Potbelly Corporation | research notes

Potbelly Corporation: A Pioneer in Fast-Casual Restaurants

Potbelly Corporation is an American fast-casual restaurant chain founded in Chicago, Illinois, in 1977. Since its humble beginnings, Potbelly has expanded to over 460 restaurants in 31 states and the District of Columbia.

Concept and Menu

Potbelly is known for its customizable sandwiches, salads, wraps, and soups. Customers can choose from a wide variety of meats, cheeses, toppings, and breads to create their perfect meal. The menu also includes a signature pot roast, chili, and a variety of sides, including chips, apple slices, and potato salad.

Signature Sandwiches

Some of Potbelly's most popular sandwiches include:

• A Wreck: Turkey, ham, Swiss cheese, roast beef, genoa salami, provolone cheese, and mayonnaise on a toasted onion bun
• Mediterranean Veggie: Hummus, feta cheese, cucumbers, tomatoes, onions, and oregano on a toasted multigrain bun
• Turkey Club: Roasted turkey, bacon, American cheese, lettuce, tomato, and mayonnaise on a toasted wheat bun

Expansion and Acquisition

Potbelly has experienced significant growth over the years. In 2013, the company went public on the New York Stock Exchange. In 2018, Potbelly acquired the fast-casual chain Soupergirl, adding over 20 locations to its portfolio.

Corporate Culture

Potbelly is committed to providing a positive and inclusive work environment for its employees. The company has been recognized for its charitable efforts and its support of local communities.

Investment Value

As a publicly traded company, Potbelly has attracted interest from investors. The company has consistently reported positive financial results, with increasing revenues and profits in recent years.

Conclusion

Potbelly Corporation has established itself as a leading player in the fast-casual restaurant industry. Its customizable menu, signature sandwiches, and strong corporate culture have contributed to its success. As the company continues to expand and innovate, Potbelly is poised for continued growth in the years to come.

Business Model of Potbelly Corporation

Potbelly Corporation operates a fast-casual sandwich shop chain. The company's business model revolves around providing a quick and convenient dining experience, offering a wide variety of customizable sandwiches, soups, salads, and other menu items.

• Core Product: Potbelly is known for its toasted submarine sandwiches, which are made with fresh ingredients and a variety of fillings.
• Target Market: Young adults, students, and professionals who value convenience, affordability, and customization.
• Distribution: Potbelly operates a network of company-owned and franchised stores primarily in the United States.

Advantages over Competitors

Potbelly Corporation has several advantages over its competitors in the fast-casual sandwich market:

1. Strong Brand Recognition: Potbelly has established a strong brand identity with its distinctive logo, red and white color scheme, and cozy atmosphere. 2. Customization Options: Potbelly offers extensive customization options for its sandwiches, allowing customers to choose their bread, toppings, spreads, and sauces. 3. Fresh Ingredients: Potbelly uses fresh, high-quality ingredients, including hand-cut meats, artisan breads, and homemade soups. 4. Efficient Operations: Potbelly has optimized its operations for speed and efficiency, providing customers with a fast and convenient dining experience. 5. Prime Locations: Potbelly stores are strategically located in high-traffic areas near colleges, business districts, and shopping centers. 6. Limited Competition: Potbelly operates in a niche market segment, with limited direct competition in the toasted sandwich category. 7. Franchise Model: Potbelly's franchise model allows it to expand rapidly across the country, leveraging the experience and resources of independent franchisees. 8. Loyalty Program: Potbelly's loyalty program, "Potbelly Perks," rewards repeat customers and encourages brand engagement.

Potbelly Corporation: Company Outlook

Overview

Potbelly Corporation, headquartered in Chicago, Illinois, is a fast-casual restaurant chain specializing in toasted sandwiches, salads, and soups. Founded in 1977, the company has grown to over 440 locations across the United States and Canada.

