Potbelly (PBPB) 10-Q 9 May 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Apr. 01, 2018	Apr. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 1, 2018
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q1
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		25,446,229

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Current assets
Cash and cash equivalents	$ 28,936	$ 25,530
Accounts receivable, net of allowances of $103 and $129 as of April 1, 2018 and December 31, 2017, respectively	4,879	5,087
Inventories	3,457	3,525
Prepaid expenses and other current assets	11,251	11,061
Total current assets	48,523	45,203
Property and equipment, net	100,732	103,859
Indefinite-lived intangible assets	3,404	3,404
Goodwill	2,222	2,222
Deferred income taxes, noncurrent	10,902	11,202
Deferred expenses, net and other assets	4,810	4,840
Total assets	170,593	170,730
Current liabilities
Accounts payable	3,368	3,903
Accrued expenses	22,538	23,273
Accrued income taxes	176	176
Total current liabilities	26,082	27,352
Deferred rent and landlord allowances	22,964	22,987
Other long-term liabilities	4,214	3,153
Total liabilities	53,260	53,492
Stockholders’ equity
Common stock, $0.01 par value—authorized 200,000,000 shares; outstanding 25,286,229 and 24,999,688 shares as of April 1, 2018 and December 31, 2017, respectively	321	318
Additional paid-in-capital	424,771	421,657
Treasury stock, held at cost, 6,845,279 and 6,831,508 shares as of April 1, 2018, and December 31, 2017, respectively	(85,441)	(85,262)
Accumulated deficit	(222,874)	(219,990)
Total stockholders’ equity	116,777	116,723
Non-controlling interest	556	515
Total stockholders' equity	117,333	117,238
Total liabilities and equity	$ 170,593	$ 170,730

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Apr. 01, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Allowances on accounts receivable	$ 103	$ 129
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	200,000,000	200,000,000
Common stock, outstanding	25,286,229	24,999,688
Treasury stock, shares	6,845,279	6,831,508

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Mar. 26, 2017
Revenues
Sandwich shop sales, net	$ 102,247	$ 100,859
Franchise royalties and fees	670	840
Total revenues	102,917	101,699
Sandwich shop operating expenses
Cost of goods sold, excluding depreciation	26,636	26,663
Labor and related expenses	31,579	30,462
Occupancy expenses	14,726	14,169
Other operating expenses	12,500	11,633
General and administrative expenses	12,188	10,352
Depreciation expense	5,826	6,199
Pre-opening costs	68	73
Impairment and loss on disposal of property and equipment	2,024	885
Total expenses	105,547	100,436
Income (loss) from operations	(2,630)	1,263
Interest expense	27	28
Income (loss) before income taxes	(2,657)	1,235
Income tax expense (benefit)	(504)	553
Net income (loss)	(2,153)	682
Net income (loss) attributable to non-controlling interest	41	(1)
Net income (loss) attributable to Potbelly Corporation	$ (2,194)	$ 683
Net income (loss) per common share attributable to common stockholders:
Basic	$ (0.09)	$ 0.03
Diluted	$ (0.09)	$ 0.03
Weighted average shares outstanding:
Basic	25,144,855	25,099,962
Diluted	25,144,855	26,082,478

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. 25, 2016	$ 124,236	$ 309	$ (72,321)	$ 909	$ 407,622	$ (213,034)	$ 751
Beginning balance, common shares at Dec. 25, 2016		25,139,127
Net income (loss)	682					683	(1)
Exercise of stock options	551	$ 1			550
Exercise of stock options, shares		59,119
Repurchases of common stock	(1,988)		(1,988)
Repurchases of common stock, shares		(152,558)
Amortization of stock-based compensation	820				820
Ending balance at Mar. 26, 2017	124,301	$ 310	(74,309)	$ 909	408,992	(212,351)	750
Ending balance, common shares at Mar. 26, 2017		25,045,688
Beginning balance at Dec. 31, 2017	$ 117,238	$ 318	(85,262)		421,657	(219,990)	515
Beginning balance, common shares at Dec. 31, 2017	24,999,688	24,999,688
Cumulative impact of Topic 606 at 1/1/2018	$ (690)					(690)
Net income (loss)	(2,153)					(2,194)	41
Exercise of stock options	$ 2,255	$ 3			2,252
Exercise of stock options, shares	275,000	300,312
Repurchases of common stock	$ (63)		(63)
Repurchases of common stock, shares	(5,000)	(5,000)
Treasury shares used for stock-based plans	$ (116)		(116)
Treasury shares used for stock-based plans, shares		(8,771)
Amortization of stock-based compensation	862				862
Ending balance at Apr. 01, 2018	$ 117,333	$ 321	$ (85,441)		$ 424,771	$ (222,874)	$ 556
Ending balance, common shares at Apr. 01, 2018	25,286,229	25,286,229

