 2, 2018 includes the effect of certain permanent differences between tax reporting purposes and financial reporting purposes. The effective tax rate for the three months ended July 3, 2017 , includes the effect of a switch during the quarter from an expected full year provision rate to a full year benefit rate. The effective income tax rate for the six months ended July 2, 2018 includes the effect of certain permanent differences between tax reporting purposes and financial reporting purposes. The effective tax rate for the six months ended July 3, 2017 , includes the effect of a discrete adjustment for the share-based compensation expense recorded for vesting restricted common shares.

Share-based Compensation

Share-based Compensation	6 Months Ended
	Jul. 02, 2018
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 1, 2018 34,898 40,354 $ 3.44 Granted 20,000 — 5.38 Vested (13,898 ) — 4.83 Unvested, July 2, 2018 41,000 40,354 $ 3.67 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 1, 2018 949,115 158,127 $ 7.60 Granted 159,200 — 5.07 Exercised (20,000 ) — 3.99 Forfeited (79,104 ) — 9.24 Outstanding, July 2, 2018 1,009,211 158,127 $ 7.21 8.1 years $ 427 Exercisable, July 2, 2018 336,419 — $ 10.09 6.7 years $ 72 Compensation cost Stock-based compensation expense recognized in connection with the Incentive Plans for each of the three months ended July 2, 2018 and July 3, 2017 amounted to $0.2 million . Stock-based compensation expense recognized in connection with the Incentive Plans for each of the six month periods ended July 2, 2018 and July 3, 2017 amounted to $0.4 million . As of July 2, 2018 , total unrecognized stock-based compensation expense was $1.5 million , with $1.2 million associated with time vesting awards and $0.3 million associated with market condition awards. The remaining weighted average period for unrecognized stock-based compensation expense was 2.4 years as of July 2, 2018 .

Brand Marketing Fund (Notes)

Brand Marketing Fund (Notes)	6 Months Ended
	Jul. 02, 2018
Other Income and Expenses [Abstract]
Brand Marketing Fund	The Company manages the BMF on behalf of all Papa Murphy’s stores in the United States. The Company is committed under its franchise and other agreements to spend revenues of the BMF on marketing, creative efforts, media support, or related purposes specified in the agreements. Contributions to the BMF are recognized as revenue, while expenditures are included in selling, general, and administrative expenses. Expenditures of the BMF 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 BMF exceed expenditures on a cumulative basis, the excess contributions are recorded in accrued expenses in the Company’s Condensed Consolidated Balance Sheets . While no profit is recognized on amounts received by the BMF , when expenditures exceed contributions to the BMF on a cumulative basis, income from operations and net income may be affected due to the timing of when revenues are received and expenses are incurred. Information on the Company’s BMF balances for the periods reported is as follows: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Opening BMF deficit $ (5,862 ) $ (9,413 ) $ (5,461 ) $ (1,071 ) Net activity during the period (15 ) 2,809 (416 ) (5,533 ) Ending BMF deficit $ (5,877 ) $ (6,604 ) $ (5,877 ) $ (6,604 ) As of July 2, 2018 , previously recognized expenses of $5.9 million may be recovered in future periods if subsequent BMF contributions exceed expenditures.

Earnings per Share (EPS)

Earnings per Share (EPS)	6 Months Ended
	Jul. 02, 2018
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 Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands, except per share data) (unaudited) (as adjusted) (unaudited) (as adjusted) Earnings: Net income (loss) $ 1,386 $ (6,085 ) $ 2,966 $ (11,292 ) Shares: Weighted average common shares outstanding 16,922 16,868 16,914 16,854 Dilutive effect of restricted equity awards 39 — 39 — Diluted weighted average number of shares outstanding 16,960 16,868 16,953 16,854 Earnings (loss) per share: Basic earnings (loss) per share $ 0.08 $ (0.36 ) $ 0.18 $ (0.67 ) Diluted earnings (loss) per share $ 0.08 $ (0.36 ) $ 0.17 $ (0.67 ) For the three months ended July 2, 2018 , and July 3, 2017 , an aggregated total of 0.6 million shares and 0.9 million shares, respectively, have been excluded from the diluted EPS calculation because their effect would have been anti-dilutive. For the six months ended July 2, 2018 , and July 3, 2017 , an aggregated total of 0.6 million shares and 1.1 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	6 Months Ended
	Jul. 02, 2018
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Legal proceedings The Company is from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of business. The Company accrues a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of the probability of a loss and the determination as to whether a loss is reasonably estimable. These accruals are reviewed at least quarterly and adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel and technical experts and other information and events pertaining to a particular matter. To the extent there is a reasonable possibility (within the meaning of Accounting Standards Codification (“ASC”) 450) that losses could exceed amounts already accrued, if any, and the additional loss or range of loss is able to be estimated, the Company discloses the additional loss or range of loss. In some instances, the Company is unable to reasonably estimate any potential loss or range of loss. The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on its business. There are many reasons that the Company cannot make these assessments, including, among others, one or more of the following: the early stages of a proceeding; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery not having been started or incomplete; the complexity of the facts that are in dispute; the difficulty of assessing novel claims; the parties not having engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and/or the often slow pace of litigation. 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. In June 2017, the parties moved for summary judgment. The Company moved for summary judgment against two of the remaining franchise owner groups, the board of directors members moved for summary judgment on all claims against them, and the plaintiffs moved for summary judgment against all defendants on their Washington Consumer Protection Act and Washington Franchise Investment Protection Act claims. 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 resolutions with six of the remaining franchise owner groups, and their claims have been dismissed. In April 2018, the Company reached resolution with four of the remaining franchise owner groups, conditioned upon dismissal of their claims. In June 2018, the Company reached resolution with an additional franchise owner group. On June 29, 2018, the Court granted the Company’s motion to strike the remaining franchise owner groups’ jury demand. The Court denied the Company’s motion for separate trials, because at the time of the hearing there were only two franchise owner groups remaining in the case, based on tentative settlements with two other groups. In July 2018, the Company finalized the tentative settlements with two of the aforementioned franchise owner groups, conditioned upon dismissal of their claims. There are two groups remaining in the case, with a trial likely to be set in the first half of 2019. The Company is named as a defendant in a putative class action lawsuit filed by plaintiff John Lennartson on May 7, 2015, in the United States District Court for the Western District of Washington. The lawsuit alleges the Company failed to comply with the requirements of the Telephone Consumer Protection Act ("TCPA") when it sent SMS text messages to consumers. Mr. Lennartson asks that the court certify the putative class and that statutory damages under the TCPA be awarded to plaintiff and each class member. On October 14, 2016, the Federal Communications Commission ("FCC") granted the Company a limited waiver from the TCPA’s written consent requirements for certain text messages that it sent up through October 16, 2013 to individuals who, like Mr. Lennartson, provided written consent prior to October 16, 2013. On October 20, 2016, the Company filed a motion for summary judgment seeking dismissal. On October 27, 2016, Mr. Lennartson filed a motion seeking to extend the time to respond to the summary judgment motion on the basis that he intends to appeal the FCC’s waiver. On November 4, 2016, the Court granted Mr. Lennartson’s motion to continue his response to the Company’s summary judgment motion until he could complete his appeal of the FCC’s waiver order. In addition, on January 9, 2017, Mr. Lennartson filed an amended complaint adding additional plaintiffs, some of whom provided consent after October 16, 2013, and who are therefore differently situated from Mr. Lennartson, as well as additional Washington state law claims. On October 27, 2017, plaintiffs moved to certify their putative class, which the Company opposed, and on November 22, 2017, the Company moved for summary judgment on all of plaintiffs’ claims. The Court issued a stay of the case for 30 days while the parties pursued settlement negotiations. On April 23, 2018, the parties entered into a Settlement Agreement and Release and plaintiffs filed a Motion and Memorandum for Preliminary Approval of Settlement with the Court. The Court gave preliminary approval to the settlement on May 16, 2018, in its Preliminary Approval Order Approving Settlement, Certifying Settlement Class, Approving Notice Plan, and Setting Fairness Hearing. The Settlement Agreement, subject to final approval from the Court, will result in the final resolution of the lawsuit; however, the Company provides no assurance that the final settlement agreement will be approved by the Court, or that the lawsuit will be finally resolved. The Company has recorded a contingent liability of $3.9 million related to this lawsuit. An adverse judgment or settlement related to this lawsuit could have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. In addition to the foregoing, the Company is subject to routine legal proceedings, claims and litigation in the ordinary course of its business. The Company may also engage in future litigation with franchise owners to enforce the terms of franchise agreements and compliance with brand standards as determined necessary to protect the Company’s brand, the consistency of products and the customer experience. Lawsuits require significant management attention and financial resources and the outcome of any litigation is inherently uncertain. The Company does not, however, currently expect that the costs to resolve these routine matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Segment Information

