Potbelly (PBPB) 10-Q 3 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information	9 Months Ended
	Sep. 24, 2017shares
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 24, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q3
Trading Symbol	PBPB
Entity Registrant Name	Potbelly Corporation
Entity Central Index Key	1,195,734
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	24,804,265

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 24, 2017	Dec. 25, 2016
Current assets
Cash and cash equivalents	$ 22,178	$ 23,379
Accounts receivable, net of allowances of $112 and $78 as of September 24, 2017 and December 25, 2016, respectively	5,858	3,787
Inventories	3,310	3,365
Prepaid expenses and other current assets	10,694	8,020
Total current assets	42,040	38,551
Property and equipment, net	105,379	107,074
Indefinite-lived intangible assets	3,404	3,404
Goodwill	2,222	2,222
Deferred income taxes, non-current	18,381	19,410
Deferred expenses, net and other assets	4,804	4,784
Total assets	176,230	175,445
Current liabilities
Accounts payable	4,569	3,111
Accrued expenses	24,194	23,082
Accrued income taxes		1,622
Total current liabilities	28,763	27,815
Deferred rent and landlord allowances	23,000	21,076
Other long-term liabilities	2,511	2,318
Total liabilities	54,274	51,209
Stockholders’ equity
Common stock, $0.01 par value—authorized 200,000,000 shares; outstanding 24,804,265 and 25,139,127 shares as of September 24, 2017 and December 25, 2016, respectively	313	309
Warrants		909
Additional paid-in-capital	414,943	407,622
Treasury stock, held at cost, 6,498,908 and 5,753,412 shares as of September 24, 2017, and December 25, 2016, respectively	(81,174)	(72,321)
Accumulated deficit	(212,729)	(213,034)
Total stockholders’ equity	121,353	123,485
Non-controlling interest	603	751
Total stockholders' equity	121,956	124,236
Total liabilities and equity	$ 176,230	$ 175,445

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 24, 2017	Dec. 25, 2016
Statement Of Financial Position [Abstract]
Allowances on accounts receivable	$ 112	$ 78
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	200,000,000	200,000,000
Common stock, outstanding	24,804,265	25,139,127
Treasury stock, shares	6,498,908	5,753,412

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 24, 2017	Sep. 25, 2016	Sep. 24, 2017	Sep. 25, 2016
Revenues
Sandwich shop sales, net	$ 105,327	$ 103,224	$ 313,568	$ 303,116
Franchise royalties and fees	800	558	2,394	1,657
Total revenues	106,127	103,782	315,962	304,773
Sandwich shop operating expenses
Cost of goods sold, excluding depreciation	28,405	28,478	83,703	83,224
Labor and related expenses	31,187	30,163	93,213	88,260
Occupancy expenses	14,354	13,111	42,792	39,042
Other operating expenses	12,464	11,338	36,349	32,570
General and administrative expenses	12,104	9,999	33,375	30,827
Depreciation expense	6,315	5,656	18,960	16,996
Pre-opening costs	336	340	955	731
Impairment and loss on disposal of property and equipment	1,536	1,855	5,762	2,880
Total expenses	106,701	100,940	315,109	294,530
Income (loss) from operations	(574)	2,842	853	10,243
Interest expense	32	33	101	102
Income (loss) before income taxes	(606)	2,809	752	10,141
Income tax expense (benefit)	(487)	960	252	3,732
Net income (loss)	(119)	1,849	500	6,409
Net income attributable to non-controlling interest	121	54	195	153
Net income (loss) attributable to Potbelly Corporation	$ (240)	$ 1,795	$ 305	$ 6,256
Net income (loss) per common share attributable to common stockholders:
Basic	$ (0.01)	$ 0.07	$ 0.01	$ 0.24
Diluted	$ (0.01)	$ 0.07	$ 0.01	$ 0.24
Weighted average shares outstanding:
Basic	24,959,023	25,240,374	25,030,951	25,772,846
Diluted	24,959,023	25,829,970	25,857,083	26,341,913