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Apr. 01, 2018	Mar. 26, 2017
Cash flows from operating activities:
Net income (loss)	$ (2,153)	$ 682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	5,826	6,199
Deferred income tax		185
Deferred rent and landlord allowances	(23)	632
Amortization of stock compensation expense	862	820
Excess tax deficiency from stock-based compensation	122	89
Asset impairment, store closure and disposal of property and equipment	2,381	907
Amortization of debt issuance costs	9	9
Changes in operating assets and liabilities:
Accounts receivable, net	(41)	(1,074)
Inventories	68	223
Prepaid expenses and other assets	207	465
Accounts payable	(241)	865
Accrued and other liabilities	(352)	2,418
Net cash provided by operating activities:	6,665	12,420
Cash flows from investing activities:
Purchases of property and equipment	(4,939)	(6,927)
Net cash used in investing activities:	(4,939)	(6,927)
Cash flows from financing activities:
Proceeds from exercise of stock options	2,255	552
Employee taxes on certain stock-based payment arrangements	(512)	(60)
Treasury stock repurchases	(63)	(1,988)
Net cash provided by (used in) financing activities:	1,680	(1,496)
Net increase in cash and cash equivalents	3,406	3,997
Cash and cash equivalents at beginning of period	25,530	23,379
Cash and cash equivalents at end of period	28,936	27,376
Supplemental cash flow information:
Income taxes paid		87
Interest paid	19	21
Supplemental non-cash investing and financing activities:
Unpaid liability for purchases of property and equipment	$ 1,234	$ 2,220

Organization and Other Matters

Organization and Other Matters	3 Months Ended
	Apr. 01, 2018
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 32 states and the District of Columbia, and 17 franchises outside the United States . 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 31, 2017. 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 April 1, 2018 and December 31, 2017, its statement of operations for the 13 weeks ended April 1, 2018 and March 26, 2017 and its statement of cash flows for the 13 weeks ended April 1, 2018 and March 26, 2017 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”); nine of LLC’s wholly owned subsidiaries and LLC’s five joint ventures, collectively, the “Company.” All 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 2018 consists of 52 weeks and 2017 consisted of 53 weeks. The fiscal quarters ended April 1, 2018 and March 26, 2017 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. Recent Accounting Pronouncements I n 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). 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 adopted the standard effective January 1, 2018 using the modified retrospective method applied to contracts that were not completed as of the date of adoption. The adoption does not have a material impact on sandwich shop sales, but impacted the recognition of 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 payment which historically was recognized as revenue when the shop opened. Effective for the annual period beginning January 1, 2018, initial franchise fees are recognized as revenue over the contractual term. Potbelly sells gift cards to customers and records the sale as a liability. The liability is released once the card is redeemed. Historically, a portion of these gift card sales were not redeemed by the customer (“breakage”) and Potbelly would recognize breakage two years after the period of sale. Effective for the annual period beginning January 1, 2018, expected breakage is recognized as customers redeem the gift cards. Upon adoption of the standard, Potbelly’s accumulated deficit increased by $0.7 million (net of tax). The franchise revenue adjustment impacted accrued expenses, other long-term liabilities and deferred income taxes. The breakage adjustment impacted accrued expenses and deferred income taxes. Revenue recognized in the first quarter of 2018 was $0.1 million higher than it would have been under the previous methodology. 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 while 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.

