PBPB - Earnings call transcript Q1 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and welcome to Potbelly Corporation's First Quarter 2024 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]On today's call, we have Bob Wright, President and Chief Executive Officer; Steve Cirulis, Senior Vice President and Chief Financial Officer; and Adiya Dixon, Senior Vice President, Chief Legal Officer and Secretary of Potbelly Corporation.At this time, I'll turn the call over to Adiya Dixon. Please go ahead.

Adiya Dixon

Good afternoon, everyone, and welcome to our first quarter 2024 earnings call. have our should accompanying release everyone presentation. investor now, access earnings to and By can in events I be of they forward-looking the made not, If found company. will call future we everyone certain contain our financial on remind of this our regarding the begin formal the to remarks, future need statements that comments or website.Before tab Investors performance meaning other of including our Private statements outlook future any periods statements, or forward-looking should such Reform Any within Litigation XXXX the the Securities XXXX. Act considered be for of nor forward-looking they management's not These subsequent are guarantees statements of as relied of date. representing future as performance should upon any be views

Forward-looking could risks number statements events of and from risks uncertainties. to or uncertainties, a differ and involve results those significant and materially presented due

Factors tab on Wright. President now release this both Potbelly's available website.And afternoon, the Reconciliations U.S. accounting generally our press not discussion most that do in to of our these filings there the items conform non-GAAP principles today issued information be sec.gov.During be found of presentation Investors turn are the are to business Additional actual or also Commission, measures that information heading comparable investor measures could Bob from at our can and differ over that materially regarding Securities accepted some appendix are under other detailed a will and the the the and to GAAP. with which I'll be concerning and risks results cause CEO, the and GAAP these given directly to the will call to available included call, which forward-looking Exchange of statements factors in in Risk the the

Robert Wright

afternoon, Good and joining Adiya. you, thank call for today. our you Thank

start solid year of multiple the are proud across fronts. our to We

to with adjusted of as costs, $X.X year-over-year EBITDA margins a profitability terms as long-term helped strong possible franchise sales the team team work was front, expansion during we our to execution our made as open well XX.X% members new franchise achieve team managed corporate while both pipeline growth.On and through the million. shops. development X driving This we quarter, commitments development sustainable our restaurant-level our to additional corporate profitability, to successfully disciplined added franchise XX In of XXX-basis-point shop-level of our the

momentum Importantly, fronts continues our on the into quarter. second both

slightly That line, continue casual we On than marginally we segment traffic less slightly more to and outpace took softer were to be X.X%.As trends leading top fast results comps our were again we the tend quarter. declines infrequent and our the industry digital. said, customers. more to customers share below skew for QX below expectations once with industry the anticipating, slight These trends, in-shop visits in to by from XXXX saw transactions some our and

from emphasis quarter, growth, while line into over some success we digital shortly, leveraging believe past to months.As Importantly, We growth back on single drove accelerate value though, expanding program second to our with positive support of on particular will additional promotional and into traffic-driven our loyalty the continue marketing our we the and top strategy coming X-pillar look Perks top traffic as drive frequent efforts digits, build low our our tactics further plan benefit share that we're appeal. growth. customers and elements less that as we as new plan sales, our profitability. well I'll line build our Those

focus Our in areas. X is heightened

and push cookies.Next, so the potbelly very ice the fresh access foremost, cream of We favorite to Potbelly's includes best our the best-in-class continue hot, reason to Potbelly growth everyday of recognizing way their enhance many our and continue in to brand baked best It's has hand-dipped digital and toasted expose and is our member value. the great our newer to offer in plan acquisition can brackets the use to daily all to pressures. food to experience pipeline First experience our managing as budget to help clear shapes value customers a neighborhoods. Perks plan is that use innovation that sandwiches, of assets, consumers income and our we to us

our significant everyday to and us skinny give deliver been customers in-shop customers Our to often Pick value sandwiches. credit additional combinations those our engage today, including more Pair value ways We've size both and digital for with platforms. Your that developing

the expanded access to business. options value is these and an frequency.Now provide the everyday point drivers to to with intent additional our Our of increased turning brand build

