Dive Brief:
- Potbelly will open 15 units in the Atlanta area through a franchising agreement with Royal Restaurant Group, according to a Friday press release.
- The deal will bring Potbelly to Georgia for the first time, with construction to start in January 2026. The franchisee will open three shops each year until it reaches the unit target, according to the press release.
- Potbelly also disclosed in a separate release that it signed six other deals for 32 units in the quarter, covering parts of Arizona, Illinois, Missouri, North Carolina, Texas and Virginia. The chain has been on a franchising spree since launching its Franchise Growth Acceleration Initiative in 2022.
Dive Insight:
Last year, the chain signed a 36-store development deal with Royal, which acquired four stores in Ohio as an adjunct to its construction commitments. Potbelly aims to eventually hit 2,000 stores in the U.S., with roughly 85% franchised.
Potbelly CEO Bob Wright said in an interview with Restaurant Dive that the recent agreements constitute “a nice down payment on getting to that 2,000-unit number.”
Still, the chain’s pace of openings has been fairly slow — the brand’s footprint increased from 430 stores at the end of Q3 2023 to 435 at the end of the most recent quarter, according to its earnings release. The chain opened eight shops during the third quarter bringing its year-to-date total to 15, Wright said on an earnings call last week. The chain expects total openings to reach 24 to 26 for the year.
The brand has about 260 agreements for development signed but not yet completed.
“2024 is shaping up to be our best unit growth year since 2017 and we'll end the year with a record number of franchise shops representing approximately 22% of the system,” Wright said. “We anticipate our unit growth to further accelerate from here.”
New stores, which have performed well this year, could help bolster sales as well. Same-store sales at Potbelly have been pressured by the broader consumer environment, falling 1.8% at company-operated stores in the quarter. Wright said the chain’s value proposition is strong and its meal deal, the $7.99 Skinny combo, is a compelling offer for consumers.
Wright said that the brand’s market research indicated that $9 is the approximate ceiling for a lunch meal to offer perceived value to consumers. The $7.99 deal is meant to come in safely below that threshold.
“Value doesn't always come in a big discount,” Wright said. “It comes in what you get for what you pay.”
Since the deal is a permanent addition to Potbelly’s menu, Wright expects it will drive more long-term benefits for the company than a time-limited, steeper discount that could juice traffic at the expense of margins. The meal deal includes items that were already on Potbelly’s menu, meaning it does not change store-level or supply chain operations.
