Financing

3G Capital is making a bet on Potbelly

The private-equity firm has been buying up stock in the sandwich chain. Exactly why is uncertain.
Photograph: Shutterstock

3G Capital, the Brazilian private-equity firm that formed Restaurant Brands International, apparently thinks bigger things are in store for Chicago-based sandwich chain Potbelly Sandwich Shop.

The firm owns 875,130 shares of Potbelly, according to a federal securities filing last week. 3G has been buying up shares since February, and in May revealed it owned more than 850,000 shares in the company.

The holdings represent about 3.5% of Potbelly’s outstanding shares. Currently, the holdings are worth about $4.2 million.

Exactly what 3G has in mind for the stock is uncertain. At this point, it’s a simple investment, and one of several the firm has made, including in technology companies such as Facebook and Microsoft and communications companies such as Fox Corp. and Comcast. The value of 3G’s Potbelly investment is the smallest.

Potbelly is the only restaurant chain among those investments.

The chain has been struggling in recent years, and its comeback under CEO Alan Johnson has yet to yield positive sales results. The company’s stock is down 67% over the past year and 40% in 2019, currently trading below $5 per share.

Same-store sales declined 4% in the second quarter due to “weak traffic trends.” The company has been working on digital orders and delivery and is also working to bolster off-premise sales and catering. The company has also made changes to its menu to boost sales.

Hedge funds and investment firms routinely make bets on companies without intending to do much more than that. But 3G has a history of buying consumer companies: It has bought Anheuser-Busch InBev and it what is now Kraft Heinz.

In 2010 it took private Burger King, at the time a struggling brand. Four years later, it merged the company with Tim Hortons. In 2017, the resulting Restaurant Brands International acquired Popeyes Louisiana Kitchen.

Potbelly is considerably smaller than any of those companies.

The sandwich chain has looked for buyers in the past, but after a several-month review process, ultimately opted against selling itself.

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