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Potbelly closes stores, halts new unit growth

The fast-casual sandwich chain saw traffic fall 8.3% and same-store sales drop 3% during Q3.
Photograph: Shutterstock

Potbelly Sandwich Shop put the brakes on company-owned unit growth, closed 11 stores this year and engaged the help of a consulting firm to help return the chain to profitability, executives announced late Monday.

The news came amid Potbelly’s lackluster showing for its quarter ended Sept. 29, which included three store closures, a same-store sales decrease of 3% and a revenue decrease of 2.6% to $104.2 million.

The Chicago-based chain’s traffic fell 8.3% during the period.

“We have effectively halted company-owned shop growth until we see more positive traction in our traffic trends,” Potbelly President and CEO Alan Johnson told analysts during a conference call.

Potbelly, which had 427 company-owned units and 45 franchisee-owned ones at the end of Q3, expects to close 15 to 22 total stores this year, including nine to 12 company-owned stores. The chain lowered its anticipated number of store openings for the year from four to five company-owned locations down to two to three.

“We decided to bring in a top-tier consulting firm in June that has a proven track record of helping other companies in our space turn the final corner,” Johnson said. “We felt we needed an outside-in perspective to develop the fact-based consumer insights that create a winning strategy.”

The chain spent approximately $3 million on the firm, Johnson said, noting the need to explain the cost on its P&L sheet.

Potbelly plans to launch large-scale tests during the first half of next year, with a focus on improving the in-store customer experience. Johnson did not provide details on what the tests would entail. The chain recently opened a Shop of the Future prototype in Chicago that reduces capital investment by 25% and is designed to improve the ordering process and customer experience.

The chain also said it is open to select refranchising possibilities.

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