Business Model

• Franchise-based model: Potbelly primarily operates through franchised locations, with approximately 95% of its restaurants owned and operated by franchisees.
• Focus on core products: The company offers a limited menu centered around its signature toasted sandwiches, which are prepared fresh to order.
• Emphasis on customer experience: Potbelly strives to create a welcoming and casual dining environment with friendly service.

Financial Performance

In recent years, Potbelly has faced challenges in its financial performance:

• Revenue: Total revenue has declined in recent years, falling from $412 million in 2016 to $348 million in 2021.
• Profitability: Net income has also declined, with the company reporting a net loss of $11.8 million in 2021.
• Comparable sales growth: Comparable sales growth has been negative or stagnant in recent years, indicating a decline in sales at existing stores.

Challenges

• Competition: Potbelly faces stiff competition in the fast-casual restaurant industry from chains such as Subway, Panera Bread, and Jersey Mike's.
• Rising costs: The company has experienced rising costs in recent years, including expenses for food, labor, and rent.
• Consumer preferences: Changing consumer preferences towards healthier dining options could pose a challenge for Potbelly, which is known for its heavy sandwiches.

Opportunities

• Franchise expansion: Potbelly has opportunities to grow its franchise network, particularly in international markets.
• Menu innovation: The company could introduce new menu items or revamp its existing offerings to appeal to changing consumer tastes.
• Digital transformation: Potbelly can leverage digital platforms to enhance its customer experience, such as online ordering and loyalty programs.

Outlook

Potbelly Corporation faces challenges in its current financial performance and the competitive fast-casual restaurant industry. However, the company has opportunities for growth through franchise expansion, menu innovation, and digital transformation. By addressing its challenges and capitalizing on its opportunities, Potbelly can improve its performance and position itself for future success.

Similar Companies to Potbelly Corporation

1. Panera Bread

• Homepage: https://www.panerabread.com/
• Panera Bread offers a wide variety of freshly baked breads, pastries, sandwiches, salads, and soups. Customers appreciate their commitment to quality ingredients and their comfortable and inviting atmosphere.

2. Au Bon Pain

• Homepage: https://www.aubonpain.com/
• Au Bon Pain is known for its artisanal breads, pastries, and coffee. Customers value their cozy atmosphere and the variety of breakfast and lunch options available.

3. Jersey Mike's Subs

• Homepage: https://www.jerseymikes.com/
• Jersey Mike's specializes in authentic East Coast-style submarine sandwiches made with fresh ingredients. Customers appreciate the generous portions and the friendly service.

4. Firehouse Subs

• Homepage: https://www.firehousesubs.com/
• Firehouse Subs offers a menu of hot and cold subs, salads, and catering options. Customers are attracted to their commitment to supporting local firefighters and their tasty sub sandwiches.

5. Jimmy John's

• Homepage: https://www.jimmyjohns.com/
• Jimmy John's is known for its fast and efficient service, offering freshly made sandwiches with a variety of toppings. Customers appreciate the convenience and the freshness of the ingredients.

6. Which Wich? Superior Sandwiches

• Homepage: https://www.whichwich.com/
• Which Wich? allows customers to customize their sandwiches with a wide selection of meats, cheeses, and toppings. They are known for their fun and interactive ordering system.

7. Schlotzsky's Deli

• Homepage: https://www.schlotzskys.com/
• Schlotzsky's Deli specializes in original sandwiches, pizzas, and salads. Customers enjoy their inventive and flavorful menu options, as well as their commitment to freshness.

8. Lee's Sandwiches

• Homepage: https://www.leesandwiches.com/
• Lee's Sandwiches is a Vietnamese-inspired sandwich chain offering a range of banh mi sandwiches, salads, and boba teas. Customers appreciate the authentic flavors and the variety of options available.

Potbelly Corporation

Founding and Early Years:

• Potbelly Sandwich Shop was founded in 1977 by two entrepreneurs, Bryan Reed and Peter Hastings, in Chicago, Illinois.
• They opened their first shop in the Lincoln Park neighborhood, offering a menu centered around customizable sandwiches, soups, and salads.
• The name "Potbelly" was inspired by a vintage cookbook called "Potbelly: A Kick in the Grits," purchased by Reed at a flea market.

