Potbelly Q2 2025 slides: Same-store sales accelerate, franchise growth surges 23%

Potbelly Corporation (NASDAQ:PBPB) reported strong second-quarter 2025 results on August 6, highlighting accelerating same-store sales growth and significant franchise expansion. The sandwich chain’s stock, which closed at $11.51 prior to the presentation, has seen a 3.79% increase on the day.

Quarterly Performance Highlights

Potbelly delivered solid financial results across key metrics in Q2 2025. Systemwide sales reached $154.2 million, representing a 6.7% increase compared to the same period last year. Same-store sales grew 3.2% year-over-year, showing significant acceleration from the 0.9% growth reported in Q1 2025.

As shown in the following chart of quarterly systemwide sales growth:

The company’s average weekly sales (AWS) also demonstrated consistent improvement, reaching $27,040 in Q2 2025 compared to $26,110 in Q2 2024. This performance reflects a steady recovery from the negative same-store sales experienced in Q3 2024.

The following chart illustrates the company’s AWS growth trajectory:

Potbelly’s profitability metrics showed notable improvement as well. Shop-level profit margin expanded to 16.7% in Q2 2025, up from 15.7% in the prior-year period. This margin expansion was primarily driven by an 80 basis point decrease in food, beverage, and packaging costs, along with a 30 basis point reduction in occupancy expenses.

The breakdown of shop-level profit margin improvements is illustrated here:

Adjusted EBITDA increased 13.0% year-over-year to $9.6 million, while franchise royalties, fees, and rent income surged 27.7% to $5.3 million, highlighting the success of Potbelly’s franchise-focused growth strategy.

Strategic Initiatives

Potbelly continues to execute against its five-pillar strategic plan, which focuses on "Traffic-Driven Profitability and Unit Growth." The company’s mission is "to delight customers with great food & good vibes," with a vision "to be the most loved sandwich brand in every neighborhood."

The company has introduced menu innovations to drive traffic and sales, including the new Prime Rib Steak Sandwich and Potbelly Hot Pepper Chips. These additions aim to bring exciting new flavors to the menu and enhance customer appeal.

Digital transformation remains a key focus area, with Potbelly rebuilding its website and mobile app from the ground up to make ordering faster and easier. This initiative builds upon the digital sales momentum reported in Q1 2025, when digital channels accounted for over 42% of total shop sales.

Franchise Growth Acceleration

Potbelly’s franchise expansion strategy continues to gain traction. The company reported 816 open and committed shops as of Q2 2025, representing a 23% year-over-year increase from 663 shops in Q2 2024. This growth of 153 additional shops marks significant progress toward the company’s target of 2,000 locations.

The following chart illustrates this franchise growth acceleration:

The company’s franchise strategy is supported by several key factors, including a strong economic model with what Potbelly claims is "among the highest Average Unit Volume (AUV) in the sandwich category" and a "~2:1 sales to investment ratio." Potbelly has also introduced a smaller 1,800 square foot prototype design, which is 500 square feet smaller than the current average, providing more flexibility for real estate options.

Financial Outlook

Looking ahead, Potbelly provided guidance for both Q3 2025 and the full year. For the third quarter, the company expects same-store sales growth of 3.25% to 4.25% and adjusted EBITDA of $9.0 million to $10.0 million.

For full-year 2025, Potbelly anticipates:

• Same-store sales growth of 2.0% to 3.0%
• At least 38 new shop openings
• Adjusted EBITDA of $34 million to $35 million

The company also outlined its long-term growth targets, projecting low-single to mid-single digit same-store sales growth, low-double digit new unit growth, and low-double digit to mid-teens adjusted EBITDA growth.

From Turnaround to Growth Story

Potbelly’s Q2 2025 results demonstrate the company’s successful transition "from turnaround story to growth story," as highlighted in its presentation. The acceleration in same-store sales growth from 0.9% in Q1 to 3.2% in Q2, combined with expanding profit margins and robust franchise development, suggests that the company’s strategic initiatives are gaining momentum.

The company’s focus on menu innovation, digital transformation, and franchise-led expansion provides multiple growth avenues. With 816 open and committed shops against a target of 2,000, Potbelly has significant runway for continued expansion.

While the fast-casual dining sector remains competitive, Potbelly’s 47-year brand history and improving financial metrics position the company to capitalize on its growth opportunities. Investors will be watching closely to see if the company can maintain its sales momentum and execute on its ambitious franchise growth plans in the coming quarters.

Full presentation:

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