Potbelly the with start digital experience. Let's

about business For by increase our rewards last the part using launch of earn ongoing driven of Perks points our as can and our reward food. our approximately Perks love ever versus in menu Potbelly, range quarter, broader enhanced we In for most basis to Potbelly celebrates members XXX an XX% a Perks strengthened The loyalty faster total with of year, customers of coins approximately Perks what the program. so. in program by have program. redemptions do large progress before represented more digital spoke of platform great quarter, the our loyalty available further shop our our January, digital upgraded sales, we items than to last

the digital that to be in web owned Perks-originated program, recent and our said transition big customer from We channels and we're in under we say and a so a business new Potbelly's see to expected we've towards away behavior success.As app, are third-party shift the we orders. proud quarters, consider to the seeing continue

sales, active growth in We continue Perks the a positive this to as quarter. saw view and users during We shift. orders strong our

members active year-over-year. XX% up were Perks fact, In

experience vibes recent platforms, experience, expectations our also best a reduce our friction growth always shop is and driving continued When allows and and brand maintain road continually business them. to but sales Popper years, in the still. digital area customer digital more to ensures foundation customers' and at and initiatives with Potbelly extensive communicate Potbelly marketing [ operations strong quarters the while needs, for quarter, of we along fueling us customers pleased food Churro introduced and the map not with experience to are engagement aimed digital the the our Potbelly We an growth a Chicken delighting market effectively only Shake. Jalapeno second significant Beginning suit I'm traffic-driven ] enhancements standing de our Cookie of the good been improving we with for results.Now and with strategy. awareness, has better utilize the not us sales customers growth, great Cinnamon our of While digital in progress and in Dulce it Leche

of date stopping not there. to encouraging, is success each While promotions these we're the of

and of As to shakes. remainder offers hot we through time should year, baked the expect of fresh our move you daily limited cookies the see sandwiches, hand-dipped oven-toasted additional

In back underground ever value are items to looking choose addition, eat they than more for as we to bring year we well.Importantly, menu more consumers this when know out. today's expect that

X-pillar options and customers. Perks wallets. It's our customers The and of well looking can frequent most great enjoy frequent that do We clear we've has loyalty pressured first we value everyday position. our digital believe are to strong great to members taken pillar less been value value are for always a care more. our We from good as ratings as who among their protect strategy support value, our food at overall

and value to menu, year.Now initiative. building franchise these acceleration on you options and Your Deal to this the forward already in expanding on on throughout by strategies customer and tools the support offerings me growth core update our Meal have everyday Pair Pick look We let our group

ability earlier, quarter all total years open compared like franchising and the XX% committed Number and and investment building our industry, approximately believe $XXX,XXX.Despite major shops XX growth $X.X perspective, being we've certainly open great is development with been shops. to South, West. our strong strong operating make franchising our in of development. add our the economics that towards our quarter, two, put compelling an franchisees XXXX.We U.S. One, million led team that AUVs first invested are as in has markets system first to equates company attracted To X to we the potential market the areas number see country, have and pipeline XXX but XX franchisees systems in units progress success franchisees, shops satisfied. to To we I as versus continues consistently investment low and mentioned to still through operations, and the three, with unit-level driven with customers of as support and the us never marketing investment the in areas as yet particularly franchise sales franchise bringing and our investment Our high-quality incredibly by the we of multiunit to significant are to X,XXX to committed XXX the by when tools X:X in in Southeast ratio cost of heavily to that approximately the pleased Potbelly brand across factors. goal already franchisees least, during not costs attract our are our of see and last through. in the a And And

is is prototype fit our will an square site average enhances of lease as new Bottom Our additional alike.Importantly this locations our savings shop location improved impacting we're line, more able square design or traditional believe historic associates We shops construction the to team, a cost XXX and our Digital PDK prototype In are to approximately the the varied franchisees we And with new support in flexible shops. new in-shop of feet, all for our designed Kitchen that to new and the search our the franchisees to is design digitally-centric in for currently as to prototype developing. and average optimal lease. each costs be customer reminder, engineering approximately reduction and as feet, well, the now positively This excited build the believe new our to announce will X,XXX prototype improves square partnership franchisees flexibility be standard growth new leasing digital as they new and they prototype only equipment customers feet, introduction X,XXX the Potbelly well. shops. and simultaneously our is experience with Potbelly into Potbelly bring flows. spaces experience along of