Segment Information	6 Months Ended
	Jul. 02, 2018
Segment Reporting [Abstract]
Segment Information	As a result of changes in the Company’s executive management responsibilities, effective January 2, 2018, the Company changed its reportable segments by combining its domestic and international franchise business into a single Franchise segment and separating its Brand Funds business into a separate reportable segment. No changes were made to the Company’s Company Stores segment. Management believes this change better reflects the priorities and decision making analysis around the allocation of the Company’s resources. Prior period results for the affected segments have been retrospectively revised to reflect this change. The Company now has the following reportable segments: (i) Franchise; (ii) Company Stores; and (iii) Brand Funds. The Franchise segment includes operations with respect to franchised stores and derives its revenues primarily from franchise and development fees and franchise royalties from franchised stores. The Company Stores segment includes operations with respect to Company-owned stores and derives its revenues from retail sales of pizza and side items to the general public. The Brand Funds segment includes the Brand Marketing Fund and the Company’s Convention Fund. 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 income (loss) 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, adjusted EBITDA and assets for each of the Company’s reportable segments and include a reconciliation of segment adjusted EBITDA to income (loss) before income taxes: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Revenues Franchise segment $ 10,764 $ 10,387 $ 22,525 $ 21,823 Brand Funds segment 5,236 7,428 11,120 15,930 Intersegment eliminations (1,186 ) (423 ) (2,641 ) (963 ) Franchise related 14,814 17,392 31,004 36,790 Company Stores segment 15,979 18,715 34,561 39,490 Total $ 30,793 $ 36,107 $ 65,565 $ 76,280 Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Segment Adjusted EBITDA Franchise $ 5,760 $ 5,742 $ 13,048 $ 14,430 Company Stores (82 ) 539 992 1,326 Brand Funds 73 2,810 (165 ) (5,532 ) Total reportable segments adjusted EBITDA 5,751 9,091 13,875 10,224 Corporate and unallocated (1,170 ) (1,061 ) (2,158 ) (4,539 ) Depreciation and amortization (1,874 ) (2,906 ) (4,015 ) (6,023 ) Interest expense, net (1,296 ) (1,286 ) (2,588 ) (2,513 ) CEO transition and restructuring costs (1) (119 ) (131 ) (363 ) (2,329 ) E-commerce impairment and transition costs (2) 8 (9,124 ) (350 ) (9,124 ) Store divestitures, closures, and impairments (3) 723 (2,615 ) 723 (2,615 ) Litigation settlement and reserves (4) (89 ) — (1,029 ) — Income (Loss) Before Income Taxes $ 1,934 $ (8,032 ) $ 4,095 $ (16,919 ) (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 charges on the write-down of our e-commerce platform based on the decision to move to a third-party developed and hosted solution and non-recurring costs incurred to complete the transition. (3) For 2018, represents primarily gains on the refranchising of Company-owned stores. For 2017, represents primarily non-cash charges associated with the impairment and disposal of store assets upon the decision to close stores. (4) Accruals made for franchisee litigation settlements. July 2, 2018 January 1, 2018 (in thousands) (unaudited) (as adjusted) Total Assets Franchise $ 117,866 $ 121,179 Company Stores 41,299 53,226 Brand Funds 87 509 Other (1) 87,194 87,201 Total $ 246,446 $ 262,115 (1) Other assets which are not allocated to the individual segments primarily include trade names and trademarks and taxes receivable.

Description of Business and B23

Description of Business and Basis of Presentation (Policies)	6 Months Ended
	Jul. 02, 2018
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 1, 2018 .
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 years 2018 and 2017 are 52-week years. 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 2018 and 2017 are references to fiscal years ending December 31, 2018 and ended January 1, 2018 , respectively.
Recently issued accounting standards	Recently Issued Accounting Standards Recently Adopted Accounting Standards Revenue from Contracts with Customers The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASU 2014-09 ”) as of January 2, 2018. The Company adopted the new standard using the full retrospective method and elected applicable practical expedients on adoption. Accordingly, previously reported financial information has been restated to reflect the application of the new standard to all comparative periods presented. Adoption of ASU 2014-09 had a material impact on the Company’s interim unaudited condensed consolidated financial statements . The most significant impacts relate to the: (i) accounting for franchise and development fees, and (ii) accounting for the Company’s advertising fund (the "Brand Marketing Fund" or " BMF ") and Convention Fund (with the BMF , the “ Brand Funds ”). Specifically, under the new standard the Company recognizes franchise fees ratably over the life of the contract rather than at the time the store is opened or a successive contract commences. Revenue related to the Company’s franchise royalties, which are based on a percentage of franchise sales, and revenue from Company-owned stores remain substantially unchanged. The Company has determined that ASU 2014-09 requires a gross presentation on the Company’s Condensed Consolidated Statements of Operations for revenues and related expenses of the BMF and Convention Fund, or Brand Funds . These funds exist solely for the purpose of promoting the Papa Murphy’s brand in the U.S. While this change will materially affect the gross amount of reported revenues and expenses, the effect will generally be an offsetting increase to both revenues and expenses with no net effect on previously reported Operating Income (Loss) and Net Income (Loss) . Refer to Impacts to Reported Results below for more detailed effects of adoption on the Company’s financial statements and refer to Note 10 — Revenue for more information on our accounting for revenue. Leases The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ ASU 2016-02 ”) as of January 2, 2018, concurrent with the adoption of the new revenue standard. The Company adopted this standard using the modified retrospective approach and elected the available practical expedients on adoption. Accordingly, previously reported financial information has been restated to reflect the application of the new standard to all comparative periods presented. Adoption of the new standard had a material impact on the Company’s interim unaudited condensed consolidated financial statements . The most significant impacts related to the (i) recognition of right-of-use (" ROU ") assets and lease liabilities for operating leases, and (ii) changes in occupancy costs and impairment losses related to prior year store closures and impairments. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. A loss is recognized when the ROU asset is impaired in connection with the impairment of a store’s assets due to economic or other factors. Refer to Impacts to Reported Results below for more detailed effects of adoption on the Company’s financial statements and refer to Note 11 — Leases for more information on our accounting for leases. Other standards adopted In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 320) (“ ASU 2016-15 ”), which clarifies the presentation of certain cash receipts and cash payments in the statement of cash flows. The Company adopted the standard on January 2, 2018. Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements. In preparation for the adoption of the above standards, the Company implemented internal controls and key system functionality to enable the preparation of financial information in accordance with the standards. Recent Accounting Pronouncements Not Yet Adopted 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.

