Business Operations - As of December 31, 2023, Potbelly had 424 shops in 31 states and the District of Columbia, with 345 company-operated and 79 franchise-operated shops[18][46]. - Potbelly refranchised 33 company-operated shops during 2023 and expects most shop growth to occur through franchisee development in 2024[48]. - The company opened one new company-operated shop and closed seven in 2023, indicating a cautious approach to growth[47]. - Potbelly employs over 5,000 individuals, with approximately 180 in corporate roles and 450 in shop management[36]. - New shops are designed to create a unique customer experience, averaging 2,300 square feet, with a target size of 1,800 to 2,000 square feet for new openings[51]. - Construction of a new shop takes approximately 60 to 90 days, requiring a cash investment of around $650,000, which may vary based on market conditions[52]. - The company focuses on franchise unit growth while limiting the rate of company-operated shop growth, emphasizing location selection based on demographic and traffic criteria[50]. Financial Performance - In fiscal year 2023, the system-wide average check per entree was approximately $11.87, an increase from $11.38 in 2022[28]. - Average new shop investment is approximately $650,000 with average unit volumes of $1.32 million for fiscal year 2023, aiming for mid to high teens profit margins[49]. - The company’s financial performance could be negatively impacted by adverse weather conditions affecting customer traffic and shop operations[154]. - Labor cost inflation continues to impact the company's financial performance, with potential increases in minimum wages and benefits significantly raising overall labor costs[166]. - Rising healthcare costs related to employee health benefit plans could materially affect the company's financial performance if actual claims exceed estimates[167]. - The company has no plans to pay regular cash dividends for the foreseeable future, which may limit returns on investment for shareholders[183]. - The company entered into an equity sales agreement allowing for the issuance of shares with an aggregate offering price of up to $40 million, subject to market conditions[181]. - Changes in tax laws and unanticipated tax liabilities could adversely affect the company's profitability and financial results[165]. - The company may experience volatility in its stock price due to various factors, including market conditions and operational performance[174]. Customer Experience and Marketing - The company operates with over 39% of orders being digital through the Potbelly App or website and third-party delivery services[33]. - Potbelly's strategic plan includes five pillars focused on traffic-driven profitability, enhancing customer experience, and expanding the Potbelly Perks rewards program[22][23]. - The Potbelly Perks loyalty program allows members to earn 10 points for every dollar spent, with a free entrée reward after 1,000 points[59]. - The company has enhanced the Potbelly Perks program to offer more reward options, allowing members to earn coins based on their annual spend[60]. - The company intends to invest in marketing efforts to attract and retain customers, but these initiatives may not yield the expected revenue increases[160]. Supply Chain and Food Safety - In fiscal year 2023, over 90% of food supplies were sourced through Distribution Market Advantage, Inc., with six primary distributors[61]. - Meats account for approximately 30% of product purchasing, with over 80% sourced from 10 suppliers under non-exclusive contracts[63]. - The company relies heavily on a limited number of suppliers, purchasing almost all bread from one supplier and over 80% of meat products from 10 suppliers[95]. - Supply shortages or interruptions in fresh food products could adversely affect operating results[93]. - The company emphasizes food safety and quality assurance, dedicating substantial resources to ensure safe food products[30][31]. Challenges and Risks - Increased commodity and energy costs could decrease shop-level profit margins, impacting overall profitability[91]. - The company faces challenges in attracting and retaining qualified personnel, which could lead to increased labor costs and operational inefficiencies[97]. - New shop openings may not be profitable and could take 8 to 12 weeks to reach planned operating levels due to initial inefficiencies[105]. - The company’s growth strategy includes closing underperforming shops while expanding in existing and new markets, but this carries risks of delays and increased costs[102]. - Unionization efforts could disrupt operations and affect profitability if a significant number of employees become unionized[98]. - The company’s ability to manage growth effectively is crucial, as existing systems may not support planned expansion[109]. - The success of franchisees is vital for future growth, as their performance directly impacts the company's reputation and financial results[113]. - The company may face challenges in implementing initiatives aimed at increasing sales and traffic, with no guarantee of positive outcomes[111]. - The inability to successfully raise menu prices could lead to a decline in profitability, impacting financial results negatively[115]. - Changes in regulations and consumer eating habits regarding diet and health may adversely affect revenues, necessitating modifications to menu offerings[116]. - Evolving consumer preferences and tastes could result in reduced customer demand for current offerings, impacting financial performance[117]. - Risks related to information technology systems and cybersecurity could lead to civil and criminal penalties, reputational harm, and substantial costs[119]. - Compliance with privacy and data protection laws is complex and may result in significant costs, affecting brand reputation and operational results[120]. - Security breaches of customer information could lead to negative publicity, loss of customers, and legal liabilities, impacting business operations[123]. - Compliance with nutritional information regulations may be costly and time-consuming, potentially requiring modifications to menu items[132]. - Increases in minimum wage laws could raise labor costs, impacting profitability and operational efficiency[135]. - The Americans with Disabilities Act (ADA) compliance may require additional expenditures to modify shops for disabled access[136]. - The company is subject to federal and state laws regulating the offer and sale of franchises, which may impose registration and disclosure requirements[137]. - The company faces potential increases in compliance costs due to current and future laws and regulations, which could adversely affect operational results[139]. - The company may incur significant costs related to litigation from employees, consumers, and suppliers, which could divert management attention and resources[141]. - The company is at risk of losing food service licenses if it fails to comply with food control regulations, which could adversely affect business operations[140]. - The company faces risks related to evolving environmental, social, and governance (ESG) regulations, which may increase administrative expenses and management focus[171]. - Climate change poses risks to the company's operations, potentially increasing costs and affecting the availability and pricing of ingredients[172]. Seasonal Trends - The business is subject to seasonal fluctuations, with customer spending typically lowest in the first quarter of the year[75]. - The company's financial results are subject to seasonal fluctuations, with customer spending typically lowest in the first quarter due to holidays and adverse weather[162]. Menu Innovation - Potbelly's menu innovation includes developing bundling options and premium protein sandwiches to respond to consumer trends[29].