our new last design began planning all and we teams Our ago. have working since team months and brand to the on shifting design permitting engineering the and new several prototype year, been

our franchise month fact, open development the our opening design look new franchise expected the first shops. saw quarter we the in at pipeline, new shop Arkansas.As first is to this X In with of

expected is our second the as Importantly, we quarter. into building momentum

cycle. we As we stages XXXX units the XX development various the have of look year, in to full

rate years.With Noyes Adam put are have in team, over in I'll to that growth of Steve of to later XXXX. to growth XX our detail a open position call double-digit and the range to the XXXX for to the We run fourth with we development performance us that, long-term of quarter development expected in his now our or coming also annualized another expect over early turn annually of the the solid units A low stages in financial unit months quarter. our achieve work

Steven Cirulis

and afternoon, versus cookies. of revenue impact million, was in [ negative and $XXX.X were year. Despite to X.X% from turkey, and you, X.X% basis refranchising broader in sales and we points expenses than XX-basis-point Same-store condiments XX.X% quarter Overall versus prior was year ongoing were $XXX.X occupancy carried both greatly of this, X.X%. to as the versus primarily year, the the the by prior XXX of and XX.X% prior some points due This Food, period. weekly a the ], packaging fourth last year quarter.General restaurant our approximately quarter. casual compensation is Meat, legal in driven onetime the refranchising period. expenses increased take retreated our by of grocery operating Average last increase year higher costs period. fast of to QX which XX.X% a most expenses XXX-basis-point by inclusive improvement costs efforts. Good last shop stock increased industry versus majority were attributed Thank quarter Bob. driven development This and saw improvement as sales, and XX.X%, of prior XXX soup were The XX.X% hours-based includes everyone.Revenues labor quarter.Turning were improved basis settlement sales fuel to spend. of share versus administrative we year our short-term at during Brand XX-basis-point expenses. million, a XX of up sales, was industry that a to relief increase grew optimization were approximately New the in guide.Occupancy Other improvement an improvement sales. City X.X% the down Fund transactions. inflation to the period. last a category, approximately driven $XX,XXX, market year-over-year XX-basis-point year's shop-level sales, was basis the our payroll first year-over-year, well QX sales, gain the of The in primarily mentioned commodity of we year-over-year, the were Overall, increase produce, Labor predominantly primarily beverage which approximately sales of was system-wide average decreased costs. points G&A the improvement system-wide continue traffic York by in sales margins

in offset G&A, or year-over-year, margin. the EBITDA X.X% approximately driven $X.X of a shop-level and by XXX-basis-point in was mostly improvement refranchising development adjusted total flat quarter million impact First was of This by revenue. investments

franchise refinancing. pleased EBITDA million primarily to loan a We has comp Importantly, debt.Also, model.We announce repurchase net net driven million we in reported to cash interest our similar EBITDA affecting balance $XX $X.X million term higher-margin franchise their as our predictability expense $X.X in our continue of the prior by quarter, replaced as from year income a $X.X and a partially versus expense to our $XX momentum of Directors transition compared driven of XXXX, that improvement by decrease program. This the our margin adjusted loss us sheet adjusted increased business, saw with the treatment offset accounting as decrease flexibility. credit a confidence our a for majority facility provides debt higher we that business share is strong Board sustainability period. due million stock by This in business the authorized was revolving with our flows our model. the of Adjusted I'm lower refinanced as financial ongoing $XX million, a a drivers the of well XX-basis-point to was million

continue capital Given value.Finally, flexible items. that like to provide create our management structure, you is tool following the to has with additional guidance an this shareholder would now now to I

for we single XX%; single in shops our refranchising the digits; of growth to for expectations EBITDA The impact EBITDA XXrd half occurred For on QX week XXXX.With approximately strength low of X we XXXX the EBITDA of sales and operating mid- following: expect refranchising quarters is growth full our adjusted high the XXXX, the overcome the growth year second to first adjusted same-store digits. growth high in the to unit be majority incorporate performance of management model year. our EBITDA the growth slower growth and XX rate adjusted most to team, achieve mid- refranchised sales in pronounced in able single-digit anticipate XXXX. as the of the the our adjusted the in XXXX and of of The and effects

between and the following, million.With we Bob. of quarter adjusted back $X.X XXXX, and million same-store the X% I'll anticipate between sales EBITDA X% call of to turn over the $X second and For that, growth of