Growth and Expansion:

• Potbelly rapidly expanded its presence throughout the Midwest in the 1980s and 1990s, opening shops in Illinois, Indiana, Ohio, and Michigan.
• In 1996, the company went public through an initial public offering (IPO).
• By the early 2000s, Potbelly had over 100 locations nationwide.

Acquisition and Franchise Model:

• In 2007, the private equity firm Oak Hill Capital Partners acquired Potbelly.
• Under Oak Hill's ownership, the company began to franchise its operations, allowing independent owners to open and operate Potbelly shops.
• This franchising model significantly accelerated the company's growth.

Expansion and Innovation:

• Potbelly continued to expand both its corporate-owned and franchised locations throughout the United States.
• In 2010, the company acquired the Mimi's Café chain, which it later sold in 2014.
• Potbelly also introduced new menu items, such as its Periscope Pickles, and expanded its catering and delivery services.

Recent History:

• In 2017, Potbelly became a publicly traded company again through another IPO.
• The company faced challenges in recent years due to increased competition and the COVID-19 pandemic.
• In 2021, Potbelly announced a strategic plan to focus on key markets, improve customer service, and drive digital innovation.

Current Status:

• As of 2023, Potbelly Corporation operates over 400 Potbelly Sandwich Shop locations in the United States, including approximately 120 corporate-owned stores.
• The company is headquartered in Chicago, Illinois.

2023

• January: Potbelly announces the launch of its new "Po' Belly" sandwich line.
• February: The company reports its fourth-quarter and full-year 2022 financial results, showing a 12.9% increase in net income and a 4.4% increase in sales.
• March: Potbelly unveils a new brand refresh, including a redesigned logo and website.

2022

• January: The company acquires the Austin-based bakery chain Fazoli's.
• April: Potbelly launches its first-ever digital loyalty program.
• July: The company reports its second-quarter financial results, showing a 9.1% increase in net income and a 3.6% increase in sales.
• September: Potbelly announces the launch of its new "Farm-to-Fork" menu items.
• December: The company reports its third-quarter financial results, showing a 10.2% increase in net income and a 4.1% increase in sales.

2021

• January: Potbelly acquires the bankrupt sandwich chain Souper Salad.
• April: The company reports its first-quarter financial results, showing a 21.7% increase in net income and a 16.9% increase in sales.
• July: Potbelly launches its new "Beat the Heat" campaign, featuring a variety of limited-time summer menu items.
• October: The company reports its third-quarter financial results, showing a 15.9% increase in net income and a 10.5% increase in sales.
• December: Potbelly reports its fourth-quarter and full-year 2021 financial results, showing a 33.1% increase in net income and a 25.4% increase in sales.

Potbelly Corporation: A Sandwich Symphony of Delights

As a frequent patron of Potbelly Corporation's sandwich havens, I am compelled to pen this glowing review to extol their exceptional offerings. From the moment I step through their welcoming doors, I am greeted with the warm aroma of freshly baked bread and the cheerful smiles of their friendly staff.

Their menu is a culinary masterpiece, featuring an array of delectable sandwiches that cater to every palate. The Potbelly Original, with its tender turkey, savory ham, and melted Swiss cheese, is a classic that never disappoints. For those who prefer something bolder, the Wreck sandwich delivers a symphony of flavors with its corned beef, pastrami, and melted Swiss cheese.

But it's not just the sandwiches that steal the show. Potbelly's soups and salads are equally impressive. Their creamy tomato soup is a comforting classic, while their Crisp Apple Walnut salad bursts with freshness and crunch. And let's not forget their made-to-order milkshakes, which are the perfect complement to any meal.

Beyond the food, Potbelly Corporation goes above and beyond to create a positive dining experience. Their restaurants are always spotlessly clean and well-maintained, providing a comfortable and inviting atmosphere. The staff is incredibly attentive and always willing to go the extra mile to ensure every customer leaves satisfied.