Revenue (Policies)

Revenue (Policies)	6 Months Ended
	Jul. 02, 2018
Revenue from Contract with Customer [Abstract]
Revenue recognition, Company Stores	Company-owned stores revenue consists of retail sales of food through Company-owned stores located in the United States. Company-owned stores revenue is recognized when the food items are delivered to or carried out by customers. Customer payments are generally collected at the time of sale. Sales taxes collected from customers are remitted to the appropriate taxing authority and are not recognized as revenue.
Revenue recognition, royalties	Royalty revenues. Royalty revenues, which includes advertising fees from domestic franchise stores, are based on a percentage of sales and are recognized when the food items are delivered to or carried out by customers. Payments for domestic royalties and advertising fees are generally due and collected within seven days of the prior week end date. Payments for international royalties are due and collected within 30 days of month-end.
Revenue recognition, franchise fees	Franchise Revenues The franchise arrangement between the Company and each franchise owner of a Papa Murphy’s Take ‘N’ Bake Pizza store is documented in the form of a franchise agreement and, in select cases, a development agreement. The franchise arrangement requires the Company as franchisor to perform various activities to support the Papa Murphy’s Take ‘N’ Bake Pizza brand and does not involve the direct transfer of goods and services to the franchise owner as a customer. Activities performed by the Company are highly interrelated with the franchise license and are considered to represent a single performance obligation, which is the transfer of the franchise license. The nature of the Company’s promise in granting the franchise license is to provide the franchise owner with access to the brand’s intellectual property over the term of the franchise arrangement. The transaction price in a standard franchise arrangement consists of (a) franchise/development fees; (b) continuing franchise fees (royalties); and (c) advertising fees. Since the Company considers the franchise license to be a single performance obligation, no allocation of the transaction price under a standard agreement is performed for revenue recognition purposes. However, if additional separate and distinct goods or services are included with a franchise arrangement and are deemed to be additional performance obligations, the total transaction price of the contract is allocated to each performance obligation based on the stand-alone selling price of each performance obligation. Franchise and development fees. Franchise and development fees are paid in advance of a store opening, typically when entering into a new franchise or development agreement. Fees allocated to the franchise license are recognized as revenue on a straight-line basis over the term of each respective franchise store agreement. Initial franchise agreement terms are typically ten years while successive agreement terms are typically five years. The Company has determined that these fees, which are paid in advance of when they are recognized as revenue, do not contain a significant financing component.
Revenue recognition, other	E-commerce fees include point-of-sale (“ POS ”) support fees and transaction fees for purchases made through the Company’s e-commerce platform. POS support fees are due quarterly in advance and recognized as revenue over the respective quarter. Transaction fees are recognized when the food items purchased from a store are delivered to or carried out by customers and are due and collected within seven days of the prior week end date. Revenue is recognized upon the transfer of control of promised goods or services to customers in an amount that reflects the consideration the Company expects to receive for those goods or services. Vendor payments are received from vendors that supply franchised and Company-owned stores with products and are typically based on the volume of product purchased by the stores. Revenues from the sale of products are recognized when product is shipped from a distribution center to a store. Payments are due and collected within 30 days after month-end. The Company charges domestic stores for marketing materials shipped to stores one to three times per quarter. These products are sold at cost and the revenues from their sale are recognized when the product is shipped by the vendors producing the kits. Payments are due and collected within 30 days of shipment.
Revenue recognition, deferred revenue	The timing of revenue recognition may differ from the timing of payment from customers. We record a receivable when revenue is recognized in advance of payment, and a contract liability (“unearned revenue”), when revenue is recognized subsequent to payment. Unearned revenue consists mainly of franchise and development fees paid in advance. A refund liability is recorded when it is known that an amount previously received will be refunded instead of recognized as revenue.
Revenue recognition, contract acquisition costs	The Company does not incur a significant amount of contract acquisition costs in conducting its franchising activities and has not capitalized any such costs.

Leases (Policies)

Leases (Policies)	6 Months Ended
	Jul. 02, 2018
Leases [Abstract]
Leases	ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating lease ROU assets also exclude lease incentives received. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For certain equipment leases, such as copiers, the Company accounts for the lease and non-lease components as a single lease component. Lease terms for Company-owned stores are generally five years with one or more five-year renewal options and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs in addition to a base or fixed rent. The Company’s leases have remaining lease terms of 1 to 10.4 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Economic performance of a store is the primary factor used to estimate whether an option to extend a lease term will be exercised or not.

Brand Marketing Fund (Policies)

Brand Marketing Fund (Policies)	6 Months Ended
	Jul. 02, 2018
Other Income and Expenses [Abstract]
Brand Marketing Fund	Contributions to the BMF are recognized as revenue, while expenditures are included in selling, general, and administrative expenses. Expenditures of the BMF 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 BMF exceed expenditures on a cumulative basis, the excess contributions are recorded in accrued expenses in the Company’s Condensed Consolidated Balance Sheets . While no profit is recognized on amounts received by the BMF , when expenditures exceed contributions to the BMF on a cumulative basis, income from operations and net income may be affected due to the timing of when revenues are received and expenses are incurred.

Description of Business and B27

Description of Business and Basis of Presentation (Tables)	6 Months Ended
	Jul. 02, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Impacts of adoption of standards related to revenue recognition and leases to previously reported results	Adoption of the standards related to revenue recognition and leases affected the Company’s previously reported results as follows: Statement of Operations Three Months Ended July 3, 2017 (unaudited) (in thousands, except earnings per share) As Reported New Revenue Standard Adjustment New Lease Standard Adjustment As Adjusted Total revenues (1) $ 29,102 $ 7,005 $ — $ 36,107 Store operating costs 18,608 (382 ) (719 ) 17,507 Selling, general, and administrative (1) 3,408 7,423 (8 ) 10,823 Loss on disposal or impairment of property and equipment 11,041 — 527 11,568 (Benefit from) provision for income taxes (2,008 ) (13 ) 74 (1,947 ) Net (loss) income (6,187 ) (23 ) 125 (6,085 ) Diluted (loss) earnings per share (0.37 ) 0.00 0.01 (0.36 ) (1) Recognition of advertising revenue and expense on a gross basis instead of a net basis by the Brand Funds comprised $7.1 million of the revenue adjustment and $7.4 million of the expense adjustment under the revenue standard. The revenue adjustment due to the change in method of recognizing franchise and development fees was $(0.1) million . Statement of Operations Six Months Ended July 3, 2017 (unaudited) (in thousands, except earnings per share) As Reported New Revenue Standard Adjustment New Lease Standard Adjustment As Adjusted Total revenues (1) $ 61,096 $ 15,184 $ — $ 76,280 Store operating costs 38,208 (807 ) (932 ) 36,469 Selling, general, and administrative (1) 20,621 15,930 (26 ) 36,525 Loss on disposal or impairment of property and equipment 11,050 — 527 11,577 (Benefit from) provision for income taxes (5,810 ) 23 160 (5,627 ) Net (loss) income (11,601 ) 38 271 (11,292 ) Diluted (loss) earnings per share (0.69 ) 0.00 0.02 (0.67 ) (1) Recognition of advertising revenue and expense on a gross basis instead of a net basis by the Brand Funds comprised $15.1 million of the revenue adjustment and $15.9 million of the expense adjustment under the revenue standard. The revenue adjustment due to the change in method of recognizing franchise and development fees was $0.1 million . Balance Sheet January 1, 2018 (in thousands) As Reported New Revenue Standard Adjustment New Lease Standard Adjustment As Adjusted Prepaid expenses and other current assets $ 2,671 $ — $ (390 ) $ 2,281 Operating lease right of use assets — — 16,331 16,331 Unearned franchise and development fees 1,702 9,899 — 11,601 Accrued expenses and other current liabilities 13,139 (507 ) (250 ) 12,382 Lease liabilities — — 19,678 19,678 Deferred tax liability, net 24,457 (2,319 ) (313 ) 21,825 Other long-term liabilities 3,922 — (2,218 ) 1,704 Accumulated deficit (18,613 ) (7,073 ) (956 ) (26,642 )