Robert Wright

has thrilled what Thanks, first during headwinds for Steve.Despite store the quarter, macro are in the with we us. XXXX

we road that of we will an further First, experience. strengthen extensive map digital enhancements have our believe Potbelly digital

X the achieve to our any happy closing, look quarters. us range questions. all for the sharing to that, the franchisees done our In of years we most ahead, capitalize the work and I we're annually for low U.S., like updates build our sandwich of toward making Second, teams support have growth neighborhood.With unit Potbelly we members our to answer to coming forward our of sales as positioned center please is their initiatives progressing the would additional their position for marketing our commitment to over to our and Potbelly growth opportunities years.The team brand us in course, support teams open the our strategy. finally, work a to very well every and Operator, thank on associates, coming of line putting in from the growth in to frontline loved continue initiative questions. employees X,XXX growth And and our franchise double-digit long-term in have units our traffic-driven goal past hard

Operator

[Operator Capital Lake Instructions] with Smith question Mark Street Markets. Our first from is

Alex Sturnieks

line on is this today Guys, for Alex Sturnieks Smith. the Mark

for one me. First

consumer a As quarter, are with trends behavior any the a maybe And location at on throughout then from store consumer we suburban different look shifts see you did anything locations, to any to comps seeing sequentially? add CBD that, you guys with standpoint? to

Robert Wright

for Alex, thanks Yes, question. the

in some with syndicated business that data our customer a the infrequent February and the those all of month digital March to is is the our some more there's what that us.I behaviors. start menu. the and the that have that more on just that's was us.When we we all, sales even a for indication about the reason be that's consumer. of little membership. there's then the -- big did to, great focus that data slight that are that this internal years, a softer just on the them think visit certainly certainly do the think that of have was To we to an bit, could pullback that's positive our industry what quarter, a I That think the than seeing we those and And digital Potbelly the we January returning as the of more. those of area back the And infrequent we to that, numbers we you hearing but we've digital the work we more consumer going and access Those to we in we shop them customers. saw, can more seasonality into can started really consumers. all these year that rebuilt these even to we for we've similar their our XXXX you're funnel But strengthen. be affinity probably the mentioned, We value quarter, had be of ago. quarter, got hear the see part when we're about we to a how a work draw our as shared growth and all off little to maybe everyday going weather Potbelly, at they're had to bring brand. platform the both clearly Perks second a customer first we becoming ones they It's our of are get and into of that to are coming They're assets begins frequent, data But little then frequent wallet my frequency starting why to return more most think the clear, clearly. managing that into you continue most into people remarks the heard eventually a And menu.

slight we address. more think And we that frequency think frequency, we've analyzed as in we shift a can so it a

Alex Sturnieks

No, where me. know for from to Got one previously Could on changed purchase updates locations? curious others more you at just mentioned company your you've sell last any but give or it. when, has that that's units company Yes. if being I demand then all. And about helpful. and selective to the existing desire

Robert Wright

we operating haven't new what with even see and and that brands the strategy comes the that doing we the and market, we example, each we has got numbers some units. past. a are more that What you have of still units we with commitments refranchise but growth. can pipeline, with pleased I if comfortable QX open until continuing catalyze growing It judiciously we shops really Washington, along we're in quarter did announced D.C. you efforts.And in Yes. our number development and see as is that. the an the we you same. market see And always see strategy we're in would is And very the can our we're refranchise still what been committed that with to locations in there, think the deploying company franchise obviously that what the than in Look, take little

sold. it. something of last think I a little shared So continues of with that fewer growth. quarter, to that Out be that the But more them be careful with And roughly to to those it we're this do a our do. we'll a We'll go no lot there'd we XXX willing or X/X you year. still thought We rush about be of we're again, part significant been in rest. isn't that have if of

Operator

Hamblin The Craig-Hallum. next with question from is Jeremy

Jeremy Hamblin

start the franchise the congrats I wanted And strong unit to results. with on development.

