In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Potbelly Sandwich Shop franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Potbelly Sandwich Shop franchise, based on Item 7 of the company’s 2015 FDD
- Section III – Presentation and analysis of Potbelly Sandwich Shop’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
- 2014 average weekly gross sales for the 11 franchised Potbelly Sandwich Shops that were open for the full 12 months in 2014
- 2014 average gross sales, net sales, total cost of sales, gross profit, total labor, other operating expenses, occupancy expenses, and shop profits for the 249 affiliate-owned Potbelly Sandwich Shops (excluding airport locations) that were open for at least 15 months as of the end of December 2014
Section I – Background Information
Potbelly Sandwich Shop Aims for Continual Franchise Growth
Chicago-based Potbelly Sandwich Shop continues to post growth as the chain focuses on expansion of its franchise markets.
Potbelly announced a franchise growth plan in December 2015 that would grow the brand throughout California. The chain chose California for franchise expansion because of the state’s strong interest in fresh, quality ingredients. Expansion is initially planned in San Diego, Riverside County, Orange County, the East Bay and the Central Valley.
Earlier franchise growth plans in the past couple of years were announced in Upstate New York, North Carolina and Oklahoma City, Oklahoma.
Under CEO Aylwin Lewis, the chain is projecting increases of at least 10 percent each year, with a potential of reaching up to 1,000 locations, including in global markets.
Antique Shop Fueled Potbelly Name
The company started in 1977 when Potbelly Sandwich Shop was opened by founder Peter Hastings on Lincoln Avenue in Chicago, Illinois. The original location was previously an antique store, Hindsight, which was also owned by Hastings.
Items from the antique store became decor for the original restaurant, including an antique potbelly stove. These stoves are featured in the chain’s locations, making Potbelly the world’s largest collector of antique potbelly stoves.
Growth Began With Sale of First Store
Bryant Keil purchased the store in 1996, opened a second location in 1997 and continued to expand as the reasonably priced toasted sandwiches attracted more and more attention. The 10th shop opened in 2002 and the 100th in 2005.
‘Fast, But Not Fast Food’
The chain, which promises service within eight minutes of ordering, bills itself as “fast, but not fast food.” The sandwiches are served hot on regular or multigrain wheat bread loaves that are hollowed out and filled with meat, cheese and toppings.
Customers can opt for an Original, a “thin-cut” style in which a third of the bread is removed to curb calories and carbohydrates, or BIGS, which are 30 percent larger than the Originals. The stores began offering Skinnys, sandwiches with less than 400 calories, in 2009, the same year it added the BIGS size.
Also on the menu are soup, baked goods, shakes, malts and smoothies, as well as breakfast sandwiches and oatmeal. Live music provided by local musicians is featured during the lunch periods at most of the restaurants.
Potbelly filed for its initial public offering in September 2013, when it had about 300 locations in 18 states, Washington, D.C., and the Middle East, which it entered in 2011. The chain, which began trading in October 2013, now has more than 350 restaurants in 26 states, Washington, D.C., the Middle East and the United Kingdom, where five locations are planned over a five-year period.
CFO Talbot Resigns, Replaced by Coyne
Potbelly Chief Financial Officer Charles Talbot announced his resignation in February 2015 to take a senior leadership position at a then-undisclosed company (he left Potbelly in March and became CFO of Athletico in April). Talbot had been with Potbelly since October 2008.
Michael Coyne replaced Talbot in May. Coyne’s 30 years of leadership positions include jobs with Sears Holdings Corporation and his most recent position as senior vice president, small business at CNA Financial Corporation.
Section II – Estimated Costs
- Please click here for detailed estimates of Potbelly Sandwich Shop franchise costs, based on Item 7 of the company’s 2015 FDD (updated).