Prepaid Expenses and Other Cu28

Prepaid Expenses and Other Current Assets (Tables)	6 Months Ended
	Jul. 02, 2018
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: July 2, 2018 January 1, 2018 (in thousands) (unaudited) (as adjusted) Prepaid media production costs $ 38 $ 376 Prepaid software and support 660 223 Prepaid occupancy related costs 271 159 Prepaid insurance 28 377 Taxes receivable 188 182 POS software licenses for resale 368 364 Assets held for sale 216 432 Advertising cooperative assets, restricted 56 4 Other 177 164 Total prepaid expenses and other current assets $ 2,002 $ 2,281

Goodwill (Tables)

Goodwill (Tables)	6 Months Ended
	Jul. 02, 2018
Goodwill [Abstract]
Summary of changes to goodwill	The following summarizes changes to the Company’s goodwill, by reportable segment: (in thousands) Company Stores Franchise Total Balance at January 1, 2018 $ 26,205 $ 81,546 $ 107,751 Disposition (5,155 ) — (5,155 ) Balance at July 2, 2018 $ 21,050 $ 81,546 $ 102,596

Financing Arrangements (Tables)

Financing Arrangements (Tables)	6 Months Ended
	Jul. 02, 2018
Debt Disclosure [Abstract]
Long-term debt	Long-term debt consists of the following: (in thousands) July 2, 2018 January 1, 2018 Term loan $ 81,800 $ 92,900 Notes payable 3,000 3,000 Total principal amount of long-term debt 84,800 95,900 Unamortized debt issuance costs (346 ) (506 ) Total long-term debt 84,454 95,394 Less current portion (3,000 ) (8,400 ) Total long-term debt, net of current portion $ 81,454 $ 86,994

Fair Value Measurement (Tables)

Fair Value Measurement (Tables)	6 Months Ended
	Jul. 02, 2018
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: July 2, 2018 January 1, 2018 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Fair Value Measurement Financial assets Notes receivable (1) $ 97 $ 86 $ 97 $ 88 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)	6 Months Ended
	Jul. 02, 2018
Payables and Accruals [Abstract]
Accrued and other liabilities	Accrued expenses and other current liabilities consist of the following: July 2, 2018 January 1, 2018 (in thousands) (unaudited) (as adjusted) Accrued compensation and related costs $ 2,818 $ 3,902 Accrued legal settlement costs 3,790 3,940 Gift cards payable 2,032 2,676 Accrued interest and non-income taxes payable 317 461 Convention fund balance 311 841 Advertising cooperative liabilities 99 60 Other 485 502 Total accrued expenses and other current liabilities $ 9,852 $ 12,382 Accrued legal settlement costs decreased since January 1, 2018 due to $1.8 million in payments to partially settle the TCPA class action lawsuit and $2.1 million in payments to settle franchise litigation claims that reduced the $3.7 million accrual for legal settlement costs related to the franchise litigation recorded in the current year. Both lawsuits are discussed in more detail in Note 16 — Commitments and Contingencies . Included in Accounts receivable, net is an insurance receivable equal to 75% of the anticipated settlement of the franchise owner lawsuit.

Revenue (Tables)

Revenue (Tables)	6 Months Ended
	Jul. 02, 2018
Revenue from Contract with Customer [Abstract]
Revenues by contract type	Revenues by contract type were as follows: Three Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 8,721 $ — $ 3,539 $ 12,260 Franchise fees 720 — — 720 Vendor payments — — 836 836 E-commerce fees 517 — — 517 Other franchise and brand 11 — 470 481 Company-owned stores — 15,979 — 15,979 Total revenues 9,969 15,979 4,845 30,793 Intersegment revenues 795 — 391 1,186 Reconciliation to business segment revenues $ 10,764 $ 15,979 $ 5,236 $ 31,979 Three Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 9,102 $ — $ 5,353 $ 14,455 Franchise fees 782 — — 782 Vendor payments — — 1,111 1,111 E-commerce fees 429 — — 429 Other franchise and brand 19 — 596 615 Company-owned stores — 18,715 — 18,715 Total revenues 10,332 18,715 7,060 36,107 Intersegment revenues 55 — 368 423 Reconciliation to business segment revenues $ 10,387 $ 18,715 $ 7,428 $ 36,530 Six Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 18,182 $ — $ 7,379 $ 25,561 Franchise fees 1,460 — — 1,460 Vendor payments — — 1,952 1,952 E-commerce fees 1,063 — — 1,063 Other franchise and brand 35 — 933 968 Company-owned stores — 34,561 — 34,561 Total revenues 20,740 34,561 10,264 65,565 Intersegment revenues 1,785 — 856 2,641 Reconciliation to business segment revenues $ 22,525 $ 34,561 $ 11,120 $ 68,206 Six Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total Franchise royalties $ 19,135 $ — $ 11,269 $ 30,404 Franchise fees 1,538 — — 1,538 Vendor payments — — 2,455 2,455 E-commerce fees 986 — — 986 Other franchise and brand 46 — 1,361 1,407 Company-owned stores — 39,490 — 39,490 Total revenues 21,705 39,490 15,085 76,280 Intersegment revenues 118 — 845 963 Reconciliation to business segment revenues $ 21,823 $ 39,490 $ 15,930 $ 77,243
Revenues by geographic location	Revenues by geographic location were as follows: Three Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total United States $ 9,888 $ 15,979 $ 4,845 $ 30,712 International 81 — — 81 Total revenues $ 9,969 $ 15,979 $ 4,845 $ 30,793 Three Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total United States $ 10,233 $ 18,715 $ 7,060 $ 36,008 International 99 — — 99 Total revenues $ 10,332 $ 18,715 $ 7,060 $ 36,107 Six Months Ended July 2, 2018 (unaudited) (in thousands) Franchise Company Stores Brand Funds Total United States $ 20,580 $ 34,561 $ 10,264 $ 65,405 International 160 — — 160 Total revenues $ 20,740 $ 34,561 $ 10,264 $ 65,565 Six Months Ended July 3, 2017 (as adjusted) (in thousands) Franchise Company Stores Brand Funds Total United States $ 21,500 $ 39,490 $ 15,085 $ 76,075 International 205 — — 205 Total revenues $ 21,705 $ 39,490 $ 15,085 $ 76,280
Changes in contract liabilities (unearned revenue)	Changes in the balances of contract liabilities (unearned revenue) during the periods reported were as follows: (in thousands) Contract Liabilities Balance at January 1, 2018 $ 11,151 Revenue recognized that was included in the balance at the beginning of the period (1,428 ) Cash received, net of amounts recognized as revenue during the period 1,059 Contract refunds (210 ) Balance at July 2, 2018 $ 10,572
Expected timing for satisfaction of performance obligations	The following table includes estimated franchise fee revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of July 2, 2018 (in thousands): Fiscal year 2018 $ 813 2019 1,576 2020 1,432 2021 1,265 2022 1,092 Thereafter 4,394 Total $ 10,572

Leases (Tables)