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Warrants [Member]	Additional Paid-in-Capital [Member]	Accumulated Deficit [Member]	Non-Controlling Interest [Member]
Beginning balance at Dec. 27, 2015	$ 130,213	$ 303	$ (50,000)	$ 909	$ 399,458	$ (221,246)	$ 789
Beginning balance, common shares at Dec. 27, 2015		26,304,261
Net income	6,409					6,256	153
Stock-based compensation plans	5,419	$ 5			5,414
Stock-based compensation plans, shares		511,781
Excess tax deficiencies associated with exercise of stock options	(605)				(605)
Repurchases of common stock	(20,447)		(20,447)
Repurchases of common stock, shares		(1,574,316)
Distributions to non-controlling interest	(249)						(249)
Contributions from non-controlling interest	74						74
Amortization of stock-based compensation	2,266				2,266
Ending balance at Sep. 25, 2016	123,080	$ 308	(70,447)	909	406,533	(214,990)	767
Ending balance, common shares at Sep. 25, 2016		25,241,726
Beginning balance at Dec. 25, 2016	$ 124,236	$ 309	(72,321)	909	407,622	(213,034)	751
Beginning balance, common shares at Dec. 25, 2016	25,139,127	25,139,127
Net income	$ 500					305	195
Stock-based compensation plans	1,181	$ 2			1,179
Stock-based compensation plans, shares		168,930
Exercise of stock warrants	$ 1,972	$ 2		$ (909)	2,879
Exercise of stock warrants, shares	125,000	241,704
Repurchases of common stock	$ (8,853)		(8,853)
Repurchases of common stock, shares	(745,496)	(745,496)
Distributions to non-controlling interest	$ (354)						(354)
Contributions from non-controlling interest	11						11
Amortization of stock-based compensation	3,263				3,263
Ending balance at Sep. 24, 2017	$ 121,956	$ 313	$ (81,174)		$ 414,943	$ (212,729)	$ 603
Ending balance, common shares at Sep. 24, 2017	24,804,265	24,804,265

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 24, 2017	Sep. 25, 2016
Cash flows from operating activities:
Net income	$ 500	$ 6,409
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	18,960	16,996
Deferred income tax		397
Deferred rent and landlord allowances	1,924	1,912
Amortization of stock compensation expense	3,263	2,266
Excess tax deficiency (benefit) from stock-based compensation	292	(24)
Asset impairment, store closure and disposal of property and equipment	5,922	2,897
Amortization of debt issuance costs	28	25
Changes in operating assets and liabilities:
Accounts receivable, net	(1,422)	(61)
Inventories	54	141
Prepaid expenses and other assets	(2,650)	(457)
Accounts payable	699	(1,496)
Accrued and other liabilities	798	4,566
Net cash provided by operating activities	28,368	33,571
Cash flows from investing activities:
Acquisition of franchise shop		(1,108)
Purchases of property and equipment	(23,526)	(19,883)
Net cash used in investing activities	(23,526)	(20,991)
Cash flows from financing activities:
Proceeds from exercise of stock options	1,181	5,746
Proceeds from exercise of stock warrants	1,972
Treasury stock repurchases	(8,853)	(20,447)
Excess tax benefit from stock-based compensation		24
Contributions from non-controlling interest	11	74
Distributions to non-controlling interest	(354)	(249)
Net cash used in financing activities	(6,043)	(14,852)
Net decrease in cash and cash equivalents	(1,201)	(2,272)
Cash and cash equivalents at beginning of period	23,379	32,006
Cash and cash equivalents at end of period	22,178	29,734
Supplemental cash flow information:
Income taxes paid	3,346	2,265
Interest paid	73	82
Supplemental non-cash investing and financing activities:
Unpaid liability for purchases of property and equipment	$ 2,752	$ 3,142