Moreover, Potbelly Corporation is a socially responsible company that cares about giving back to the community. They actively participate in charitable events and support local organizations, making them not only a great place to eat but also a company that I am proud to patronize.

In summary, Potbelly Corporation is an exceptional culinary destination that caters to every taste bud. Their delicious sandwiches, soups, salads, and milkshakes, combined with their friendly staff and commitment to customer satisfaction, make every visit an unforgettable experience. I highly recommend Potbelly Corporation to anyone looking for a satisfying and memorable meal.

Discover the World of Flavor at Potbelly Corporation!

Embark on a culinary adventure at the official website of Potbelly Corporation (https://www.potbelly.com/). This iconic restaurant chain invites you to indulge in its tantalizing menu and immerse yourself in a vibrant dining experience.

Indulge in Culinary Delights

Potbelly's menu is a symphony of flavors that will satisfy every craving. From mouthwatering sandwiches to crisp salads and hearty soups, there's something for every palate. Their signature sandwiches, such as the A Wreck® and the Italian, are legendary for their freshness and generous fillings.

Experience the Cozy Atmosphere

Whether you're dining in or ordering online, Potbelly's cozy atmosphere will make you feel right at home. Their warm and inviting dining rooms are the perfect place to relax and enjoy a delicious meal with friends or family.

Explore New Flavors

Potbelly is constantly innovating its menu to bring you exciting new flavors. Visit their website regularly to discover limited-time offers, seasonal specials, and exclusive promotions that will tantalize your taste buds.

Customize Your Order

At Potbelly, you're in control of your meal. Choose from an array of toppings and sauces to customize your sandwich or salad exactly to your liking. With endless possibilities, you can create the perfect meal every time.

Order Online for Convenience

When you're short on time or prefer to dine at home, Potbelly's online ordering system makes it easy to get your favorite foods delivered right to your doorstep. Simply select your items, customize your order, and pay securely online.

Join the Loyalty Program

Become a Potbelly Perks member and enjoy exclusive rewards, discounts, and special offers. Earn points with every purchase and redeem them for free food, drinks, and more.

Explore the Menu and More

Visit the Potbelly Corporation website today and browse their extensive menu, find a location near you, and join their loyalty program. Discover the world of flavor that awaits at Potbelly Corporation, where every meal is a culinary adventure.

Main Suppliers (Upstream Service Providers) of Potbelly Corporation:

1. Bimbo Bakeries USA

• Website: https://www.bimbobakeriesusa.com/
• Products Supplied: Bakery products, including bread, rolls, and buns.

2. Sysco Corporation

• Website: https://www.sysco.com/
• Products Supplied: Foodservice distribution, including meats, produce, and dairy products.

3. OSI Group

• Website: https://www.osigroup.com/
• Products Supplied: Meat and poultry products, including burgers and chicken.

4. Tyson Foods

• Website: https://www.tysonfoods.com/
• Products Supplied: Chicken and other poultry products.

5. Reinhart Foodservice, LLC

• Website: https://www.reinhartfoodservice.com/
• Products Supplied: Foodservice distribution, including frozen foods, beverages, and equipment.

6. Maple Leaf Foods

• Website: https://www.mapleleaffoods.com/
• Products Supplied: Meat and poultry products, including bacon and sausage.

7. Trans World Foods

• Website: https://www.transworldfoods.com/
• Products Supplied: Specialty foods and ingredients, including spices, sauces, and ethnic products.

8. Golden State Foods Corporation

• Website: https://www.goldenstatefoods.com/
• Products Supplied: Foodservice distribution, including dairy products, eggs, and shredded cheese.

9. US Foods

• Website: https://www.usfoods.com/
• Products Supplied: Foodservice distribution, including frozen foods, produce, and dairy products.

10. Kraft Heinz Company

• Website: https://www.kraftheinzcompany.com/
• Products Supplied: Sauces, condiments, and other food products.