Leases (Tables)	6 Months Ended
	Jul. 02, 2018
Leases [Abstract]
Components of lease expense	The components of lease expense for the periods reported are as follows: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Operating lease cost $ 1,038 $ 1,298 $ 2,084 $ 2,459 Short-term lease cost 11 4 25 11 Variable lease cost 5 6 6 21 Sublease income (8 ) (16 ) (26 ) (37 ) Total lease cost $ 1,046 $ 1,292 $ 2,089 $ 2,454
Cash flow supplemental disclosures for leases	Supplemental cash flow information related to leases for the periods reported is as follows: Six Months Ended (in thousands) July 2, 2018 July 3, 2017 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,424 $ 2,472 Right-of-use assets obtained in exchange for new operating lease liabilities — 213 Weighted-average remaining lease term of operating leases 5.5 years 6.6 years Weighted-average discount rate of operating leases 4.6 % 4.8 %
Schedule of future minimum lease payments	Future minimum lease payments under non-cancelable leases as of July 2, 2018 are as follows (in thousands): Fiscal year 2018 $ 1,985 2019 4,581 2020 3,774 2021 2,586 2022 1,773 Thereafter 3,304 Total future minimum lease payments 18,003 Less imputed interest (2,499 ) Total Lease Liabilities $ 15,504

Income Taxes (Tables)

Income Taxes (Tables)	6 Months Ended
	Jul. 02, 2018
Income Tax Disclosure [Abstract]
Income tax information	Information on the Company’s income taxes for the periods reported is as follows: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Provision for (benefit from) income taxes $ 548 $ (1,947 ) $ 1,129 $ (5,627 ) Income (loss) before income taxes 1,934 (8,032 ) 4,095 (16,919 ) Effective income tax rate 28.3 % 24.2 % 27.6 % 33.3 %

Share-based Compensation (Table

Share-based Compensation (Tables)	6 Months Ended
	Jul. 02, 2018
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 1, 2018 34,898 40,354 $ 3.44 Granted 20,000 — 5.38 Vested (13,898 ) — 4.83 Unvested, July 2, 2018 41,000 40,354 $ 3.67
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 1, 2018 949,115 158,127 $ 7.60 Granted 159,200 — 5.07 Exercised (20,000 ) — 3.99 Forfeited (79,104 ) — 9.24 Outstanding, July 2, 2018 1,009,211 158,127 $ 7.21 8.1 years $ 427 Exercisable, July 2, 2018 336,419 — $ 10.09 6.7 years $ 72

Brand Marketing Fund (Tables)

Brand Marketing Fund (Tables)	6 Months Ended
	Jul. 02, 2018
Other Income and Expenses [Abstract]
Brand Marketing Fund	Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Opening BMF deficit $ (5,862 ) $ (9,413 ) $ (5,461 ) $ (1,071 ) Net activity during the period (15 ) 2,809 (416 ) (5,533 ) Ending BMF deficit $ (5,877 ) $ (6,604 ) $ (5,877 ) $ (6,604 )

Earnings per Share (EPS) (Table

Earnings per Share (EPS) (Tables)	6 Months Ended
	Jul. 02, 2018
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 Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands, except per share data) (unaudited) (as adjusted) (unaudited) (as adjusted) Earnings: Net income (loss) $ 1,386 $ (6,085 ) $ 2,966 $ (11,292 ) Shares: Weighted average common shares outstanding 16,922 16,868 16,914 16,854 Dilutive effect of restricted equity awards 39 — 39 — Diluted weighted average number of shares outstanding 16,960 16,868 16,953 16,854 Earnings (loss) per share: Basic earnings (loss) per share $ 0.08 $ (0.36 ) $ 0.18 $ (0.67 ) Diluted earnings (loss) per share $ 0.08 $ (0.36 ) $ 0.17 $ (0.67 )

Segment Information (Tables)

Segment Information (Tables)	6 Months Ended
	Jul. 02, 2018
Segment Reporting [Abstract]
Segment reporting information by segment	The following tables summarize information on revenues, adjusted EBITDA and assets for each of the Company’s reportable segments and include a reconciliation of segment adjusted EBITDA to income (loss) before income taxes: Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Revenues Franchise segment $ 10,764 $ 10,387 $ 22,525 $ 21,823 Brand Funds segment 5,236 7,428 11,120 15,930 Intersegment eliminations (1,186 ) (423 ) (2,641 ) (963 ) Franchise related 14,814 17,392 31,004 36,790 Company Stores segment 15,979 18,715 34,561 39,490 Total $ 30,793 $ 36,107 $ 65,565 $ 76,280 Three Months Ended Six Months Ended July 2, 2018 July 3, 2017 July 2, 2018 July 3, 2017 (in thousands) (unaudited) (as adjusted) (unaudited) (as adjusted) Segment Adjusted EBITDA Franchise $ 5,760 $ 5,742 $ 13,048 $ 14,430 Company Stores (82 ) 539 992 1,326 Brand Funds 73 2,810 (165 ) (5,532 ) Total reportable segments adjusted EBITDA 5,751 9,091 13,875 10,224 Corporate and unallocated (1,170 ) (1,061 ) (2,158 ) (4,539 ) Depreciation and amortization (1,874 ) (2,906 ) (4,015 ) (6,023 ) Interest expense, net (1,296 ) (1,286 ) (2,588 ) (2,513 ) CEO transition and restructuring costs (1) (119 ) (131 ) (363 ) (2,329 ) E-commerce impairment and transition costs (2) 8 (9,124 ) (350 ) (9,124 ) Store divestitures, closures, and impairments (3) 723 (2,615 ) 723 (2,615 ) Litigation settlement and reserves (4) (89 ) — (1,029 ) — Income (Loss) Before Income Taxes $ 1,934 $ (8,032 ) $ 4,095 $ (16,919 ) (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 charges on the write-down of our e-commerce platform based on the decision to move to a third-party developed and hosted solution and non-recurring costs incurred to complete the transition. (3) For 2018, represents primarily gains on the refranchising of Company-owned stores. For 2017, represents primarily non-cash charges associated with the impairment and disposal of store assets upon the decision to close stores. (4) Accruals made for franchisee litigation settlements. July 2, 2018 January 1, 2018 (in thousands) (unaudited) (as adjusted) Total Assets Franchise $ 117,866 $ 121,179 Company Stores 41,299 53,226 Brand Funds 87 509 Other (1) 87,194 87,201 Total $ 246,446 $ 262,115 (1) Other assets which are not allocated to the individual segments primarily include trade names and trademarks and taxes receivable.

Description of Business and B40

Description of Business and Basis of Presentation - Description of business (Details)	Jul. 02, 2018statestore
Franchisor Disclosure [Line Items]
Number of stores	1,477
Number of states in which the Company operates | state	37
Domestic
Franchisor Disclosure [Line Items]
Number of stores	1,438
Domestic | Franchised stores
Franchisor Disclosure [Line Items]
Number of stores	1,316
Domestic | Company-owned stores
Franchisor Disclosure [Line Items]
Number of stores	122
Canada and the United Arab Emirates | Franchised stores
Franchisor Disclosure [Line Items]
Number of stores	39

