In an ongoing push to transform Potbelly into a mostly franchised chain, CEO Bob Wright announced an ambitious incentive program to spur growth.
At the same time, the Chicago-based company said Thursday it is planning to open more company-owned units, after slowing company growth to focus on franchisees.
It is all part of Wright’s Franchise Growth Acceleration Initiative, which set the goal of reaching 2,000 units, with at least 85% of those being franchised. Since 2023, the company sold 34 units to franchisees in an effort to kickstart franchise growth.
That plan worked—at least to the point that refranchising was paused last year.
Potbelly ended fiscal 2024 with 442 shops, of which 96 are franchised. In 2024, the chain added 23 new locations—of which 18 were franchised—with signed deals for another 113. At least 38 are expected to open this year.
Now, Wright said the company plans to “add another layer to the Potbelly growth story” by adding about 20 company-owned shops annually in some of its current markets, including a handful later this year, in addition to the 38 franchise restaurants planned.
However, Wright added, “Make no mistake. Potbelly is a franchise-focused company.”
The new Potbelly 50/50 Large Area Developer Incentive Program is designed to reward multi-unit franchisees for opening shops faster.
Franchisees who sign an agreement to open at least 15 Potbelly units in eight years or less will have the opportunity to reduce their franchise fees and deposit fees, and cut their royalty fees in half for the period of time the shop is opened ahead of the required opening date.
Wright said franchisees are looking to plan longer term.
“We’re seeing a broader array of larger and more financially savvy and very sharp investing franchisees and franchise candidates that are coming into the system,” he said. “And as they’re looking at their long-range plan and thinking about building two or three, or, in some cases, considering territories where they need to build four units a year, everything for them is about longer-term planning.”
Same-store sales at Potbelly’s company-owned units increased 0.3% in the Dec. 29-ended fourth quarter, though that was based on a 2.2% increase in average check that was offset by a 1.9% decline in transactions.
Bad weather across the Midwest earlier this year is expected to dampen first quarter same-store sales, which the company projected would be negative 1.5% to negative 0.5%.
But the chain is expecting same-store sales growth for the year between 1.5% to 2.5%.
Wall Street, however, appeared to be disappointed in the results. Potbelly’s stock fell more than 18% on Friday to close at $9.66 per share.
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