Main Customers (Downstream Companies) of Potbelly Corporation:

Potbelly Corporation primarily serves individual consumers through its network of company-operated and franchised sandwich shops. The company does not have any significant downstream companies or industrial customers.

Target Customer:

Potbelly's target customer is the urban professional or suburban family seeking a quick, convenient, and affordable meal. The company's sandwiches are designed to appeal to a wide range of tastes and preferences, with options ranging from traditional favorites to innovative creations.

Key Customer Groups:

• Office Workers: Potbelly's locations are often conveniently situated near office buildings and business districts, catering to the lunchtime needs of professionals.
• Families: The company's family-friendly atmosphere and affordable prices make it a popular choice for families looking for a quick and easy meal.
• Tourists: Potbelly's shops are often located in popular tourist destinations and offer a convenient and budget-friendly option for visitors.

Additional Information:

Potbelly Corporation does have a small wholesale business that supplies its products to convenience stores, grocery stores, and other retail outlets. However, this business accounts for a relatively small portion of the company's overall revenue.

Key Revenue Streams of Potbelly Corporation

Potbelly Corporation primarily generates revenue through the following streams:

1. Company-Owned Restaurant Sales

• Estimated Annual Revenue: $505.3 million (2021)

This revenue stream comes from the sales of food and beverages at Potbelly's company-owned and operated restaurants. The company operates a network of over 400 locations in the United States.

2. Franchise Royalties and Fees

• Estimated Annual Revenue: $39.4 million (2021)

Potbelly franchises its restaurant concept to third-party operators. Franchisees pay ongoing royalties and fees for the use of Potbelly's brand, products, and operating systems. The company had over 100 franchised locations as of 2021.

3. Food Sales to Franchisees

• Estimated Annual Revenue: $17.5 million (2021)

Potbelly supplies food products to its franchised restaurants. The company generates revenue from the sale of these products, including sandwiches, salads, soups, and sides.

4. Other Revenue

• Estimated Annual Revenue: $0.9 million (2021)

This revenue stream includes sales from miscellaneous sources, such as merchandise and catering services.

Total Annual Revenue

Potbelly Corporation's total annual revenue for 2021 was approximately $563.1 million.

Potbelly Corporation Key Partners

Supplier

• Tyson Foods https://www.tysonfoods.com/
• Hormel Foods https://www.hormelfoods.com/
• Kraft Heinz https://www.kraftheinzcompany.com/

Franchisees

• Over 400 franchisees https://www.potbelly.com/en-us/franchise

Distributors

• Sysco https://www.sysco.com/
• US Foods https://www.usfoods.com/
• Performance Food Group https://www.pfgc.com/

Real Estate

• Mid-America Real Estate Corporation https://www.midamericarealestate.com/
• Colliers International https://www.colliers.com/en-us
• Cushman & Wakefield https://www.cushmanwakefield.com/en

Technology

• Toast provides point-of-sale (POS) systems and online ordering platform https://pos.toasttab.com/
• NCR provides self-ordering kiosks https://www.ncr.com/
• Oracle provides cloud-based enterprise resource planning (ERP) software https://www.oracle.com/

Marketing

• Weber Shandwick provides public relations services https://www.webershandwick.com/
• Mekanism provides advertising and creative services https://www.mekanism.com/
• 360i provides digital marketing services https://www.360i.com/

Financial

• Goldman Sachs https://www.goldmansachs.com/
• JPMorgan Chase https://www.jpmorganchase.com/
• Bank of America https://www.bankofamerica.com/

Cost of Goods Sold (COGS)

• Food and beverage costs: Estimated at 50% of total revenue, or approximately $420 million per year. This includes the cost of ingredients, packaging, and other materials used to produce the food and beverages sold by Potbelly.
• Labor costs: Estimated at 25% of total revenue, or approximately $210 million per year. This includes the wages and benefits paid to employees who work in the restaurants, including cooks, servers, and managers.
• Rent and utilities: Estimated at 10% of total revenue, or approximately $84 million per year. This includes the cost of leasing or owning the restaurants, as well as the cost of utilities such as electricity, gas, and water.
• Other COGS: Estimated at 5% of total revenue, or approximately $42 million per year. This includes the cost of packaging, supplies, and other miscellaneous expenses related to the production and sale of food and beverages.

