Potbelly CEO wants to make sandwiches more interesting
The fast-casual chain has struggled in an increasingly crowded market
Potbelly Corp.’s new chief executive thinks more interesting sandwiches can save the struggling restaurant chain.
“You don’t differentiate yourself by calling yourself generic names,” said Alan Johnson, a consultant and retail executive with turnaround experience who was recruited in December to take over as CEO.
The four-decade-old company, named for the antique potbelly stoves that decorate its restaurants, built a devoted following with live music performances and hearty sandwiches like “A Wreck,” piled high with salami, roast beef, turkey and ham. But in recent years, Chicago-based Potbelly became harder to distinguish from other sandwich makers.
Consulting firm Technomic Inc. said the number of stores operated by fast-casual sandwich chains with more than $50 million (U.S.) in annual sales, a category that includes Jersey Mike’s Subs and Jimmy John’s Gourmet Sandwiches, grew 70% to more than 7,500 over the past five years.
After Potbelly’s sales growth began to slow, then-CEO Aylwin Lewis said in May 2017 that he would step down. Three months later, the company said it would review its business and consider selling itself.
Mr. Johnson called 2018 a transition period and said that sales likely won’t improve until next year. For the quarter ended April 1, same-store sales at companyowned restaurants—most of the 500 total—fell 3.6%. Potbelly’s shares are up less than 1% this year.
The Potbelly CEO said he is focused on improving Potbelly rather than selling the business. “We had a lot of interest, but in the end we and the board decided to implement the strategy we’re working on now,” he said.
Mr. Johnson said Potbelly needs to make its sandwiches stand out. Chicken salad and turkey club sandwiches introduced before he was hired, he
said, sound too much like those served at other chains. The company wouldn’t offer any specific new names that it is considering.
Mr. Johnson also said Potbelly’s menu had grown too complicated, with 115 items at 66 different prices. “It’s like looking at an Excel spreadsheet,” he said. He plans to trim it back and to pair sandwiches with cookies and drinks. Potbelly hasn’t offered such “combo meals” before.
He recently overhauled Potbelly’s management team. One of
his new recruits is Ryan LaRoche, a former executive sous chef at the Michelin-starred L’Atelier de Joël Robuchon in Las Vegas. Mr. LaRoche, the chain’s vice president of culinary innovation, also worked as an executive chef at Park Hyatt hotels in Chicago and Washington.
One of the first menu items developed by Mr. LaRoche, two barbecue pulled pork sandwiches—one spicy, one not—will go on sale at Potbelly restaurants for a limited time later this month. He also is working to improve breakfast items.
Mr. Johnson said he also will expand the chain more slowly and convert more stores into franchises after what he said was a too-rapid expansion into too many markets.
The sandwich chain has grown the number of customers in its loyalty program by 60% to 800,000 since the beginning of the year by providing more personalized rewards and perks beyond a free cookie.
The average Potbelly customer visits the chain 16 times a year, Mr. Johnson said. He wants to lure them in once more, and to get them to buy one more item when they visit.
The company is spending more on marketing and training employees to upsell customers who order a sandwich by offering them a milkshake too. To date, he said, too few employees are encouraging customers to add items to their order.
“That’s the sales-prevention business,” he said.