Operations

More store closures ahead for Potbelly

The struggling sandwich shop is facing pressure from activist investors and falling traffic.
Potbelly storefront
Photograph: Shutterstock

Potbelly Sandwich Shop plans to close eight to 10 more underperforming units this year as it faces pressure from declining traffic and attention from activist investors, the fast-casual chain’s executives revealed during a call with analysts Tuesday.

For its quarter ended Dec. 29, the Chicago-based chain reported a slight dip in same-store sales at company-owned units of negative 0.1%. Traffic, however, dropped 6.4%, offset by a 6.7% increase in average check.

Nevertheless, the quarter marked the 470-unit chain’s strongest same-store sales in three years and the third consecutive quarter of comps growth.

As part of its turnaround efforts, the company is focusing on its off-premise and digital channels, which grew from 19.4% of sales in Q4 2018 to 24.4% during the same period the following year. A refresh of the chain’s catering website has also lifted off-premise sales.

Potbelly is also shifting its promotional messaging away from discounting toward discussion of its food quality.

During 2019, Potbelly shuttered 21 stores, including 11 company-operated restaurants, two domestic franchise locations and its eight remaining international franchise stores. The chain projects it will open 12 to 13 new units in 2020, including four stores that were slated to open in 2019.

Earlier this month, the chain said it will consider input from an activist investor regarding the nomination of directors to its board. And in January, investment group 180 Degree Capital Corp. said it had raised its stake in the chain and that it had plans to discuss “operational and strategic matters” with the chain’s management.

Two years ago, Ancora Advisors pressured the chain into putting itself up for sale, but a buyer never emerged.

 

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.

Multimedia

Exclusive Content

Operations

Hitting resistance elsewhere, ghost kitchens and virtual concepts find a happy home in family dining

Reality Check: Old-guard chains are finding the alternative operations to be persistently effective side hustles.

Financing

The Tijuana Flats bankruptcy highlights the dangers of menu miscues

The Bottom Line: The fast-casual chain’s problems following new menu debuts in 2021 and 2022 show that adding new items isn’t always the right idea.

Financing

For Papa Johns, the CEO departure came at the wrong time

The Bottom Line: The pizza chain worked to convince franchisees to buy into a massive marketing shift. And then the brand’s CEO left.

Trending

More from our partners