Description of Business and B41

Description of Business and Basis of Presentation - Impacts of adoption of accounting standards (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017	Jan. 01, 2018
Statement of Operations
Total revenues	$ 30,793	$ 36,107	$ 65,565	$ 76,280
Store operating costs		17,507		36,469
Selling, general, and administrative	11,423	10,823	24,436	36,525
Loss on disposal or impairment of property and equipment	(715)	11,568	(713)	11,577
(Benefit from) provision for income taxes	548	(1,947)	1,129	(5,627)
Net (loss) income	$ 1,386	$ (6,085)	$ 2,966	$ (11,292)
Diluted earnings (loss) per share	$ 0.08	$ (0.36)	$ 0.17	$ (0.67)
Balance Sheet
Prepaid expenses and other current assets	$ 2,002		$ 2,002		$ 2,281
Operating lease right of use assets	12,734		12,734		16,331
Unearned franchise and development fees					11,601
Accrued expenses and other current liabilities	9,852		9,852		12,382
Lease liabilities	15,504		15,504		19,678
Deferred tax liability	22,869		22,869		21,825
Other long-term liabilities	1,739		1,739		1,704
Accumulated deficit	(23,676)		(23,676)		(26,642)
As Reported
Statement of Operations
Total revenues		$ 29,102		$ 61,096
Store operating costs		18,608		38,208
Selling, general, and administrative		3,408		20,621
Loss on disposal or impairment of property and equipment		11,041		11,050
(Benefit from) provision for income taxes		(2,008)		(5,810)
Net (loss) income		$ (6,187)		$ (11,601)
Diluted earnings (loss) per share		$ (0.37)		$ (0.69)
Balance Sheet
Prepaid expenses and other current assets					2,671
Operating lease right of use assets					0
Unearned franchise and development fees					1,702
Accrued expenses and other current liabilities					13,139
Lease liabilities					0
Deferred tax liability					24,457
Other long-term liabilities					3,922
Accumulated deficit					(18,613)
New Revenue Standard Adjustment
Statement of Operations
Total revenues		$ 7,005		$ 15,184
Store operating costs		(382)		(807)
Selling, general, and administrative		7,423		15,930
Loss on disposal or impairment of property and equipment		0		0
(Benefit from) provision for income taxes		(13)		23
Net (loss) income		$ (23)		$ 38
Diluted earnings (loss) per share		$ 0		$ 0
Balance Sheet
Prepaid expenses and other current assets					0
Operating lease right of use assets					0
Unearned franchise and development fees					9,899
Accrued expenses and other current liabilities					(507)
Lease liabilities					0
Deferred tax liability					(2,319)
Other long-term liabilities					0
Accumulated deficit					(7,073)
New Lease Standard Adjustment
Statement of Operations
Total revenues		$ 0		$ 0
Store operating costs		(719)		(932)
Selling, general, and administrative		(8)		(26)
Loss on disposal or impairment of property and equipment		527		527
(Benefit from) provision for income taxes		74		160
Net (loss) income		$ 125		$ 271
Diluted earnings (loss) per share		$ 0.01		$ 0.02
Balance Sheet
Prepaid expenses and other current assets					(390)
Operating lease right of use assets					16,331
Unearned franchise and development fees					0
Accrued expenses and other current liabilities					(250)
Lease liabilities					19,678
Deferred tax liability					(313)
Other long-term liabilities					(2,218)
Accumulated deficit					$ (956)
Brand Funds
Statement of Operations
Total revenues	4,845	$ 7,060	10,264	$ 15,085
Brand Funds | New Revenue Standard Adjustment
Statement of Operations
Total revenues		7,100		15,100
Selling, general, and administrative		7,400		15,900
Franchise
Statement of Operations
Total revenues	$ 9,969	10,332	$ 20,740	21,705
Franchise | New Revenue Standard Adjustment
Statement of Operations
Total revenues		$ (100)		$ 100

Prepaid Expenses and Other Cu42

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Jul. 02, 2018	Jan. 01, 2018
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid media production costs	$ 38	$ 376
Prepaid software and support	660	223
Prepaid occupancy related costs	271	159
Prepaid insurance	28	377
Taxes receivable	188	182
POS software licenses for resale	368	364
Assets held for sale	216	432
Advertising cooperative assets, restricted	56	4
Other	177	164
Total prepaid expenses and other current assets	$ 2,002	$ 2,281

Property and Equipment (Details

Property and Equipment (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017	Jan. 01, 2018
Property, Plant and Equipment [Abstract]
Accumulated depreciation	$ 21		$ 21		$ 21.9
Depreciation expense	$ 0.8	$ 1.7	$ 1.8	$ 3.6

Divestitures (Details)

Divestitures (Details) $ in Thousands	6 Months Ended
	Jul. 02, 2018USD ($)store	Jun. 25, 2018store	May 21, 2018store	Apr. 23, 2018store
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of stores | store	1,477
Franchise fees paid	$ 450
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 | store	22	10	10	2
Aggregate sale price	$ 7,300
Gain (loss) on disposal	$ 700

Goodwill (Details)

Goodwill (Details) $ in Thousands	6 Months Ended
	Jul. 02, 2018USD ($)
Goodwill [Line Items]
Beginning balance	$ 107,751
Disposition	(5,155)
Ending balance	102,596
Brand Funds
Goodwill [Line Items]
Beginning balance	0
Ending balance	0
Company Stores
Goodwill [Line Items]
Beginning balance	26,205
Disposition	(5,155)
Ending balance	21,050
Franchise
Goodwill [Line Items]
Beginning balance	81,546
Disposition	0
Ending balance	$ 81,546

Intangible Assets (Details)

Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017	Jan. 01, 2018
Intangible Assets, Net
Accumulated amortization	$ (32.4)		$ (32.4)		$ (30.2)
Amortization expense	$ 1.1	$ 1.2	$ 2.2	$ 2.4

Financing Arrangements - Sched

Financing Arrangements - Schedule of Long-term debt (Details) - USD ($) $ in Thousands	Jul. 02, 2018	Jan. 01, 2018
Debt Instrument [Line Items]
Principal amount of long-term debt	$ 84,800	$ 95,900
Unamortized debt issuance costs	(346)	(506)
Long-term debt	84,454	95,394
Less current portion	(3,000)	(8,400)
Total long-term debt, net of current portion	81,454	86,994
Secured debt | Term loan
Debt Instrument [Line Items]
Principal amount of long-term debt	81,800	92,900
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	6 Months Ended
	Jul. 02, 2018	Jul. 02, 2018	Jan. 01, 2018
Debt Instrument [Line Items]
Long-term debt	$ 84,454	$ 84,454	$ 95,394
Principal amount of long-term debt	84,800	84,800	95,900
Secured debt | Term loan
Debt Instrument [Line Items]
Principal amount of long-term debt	81,800	81,800	92,900
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	5.30%	5.30%
Weighted average | Senior secured credit facility | PMI Holdings Inc. | Secured debt
Debt Instrument [Line Items]
Interest rate during period	5.20%

Fair Value Measurement (Details

Fair Value Measurement (Details) - USD ($) $ in Thousands		Jul. 02, 2018	Jan. 01, 2018
Reported value measurement
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes receivable	[1]	$ 97	$ 97
Estimate of fair value measurement | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notes receivable	[1]	$ 86	$ 88
[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 Liabilities50

Accrued and Other Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 02, 2018	Jan. 01, 2018
Accrued Liabilities, Current [Abstract]
Accrued compensation and related costs	$ 2,818	$ 3,902
Accrued legal settlement costs	3,790	3,940
Gift cards payable	2,032	2,676
Accrued interest and non-income taxes payable	317	461
Convention fund balance	311	841
Advertising cooperative liabilities	99	60
Other	485	502
Accrued and other liabilities	9,852	$ 12,382
TCPA
Loss Contingencies [Line Items]
Contingency payments	1,800
Contingency liability	3,900
Litigation with franchise owners
Loss Contingencies [Line Items]
Contingency payments	2,100
Contingency liability	$ 3,700