Financial Data and Key Metrics Changes - Revenues in Q4 2023 increased approximately 4.7% to $125.7 million, partially offset by the short-term revenue impact of recent refranchising transactions and benefiting from the 53rd week [16][19] - Fourth quarter adjusted EBITDA was $7.5 million, or 5.9% of total revenue, approximately flat year-over-year [19] - Net income for the quarter was $2.7 million, with adjusted net income decreasing by $1.9 million compared to the prior year [19][20] - Average unit volumes reached $1.3 million, with a target of achieving 16% shop level margins [11][19] Business Line Data and Key Metrics Changes - Same-store sales growth was 6.3% in Q4, driven primarily through traffic growth [32][39] - Digital business represented approximately 40% of total shop sales, an increase of 150 basis points year-over-year [6][39] - Shop level margins improved by 150 basis points year-over-year to 15.7% for the quarter [12][19] Market Data and Key Metrics Changes - System-wide sales grew by approximately 11.4% to $147.5 million [39] - Labor expenses were 28.8% of sales, a 200 basis point improvement versus the prior year [40] - General and administrative expenses were approximately 10.1% of system-wide sales for Q4 [41] Company Strategy and Development Direction - The company is focused on a five-pillar strategy aimed at enhancing customer experience and driving profitability [4][21] - Long-term growth targets include same-store sales growth in the low to mid-single digits, unit growth in the low double digits, and adjusted EBITDA growth in the low to mid-double digits [5][20] - The company plans to achieve approximately 10% unit growth in 2024, with a goal of reaching 2,000 units in the U.S. [11][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single to low double-digit adjusted EBITDA growth despite headwinds from refranchising [42][43] - The company anticipates a stabilization in wage inflation and low single-digit increases in commodity costs for the upcoming year [76] - Management highlighted the importance of the Potbelly Perks loyalty program, which saw an 87% increase in member acquisition during Q4 [33][107] Other Important Information - The company signed a new three-year $30 million revolving credit facility, providing significant financial flexibility [42] - The 53rd week contributed approximately $7.5 million in sales, although it had a slight negative impact on average weekly sales [98][100] Q&A Session Summary Question: Clarification on FY 2024 guidance for adjusted EBITDA - Management confirmed that the guidance for adjusted EBITDA growth is in the high single-digit to low double-digit range [47][48] Question: Pipeline for new franchise units and potential headwinds - Management indicated strong growth in the pipeline for new franchise units and no significant slowdowns reported [54] Question: Recent price increases and their impact on guidance - Management noted a gross price increase of 3.8% in Q4 and anticipated low single-digit price increases for the upcoming year [79] Question: Outlook for commodity prices and labor costs - Management expects low single-digit increases in commodity costs and stabilization in wage inflation [76] Question: Impact of the 53rd week on sales and margins - Management explained that the 53rd week added approximately $7.5 million in sales but had a slight negative impact on margins due to lower volume [98][100]

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Potbelly Corporation (NASDAQ:PBPB) Q3 2023 Results Conference Call November 1, 2023 5:00 PM ET Company Participants Bob Wright - President, CEO Steve Cirulis - SVP, CFO Adiya Dixon - Chief Legal Officer and Secretary Conference Call Participants Todd Brooks - The Benchmark Company Jeremy Hamblin - Craig-Hallum Capital Group Mark Smith - Lake Street Capital Matt Curtis - William Blair Operator Good afternoon, everyone, and welcome to Potbelly Corporation's Third Quarter 2023 Earnings Conference Call. Today's ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ______________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 24, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ____to ____ Commission File Number: 001-36104 ______________________________________________ Potbell ...