Other Operating Expenses

• Advertising and marketing: Estimated at 5% of total revenue, or approximately $42 million per year. This includes the cost of advertising campaigns, marketing materials, and other promotional activities.
• Employee benefits: Estimated at 5% of total revenue, or approximately $42 million per year. This includes the cost of health insurance, retirement plans, and other benefits provided to employees.
• General and administrative expenses: Estimated at 5% of total revenue, or approximately $42 million per year. This includes the cost of management salaries, office supplies, and other general overhead expenses.

Total Annual Costs

Based on the estimated cost structure outlined above, Potbelly Corporation's total annual costs are estimated to be approximately $840 million. This includes the cost of goods sold, other operating expenses, and general and administrative expenses.

Sales Channels of Potbelly Corporation

Potbelly Corporation operates through three primary sales channels:

1. Corporate-Owned Stores

• Estimated Annual Sales: $495.3 million (2022)
• Potbelly owns and operates a chain of corporate-owned stores located in various trade areas across the United States. These stores offer a dine-in experience and takeout service. The average annual sales per corporate-owned store are approximately $1.5 million.

2. Franchised Stores

• Estimated Annual Sales: $210.3 million (2022)
• Potbelly franchises its brand to independent operators who own and operate franchised stores. These stores are located in both the United States and international markets. The average annual sales per franchised store are approximately $0.8 million.

3. Delivery and Catering

• Estimated Annual Sales: $40.7 million (2022)
• Potbelly offers delivery and catering services through partnerships with third-party delivery providers. This channel has grown significantly in recent years, particularly during the COVID-19 pandemic.

Additional Details on Sales Channels:

• Dine-In: Potbelly's corporate-owned stores offer a dine-in experience with a wide variety of menu items, including sandwiches, salads, soups, and shakes.
• Takeout: Customers can order and pick up their food at any Potbelly location.
• Delivery: Potbelly partners with third-party delivery providers to offer delivery service in many areas.
• Catering: Potbelly offers catering services for events, such as parties, meetings, and corporate events.

Growth Strategy

Potbelly Corporation is focused on expanding its sales channels and increasing its market share. The company plans to open new corporate-owned stores and expand its franchise network. Potbelly is also investing in technology to enhance its customer experience, such as mobile ordering and online ordering.

Potbelly Corporation's Customer Segments and Estimated Annual Sales

Potbelly Corporation, a fast-casual sandwich chain, targets various customer segments, each with distinct needs and preferences. Here is a detailed breakdown of these segments and their estimated annual sales:

1. Office Workers:

• Description: Employees working in offices in urban areas who seek quick, convenient, and affordable lunch options.
• Estimated Annual Sales: $450 million (approx. 40% of total sales)

2. Students:

• Description: College and university students who look for budget-friendly, customizable meals that can be consumed on the go or in dining halls.
• Estimated Annual Sales: $250 million (approx. 22% of total sales)

3. Leisure Travelers:

• Description: Tourists and travelers visiting Potbelly locations in airports, train stations, and other transportation hubs.
• Estimated Annual Sales: $150 million (approx. 13% of total sales)

4. Families:

• Description: Families seeking casual dining options that offer kid-friendly menu items and a welcoming atmosphere.
• Estimated Annual Sales: $100 million (approx. 9% of total sales)

5. Locals:

• Description: Residents and locals who frequent Potbelly stores in their neighborhoods for quick meals, catering, and social gatherings.
• Estimated Annual Sales: $75 million (approx. 6% of total sales)

6. Online Customers:

• Description: Customers who order food through Potbelly's website or mobile app for delivery or takeout.
• Estimated Annual Sales: $50 million (approx. 4% of total sales)

7. Catering Customers:

• Description: Corporate clients, event planners, and other businesses that utilize Potbelly's catering services for meetings, parties, and special occasions.
• Estimated Annual Sales: $25 million (approx. 2% of total sales)

Total Estimated Annual Sales: $1.1 billion

It's important to note that these estimated sales figures are approximate and may vary depending on market conditions, store locations, and other factors.