Revenue - Disaggregation of Rev

Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Disaggregation of Revenue [Line Items]
Revenues	$ 30,793	$ 36,107	$ 65,565	$ 76,280
United States
Disaggregation of Revenue [Line Items]
Revenues	30,712	36,008	65,405	76,075
International
Disaggregation of Revenue [Line Items]
Revenues	81	99	160	205
Franchise royalties
Disaggregation of Revenue [Line Items]
Revenues	12,260	14,455	25,561	30,404
Franchise fees
Disaggregation of Revenue [Line Items]
Revenues	720	782	1,460	1,538
Vendor payments
Disaggregation of Revenue [Line Items]
Revenues	836	1,111	1,952	2,455
E-commerce fees
Disaggregation of Revenue [Line Items]
Revenues	517	429	1,063	986
Other franchise and brand
Disaggregation of Revenue [Line Items]
Revenues	481	615	968	1,407
Company-owned stores
Disaggregation of Revenue [Line Items]
Revenues	15,979	18,715	34,561	39,490
Franchise
Disaggregation of Revenue [Line Items]
Revenues	9,969	10,332	20,740	21,705
Franchise | United States
Disaggregation of Revenue [Line Items]
Revenues	9,888	10,233	20,580	21,500
Franchise | International
Disaggregation of Revenue [Line Items]
Revenues	81	99	160	205
Franchise | Franchise royalties
Disaggregation of Revenue [Line Items]
Revenues	8,721	9,102	18,182	19,135
Franchise | Franchise fees
Disaggregation of Revenue [Line Items]
Revenues	720	782	1,460	1,538
Franchise | Vendor payments
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Franchise | E-commerce fees
Disaggregation of Revenue [Line Items]
Revenues	517	429	1,063	986
Franchise | Other franchise and brand
Disaggregation of Revenue [Line Items]
Revenues	11	19	35	46
Franchise | Company-owned stores
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores
Disaggregation of Revenue [Line Items]
Revenues	15,979	18,715	34,561	39,490
Company Stores | United States
Disaggregation of Revenue [Line Items]
Revenues	15,979	18,715	34,561	39,490
Company Stores | International
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores | Franchise royalties
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores | Franchise fees
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores | Vendor payments
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores | E-commerce fees
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores | Other franchise and brand
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Company Stores | Company-owned stores
Disaggregation of Revenue [Line Items]
Revenues	15,979	18,715	34,561	39,490
Brand Funds
Disaggregation of Revenue [Line Items]
Revenues	4,845	7,060	10,264	15,085
Brand Funds | United States
Disaggregation of Revenue [Line Items]
Revenues	4,845	7,060	10,264	15,085
Brand Funds | International
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Brand Funds | Franchise royalties
Disaggregation of Revenue [Line Items]
Revenues	3,539	5,353	7,379	11,269
Brand Funds | Franchise fees
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Brand Funds | Vendor payments
Disaggregation of Revenue [Line Items]
Revenues	836	1,111	1,952	2,455
Brand Funds | E-commerce fees
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Brand Funds | Other franchise and brand
Disaggregation of Revenue [Line Items]
Revenues	470	596	933	1,361
Brand Funds | Company-owned stores
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Intersegment Eliminations
Disaggregation of Revenue [Line Items]
Revenues	1,186	423	2,641	963
Intersegment Eliminations | Franchise
Disaggregation of Revenue [Line Items]
Revenues	795	55	1,785	118
Intersegment Eliminations | Company Stores
Disaggregation of Revenue [Line Items]
Revenues	0	0	0	0
Intersegment Eliminations | Brand Funds
Disaggregation of Revenue [Line Items]
Revenues	391	368	856	845
Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	31,979	36,530	68,206	77,243
Operating Segments | Franchise
Disaggregation of Revenue [Line Items]
Revenues	10,764	10,387	22,525	21,823
Operating Segments | Company Stores
Disaggregation of Revenue [Line Items]
Revenues	15,979	18,715	34,561	39,490
Operating Segments | Brand Funds
Disaggregation of Revenue [Line Items]
Revenues	$ 5,236	$ 7,428	$ 11,120	$ 15,930

Revenue - Contract Balances (De

Revenue - Contract Balances (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 02, 2018	Jan. 01, 2018
Revenue from Contract with Customer [Abstract]
Contract liabilities (unearned revenue), beginning of period	$ 11,151
Revenue recognized that was included in the balance at the beginning of the period	(1,428)
Cash received, net of amounts recognized as revenue during the period	1,059
Contract refunds	210
Contract liabilities (unearned revenue), end of period	10,572
Refund liability	400	$ 500
Receivables from contracts with customers	$ 3,400	$ 3,800

Revenue - Schedule of future pe

Revenue - Schedule of future performance obligations (Details) $ in Thousands	6 Months Ended
	Jul. 02, 2018USD ($)
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 10,572
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-03
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 813
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 1,576
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 1,432
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 1,265
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 1,092
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil)
Revenue from Contract with Customer [Abstract]
Revenue, Remaining Performance Obligation	$ 4,394
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	0 years

Leases (Details)

Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017	Jan. 01, 2018	Apr. 03, 2017
Lease, Cost [Abstract]
Operating lease cost	$ 1,038	$ 1,298	$ 2,084	$ 2,459
Short-term lease cost	11	4	25	11
Variable lease cost	5	6	6	21
Sublease income	(8)	(16)	(26)	(37)
Total lease cost	$ 1,046	$ 1,292	2,089	2,454
Operating cash flows from operating leases			2,424	2,472
Right-of-use assets obtained in exchange for new operating lease liabilities			$ 0	$ 213
Weighted-average remaining lease term of operating leases			5 years 6 months	6 years 7 months
Weighted-average discount rate of operating leases	4.60%		4.60%			4.80%
Operating Lease Liabilities, Payments Due [Abstract]
2,018	$ 1,985		$ 1,985
2,019	4,581		4,581
2,020	3,774		3,774
2,021	2,586		2,586
2,022	1,773		1,773
Thereafter	3,304		3,304
Total future minimum lease payments	18,003		18,003
Imputed interest	(2,499)		(2,499)
Total Lease Liabilities	$ 15,504		$ 15,504		$ 19,678
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms			1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease terms			10 years 5 months

Leases - Lease guarantees (Deta

Leases - Lease guarantees (Details)	6 Months Ended
	Jul. 02, 2018USD ($)store
Guarantor Obligations [Line Items]
Number of stores	1,477
Guarantor for operating leases
Guarantor Obligations [Line Items]
Loss contingency | $	$ 170,000
Franchised stores | Guarantor for operating leases
Guarantor Obligations [Line Items]
Number of stores	41

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Income Tax Disclosure [Abstract]
Provision for (benefit from) income taxes	$ 548	$ (1,947)	$ 1,129	$ (5,627)
Income (loss) before income taxes	$ 1,934	$ (8,032)	$ 4,095	$ (16,919)
Effective income tax rate	28.30%	24.20%	27.60%	33.30%

Share-based Compensation (Restr

Share-based Compensation (Restricted Common Shares and Stock Options) (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jul. 02, 2018USD ($)$ / 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	$ 3.44
Weighted average grant date fair value per share | $ / shares	5.38
Vested (usd per share) | $ / shares	4.83
Unvested, Ending balance (usd per share) | $ / shares	3.67
Stock Option
Stock options outstanding, weighted average exercise price (in dollars per share)
Outstanding, Beginning balance (usd per share) | $ / shares	7.60
Granted (usd per share) | $ / shares	5.07
Exercised (usd per share) | $ / shares	3.99
Forfeited (usd per share) | $ / shares	9.24
Outstanding, Ending balance (usd per share) | $ / shares	7.21
Exercisable (usd per share) | $ / shares	$ 10.09
Stock Option Grants
Weighted Average Remaining Contractual Term, Outstanding	8 years 1 month
Weighted Average Remaining Contractual Term, Exercisable	6 years 8 months
Aggregate Intrinsic Value, Outstanding | $	$ 427
Aggregate Intrinsic Value, Exercisable | $	$ 72
Time Vesting | Restricted Stock
Number of shares of restricted common stock, unvested [Roll Forward]
Unvested, Beginning balance (in shares)	34,898
Granted (in shares)	20,000
Vested (in shares)	(13,898)
Unvested, Ending balance (in shares)	41,000
Time Vesting | Stock Option
Number of shares of stock options, outstanding [Roll Forward]
Outstanding, Beginning balance (in shares)	949,115
Granted (in shares)	159,200
Exercised (in shares)	20,000
Forfeited (in shares)	(79,104)
Outstanding, Ending balance (in shares)	1,009,211
Exercisable (in shares)	336,419
Market Condition | Restricted Stock
Number of shares of restricted common stock, unvested [Roll Forward]
Unvested, Beginning balance (in shares)	40,354
Granted (in shares)	0
Vested (in shares)	0
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)	158,127
Granted (in shares)	0
Exercised (in shares)	0
Forfeited (in shares)	0
Outstanding, Ending balance (in shares)	158,127
Exercisable (in shares)	0

