Potbelly Launches Large Area Developer Incentive Program for Multi-Unit Franchisees

Rhea-AI Summary

Potbelly (NASDAQ: PBPB) has launched the 'Potbelly 50/50 Large Area Developer Incentive Program' to accelerate franchise expansion across the U.S. The program targets multi-unit franchisees who commit to opening at least 15 Potbelly shops within eight years.

Key benefits for qualifying franchisees include:

• Reduced initial franchise fees
• Reduced deposit fees
• 50% discount on royalty fees for shops opened ahead of schedule

The company is specifically targeting existing franchisees of non-competing brands with strong portfolios and financial capabilities. Franchise opportunities are available in multiple markets including Atlanta, Phoenix, Denver, Ohio, Virginia, Pennsylvania, parts of Florida, Tennessee, Dallas, Houston, and other Texas locations. Potbelly currently operates over 440 shops nationwide, including more than 90 franchised locations.

Positive

• New incentive program reduces franchise costs and fees
• Aggressive expansion plan targeting 15+ shops per franchisee
• Strategic focus on experienced multi-unit operators

Negative

• Success depends on franchisees meeting aggressive timeline targets
• Significant capital requirements for multi-unit development
• Program benefits contingent on accelerated opening schedules

Insights

Financial Analyst

Potbelly's new 50/50 Large Area Developer Incentive Program represents a calculated strategic shift toward accelerated franchise expansion while minimizing capital expenditure. By offering reduced initial franchise fees, deposit reductions, and 50% royalty discounts for early openings, Potbelly is effectively trading short-term revenue for faster market penetration and long-term recurring royalty streams.

The 15-shop minimum commitment over eight years creates a predictable development pipeline while targeting sophisticated multi-unit operators with proven execution capabilities. This approach addresses two critical needs simultaneously: rapid footprint expansion and quality franchisee recruitment.

From a financial perspective, this program will likely create some near-term royalty dilution but should accelerate unit growth, potentially improving the company's valuation multiple which currently sits below some faster-growing peers. With 440+ total shops including 90+ franchised locations, Potbelly has substantial whitespace for expansion through this capital-light growth model.

The timing aligns with industry trends showing increased multi-unit development activity as operators seek to achieve scale economies. By targeting existing franchisees from non-competing brands, Potbelly is focusing on experienced operators who understand development timelines and have established access to capital — critical factors for successful implementation of this accelerated growth strategy.

Growth Strategy Specialist

Potbelly's new incentive program demonstrates a sophisticated approach to modern franchise development. The structure reveals a thoughtful balance between maintaining brand standards and accelerating unit growth. By requiring a minimum 15-unit commitment, Potbelly ensures franchisees have sufficient scale to justify investment in operational infrastructure while the accelerated timeline incentives prevent territorial warehousing.

What's particularly noteworthy is the 50% royalty reduction mechanism that rewards early openings. This creates a powerful economic incentive that aligns franchisee and franchisor interests around speed-to-market without sacrificing location quality. The program effectively transfers some of the time-value benefit of accelerated openings back to the franchisee.

The strategic targeting of existing multi-unit operators from non-competing concepts is equally significant. These operators bring established real estate relationships, existing back-office capabilities, and proven development expertise. This reduces Potbelly's onboarding costs and minimizes execution risk compared to recruiting first-time franchisees.

Markets like Atlanta, Phoenix, and Texas represent high-growth regions with favorable demographics for Potbelly's value proposition. The company appears to be systematically addressing development gaps in its footprint rather than pursuing random opportunistic growth. This suggests a disciplined approach to network planning that should enhance brand presence and marketing efficiency across contiguous territories.

Program will reward efficient development timelines with significant financial savings, while supporting long-term growth plans

CHICAGO, March 04, 2025 (GLOBE NEWSWIRE) -- Potbelly Corporation (NASDAQ: PBPB), the iconic neighborhood sandwich shop concept, today announced the launch of its Potbelly 50/50 Large Area Developer Incentive Program, designed to reward multi-unit operating partners who successfully develop and open shops on an accelerated timeline. This announcement comes as Potbelly continues to strategically execute its long-term growth plans and expand its brand across the U.S.

As part of the program, franchisees who enter a Shop Development Area Agreement (SDAA) to open at least 15 Potbelly shops in eight years or less will now have the opportunity to receive substantial financial benefits for beating their committed dates. Through the Potbelly 50/50 Large Area Developer Incentive Program, Potbelly will offer qualifying franchisees reduced initial franchise fees and reduced deposit fees, as well as 50% off royalty fees for the period of time the shop is opened ahead of the required opening date.

“Our franchisees are key partners in our long-term growth, and Potbelly is proud to support them in all aspects of their business, including the critical development stage,” said Lynette McKee, CFE, Senior Vice President of Franchising at Potbelly. “We are excited to introduce these new benefits to support and deliver significant cost savings to our multi-unit franchisees who are able to execute efficient development timelines and bring Potbelly’s good vibes and delicious food to new neighborhoods.”

As Potbelly continues to grow, it remains focused on attracting existing franchisees of non-competing brands with a strong franchising portfolio and financial strength to help the brand scale. Franchising opportunities are available across the U.S., including in the markets of Atlanta, GA, Phoenix, Denver, Ohio, Virginia, Pennsylvania, parts of Florida and Tennessee, Dallas, Houston and other Texas markets.

You can learn more about franchise opportunities with Potbelly at https://www.potbelly.com/franchising-why-potbelly.

About Potbelly
Potbelly Corporation is a neighborhood sandwich concept that has been feeding customers’ smiles with warm, toasty sandwiches, signature salads, hand-dipped shakes and other fresh menu items, customized just the way customers want them, for more than 40 years. Potbelly promises Fresh, Fast & Friendly service in an environment that reflects the local neighborhood. Since opening its first shop in Chicago in 1977, Potbelly has expanded to neighborhoods across the country - with more than 440 shops in the United States including more than 90 franchised shops in the United States. For more information, please visit our website at www.potbelly.com.

Forward Looking Statements

This press release may contain statements that might be considered as forward-looking statements or predictions of future operations including, but not limited to, statements regarding the Company’s ability to execute its long-term growth strategy, the expansion of the Potbelly brand across the U.S. and the Company’s ability to attract franchisees of non-competing brands. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management’s belief or interpretation of information currently available. These statements and assumptions involve certain risks and uncertainties including the Company’s ability to successfully execute its long-term growth plans and the Company’s ability to achieve its planned expansion through the Potbelly 50/50 Large Area Developer Incentive Program. Actual events may also differ from these expectations as a result of the risks identified from time to time in our filings with the Securities and Exchange Commission. We assume no duty to update these statements as of any future date.

Media Contact:
ICR
PotbellyPR@icrinc.com

FAQ

What are the requirements to qualify for Potbelly's (PBPB) new franchise incentive program?

Franchisees must commit to opening at least 15 Potbelly shops within 8 years through a Shop Development Area Agreement (SDAA).

What financial benefits does PBPB's 50/50 Large Area Developer program offer?

The program offers reduced initial franchise fees, reduced deposit fees, and 50% off royalty fees for shops opened ahead of schedule.

How many Potbelly locations currently exist in the United States?

Potbelly operates more than 440 shops in the United States, including over 90 franchised locations.

Which markets is Potbelly (PBPB) targeting for franchise expansion in 2025?

Target markets include Atlanta, Phoenix, Denver, Ohio, Virginia, Pennsylvania, parts of Florida, Tennessee, Dallas, Houston, and other Texas markets.