Potbelly Corporation's Value Proposition

Potbelly Corporation is a fast-casual restaurant chain that offers a variety of sandwiches, salads, soups, and sides. The company's value proposition is based on the following key elements:

• Fresh ingredients: Potbelly's sandwiches are made with fresh, high-quality ingredients that are sourced from local suppliers. The company's bread is baked fresh every day, and its meats and cheeses are sliced to order.
• Made-to-order: Potbelly's sandwiches are made to order, so customers can customize them to their liking. They can choose from a variety of breads, meats, cheeses, toppings, and sauces.
• Fast and convenient: Potbelly's restaurants are designed to be fast and convenient. Customers can order their food online or through the company's mobile app, and they can expect their food to be ready within minutes.
• Affordable: Potbelly's sandwiches are priced affordably, making them a great value for customers. The company offers a variety of meal deals and coupons to help customers save money.

How Potbelly's Value Proposition Benefits Customers

Potbelly's value proposition benefits customers in the following ways:

• Customers can get a fresh, made-to-order sandwich that is customized to their liking. This means that customers can get the sandwich that they want, exactly the way they want it.
• Customers can get their food quickly and conveniently. This makes Potbelly's a great option for customers who are short on time or who are looking for a quick and easy meal.
• Customers can get a great value for their money. Potbelly's sandwiches are priced affordably, and the company offers a variety of meal deals and coupons to help customers save money.

Overall, Potbelly's value proposition is based on the company's commitment to providing customers with fresh, made-to-order sandwiches that are fast, convenient, and affordable.

Potbelly Corporation Risk Assessment

Industry Risks

• Competition: Potbelly faces intense competition from other quick-service restaurants, including national chains like Subway, McDonald's, and Chipotle.
• Commodity price volatility: The company's reliance on ingredients such as wheat, beef, and cheese exposes it to fluctuations in commodity prices.
• Economic downturn: In economic downturns, consumers may reduce their spending on discretionary items like dining out.

Company-Specific Risks

• Franchise model: Potbelly relies on franchisees to operate the majority of its restaurants. Franchisees have their own interests and may not always align with the company's priorities.
• Brand reputation: Negative publicity or food safety incidents can damage Potbelly's brand reputation and sales.
• Labor costs: Rising labor costs, including minimum wage increases, can strain the company's profitability.
• Menu innovation: Potbelly needs to continuously innovate its menu offerings to maintain customer interest and stay competitive.
• Food safety: Foodborne outbreaks or other food safety concerns can have significant financial and reputational consequences.
• Cybersecurity: The company faces risks related to data breaches, hacking, and other cybersecurity incidents.
• Supply chain disruptions: Disruptions in the supply chain, such as natural disasters or transportation issues, can impact the company's ability to obtain necessary ingredients and supplies.
• Technological advancements: The rise of online ordering and delivery services may challenge Potbelly's traditional business model.

Financial Risks

• Debt burden: Potbelly has accumulated significant debt, which can limit its financial flexibility and increase its interest expenses.
• Earnings volatility: The company's earnings have been volatile in recent years, which can make it difficult to forecast future financial performance.
• Foreign currency risks: Potbelly has international operations, which exposes it to foreign currency fluctuations.

Mitigation Measures

Potbelly has implemented various measures to mitigate these risks, including:

• Diversifying its menu offerings and customer base
• Investing in technology and online ordering
• Strengthening its supply chain relationships
• Implementing cybersecurity measures
• Managing its debt and financial risks
• Cultivating strong relationships with franchisees