Revenue

Revenue	3 Months Ended
	Apr. 01, 2018
Revenue From Contract With Customer [Abstract]
Revenue	(2) Revenue Potbelly primarily earns revenue at a point in time through sales at our sandwich shop locations and records such revenue net of sales-related taxes collected from customers. The payment on these sales is due at the time of the customer’s purchase. The Company also receives royalties from franchisees on their respective sales, which are recognized at the point in time the sale is made, and invoiced weekly. Potbelly also records revenue from sales over time related to upfront franchise fees, and gift card redemptions and breakage. For the 13 weeks ended April 1, 2018, revenue recognized from all revenue sources on point in time sales was $102.7 million, and revenue recognized from sales over time was $0.2 million. Franchise Revenue Potbelly licenses intellectual property and trademarks to franchisees through franchise agreements. As part of these franchise agreements, Potbelly receives an upfront payment from the franchisee, which the Company recognizes over the term of the franchise agreement. The Company records a contract liability for the unearned portion of the upfront franchise payments. Gift Card Redemptions / Breakage Revenue Potbelly sells gift cards to customers and records the sale as a contract liability and recognizes the associated revenue as the gift card is redeemed. A portion of these gift cards are not redeemed by the customer (“breakage”), which is recognized by the Company as revenue as a percentage of customers gift card redemptions. The expected breakage amount recognized is determined by a historical data analysis on gift card redemption patterns. Contract Liabilities As described above, the Company records current and noncurrent contract liabilities for upfront franchise fees as well as gift cards. There are no other contract liabilities and there are no contract assets recorded by the Company. The opening and closing balances of the Company’s current and noncurrent contract liabilities from contracts with customers were as follows: Current Contract Liability Noncurrent Contract Liability (Thousands) (Thousands) Beginning balance as of January 1, 2018 $ (2,325 ) $ (2,144 ) Ending balance as of April 1, 2018 (1,691 ) (2,120 ) Decrease in contract liability $ (634 ) $ (24 ) The aggregate value of remaining performance obligations on outstanding contracts was $3.8 million as of April 1, 2018. The decrease in the liability during the first quarter was a result of gift card redemptions offset by purchases of new gift cards and recognition of franchise fees. The Company expects to recognize revenue related to contract liabilities as follows (in thousands), which may vary based upon franchise activity as well as gift card redemption patterns: Years Ending Amount 2018 $ 1,295 2019 373 2020 238 2021 231 2022 223 Thereafter 1,451 Total revenue recognized $ 3,811 The amount of revenue recognized for the 13 weeks ended April 1, 2018 related to the January 1, 2018 liability ending balance was $0.9 million. This revenue related to the recognition of gift card redemptions and upfront franchise fees. For the 13 weeks ended April 1, 2018, the Company did not recognize any revenue from obligations satisfied (or partially satisfied) in prior periods.

Fair Value Measurement

Fair Value Measurement	3 Months Ended
	Apr. 01, 2018
Fair Value Disclosures [Abstract]
Fair Value Measurement	(3) 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 ended April 1, 2018, 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 $2.0 million for the 13 weeks ended April 1, 2018. The Company recorded an impairment charge of $0.9 million for the 13 weeks ended March 26, 2017.

Earnings (Loss) Per Share

Earnings (Loss) Per Share	3 Months Ended
	Apr. 01, 2018
Earnings Per Share [Abstract]
Earnings (Loss) Per Share	(4) 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 April 1, 2018, the Company had a loss per share, and 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 April 1, March 26, 2018 2017 Net income (loss) attributable to Potbelly Corporation $ (2,194 ) $ 683 Weighted average common shares outstanding-basic 25,144,855 25,099,962 Plus: Effect of potential stock options exercise — 891,191 Plus: Effect of potential warrant exercise — 91,325 Weighted average common shares outstanding-diluted 25,144,855 26,082,478 Income (loss) per share available to common stockholders-basic $ (0.09 ) $ 0.03 Income (loss) per share available to common stockholders-diluted $ (0.09 ) $ 0.03 Potentially dilutive shares that are considered anti-dilutive: Common share options 3,101,447 980,332

Income Taxes

Income Taxes	3 Months Ended
	Apr. 01, 2018
Income Tax Disclosure [Abstract]
Income Taxes	(5) Income Taxes The Company recognized income tax benefit of $0.5 million on a pre-tax loss of $2.7 million, or an effective tax rate benefit of 19.0%, for the 13 weeks ended April 1, 2018, compared to income tax expense of $0.6 million on pre-tax income of $1.2 million, or an effective tax rate of 44.8%, for the 13 weeks ended March 26, 2017. The effective tax rate differed from the federal statutory rate due to the impact of ASU 2016-09, state income taxes and certain federal and state tax credits. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) into law making significant On that same date, the SEC staff also issued Staff Accounting Bulletin (SAB) 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. A company must reflect the income tax effects of those aspects of the Tax Act for which accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. At April 1, 2018, the Company has not completed the accounting for the tax effects of enactment of the Tax Act; however, the Company made a reasonable estimate of the effects and booked a provisional tax expense adjustment in the fiscal year 2017, the period in which the legislation was enacted