Organization and Other Matters

Organization and Other Matters	9 Months Ended
	Sep. 24, 2017
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Organization and Other Matters	(1) Organization and Other Matters Business Potbelly Corporation (the “Company” or “Potbelly”), through its wholly-owned subsidiaries, operates or franchises Potbelly Sandwich Shops in 31 states and the District of Columbia. The Company also sells and administers franchises of Potbelly Sandwich Shops. The first domestic franchise location administered by the Company opened during February 2011. Additionally, in February 2011, the Company opened its first international franchise in the Middle East. In July 2015, the Company opened its first franchise shop in the United Kingdom and in October 2016, the Company opened its first franchise shop in Canada. Additionally, during April 2016, the Company transitioned a franchise shop to a company-operated shop for a purchase price of $1.1 million. The Company recorded $0.8 million of goodwill related to the transaction. The Company believes this acquisition is immaterial. Basis of Presentation The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Potbelly Corporation and its subsidiaries and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 25, 2016. The unaudited condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC rules and regulations. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly the Company’s financial position as of September 24, 2017 and December 25, 2016, its statement of operations for the 13 and 39 weeks ended September 24, 2017 and September 25, 2016 and its statement of cash flows for the 39 weeks ended September 24, 2017 and September 25, 2016 have been included. The consolidated statements of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year. The Company does not have any components of other comprehensive income recorded within its consolidated financial statements and therefore, does not separately present a statement of comprehensive income in its condensed consolidated financial statements. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Potbelly Corporation; its wholly owned subsidiary, Potbelly Illinois, Inc. (“PII”); PII’s wholly owned subsidiaries, Potbelly Franchising, LLC and Potbelly Sandwich Works, LLC (“LLC”); eight of LLC’s wholly owned subsidiaries and LLC’s five joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For consolidated joint ventures, non-controlling interest represents a non-controlling partner’s share of the assets, liabilities and operations related to the five joint venture investments. The Company has ownership interests ranging from 51-80% in these consolidated joint ventures. Fiscal Year The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar period. Approximately every five or six years a 53rd week is added. Fiscal year 2017 consists of 53 weeks and 2016 consisted of 52 weeks. The fiscal quarters ended September 24, 2017 and September 25, 2016 each consisted of 13 weeks. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates include amounts for long-lived assets and income taxes. Actual results could differ from those estimates. New and Revised Financial Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards (IFRS). The FASB approved a one-year deferral of the effective date of ASU 2014-09, such that it will become effective for the annual period beginning after December 15, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10 and ASU 2016-12 in March 2016, April 2016 and May 2016, respectively, to help provide interpretive clarifications on the new guidance in Accounting Standards Codification (ASC) Topic 606. Potbelly will adopt the standard effective the first quarter of 2018 and apply the amendments using the modified retrospective method. The Company has determined that the adoption will not have a material impact on sandwich shop sales, but will impact franchise revenue and gift card breakage. Potbelly licenses intellectual property and trademarks to franchisees through franchise arrangements. As part of these agreements, Potbelly receives an initial franchise fee when the shop opens initial franchise fee In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which will replace the existing guidance in ASC 840, “Leases.” The pronouncement requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize a straight-line total lease expense. The pronouncement is effective for fiscal years beginning after December 15, 2018, including annual and interim periods thereafter. In addition, the pronouncement requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. The Company is currently evaluating the impact ASU 2016-02 will have on its financial position, results of operations and cash flows but expects that it will result in a material increase in its long-term assets and liabilities given the Company has a significant number of leases. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718).” The pronouncement simplifies the accounting for the taxes related to stock-based compensation, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification within the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016, including annual and interim periods thereafter. Potbelly adopted ASU 2016-09 in the first quarter of 2017. The primary impact of adoption was the recognition of excess tax benefits and deficiencies that arise upon vesting or exercise of share-based payments in the Income Statement as income tax expense instead of a component of equity recorded to paid-in capital. This aspect of the new guidance, which was required to be adopted prospectively, resulted in In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350).” The new standard eliminates step 2 from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess. Under current U.S. GAAP, to perform step 2 an entity must determine its implied fair value, which is determined in the same manner as the amount of goodwill recognized in a business combination. In addition to eliminating step 2, the new standard eliminates the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test. Instead, all reporting units, even those with a zero or negative amount will apply the same impairment test. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. The standard will be effective for Potbelly in the fiscal year beginning after December 15, 2019. Early adoption for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017 is permitted. This amendment is required to be applied on a prospective basis. Potbelly is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

