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Potbelly is facing eviction from its headquarters

The struggling sandwich chain’s landlord says it is owed more than $800,000 in back rent and other fees.
Photograph: Shutterstock

Potbelly Corp. is at risk of being evicted from its headquarters in downtown Chicago, after failing to pay more than $800,000 in rent and other fees, according to court documents.

Potbelly’s landlord, 111 N. Canal Realty Holdco, LLC, has taken the struggling sandwich chain to court, seeking to evict the company from its 27,000 square feet on the building’s eighth floor and to force it to pay its back rent and legal fees, according to documents filed in the Circuit Court of Cook County last month.

The case is set for a status conference on Dec. 4, plaintiff’s attorney Eric Kaplan said. By then, Kaplan said he expects Potbelly will owe close to $900,000.

A Potbelly representative did not respond to a Restaurant Business request for comment on the eviction case.

But, in court documents, Potbelly cited several reasons why it should not be kicked out of its headquarters.

First, the chain noted an eviction moratorium in Chicago, which has repeatedly been extended by Illinois Gov. J. B. Pritzker.

“No eviction order entered herein against Potbelly could be enforced unless plaintiff proves that Potbelly poses a ‘direct threat to the health and safety of other tenants, an immediate and severe risk to property or [that Potbelly is in] violation of any applicable building code, health ordinance or similar regulation,’” Potbelly’s attorney wrote.

The chain said it did not foresee the pandemic when it entered into its lease in Sept. 2014.

Potbelly said it has been unable to use its headquarters due to federal, state and local orders, as well as government work-from-home advisories.

“Potbelly has not been able to use the space as intended or maintain normal business operations, including at its various restaurant locations,” the chain said in court documents.

Potbelly has seen massive traffic and sales declines amid the pandemic, especially as downtown office workers continue to work from home. In May, the fast casual said it might need to permanently shutter up to 100 stores. It stepped back from that projection earlier this month, revising that number down to 25 to 30 permanent closures.

But it said it was planning corporate layoffs to stem the bleeding and reduce costs by up to $4 million.

Potbelly had 406 company-owned units and 46 franchised ones at the end of Q3, down from 427 corporate units and 45 franchised stores the previous year.

Same-store sales for Q3 fell 21%. They rose a bit through October, declining 19.4%, the chain said. In Q2, Potbelly’s same-store sales were down 41.5%.

Late last week, the chain’s chief legal officer and chief people officer, who had been Potbelly for nearly 14 years, resigned.

In June, it was rumored that Potbelly would declare bankruptcy to get out of some of its leases and that it had hired restructuring consultants to aid in the process.

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