kind that time like think I milestone here, the on a X count I'm a basis year-over-year unit of mistaken, this not up is first is if ending years. the in

and think us make on ground, done unit part the had question, that a in I could unit sure getting and the And getting XX unit about that first long progress. So as take to in help the in kudos I franchise start then from get you that. sense then the complete that openings And the shovels were how this year. cadence the units to you you once speak, details heard open? wanted behind the were early so it Did kind a today a it that in on does you of in back to work of to in XX stages. of progress I if wanted say in

Robert Wright

be well. Potbelly, the a really mentioned, XX gosh, that of the thank engineering growing new all we to the leaders construction much X think to reorganized Yes, in reports pleased. early I'll very, it start we're We're opening development and and bit. back again. split sales you're informs the little and And it estate all everything function, efforts, develop but milestone a the then pipeline franchise right, There a the we've down longer more was because innings months. we're year took time with it SLT. delivering to Jeremy, got end ago, And and when between, units. a you. on I than to really in celebrating It's our the good today, as different the obviously, between that very on and way between from how focused XX those We real franchising those

time less we from -- year. in we a a a unit reengineered means time open than As line can result, a we sign that deal, the can

why the you we There by the imagine location, that a So our we can franchisees opening. at time an we rate. time.You are have these timing not by going vary a in one at fact about market to cadence bit deal deeper to deeper working get year. their just through and last into that unit, site the asked entire and open -- does little the units ability for That's deals, one that looking ever-accelerating but went that's simply of reflect

all acceleration wanted give why backloaded cadence development our we the the but back not development, of for going of that this the quickening, in we're to opening well. a year. that some every and a and pipeline, if space get isn't to QX. open year, XX -- you but But might start then the that's you XXXX. to categories. why we to are in by units stage that crazy that anyway. we add That's a unusual slip, openings I why you as a still the loaded can we're little tell pipeline lot we're the know So XXXX end see exposure will, very will units is can to and see as I really year. we're those certainly that in are little year And XX. wanted into to like frankly, them that's them to for the that and you separate counting do continue some and into schedule to sometimes working There something that full more that, of still that's we deeper get XX reason list. time in you Those also much And you a restaurant to know that's this know that,

Jeremy Hamblin

whether think Easter impact come Great. bit out And I called on trends sales had for of a want wanted a -- of to seeing impact, in not are the have for you March for a a from terms exposure negative customers? to customer the that get average back check we the a ticket? to any any management about that restaurants think particularly like sense the I your your change or you you as get saw a areas. seeing given that lot CBD of Are quarter. And sense then in I second. spend,

Robert Wright

Yes. one of question it's those March it's but then And in there we we really swing and more over ones -- together. quarter, And it always how the what they spend, a but no because shared an -- period that's what of there's the is watching March that when other biggest through mix not we blend and trends a those our back of we're January shift, using the of was happened one not this We're Easter to we've indicators we saw holidays us affect too. from still because wanted to on February to the budget. that start way Look, pointing quarter to as way, And probably in menu little customer comes the bit a numbers extra quarters. in on that pressure bit. fits to the that their going past impact, to out.And focused are call it quarter, little the are flip the other that see customers

all going significant indicators maybe can originals is they're our or can those or have move management bigs to on. of the from that and things think with those down great great to sizes. you don't from up are occasion feeling is if shift wallet news some originals where the X of dramatic they menu. sizes but One they're skinnies And shifts, some of a But I people there's evidence not there move about some to little pull is sizes The us we people around their have completely pressure. of bit and

Jeremy Hamblin

wanted restaurant-level XX that margins the progress if think, line of then digital that light I this your deleverage One operating of through you pretty orders I year-over-year. on more I flat progress a saw you app. was comp, the it. on And Got guys provide other basis basis see your some a expenses, item that's points, you're impressive. to quarter, that. color points And down about was particularly in bit on made XXX in making bringing you more could know great

color on would So delivery exposure the culprit was about maybe the any third-party line and the that of remainder that think see to particular the would should there think expenses But deleverage you operating you item on other I down. could year? we your on what how provide

