QSR May 2023

FAST CASUAL

accessible to them, that they could use our digital assets.” Potbelly’s previous app was a white-label version of some body else’s—not an uncommon move for restaurant brands. The chain skinned an existing model and branded it. But it wasn’t designed for Potbelly. That flip can’t be understated, Wright says. The new app and web experience mimics how customers progress when they order in-store. It flows through the same steps, which include picking a sandwich, choosing a size, and selecting the bread. “We’re having this dialogue with you when you come through the shops,” Wright says. “We needed to build a way that could happen in the digital environment and be smooth, with a lot less clicks, but still reflect the way that you would step through if you came inside the restaurant.” Potbelly’s Perks loyalty program was rebuilt to unlock bet ter data. The ability to earn points and redeem them isn’t where the flip happened for Potbelly; rather it was the ability to foster connection. There are tiers now that offer different experiences. Potbelly can pulse incentives to diners based on how they behave. There’s Perks-only promotion activity, like digital-exclusive deals—such as you see on National Cookie Day—that nurture a VIP-like experience over a straight dis count. “And what we found is the brand love that we always knew was there, really comes to life with our Perks consumers,” Wright says. “And so, when you give them special treatment, they turn around and give us additional traffic.” Digital represented 38 percent of revenue in Q4. Prior to the pandemic, it was single digits. Headed into the final stretch of 2022, Perks boasted north of 2.2 million members and added 115,000 users in just Q3. “It’s digitally targeted in ways that fit [customers’] usage of the brand. That’s when it feels like the cus tomer has that experience and they start to feel like the brand really understands me and how I’m using their brand, and there fore it has a lot more upside in terms of frequency,” Wright says. It’s a formula unfolding across the sector. Use digital pro motions to spike acquisition and then follow through with a nurturing campaign that treats consumers differently as they start to develop a frequency pattern. To put in plainly, for Pot

belly and countless others, it’s a capability that just wasn’t in the playbook a couple of years ago.

FRANCHISING, MENU CHANGES, AND MORE TO COME Another unique trait of Potbelly, especially among its public, competitive set, is the brand’s makeup. As of December 25, 2022, there were 429 locations. Only 45 of them were franchise shops. The franchising program began around 2010 or so but never quite pieced together. Wright, who’s worked at Charley’s Philly Steaks, Checkers & Rally’s, and Domino’s, and was navi gating operations for more than 6,000 North America Wendy’s at the end of his tenure, has been in the franchising space his entire career. He decided early on Potbelly would lean into franchising going forward. The company set a previous goal to refranchise roughly 25 percent of its corporate footprint mid term and eventually ramp up annual franchise unit growth to at least 10 percent. The big ticket: reach 2,000 stores in the U.S. over the next eight to 10 years and become at least an 85 percent franchised system. This four-digit target didn’t emerge from the abyss. Pot belly conducted market holding capacity research for the entire country before it let investors in on the plan during a March 2022 quarterly call. The combination of shop development area agreements and refranchising forms the basis for the growth Potbelly has in mind. And all across a diverse lineup of inline, endcap, drive-thru, and nontraditional venues. Wright says Potbelly used its 2020 stall to prepare to grow again. It started with going for the biggest return items on that five-pillar approach. There were two Potbelly bet on: the tech stack outlined earlier, and the menu. Potbelly came into COVID already having done exten sive work with the latter. In fall 2018, the company tested new menuboards at 58 locations and piloted, for the first time, the inclusion of combos and bundle offers. There was a pick-your pair option and a make-a-meal choice. By February, the new, enhanced menuboards were systemwide. The biggest change,

POTBELLY’S MENU INNOVATION WON’T STAGNATE.

POTBELLY (2)

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MAY 2023 | QSR | www.qsrmagazine.com