Capital Stock

Capital Stock	3 Months Ended
	Apr. 01, 2018
Equity [Abstract]
Capital Stock	(6) Capital Stock On May 8, 2018, the Company announced that its Board of Directors authorized a stock repurchase program for up to $65.0 million of its outstanding common stock. The stock repurchase program replaced the previous program, authorized in September 2016, under which approximately $14.7 million of authorization remained as of April 1, 2018. Under the previous program, during the 13 weeks ended April 1, 2018, the Company repurchased 5,000 shares of its common stock for approximately $0.1 million, including cost and commission, in open market transactions. The new 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. The number of common stock actually repurchased, and the timing and price of repurchases, will depend upon market conditions, Securities and Exchange Commission requirements, and other factors. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. 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	3 Months Ended
	Apr. 01, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-Based Compensation	(7) Stock-Based Compensation Stock options are awarded under the 2013 Long-Term Incentive Plan to eligible employees and certain non-employee members of the Board of Directors A summary of activity for the 13 weeks ended April 1, 2018 is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 31, 2017 3,309 $ 10.71 $ 7,699 4.90 Granted 50 13.15 Exercised (275 ) 8.20 Canceled (26 ) 15.04 Outstanding—April 1, 2018 3,058 $ 10.93 $ 6,118 5.03 Exercisable—April 1, 2018 2,333 $ 10.34 $ 5,965 3.92 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 April 1, 2018 and March 26, 2017, the Company recognized stock-based compensation expense of $0.9 million and $0.8 million, respectively. As of April 1, 2018, unrecognized stock-based compensation expense was $4.4 million, which will be recognized through fiscal year 2022. The Company records stock-based compensation expense within general and administrative expenses in the condensed consolidated statements of operations.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Apr. 01, 2018
Commitments And Contingencies Disclosure [Abstract]
Commitments and Contingencies	(8) 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 October 2017, plaintiffs filed a purported collective and class action lawsuit in the United States District Court for the Southern District of New York against the Company alleging violations of the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). The plaintiffs allege that the Company violated the FLSA and NYLL by not paying overtime compensation to our assistant managers and violated NYLL by not paying spread-of-hours pay. Potbelly believes the assistant managers were properly classified under state and federal law. The Company intends to vigorously defend this action. This case is at an early stage, and Potbelly is therefore unable to make a reasonable estimate of the probable loss or range of losses, if any, that might arise from this matter.

Organization and Other Matters

Organization and Other Matters (Policies)	3 Months Ended
	Apr. 01, 2018
Accounting Policies [Abstract]
Business	Business Potbelly Corporation (the “Company” or “Potbelly”), through its wholly-owned subsidiaries, operates or franchises Potbelly Sandwich Shops in 32 states and the District of Columbia, and 17 franchises outside the United States .
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 31, 2017. 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 April 1, 2018 and December 31, 2017, its statement of operations for the 13 weeks ended April 1, 2018 and March 26, 2017 and its statement of cash flows for the 13 weeks ended April 1, 2018 and March 26, 2017 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”); nine of LLC’s wholly owned subsidiaries and LLC’s five joint ventures, collectively, the “Company.” All 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 2018 consists of 52 weeks and 2017 consisted of 53 weeks. The fiscal quarters ended April 1, 2018 and March 26, 2017 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.
Recent Accounting Pronouncements	Recent Accounting Pronouncements I n 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). 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 adopted the standard effective January 1, 2018 using the modified retrospective method applied to contracts that were not completed as of the date of adoption. The adoption does not have a material impact on sandwich shop sales, but impacted the recognition of 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 payment which historically was recognized as revenue when the shop opened. Effective for the annual period beginning January 1, 2018, initial franchise fees are recognized as revenue over the contractual term. Potbelly sells gift cards to customers and records the sale as a liability. The liability is released once the card is redeemed. Historically, a portion of these gift card sales were not redeemed by the customer (“breakage”) and Potbelly would recognize breakage two years after the period of sale. Effective for the annual period beginning January 1, 2018, expected breakage is recognized as customers redeem the gift cards. Upon adoption of the standard, Potbelly’s accumulated deficit increased by $0.7 million (net of tax). The franchise revenue adjustment impacted accrued expenses, other long-term liabilities and deferred income taxes. The breakage adjustment impacted accrued expenses and deferred income taxes. Revenue recognized in the first quarter of 2018 was $0.1 million higher than it would have been under the previous methodology. 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 while 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.