Steven Cirulis

over Yes. really expansion think the operating saw. is proud some line margin to But consumer have Jeremy, remember, changes expenses the other despite quarter experienced of I that we within our that last And our the in And you yes, several Sure. the of Fund. for didn't we're until the Brand we that that us about to we we year. ladder -- second sales. our year last of achieve the X% half we've quarters, took conversations of how talked to up that spend

the you this see year, So lapping difference. QX can

line versus in that that We this QX that Brand what expense sat other last in OpEx year year. have more in line Fund sat

weather shop obviously, QX there's restaurant really piece line, level of with a though some to And our would we around ultimately just to some into there, still it expanding savings for and on with shift see shop we've I year, G&A always Fund at that ability offset year, next think margins in our was offset to so that is, even where in important think I nothing of profitability had thing that particularly and as next where an little otherwise, well also interesting corporate or it bit have settlement our Brand through third-party as that, the in of delivery benefit we're a corporate forth. the whether we fees and And that are, the is costs, forth. quarter the benefited but thing a settlement because there. we focused the remember level, of that that X us. But sitting be our think, head because at an restaurant the expansion, that that's So still But we is reflected as quarter, have the sits.We digital that expansion, some lot margin so.The on which overall about with so other got margin, work outstrip as this margin mention, to was expense. quarter the any even from corporate our we'll like is of we they

Jeremy Hamblin

due to Fund? Brand to the points, much XX? XX points more then And was of it. Got Was XX clarify, the or it how of just that basis basis like

Steven Cirulis

a half. little was half hit. more more It than It the was than of

Jeremy Hamblin

item that settlement And the line under? falls it. just -- third-party Got then that, that the

Steven Cirulis

spread to within within F&P across It margin. it It got how ability OpEx. It our of sat and that our OpEx our of cetera. -- a other around third-parties, sat those forth. et some so and couple shop it that items on report affected sorry, because and our line, from labor in within properly And come some of our fees really of to manage kind it we sat sat details the ability line within labor schedule within affected other the

X evenly items. of among split kind those So

Operator

is Brooks question from next The with Benchmark Company. The Todd

Todd Brooks

feet. cementing that was you X,XXX to new square to -- lead excited new off. looking like Bob, prototype, the you're hear share did at think don't about for new build I Would relative a the box? to I the the cost prior the $XXX,XXX new work,

Robert Wright

it's it, remarks, on in and working last to the but about since you, excited mentioned, I'd happy we're discuss year, But really we're proud not I work and average. Todd. the an secret. it, not that's before an been when We've about to like really things not as We keeping We didn't, this. of that. a average we've talk like to tell been

that First are of to average average margin take at able But clear. advantage look triple-net basis leasing of at make those franchisees of feet, you of of that lease expansion if cost, charges, all, points hundreds today's for that. are let's XXX an of

our where is, that that win many you've side but hit. is to every even other durable back of historical is I'm And restaurant talked goods costs that is, economy companies, rooted of the thing lot a in inflation construction a pretty And so the things.The and the that's the before of hit go some $XXX,XXX hard. bit big lot of hit sure OpEx inflation

you our extracting posted will of And for keep that's is model more we these build the team been operating we the as this work. out them. of So same years costs X last that one oversees

while didn't franchise these to on But building do bringing into the while the average their there. have franchise than less don't of of the re-permit of just way publish possible.I go more in formally recent and as can been not published elements as you to design have more the some we things recent recent efficiently prototype, numbers, the some elements builds aesthetic some getting want we're get that drawings, We openings. will openings, we've all of been of our those but in So and more on $XXX,XXX. it our this, started tell you read

-- going the the business find us get then involved. is on to got engineering we've And economics of the because the ways builds. investment one that to teams it's they're we contractors, the help So about these more greatest improve franchise and things the

think I are days on the ahead our costs. best

Todd Brooks

same And How square in the discussion to to may. kind and it with as of That's lower their number within identification the does I of of the that footprint have that sell the in site whole follow-ups, units? you choose franchisees market, AUVs open easier a do now new some potential that work franchising the foot if how the excitement, then prototype, it from far build this X,XXX at up box I at the great. as square think the the can these One, just accelerating making much much franchisees that you well? effort point sites if cost. the as feet, do to if for do about is you market Two to X,XXX can partners,

Robert Wright

those are advantages. of Both Yes.