Fair Value Measurement

Fair Value Measurement	9 Months Ended
	Sep. 24, 2017
Fair Value Disclosures [Abstract]
Fair Value Measurement	(2) Fair Value Measurement The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate fair values due to the short maturities of these balances. The Company assesses potential impairments to its long-lived assets, which includes property and equipment, on a quarterly basis or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Shop-level assets are grouped at the individual shop-level for the purpose of the impairment assessment. Recoverability of an asset is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. The fair value of the shop assets was determined using the discounted future cash flow method of anticipated cash flows through the shop’s lease-end date using fair value measurement inputs classified as Level 3. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. After performing a periodic review of the Company’s shops during the 13 weeks and 39 weeks ended September 24, 2017, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance. The Company performed an impairment analysis related to these shops and recorded an impairment charge of $1.5 million and $5.8 million for the 13 and 39 weeks ended September 24, 2017, respectively. Included within the impairment charge for the 13 and 39 weeks ended September 24, 2017, impairment charges of $0.7 million were recorded in relation to Hurricane Harvey, with insurance recoveries of $0.7 million also recorded within the same caption.

Earnings (Loss) Per Share

Earnings (Loss) Per Share	9 Months Ended
	Sep. 24, 2017
Earnings Per Share [Abstract]
Earnings (Loss) Per Share	(3) Earnings (Loss) Per Share Basic and diluted income per common share attributable to common stockholders was calculated using the weighted average number of common shares outstanding for the period. Diluted income per common share attributable to common stockholders is computed by dividing the income allocated to common stockholders by the weighted average number of fully diluted common shares outstanding. In periods of a net loss, no potential common shares are included in diluted shares outstanding as the effect is anti-dilutive. For the 13 weeks ended September 24, 2017, the Company had a loss per share, therefore, shares were excluded for potential stock option exercises and warrant exercises. The following table summarizes the earnings (loss) per share calculation: For the 13 Weeks Ended For the 39 Weeks Ended September 24, September 25, September 24, September 25, 2017 2016 2017 2016 Net income (loss) attributable to Potbelly Corporation $ (240 ) $ 1,795 $ 305 $ 6,256 Weighted average common shares outstanding-basic 24,959,023 25,240,374 25,030,951 25,772,846 Plus: Effect of potential stock options exercise — 533,249 770,965 514,257 Plus: Effect of potential warrant exercise — 56,347 55,167 54,810 Weighted average common shares outstanding-diluted 24,959,023 25,829,970 25,857,083 26,341,913 Income (loss) per share available to common stockholders-basic $ (0.01 ) $ 0.07 $ 0.01 $ 0.24 Income (loss) per share available to common stockholders-diluted $ (0.01 ) $ 0.07 $ 0.01 $ 0.24 Potentially dilutive shares that are considered anti-dilutive: Common share options 4,012,073 1,233,294 1,151,317 1,236,599

Income Taxes

Income Taxes	9 Months Ended
	Sep. 24, 2017
Income Tax Disclosure [Abstract]
Income Taxes	(4) Income Taxes The Company recognized income tax benefit of $0.5 million on a pre-tax loss of $0.6 million, or an effective tax rate benefit of 80.4%, for the 13 weeks ended September 24, 2017, compared to income tax expense of $1.0 million on pre-tax income of $2.8 million, or an effective tax rate of 34.2%, for the 13 weeks ended September 25, 2016. The Company recognized income tax expense of $0.3 million on pre-tax income of $0.8 million, or an effective tax rate of 33.5%, for the 39 weeks ended September 24, 2017, compared to income tax expense of $3.7 million on pre-tax income of $10.1 million, or an effective tax rate of 36.8%, for the 39 weeks ended September 25, 2016. The effective tax rate differed from the federal statutory rate primarily due to a change in earnings and the adoption of ASU 2016-09, which had an unfavorable impact to the Company’s tax rate benefit of 7.5% for the 13 weeks ended September 24, 2017 and an unfavorable impact of 38.9% for the 39 weeks ended September 24, 2017. See Note 1 for additional information regarding the adoption of ASU 2016-09.