Revenue (Tables)

Revenue (Tables)	3 Months Ended
	Apr. 01, 2018
Revenue From Contract With Customer [Abstract]
Summary of Current and Noncurrent Contract Liabilities from Contracts with Customers	The opening and closing balances of the Company’s current and noncurrent contract liabilities from contracts with customers were as follows: Current Contract Liability Noncurrent Contract Liability (Thousands) (Thousands) Beginning balance as of January 1, 2018 $ (2,325 ) $ (2,144 ) Ending balance as of April 1, 2018 (1,691 ) (2,120 ) Decrease in contract liability $ (634 ) $ (24 )
Summary of Expected Revenue Recognition Related to Contract Liabilities	The Company expects to recognize revenue related to contract liabilities as follows (in thousands), which may vary based upon franchise activity as well as gift card redemption patterns: Years Ending Amount 2018 $ 1,295 2019 373 2020 238 2021 231 2022 223 Thereafter 1,451 Total revenue recognized $ 3,811

Earnings (Loss) Per Share (Tabl

Earnings (Loss) Per Share (Tables)	3 Months Ended
	Apr. 01, 2018
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 April 1, March 26, 2018 2017 Net income (loss) attributable to Potbelly Corporation $ (2,194 ) $ 683 Weighted average common shares outstanding-basic 25,144,855 25,099,962 Plus: Effect of potential stock options exercise — 891,191 Plus: Effect of potential warrant exercise — 91,325 Weighted average common shares outstanding-diluted 25,144,855 26,082,478 Income (loss) per share available to common stockholders-basic $ (0.09 ) $ 0.03 Income (loss) per share available to common stockholders-diluted $ (0.09 ) $ 0.03 Potentially dilutive shares that are considered anti-dilutive: Common share options 3,101,447 980,332

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	Apr. 01, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Summary of Stock Options Activity	A summary of activity for the 13 weeks ended April 1, 2018 is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 31, 2017 3,309 $ 10.71 $ 7,699 4.90 Granted 50 13.15 Exercised (275 ) 8.20 Canceled (26 ) 15.04 Outstanding—April 1, 2018 3,058 $ 10.93 $ 6,118 5.03 Exercisable—April 1, 2018 2,333 $ 10.34 $ 5,965 3.92

Organization and Other Matter19

Organization and Other Matters - Additional Information (Detail) $ in Thousands	3 Months Ended
	Apr. 01, 2018USD ($)StateFranchiseSubsidiaryJointVenture	Dec. 31, 2017USD ($)
Nature Of Business And Basis Of Presentation [Line Items]
Number of sandwich works and shops operation states | State	32
Number of franchises outside United States | Franchise	17
Number of wholly owned subsidiaries | Subsidiary	9
Number of joint ventures | JointVenture	5
Term of breakage recognized after sale	2 years
Increase in accumulated deficit	$ (222,874)	$ (219,990)
Accounting Standards Update 2014-09 [Member] | Difference between Revenue Guidance in Effect before and after Topic 606
Nature Of Business And Basis Of Presentation [Line Items]
Increase in accumulated deficit	700
Increase in revenue recognized	$ 100
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%

Revenue - Additional Informatio

Revenue - Additional Information (Detail)	3 Months Ended
	Apr. 01, 2018USD ($)
Disaggregation Of Revenue [Line Items]
Amount of revenue recognized	$ 900,000
Aggregate value of remaining performance obligation on outstanding contracts	3,800,000
Revenue recognized related to prior periods	0
Point in Time Sales [Member]
Disaggregation Of Revenue [Line Items]
Amount of revenue recognized	102,700,000
Over Time Sales [Member]
Disaggregation Of Revenue [Line Items]
Amount of revenue recognized	$ 200,000

Revenue - Summary of Current an

Revenue - Summary of Current and Noncurrent Contract Liabilities from Contracts with Customers (Detail) $ in Thousands	3 Months Ended
	Apr. 01, 2018USD ($)
Revenue From Contract With Customer [Abstract]
Beginning balance of current contract liability	$ (2,325)
Ending balance of current contract liability	(1,691)
Decrease in contract liability, current	(634)
Beginning balance of noncurrent contract liability	(2,144)
Ending balance of noncurrent contract liability	(2,120)
Decrease in contract liability, noncurrent	$ (24)