for putting materials We Discovery Day this our now. work been in prototype we've have -- a couple of quarters

been the it. and estate And getting careful development been the been their was excited everything inches, is size interested what us. that from seeing those what built and one our with and forth. things.The finalized, on, had franchisees They've in in every of so same on with from I have the QSR, engineered we've we the exposure about mean of remarks down tried while I we've So working very signing box, some to come fixed said to are be to it. fit the benefit you it they're that in front ability specific the exactly to and a big world counter real I was time a so door prototype was the deals

then build standard a you into which is prototype a shop. fit from Our it

Some We've of highlighted we are other that customers elements our if they more made look a line square, We've rectangle. And they a today's to all and little for experience things of be Potbelly location, X,XXX pickup with that's digital experience. and then that the some and the are of it for that's the more the are place best mix about.We've the digital triangular We we were some we and of some that. reoriented used best feet think even can of issues little associates And little designed do. efficient. seating some I to because of than and that's classic build. the starting excited keeps wonderful this well, these smaller the this more our aesthetic franchisees flow -- for built are shelf recently get thought elements plenty a what than work dine-in. needs little more a most in-shop of Still got

things you've you're really the but X,XXX, exactly flexibility, your estate the you're X,XXX begins potential set X,XXX, flexibility with real local So those when for master of that excite a opens not some and earlier got franchisees.And up are right, at market and attacking it the that development. a broker brokers, knowing

So And I it. we've a those firmly that's only I brand improved not compromised around. all win it's the think one way of believe experience, not the we've

Todd Brooks

you're least That's great. maybe -- more I'm value them about talked the course through the it's non-digital specific you tactics how shop. that they sure Shifting you to point of to us to not deliver channel walk -- communicate fairly value into in-shop the the where do gears, that. customers walk need how in you customers, this Bob, going maybe some once direction try to for of to Can to year. customer can about you But overt deliver how to and you over at

Robert Wright

very for for they're if We're conclusion Perks all we're because the we've example. do, -- frequency come quarter back the about rate consumers, places. restaurants, with or meaningfully is infrequent that under that managing and us other customer brand to that for into this is everyday accept over do budget has a lot members, slightly refrigerator. higher And just with the time, we layer and competing is additional familiar the competing nondigital over consumer, talked digital is their overlaps same pulling you they at the month an love is ever can situation. so trade entire see start meal to, of affinity on we've from because consumer financial the they'd certainly some personal food who and It they're mix pressure, And when us with probably And with with infrequent they people's and don't choices. their certain more our openly their restaurants.So our to compromising with options want the work the for Yes.

we So advertising reach to customers. little digital for But it's harder a in use addition. those us, still

In a majority effort where is goes their advertising fact, of that's large our digital efforts. through

our they're still not part up our spread to in-shop, those sure I are we brings more they're make who to to maybe do digital Perks remembering that program.And too, So they're just their they those people when using back yet things come would that that slightly to word do picking think messages, they're those and them to little they and bit a then as so even because have of where the in-shop, ads, which naturally than want skew that visit, wallet. trying you they that and higher we're go manage some if frequency in do messages seeing keeps

Todd Brooks

pretty shop-level at can effort? quickly? the Or be long-tailed delivered a that that Is

Robert Wright

We it pretty quickly. deliver can Yes. Yes.

Todd Brooks

follow-up Steve, back jump I'll one queue. just and to then And quick in

And mix into up baked I assumption flat positive we're the for on to Within that the low sales single-digit What's quarter think, the X% at guidance flat Bob, to price that's X%. you quarter-to-date. same-store commented second assumption? up

Steven Cirulis

and bit. Sure. the Thanks a the labor. news zone, same we pricing I'll in little years, stayed we'll price our in the the we've and manage low lows way actually kind deflate costs costs in is of mid couple costs question. this of And with of of area. saw for kind single-digits for for paper that the some of outrun commodity which Labor our last is the our the for discussed good quarter, kind food to start inputs, just order

probably efforts end what at our is new understand way through that that that of that we'll marketing forward on in me push efforts our year you'll saying that, same-store expectation price that our ultimately you the X% see perhaps some right, to price some like and in a we'll X%.So good strengthen price some price offset bring show and of value -- our year us. start increase same of netted the digital low for that the that carried offers gross can the to these in comps, side benefits is of challenges, going that's And continue and see should about X.X% traffic, about but for year. quarter up that's So get sales. -- you And describing the with we we're of and to we as had so increase said, of all modest, mid-Xs. the to was a from into kind range, in we'll traffic to X%, X% of in carrying the Bob quarter kind when with we We'll about this for the the like X%, We right? the