Share-based Compensation (Compe

Share-based Compensation (Compensation Cost) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 0.2	$ 0.2	$ 0.4	$ 0.4
Total unrecognized stock-based compensation expense	1.5		$ 1.5
Compensation not yet recognized, period for recognition			2 years 5 months
Time Vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	1.2		$ 1.2
Market Condition
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized stock-based compensation expense	$ 0.3		$ 0.3

Brand Marketing Fund (Details)

Brand Marketing Fund (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Other Income and Expenses [Abstract]
Opening BMF deficit	$ (5,862)	$ (9,413)	$ (5,461)	$ (1,071)
Advertising expense, net of cooperative contributions	(15)	2,809	(416)	(5,533)
Ending BMF deficit	$ (5,877)	$ (6,604)	$ (5,877)	$ (6,604)

Earnings per Share (EPS) (Detai

Earnings per Share (EPS) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Earnings:
Net income (loss)	$ 1,386	$ (6,085)	$ 2,966	$ (11,292)
Shares:
Weighted average common shares outstanding	16,921,597	16,867,929	16,913,668	16,853,587
Dilutive effect of potential common stock	38,668	0	39,409	0
Diluted weighted average number of shares outstanding	16,960,265	16,867,929	16,953,077	16,853,587
Earnings (loss) per share:
Basic earnings (loss) per share	$ 0.08	$ (0.36)	$ 0.18	$ (0.67)
Diluted earnings (loss) per share	$ 0.08	$ (0.36)	$ 0.17	$ (0.67)
Antidilutive shares excluded from computation of earnings per share	600,000	900,000	600,000	1,100,000

Commitments and Contingencies (

Commitments and Contingencies (Details) $ in Millions

Jun. 29, 2018plaintiff

Jun. 18, 2014plaintiff

Apr. 04, 2014plaintiff

Jul. 31, 2018plaintiff

Jun. 30, 2018plaintiff

Apr. 30, 2018plaintiff

Jul. 31, 2017plaintiff

Sep. 30, 2016plaintiff

Oct. 31, 2014plaintiff

Jan. 31, 2014plaintiff

Jan. 01, 2018plaintiff

Jul. 02, 2018USD ($)

Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

16

12

6

Contingency liability | $

$ 3.7

TCPA

Loss Contingencies [Line Items]

Contingency liability | $

$ 3.9

Mediation | Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

15

22

Resolution | Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

1

4

13

6

Amended complaint | Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

15

Pending litigation | Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

2

Tentative settlement | Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

2

Subsequent event | Pending litigation | Litigation with franchise owners

Loss Contingencies [Line Items]

Number of franchise owner groups (in plaintiff)

2

Segment Information - Profit o

Segment Information - Profit or Loss (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jul. 02, 2018	Jul. 03, 2017	Jul. 02, 2018	Jul. 03, 2017
Segment Reporting Information [Line Items]
Revenues		$ (30,793)	$ (36,107)	$ (65,565)	$ (76,280)
Franchise related		14,814	17,392	31,004	36,790
Segment Reporting Information, Profit (Loss) [Abstract]
Depreciation and amortization		(1,874)	(2,906)	(4,015)	(6,023)
Interest expense, net		(1,296)	(1,286)	(2,588)	(2,513)
CEO transition and restructuring costs	[1]		(131)		(2,329)
Store divestitures, closures, and impairments		715	(11,568)	713	(11,577)
Litigation settlement and reserves	[2]	(89)	0	(1,029)	0
(Loss) Income Before Income Taxes		1,934	(8,032)	4,095	(16,919)
Franchise
Segment Reporting Information [Line Items]
Revenues		(9,969)	(10,332)	(20,740)	(21,705)
Segment Reporting Information, Profit (Loss) [Abstract]
Segment Adjusted EBITDA		5,760	5,742	13,048	14,430
Company Stores
Segment Reporting Information [Line Items]
Revenues		(15,979)	(18,715)	(34,561)	(39,490)
Segment Reporting Information, Profit (Loss) [Abstract]
Segment Adjusted EBITDA		(82)	539	992	1,326
Store divestitures, closures, and impairments	[3]	723	(2,615)	723	(2,615)
Brand Funds
Segment Reporting Information [Line Items]
Revenues		(4,845)	(7,060)	(10,264)	(15,085)
Segment Reporting Information, Profit (Loss) [Abstract]
Segment Adjusted EBITDA		73	2,810	(165)	(5,532)
Corporate and unallocated
Segment Reporting Information, Profit (Loss) [Abstract]
(Loss) Income Before Income Taxes		(1,170)	(1,061)	(2,158)	(4,539)
Operating Segments
Segment Reporting Information [Line Items]
Revenues		(31,979)	(36,530)	(68,206)	(77,243)
Segment Reporting Information, Profit (Loss) [Abstract]
Segment Adjusted EBITDA		5,751	9,091	13,875	10,224
Operating Segments | Franchise
Segment Reporting Information [Line Items]
Revenues		(10,764)	(10,387)	(22,525)	(21,823)
Operating Segments | Company Stores
Segment Reporting Information [Line Items]
Revenues		(15,979)	(18,715)	(34,561)	(39,490)
Operating Segments | Brand Funds
Segment Reporting Information [Line Items]
Revenues		(5,236)	(7,428)	(11,120)	(15,930)
Intersegment Eliminations
Segment Reporting Information [Line Items]
Revenues		(1,186)	(423)	(2,641)	(963)
Intersegment Eliminations | Franchise
Segment Reporting Information [Line Items]
Revenues		(795)	(55)	(1,785)	(118)
Intersegment Eliminations | Company Stores
Segment Reporting Information [Line Items]
Revenues		0	0	0	0
Intersegment Eliminations | Brand Funds
Segment Reporting Information [Line Items]
Revenues		(391)	(368)	(856)	(845)
Software
Segment Reporting Information, Profit (Loss) [Abstract]
E-commerce impairment and transition costs	[4]	8	$ (9,124)	(350)	$ (9,124)
CEO transition and restructuring
Segment Reporting Information, Profit (Loss) [Abstract]
CEO transition and restructuring costs	[1]	$ (119)		$ (363)
[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]	Accruals made for franchisee litigation settlements.
[3]	For 2018, represents primarily gains on the refranchising of Company-owned stores. For 2017, represents primarily non-cash charges associated with the impairment and disposal of store assets upon the decision to close stores.
[4]	Represents impairment charges on the write-down of our e-commerce platform based on the decision to move to a third-party developed and hosted solution and non-recurring costs incurred to complete the transition.

Segment Information - Assets (

Segment Information - Assets (Details) - USD ($) $ in Thousands		Jul. 02, 2018	Jan. 01, 2018
Segment Reporting Information [Line Items]
Total Assets		$ 246,446	$ 262,115
Operating Segments
Segment Reporting Information [Line Items]
Total Assets		246,446	262,115
Operating Segments | Franchise
Segment Reporting Information [Line Items]
Total Assets		117,866	121,179
Operating Segments | Company Stores
Segment Reporting Information [Line Items]
Total Assets		41,299	53,226
Operating Segments | Brand Funds
Segment Reporting Information [Line Items]
Total Assets		87	509
Operating Segments | Other
Segment Reporting Information [Line Items]
Total Assets	[1]	$ 87,194	$ 87,201
[1]	Other assets which are not allocated to the individual segments primarily include trade names and trademarks and taxes receivable.