Capital Stock

Capital Stock	9 Months Ended
	Sep. 24, 2017
Equity [Abstract]
Capital Stock	(5) Capital Stock On September 8, 2016, the Company announced that its Board of Directors authorized a share repurchase program of up to $30.0 million of the Company’s common stock. The Company’s previous $35.0 million share repurchase program, authorized in September 2015, was completed in July 2016. The current program permits the Company, from time to time, to purchase shares in the open market (including in pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Securities Exchange Act of 1934, as amended) or in privately negotiated transactions. During the 39 weeks ended September 24, 2017, the Company repurchased 745,496 shares of its common stock for approximately $8.9 million, including cost and commission, in open market transactions. As of September 24, 2017, the remaining dollar value of authorization under the share repurchase program was $18.8 million, which does not include commission. Repurchased shares are included as treasury stock in the condensed consolidated balance sheets and the condensed consolidated statements of equity.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 24, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-Based Compensation	(6) Stock-Based Compensation Stock options are awarded under the 2013 Long-Term Incentive Plan to eligible employees. The fair value of stock options is determined using the Black-Scholes option pricing model. The weighted average fair value of options granted during the 39 weeks ended September 24, 2017 was $4.58 per share, as estimated using the following weighted average assumptions: expected life of options – 6.25 years; volatility – 36.37%; risk-free interest rate – 2.23%; and dividend yield – 0.0%. The Company used the simplified method for determining the expected life of the options. The expected volatility of the options was calculated using the Company’s historical data. A summary of activity for the 39 weeks ended September 24, 2017 is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 25, 2016 4,013 $ 10.61 $ 13,455 4.78 Granted 263 11.55 Exercised (125 ) 9.48 Canceled (68 ) 15.23 Outstanding—September 24, 2017 4,083 $ 10.63 $ 7,390 4.44 Exercisable—September 24, 2017 3,288 $ 10.06 $ 7,185 3.54 The company also awards restricted stock units (“RSUs”) to certain non-employee members of its Board of Directors and the senior leadership team. In May 2017, the Company issued 153,369 shares of RSUs with a grant-date fair value of $11.05 upon issuance. In August 2017, the Company issued 2,608 shares of RSUs to certain non-employee members of its Board of Directors. The RSUs had a grant-date fair value of $11.15 upon issuance. The Board of Director grants have a vesting schedule of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date. The senior leadership team grants vest in one-third increments over a three-year period beginning in March 2018. Stock-based compensation is measured at the grant date, based on the calculated fair value of the award and is recognized as expense over the requisite employee service period, which is generally the vesting period of the grant, with a corresponding increase to additional paid-in-capital. For the 13 weeks ended September 24, 2017, the Company recognized stock-based compensation expense of $1.4 million, of which $0.6 million was related to Chief Executive Officer (CEO) transition costs. For the 39 weeks ended September 24, 2017, the Company recognized stock-based compensation expense of $3.3 million, of which $0.8 million was related to CEO transition costs. For the 13 and 39 weeks ended September 25, 2016, the Company recognized stock-based compensation of $0.8 million and $2.3 million, respectively.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 24, 2017
Commitments And Contingencies Disclosure [Abstract]
Commitments and Contingencies	(7) Commitments and Contingencies The Company is subject to legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to those actions should not have a material adverse impact on the Company’s financial position or results of operations and cash flows. In 2016, the Company received notice of a potential claim alleging that it violated the Fair Labor Standards Act by not paying overtime to its assistant managers, whom the Company had classified as exempt employees. Although the Company believes that its assistant managers were properly classified as exempt under both federal and state laws, the Company agreed to mediate the matter. On February 20, 2017, the parties entered into a Settlement Agreement and Release whereby participating assistant managers agreed to release the Company from all federal and/or state wage and hour claims in exchange for a gross settlement amount of $1.3 million. As part of the settlement process, a complaint was filed on February 17, 2017 in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida. A motion seeking the Court’s approval of the settlement was filed on February 21, 2017, which was subsequently approved. In March 2017, the Company paid out the settlement, which was booked against the previously recorded liability.

