Potbelly expresses concern over its future as a company

The struggling sandwich chain included a going concern warning in its financial filing, noting that it likely will not be able to comply with its credit agreement and may not survive the year.
Photograph: Shutterstock

Struggling sandwich chain Potbelly Corp., which last week said it might be forced to permanently close up to 100 stores, warned investors Monday that it may not be able to survive the year.

The Chicago-based fast casual included a going concern warning in its quarterly report, filed with the Securities and Exchange Commission, noting it is “probable” that it will not be in compliance with certain credit agreements due to the effects of the coronavirus on its business.

“The probable inability of the Company to meet its current covenant requirements raises substantial doubt on the Company’s ability to meet its obligations within one year from the financial statement issuance date and to continue as a going concern,” the company said in the filing.

Potbelly said it is currently in negotiations with its lender and expects to make further amendments to its credit agreement.

The chain drew down nearly $40 million in credit in mid-March and amended its credit agreement last week to change the loan’s maturity date from July 31, 2022, to March 31, 2022, according to the filing. Potbelly repaid $15 million, with the option to reborrow the money when its cash balance falls below $28 million. The company must pay a 1% fee on its loan balance, following the credit amendment.

The 473-unit brand had 52 temporarily closed units, according to its filing, an increase from the 36 temporary closures noted by the chain last week. Those stores and others that were underperforming before the pandemic could be destined for permanent closure, the company said.

Potbelly’s same-store sales plunged nearly 70% early in the coronavirus crisis, and have since rebounded to minus 45%.

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.


Exclusive Content


It's time to send 'ghost kitchen' to the graveyard

Tech Check: The catch-all term for delivery restaurants is no longer accurate. Let’s lay it to rest and come up with a new label.


Higher-end consumers may be slowing their spending

The Bottom Line: There is some evidence that higher-income consumers may be cutting back. Or maybe there was just some pent-up demand.


Wonder bets meal kits aren't dead yet

Tech Check: By acquiring the struggling Blue Apron, the restaurant delivery concept believes it can touch more dining occasions. But will it work?


More from our partners