1. Top line growth remains intact
• Despite declining
revenue to $83.6
million, up from
$78.2 million a
Revenue slated to
grow 7% in Q2.
Looking beyond the numbers
• Potbelly warned investors that same-store-sales
for the second quarter are expected to fall 1.6%.
Yet this is an improvement on the 2.2% decline
in the prior quarter.
• Potbelly went public less than a year ago and
therefore must combat increased costs related to
• These things will pressure the stock in the near
term, but the longer-term picture looks bright
because the company’s fundamentals are intact.
2. A sustainable long-term growth plan
• The company opened 42
new stores last year and
currently owns and
operates 300 locations in
• For comparison, rival fast-
casual chain Noodles &
Company added 53 new
stores in fiscal 2013.
Potbelly is on track to
grow its store count by at
least 10% in fiscal 2014.
Why this approach is important
• By not opening too many new stores at once, it should
help Potbelly sidestep the risk of overextending itself.
• Often when companies grow their store count too
quickly they are later forced to close underperforming
• Potbelly only has 300 stores in the U.S. today, leaving
ample room for growth.
• Potbelly plans to have at least 1,000 U.S. stores in
3. International growth
• Potbelly currently
has more than
a dozen units in
the Middle East,
Potbelly is uniquely
positioned to expand
Franchising key to outsize growth?
• All of Potbelly’s company-owned stores are within
the U.S. today.
• Yet Potbelly already has franchisees operating 12
stores in the Middle East.
• The company began offering franchise
opportunities in 2010, and is now well positioned to
grow through franchising going forward.
• Potbelly’s “neighborhood marketing approach”
helps it connect with local markets.
Food for thought
Shares of Potbelly are currently trading near the
stock’s 52-week low at around $11 a share today.
However, I believe selling here would be shortsighted.
Potbelly is a well-run company with delicious food and
a long runway of growth ahead. Most of Potbelly’s
growth up to this point has come from new company-
owned stores. But there’s a clear opportunity for
Potbelly to unlock even more growth by franchising
stores in the future.