Organization and Other Matters

Organization and Other Matters (Policies)	9 Months Ended
	Sep. 24, 2017
Accounting Policies [Abstract]
Business	Business Potbelly Corporation (the “Company” or “Potbelly”), through its wholly-owned subsidiaries, operates or franchises Potbelly Sandwich Shops in 31 states and the District of Columbia. The Company also sells and administers franchises of Potbelly Sandwich Shops. The first domestic franchise location administered by the Company opened during February 2011. Additionally, in February 2011, the Company opened its first international franchise in the Middle East. In July 2015, the Company opened its first franchise shop in the United Kingdom and in October 2016, the Company opened its first franchise shop in Canada. Additionally, during April 2016, the Company transitioned a franchise shop to a company-operated shop for a purchase price of $1.1 million. The Company recorded $0.8 million of goodwill related to the transaction. The Company believes this acquisition is immaterial.
Basis of Presentation	Basis of Presentation The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Potbelly Corporation and its subsidiaries and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 25, 2016. The unaudited condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC rules and regulations. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly the Company’s financial position as of September 24, 2017 and December 25, 2016, its statement of operations for the 13 and 39 weeks ended September 24, 2017 and September 25, 2016 and its statement of cash flows for the 39 weeks ended September 24, 2017 and September 25, 2016 have been included. The consolidated statements of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year. The Company does not have any components of other comprehensive income recorded within its consolidated financial statements and therefore, does not separately present a statement of comprehensive income in its condensed consolidated financial statements.
Principles of Consolidation	Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Potbelly Corporation; its wholly owned subsidiary, Potbelly Illinois, Inc. (“PII”); PII’s wholly owned subsidiaries, Potbelly Franchising, LLC and Potbelly Sandwich Works, LLC (“LLC”); eight of LLC’s wholly owned subsidiaries and LLC’s five joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For consolidated joint ventures, non-controlling interest represents a non-controlling partner’s share of the assets, liabilities and operations related to the five joint venture investments. The Company has ownership interests ranging from 51-80% in these consolidated joint ventures.
Fiscal Year	Fiscal Year The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar period. Approximately every five or six years a 53rd week is added. Fiscal year 2017 consists of 53 weeks and 2016 consisted of 52 weeks. The fiscal quarters ended September 24, 2017 and September 25, 2016 each consisted of 13 weeks.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates include amounts for long-lived assets and income taxes. Actual results could differ from those estimates.
New and Revised Financial Accounting Standards	New and Revised Financial Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and International Financial Reporting Standards (IFRS). The FASB approved a one-year deferral of the effective date of ASU 2014-09, such that it will become effective for the annual period beginning after December 15, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10 and ASU 2016-12 in March 2016, April 2016 and May 2016, respectively, to help provide interpretive clarifications on the new guidance in Accounting Standards Codification (ASC) Topic 606. Potbelly will adopt the standard effective the first quarter of 2018 and apply the amendments using the modified retrospective method. The Company has determined that the adoption will not have a material impact on sandwich shop sales, but will impact franchise revenue and gift card breakage. Potbelly licenses intellectual property and trademarks to franchisees through franchise arrangements. As part of these agreements, Potbelly receives an initial franchise fee when the shop opens initial franchise fee In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which will replace the existing guidance in ASC 840, “Leases.” The pronouncement requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize a straight-line total lease expense. The pronouncement is effective for fiscal years beginning after December 15, 2018, including annual and interim periods thereafter. In addition, the pronouncement requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. The Company is currently evaluating the impact ASU 2016-02 will have on its financial position, results of operations and cash flows but expects that it will result in a material increase in its long-term assets and liabilities given the Company has a significant number of leases. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718).” The pronouncement simplifies the accounting for the taxes related to stock-based compensation, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification within the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016, including annual and interim periods thereafter. Potbelly adopted ASU 2016-09 in the first quarter of 2017. The primary impact of adoption was the recognition of excess tax benefits and deficiencies that arise upon vesting or exercise of share-based payments in the Income Statement as income tax expense instead of a component of equity recorded to paid-in capital. This aspect of the new guidance, which was required to be adopted prospectively, resulted in In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350).” The new standard eliminates step 2 from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess. Under current U.S. GAAP, to perform step 2 an entity must determine its implied fair value, which is determined in the same manner as the amount of goodwill recognized in a business combination. In addition to eliminating step 2, the new standard eliminates the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test. Instead, all reporting units, even those with a zero or negative amount will apply the same impairment test. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. The standard will be effective for Potbelly in the fiscal year beginning after December 15, 2019. Early adoption for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017 is permitted. This amendment is required to be applied on a prospective basis. Potbelly is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements.

