QSR May 2023

FAST CASUAL

if you look at Potbelly’s center panel of the menu, was to take it down from 55 price points to 18. Management at the time called it, “one heck of a complicated thing.” It was referred to internally as “mission impossible.” The reason boiled down to simple math. With 486 locations at the time, Potbelly had 680 unique menuboards in terms of size. It had to reprogram the point of sale, redo the company’s app, redo its website, change the loyalty program, and update the catering and delivery functionality for how customers pay. When Wright walked in, customer data was pointing to a new roadblock—guests had a problem with Potbelly’s value equation. “The reason we had been bleeding traffic was deeply rooted in what we had done to the value of the Potbelly experience,” he says. “It was with the food. And, basically, what do you get for what you pay.” In some cases, guest feedback noted they didn’t like what they were paying (prices had gone up). But more vitally, they didn’t feel like the experience had kept up with the hikes. And in just as many instances, Wright says, people felt the food itself wasn’t matching the price point and Potbelly’s past. Again, it flashed the brand drift alarm Wright wanted to guard at all costs. So Potbelly got to work. Unveiled in August 2021, the brand added a “skinny,” smaller size that lowered the entry point and enabled customers to create pick-and-pair options that better fit their appetites. Alongside, Potbelly made its original size big ger and its “big” even larger. It put more meat and cheese per inch in the larger sandwiches and “just dove in to give the cus tomer more,” Wright says. “And course correct.” Potbelly tested the platform “for months and months.” Data suggests the brand got it right. The skinny option in particu lar helped to reshape Potbelly’s accessibility. There were a fair number of lunch consumers who didn’t consider the brand approachable from a price perspective before, Wright says. Potbelly took some 60 SKUs out in total—a move that ulti mately shielded it a bit from commodity chaos in 2021 and 2022, and the inflationary pressures that remain in flux today. “We kind of reset our base with the new menu,” Wright says. “That gave us a chance to take some modest price increases. I say modest compared to competitors—they’re very high price increases versus what we’ve done in the industry in the past [about 13 percent last year for Potbelly]—but we did it without hurting the value equation.” Another hallmark of Wright’s leadership is that he’s been a top-line-first operator for more than 35 years. At the founda tion, he says, there’s no better way to grow profitability than to grow sales. And getting Potbelly’s unit-level economics to a desirable point was critical to pushing franchise expansion. The brand drove Q4 shop-level margin expansion up 14.2 percent and finished 2022 with shop margins at 10.5 percent. The goal on the whiteboard today is 16 percent. And it’s rooted in guest response. “That’s why things like Perks and the digital advertising that we’ve done and what we did with the menu, we went right to the heart of the rela tionship with the customers with the value part of the menu,” Wright says. In recent history, he adds, the company underinvested when

it came to advertising. CMO David Daniels, who joined the brand in August 2021, previously serving as SVP of marketing at The Food Hall Co. in Dallas, fine-tuned Potbelly’s creative, from refreshed logos to social media placements. Last year, the investment was still only about 2 percent of sales. Video content is on deck. And the new brand work laid down has the poten tial to work even harder for the brand, Wright says. There’s also Potbelly’s Digital Kitchen plan, or “PDK,” which supports order accuracy, speed of service, and through put. The in-shop platform was designed to improve a restaurant’s ability to sort orders, present them to employees, and coordi nate processes. Essentially, what Potbelly did was take advantage of the fact it already had two make-lines and digitized them. The chain can monitor stores with the system and troubleshoot against operational gaps. It can also use data to better deploy labor. As the calendar turned to 2023, PDK was live in 38 loca tions, with plans to end the year closer to 100. “We’re getting very, very nice returns on the customer experience,” Wright says. “We’re measuring those shops against control shops for overall customer experience, for order ready on time, which is really critical for digital orders—it’s as important as accuracy … we’re actually seeing some of our early measures on things like food quality, which makes sense on time. It’s ready, it’s hot, and the accuracy is there.” “And here’s the thing that we’re really enjoying: it definitely is helping us with those more capacity constrained shops.” PDK provided a boon in efficiency. Wright says it takes seven hours of labor out of shops. “Our managers and teams will tell us, ‘if you take this out, I’m going to leave,’” he says. Potbelly prioritized other operational efficiencies across 2022, too. It implemented a streamlined training program and refined how managers staff stores with the help of a house-based labor guide. Digital tipping joined the line as well. Dressed down, operators at all levels have a clearer view of what it means to be “fully staffed” throughout the week. Pot belly made other, less publicized investments in solutions like customer feedback tools and food safety systems that improve consistency and make the store-level business more predictable. Getting back to growth and where this goes from here, Wright says Potbelly’s 2,000-unit outlook is actually “some what conservative.” “This is where the story becomes interdependent on the other elements of the strategy,” Wright says. “Growing the top line. Getting those margins back to the teams, 16 percent or better, is where it becomes exciting for franchisees. My experience in decades in the space is you want a sales-to-investment ratio that’s exciting for franchisees. You want an earnings capacity that allows you to recoup that investment in a shorter period of time than what the rest of the competition is doing. And what I saw, even though we weren’t performing that way coming out of the pandemic, was all of those pieces coming together. And there was no reason to wait to start to build the infrastructure to support franchise growth.”

Danny Klein is the editorial director of QSR and FSR . He can be reached at dklein@wtwhmedia.com .

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MAY 2023 | QSR | www.qsrmagazine.com