Revenue - Summary of Expected R

Revenue - Summary of Expected Revenue Recognition Related to Contract Liabilities (Detail) $ in Thousands	3 Months Ended
	Apr. 01, 2018USD ($)
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 3,800
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2018-04-02
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 1,295
Revenue, remaining performance obligation, expected timing of satisfaction, period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 373
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 238
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 231
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 223
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 1,451
Revenue, remaining performance obligation, expected timing of satisfaction, period
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: (nil)
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 3,811
Revenue, remaining performance obligation, expected timing of satisfaction, period

Fair Value Measurement - Additi

Fair Value Measurement - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Apr. 01, 2018	Mar. 26, 2017
Fair Value Disclosures [Abstract]
Impairment charge	$ 2	$ 0.9

Earnings (Loss) Per Share - Add

Earnings (Loss) Per Share - Additional Information (Detail)	3 Months Ended
	Apr. 01, 2018shares
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
	Apr. 01, 2018	Mar. 26, 2017
Earnings (Loss) Per Share [Line Items]
Net income (loss) attributable to Potbelly Corporation	$ (2,194)	$ 683
Weighted average common shares outstanding-basic	25,144,855	25,099,962
Plus: Effect of potential stock options exercise		891,191
Plus: Effect of potential warrant exercise		91,325
Weighted average common shares outstanding-diluted	25,144,855	26,082,478
Income (loss) per share available to common stockholders-basic	$ (0.09)	$ 0.03
Income (loss) per share available to common stockholders-diluted	$ (0.09)	$ 0.03
Common Share Options [Member]
Earnings (Loss) Per Share [Line Items]
Potentially dilutive shares that are considered anti-dilutive	3,101,447	980,332

Income Taxes - Additional Infor

Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Apr. 01, 2018	Mar. 26, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ (504,000)	$ 553,000
Income (loss) before income taxes	$ (2,657,000)	$ 1,235,000
Effective tax rate	19.00%	44.80%
U.S. federal corporate tax rate	35.00%		21.00%
Adjustments to provisional amount previously recorded related to enactment of Tax Act	$ 0

Capital Stock - Additional Info

Capital Stock - Additional Information (Detail) - USD ($)	3 Months Ended
	Apr. 01, 2018	Mar. 26, 2017	May 08, 2018
Equity Class Of Treasury Stock [Line Items]
Remaining value of authorization under the share repurchase program	$ 14,700,000
Common stock shares repurchased	5,000
Common stock repurchased value	$ 63,000	$ 1,988,000
Subsequent Event [Member]
Equity Class Of Treasury Stock [Line Items]
Stock repurchase program, authorized amount			$ 65,000,000

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 01, 2018	Mar. 26, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average common stock fair value	$ 13.15
Recognized stock-based compensation expense	$ 862	$ 820
Unrecognized stock compensation expense	$ 4,400
Unrecognized stock compensation expense, recognition period	2,022
2013 Long Term Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average common stock fair value	$ 5.26
Expected life of options	6 years 3 months
Volatility	35.36%
Risk-free interest rate	2.80%
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	3 Months Ended	12 Months Ended
	Apr. 01, 2018	Dec. 31, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options outstanding shares, beginning balance	3,309
Options, granted	50
Options, exercised	(275)
Options, canceled	(26)
Options outstanding shares, ending balance	3,058	3,309
Options outstanding shares, exercisable	2,333
Options outstanding weighted average exercise price, beginning balance	$ 10.71
Options, weighted average exercise price, granted	13.15
Options, weighted average exercise price, exercised	8.20
Options, weighted average exercise price, canceled	15.04
Options outstanding weighted average exercise price, ending balance	10.93	$ 10.71
Options outstanding weighted average exercise price, exercisable	$ 10.34
Options outstanding aggregate intrinsic value	$ 6,118	$ 7,699
Options exercisable aggregate intrinsic value	$ 5,965
Option outstanding weighted average remaining term	5 years 10 days	4 years 10 months 24 days
Options exercisable weighted average remaining term	3 years 11 months 1 day

Commitment and Contingencies -

Commitment and Contingencies - Additional Information (Detail)	1 Months Ended
	Oct. 31, 2017
Commitments And Contingencies Disclosure [Abstract]
Purported collective and class action lawsuit filed date	October 2,017