Earnings (Loss) Per Share (Tabl

Earnings (Loss) Per Share (Tables)	9 Months Ended
	Sep. 24, 2017
Earnings Per Share [Abstract]
Summary of Earnings (Loss) Per Share Calculation	The following table summarizes the earnings (loss) per share calculation: For the 13 Weeks Ended For the 39 Weeks Ended September 24, September 25, September 24, September 25, 2017 2016 2017 2016 Net income (loss) attributable to Potbelly Corporation $ (240 ) $ 1,795 $ 305 $ 6,256 Weighted average common shares outstanding-basic 24,959,023 25,240,374 25,030,951 25,772,846 Plus: Effect of potential stock options exercise — 533,249 770,965 514,257 Plus: Effect of potential warrant exercise — 56,347 55,167 54,810 Weighted average common shares outstanding-diluted 24,959,023 25,829,970 25,857,083 26,341,913 Income (loss) per share available to common stockholders-basic $ (0.01 ) $ 0.07 $ 0.01 $ 0.24 Income (loss) per share available to common stockholders-diluted $ (0.01 ) $ 0.07 $ 0.01 $ 0.24 Potentially dilutive shares that are considered anti-dilutive: Common share options 4,012,073 1,233,294 1,151,317 1,236,599

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 24, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Summary of Stock Options Activity	A summary of activity for the 39 weeks ended September 24, 2017 is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 25, 2016 4,013 $ 10.61 $ 13,455 4.78 Granted 263 11.55 Exercised (125 ) 9.48 Canceled (68 ) 15.23 Outstanding—September 24, 2017 4,083 $ 10.63 $ 7,390 4.44 Exercisable—September 24, 2017 3,288 $ 10.06 $ 7,185 3.54

Organization and Other Matter17

Organization and Other Matters - Additional Information (Detail) $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended
	Apr. 30, 2016USD ($)	Sep. 24, 2017USD ($)StateJointVenture	Sep. 24, 2017USD ($)StateSubsidiaryJointVenture	Sep. 25, 2016USD ($)	Dec. 25, 2016USD ($)
Nature Of Business And Basis Of Presentation [Line Items]
Number of states with operations | State		31	31
Purchase price of transitioned franchise shop	$ 1,100			$ 1,108
Goodwill		$ 2,222	$ 2,222		$ 2,222
Number of wholly owned subsidiaries | Subsidiary			8
Number of joint ventures | JointVenture		5	5
Term of breakage recognized after sale			2 years
Additional income tax expense (benefit)			$ 292	$ (24)
ASU No. 2016-09 [Member]
Nature Of Business And Basis Of Presentation [Line Items]
Additional income tax expense (benefit)		$ 45	$ 292
Minimum [Member]
Nature Of Business And Basis Of Presentation [Line Items]
Ownership interest rate			51.00%
Maximum [Member]
Nature Of Business And Basis Of Presentation [Line Items]
Ownership interest rate			80.00%
Franchise-Operated Shops [Member]
Nature Of Business And Basis Of Presentation [Line Items]
Goodwill	$ 800

Fair Value Measurement - Additi

Fair Value Measurement - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 24, 2017	Sep. 25, 2016	Sep. 24, 2017	Sep. 25, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impairment charge	$ 1.5	$ 1.9	$ 5.8	$ 2.9
Hurricane Harvey [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impairment charge	0.7		0.7
Insurance recoveries	$ 0.7		$ 0.7

Earnings (Loss) Per Share - Add

Earnings (Loss) Per Share - Additional Information (Detail)	3 Months Ended
	Sep. 24, 2017shares
Common Share Options [Member]
Earnings (Loss) Per Share [Line Items]
Potential common shares included in diluted shares outstanding	0

Earnings (Loss) Per Share - Sum

Earnings (Loss) Per Share - Summary of Earnings (Loss) Per Share Calculation (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 24, 2017	Sep. 25, 2016	Sep. 24, 2017	Sep. 25, 2016
Earnings (Loss) Per Share [Line Items]
Net income (loss) attributable to Potbelly Corporation	$ (240)	$ 1,795	$ 305	$ 6,256
Weighted average common shares outstanding-basic	24,959,023	25,240,374	25,030,951	25,772,846
Plus: Effect of potential stock options exercise		533,249	770,965	514,257
Plus: Effect of potential warrant exercise		56,347	55,167	54,810
Weighted average common shares outstanding-diluted	24,959,023	25,829,970	25,857,083	26,341,913
Income (loss) per share available to common stockholders-basic	$ (0.01)	$ 0.07	$ 0.01	$ 0.24
Income (loss) per share available to common stockholders-diluted	$ (0.01)	$ 0.07	$ 0.01	$ 0.24
Common Share Options [Member]
Earnings (Loss) Per Share [Line Items]
Potentially dilutive shares that are considered anti-dilutive	4,012,073	1,233,294	1,151,317	1,236,599

