Potbelly Q1 2025 slides: Franchise growth accelerates amid modest same-store sales gains

Introduction & Market Context

Potbelly Corporation (NASDAQ:PBPB) presented its first quarter 2025 earnings results on May 7, showing modest same-store sales growth while significantly accelerating its franchise expansion strategy. The sandwich chain reported systemwide sales of $140.7 million, representing a 5% year-over-year increase, as the company continues its transition "from turnaround story to growth story."

In after-hours trading following the presentation, Potbelly shares rose 5.36% to $9.02, suggesting investors responded positively to the company’s results and outlook despite relatively flat core metrics.

Quarterly Performance Highlights

Potbelly reported a 0.9% increase in same-store sales for Q1 2025, showing improvement from the 0.2% decline in the same period last year. The company’s average weekly sales (AWS) reached $24,550, up from $24,250 in Q1 2024.

As shown in the following chart of quarterly financial results:

While sandwich shop sales increased only 1% to $109.0 million, franchise royalties, fees, and rent income surged 31% to $4.7 million, highlighting the company’s successful franchise expansion strategy. Adjusted EBITDA declined 3% to $5.5 million, though the company noted this was negatively impacted by a $1.1 million legal settlement benefit in the prior-year period.

Shop-level profit margin showed modest improvement, increasing to 13.7% from 13.5% in Q1 2024. This improvement was primarily driven by food, beverage, and packaging cost efficiencies, as illustrated in the following waterfall chart:

Strategic Initiatives

Potbelly continues to execute against its five-pillar strategic plan focused on "Traffic-Driven Profitability and Unit Growth." The company’s strategy encompasses food quality, customer experience, digital engagement, and franchise-focused development.

Menu innovation remains a key traffic driver for Potbelly, with the company introducing several new items during the quarter:

The new Prime Rib Steak Sandwich, Banana Pudding Shake, and Chili Mac represent Potbelly’s efforts to differentiate itself in the competitive fast-casual market while driving traffic and check size.

Digital engagement continues to be a success driver for the company, with its "Potbelly Perks" loyalty program helping to strengthen customer relationships and drive repeat visits:

Forward-Looking Statements

For Q2 2025, Potbelly expects same-store sales growth of 1.5% to 2.5% and adjusted EBITDA between $8.25 million and $9.75 million. The company maintained its full-year 2025 guidance, projecting:

The company’s long-term outlook remains focused on sustainable growth, with targets including low-to-mid-single-digit same-store sales growth, low-double-digit unit growth, and low-double-digit to mid-teens adjusted EBITDA growth.

Franchise Expansion Momentum

The most significant growth story for Potbelly continues to be its franchise expansion. The company reported 766 total shops in Q1 2025, representing a 19% year-over-year increase with 124 additional locations compared to Q1 2024:

This expansion is supported by Potbelly’s Franchise Growth Acceleration (FGA) Initiative, which targets specific geographic markets across the United States:

The company highlights several factors driving franchise interest, including its 47-year history, high average unit volumes, and flexible 1,800 square foot prototype design that accommodates both dine-in and digital experiences:

Detailed Financial Analysis

Potbelly’s adjusted net income for Q1 2025 was effectively breakeven at $0.0 million, compared to $0.2 million in Q1 2024. The company’s EBITDA improved significantly to $3.8 million from $0.7 million in the prior-year period, though this was largely due to the absence of a $2.4 million loss on debt extinguishment that impacted Q1 2024 results.

The company’s shop-level profit increased slightly to $14.9 million from $14.5 million in Q1 2024, while G&A expenses rose to $12.4 million from $11.5 million, reflecting investments in supporting the company’s growth initiatives.

Systemwide sales have shown consistent growth over recent quarters, with the Q1 2025 figure of $140.7 million continuing the positive trend:

Overall, Potbelly’s Q1 2025 results demonstrate the company’s continued progress in executing its strategic plan, with franchise expansion serving as the primary growth driver while same-store sales show modest improvement. The company appears well-positioned to achieve its 2025 guidance targets, particularly regarding new unit development and adjusted EBITDA growth.

Full presentation:

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