New Franchise Development Agreements Limited Availability Unavailable POTBELLY Q3'23 Guidance & FY'23 Outlook | --- | --- | |-----------------------|----------------------------------------------| | Average Weekly Sales: | Q3'23 Guidance \n $25,000 - $25,500 | | Same-store sales: | 7.0% - 9.0% | | Shop-level margin: | 12.0% - 14.0% | | Adj. EBITDA: | $5.0 million- $6.0 million | | | FY'23 Outlook | | | | | Average Unit Volumes: | Record levels | | Same-store sales: | High single-digit to low double-digit gr ...

Financial Data and Key Metrics Changes - Same-store sales grew by 12.9%, primarily driven by traffic growth [6][20] - Total revenues increased by 8.4% to $124.7 million [20] - Shop-level margins improved by 300 basis points to 14.4% [24] - Adjusted EBITDA rose to $8.0 million, a 140 basis point improvement year-over-year [24] Business Line Data and Key Metrics Changes - Digital business represented approximately 38% of total shop sales, an increase of 170 basis points year-over-year [21] - Food, beverage, and packaging costs were 28.0% of shop sales, a 50 basis point improvement [22] - Labor expenses decreased to 30.4% of sales, a 100 basis point improvement [22] Market Data and Key Metrics Changes - The company continues to take traffic share from the fast casual category on a weekly basis [6][20] - Each real estate type achieved same-store sales growth of at least high single-digit percentages [20] Company Strategy and Development Direction - The company is focused on executing a five-pillar strategic plan and expanding its franchise growth acceleration initiative [6][8] - The goal is to achieve 10% unit growth in 2024, with a target of 2,000 units in the U.S. over the next decade [15][18] - The company is enhancing its digital capabilities and expanding Potbelly Digital Kitchen installations [7][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2024 growth targets, citing strong brand value and strategic marketing efforts [17][26] - The company anticipates continued strength in same-store sales and shop-level margins [25][26] Other Important Information - The company reported net income of $2.2 million for the quarter, a $1.6 million improvement year-over-year [24] - General and administrative expenses were 9.2% of revenue, driven by higher bonus accruals and digital maintenance costs [24] Q&A Session Summary Question: What gives confidence in achieving 10% unit growth next year? - Management highlighted the number of shop commitments and the momentum built through the franchise growth acceleration initiative [28][29] Question: Why is system-wide sales a more applicable metric? - The transition to a more franchise-based organization necessitates reflecting the relationship between sales and the investment needed to support those sales [30][31] Question: How significant is the opportunity for nontraditional units? - Management sees nontraditional units as a long-term opportunity but emphasizes a focus on multiunit franchise agreements for predictable growth [32][33] Question: Clarification on the 2024 AUV target of $1.3 million - Management indicated that while current performance suggests exceeding this target, they prefer to wait for more data before solidifying the target [36][38] Question: Who are the competitors from whom Potbelly is gaining market share? - Management noted that while it's difficult to pinpoint specific chains, data indicates that Potbelly's growth is outpacing the fast casual segment [39] Question: How is the digital business performing in terms of Perks members? - Management expressed satisfaction with the growth of the Perks program, indicating that it contributes significantly to digital sales [42][43] Question: What is the composition of traffic and ticket? - Management confirmed that strong traffic growth is the primary driver of same-store sales, with a focus on customer retention and frequency [47][49]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ______________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 25, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ____to ____ Commission File Number: 001-36104 ______________________________________________ Potbelly Cor ...

First Quarter 2023 Earnings Presentation -- May 4, 2023 -- In addition to historical information, this presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Forward-looking statements, written, oral or otherwise made, represent the Company's expectation or belief concerning future events. Without limiting the foregoin ...

Potbelly Corporation (NASDAQ:PBPB) Q1 2023 Earnings Conference Call May 4, 2023 5:00 PM ET Company Participants Adiya Dixon – Senior Vice President and Chief Legal Officer Bob Wright – President and Chief Executive Officer Steve Cirulis – Senior Vice President and Chief Financial Officer Lisa Fortuna – Alpha IR Group Conference Call Participants Matt Curtis – William Blair Operator Good afternoon, everyone, and welcome to Potbelly Corporation’s First Quarter 2023 Earnings Conference Call. All participants w ...