Income Taxes - Additional Infor

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 24, 2017	Sep. 25, 2016	Sep. 24, 2017	Sep. 25, 2016
Income Tax [Line Items]
Income tax expense (benefit)	$ (487)	$ 960	$ 252	$ 3,732
Income (loss) before income taxes	$ (606)	$ 2,809	$ 752	$ 10,141
Effective tax rate	80.40%	34.20%	33.50%	36.80%
ASU No. 2016-09 [Member]
Income Tax [Line Items]
Unfavorable impact to effective tax rate	7.50%		38.90%

Capital Stock - Additional Info

Capital Stock - Additional Information (Detail) - USD ($)	9 Months Ended
	Sep. 24, 2017	Sep. 25, 2016	Sep. 08, 2016	Sep. 08, 2015
Equity [Abstract]
Stock repurchase program, authorized amount			$ 30,000,000	$ 35,000,000
Common stock shares repurchased	745,496
Common stock repurchased value	$ 8,853,000	$ 20,447,000
Remaining dollar value of authorization under the share repurchase program	$ 18,800,000

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended
	Aug. 31, 2017	May 31, 2017	Sep. 24, 2017	Sep. 25, 2016	Sep. 24, 2017	Sep. 25, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average common stock fair value					$ 11.55
Recognized stock-based compensation expense			$ 1,400	$ 800	$ 3,263	$ 2,266
Unrecognized stock compensation expense			4,900		$ 4,900
Unrecognized stock compensation expense, recognition period					2,021
Restricted Stock Units (RSUs) [Member] | Non-Employee Board Of Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock units issued	2,608	153,369
Restricted stock units issued, grant-date fair value	$ 11.15	$ 11.05
Vesting description					The senior leadership team grants vest in one-third increments over a three-year period beginning in March 2018.
Vesting period					3 years
Restricted Stock Units (RSUs) [Member] | Non-Employee Board Of Directors [Member] | First Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	50.00%	50.00%
Restricted Stock Units (RSUs) [Member] | Non-Employee Board Of Directors [Member] | Second Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	50.00%	50.00%
Chief Executive Officer (CEO) Transition Costs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized stock-based compensation expense			$ 600		$ 800
2013 Long Term Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average common stock fair value					$ 4.58
Expected life of options					6 years 3 months
Volatility					36.37%
Risk-free interest rate					2.23%
Dividend yield					0.00%
Method used to determine fair value of the options					Black-Scholes option pricing model

Stock-Based Compensation - Summ

Stock-Based Compensation - Summary of Stock Options Activity (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 24, 2017	Dec. 25, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options outstanding shares, beginning balance	4,013
Options, granted	263
Options, exercised	(125)
Options, canceled	(68)
Options outstanding shares, ending balance	4,083	4,013
Options outstanding shares, exercisable	3,288
Options outstanding weighted average exercise price, beginning balance	$ 10.61
Options, weighted average exercise price, granted	11.55
Options, weighted average exercise price, exercised	9.48
Options, weighted average exercise price, canceled	15.23
Options outstanding weighted average exercise price, ending balance	10.63	$ 10.61
Options outstanding weighted average exercise price, exercisable	$ 10.06
Options outstanding aggregate intrinsic value	$ 7,390	$ 13,455
Options exercisable aggregate intrinsic value	$ 7,185
Option outstanding weighted average remaining term	4 years 5 months 9 days	4 years 9 months 11 days
Options exercisable weighted average remaining term	3 years 6 months 15 days

Commitment and Contingencies -

Commitment and Contingencies - Additional Information (Detail) $ in Millions	Feb. 21, 2017USD ($)
Commitments And Contingencies Disclosure [Abstract]
Gross settlement amount	$ 1.3