Operator

with Matt Blair. from Curtis William The next question is

Matthew Curtis

to quarter, Is the comp year. had the point this in still full you last at said I margin year you think opportunity restaurant-level narrowing guidance? XX% play to Bob, given this that get a in

Robert Wright

Yes.

would to And us the get softer some it's the for take you this was, with what to think our QX. we where where sales comments we that think of margins, we're the and it's the keep other great things is ways expanding margins. which of there is we against expanding development, those still for one about going there's emphasis of year, if to were that I in new QX, still us talking with maintain get care you about us delivering tougher XX% most project just you original to keeps expansion about that plan franchisees build the after the course, margin prototype. saw they can those if in the especially what shared kind But kind is through with be I how and where think quickly put margins Steve those to That's this of I expansion shops. margin of

portfolio some guided manage though, on have that company, that in the tell still that top those already, and still growth corporation adjusted we we've for look profitability mentioned our you opportunities at by our So we with the I overall for EBITDA company-owned shop elsewhere. cost of the to of recognize We're that other mid- margins and single see and continue measures what significantly means think line, you're we important deliver to savings would right EBITDA out.What clearly year. year growth a adjusted other the Steve as that Well, our to high Matt. digits. our for driven a to but our is I part you majority this company such an course, to point is that

meter but way goes the shop-level earnings margins. of we're building on in continuing responsible while also our it most that those things serve growth with to that to we the be can growth and still So like some expand those investments G&A

think how those that's working together. are I X So

Matthew Curtis

for Okay. comp flattish, guidance of sort guess the Got the implies it. be And traffic will that full guess, then I year. year I full

margin expansion with would opposed level like -- case, expect by the that year supply the and as leverage? would more optimization driven be levers to efficiency chain assuming sales that's this you labor So unit

Robert Wright

the leverage... mean I sales Yes.

Steven Cirulis

that's... Yes, think I

Robert Wright

Oh, sorry, Steve. Go ahead.

Steven Cirulis

plan Matt. out, expand was the we throughout laid I -- Yes, expecting year. the The to margins Bob. have -- sorry, still as the Sorry, right, we're

to had a it. going see of some some a middle a the half see we play on gains, nevertheless, one middle we'll in last in expect is a the that to second of settle bit -- That commodity as But go inflation we strides. we quarter of at P&L, some continue the little we the first the area But of there, a less to time that's than we where the down quarter component role role help areas to of our least make back them sales We thought sorry, be labor of second perhaps in continue kind spoke. commodities. see some will -- down come bit.But as we

fantastic. we Digital And continue through of as ways to marginally our out our to we benefits of there. Potbelly to see We'll kind tweak which continue some being that, labor is find that also, hours benefit which a which hours some Our guide, labor ends expand some we continue pull well. to operation, labor of Kitchen to of up

that sure. for in labor line, leverage So

to otherwise that with get a the I from back push Fund drag think even the in continued little still us continue though -- leverage be.I OpEx Brand also, some sales until in the leverage not as there's that to so we year. the the is as just we intense for see side, on new we would forth our it we'll talked a of get opportunities bit We to about other little earlier, of think, lapping leases occupancy half and that line

nets And into just why margin. out full guiding shop-level of the to costs, for then what too, as EBITDA of margin, corporate the to line the We as having expand it the the the to ability we in can continue P&L favor, did Bob relates that's think terms work we us. that elements confident So to said, we're year. our lower

Operator

Ladies question-and-answer the the for we would end call Mr. to Wright back session. Bob to today's I turn like reached of and have gentlemen, closing over remarks.

Robert Wright

the thank Thank thank you, and you us joining for all and questions. today especially you for

associates of growing our and well. body franchisees of proud all our their to especially grateful we're team, and heard, our quarter you of proud employees of as franchisees, As and our the

talking look for So to to Have thanks great night. your We you soon. forward time. a again again

Operator

The has today's Thank conference now you concluded. presentation. for attending

disconnect. may You now

Potbelly (PBPB) 8 May 242024 Q1 Earnings call transcript