Matthew Curtis

Matthew Curtis inquired if the new franchisee incentive plan could accelerate development in 2025 and asked about its reception. He also asked for guidance on the appropriate G&A expense run rate for 2025.

Answer

CEO Robert Wright explained that the new incentive program for large developers is designed to encourage long-term, accelerated growth and has been received very positively, though its primary benefits will materialize beyond 2025. CFO Steven Cirulis stated that while G&A dollars will increase slightly in 2025 to support growth initiatives and cover inflation, the company expects to see improved leverage, with G&A decreasing as a percentage of system-wide sales.

Matthew Curtis asked for an update on the value ideas Potbelly was screening, questioning if new initiatives would launch in Q4 or 2025. He also inquired whether the recent comp acceleration was driven by increased marketing spend.

Answer

President & CEO Robert Wright confirmed that some screened value ideas, like 'Kids Eat Free on weekends' and 'half-price shakes on weekends,' have already been implemented with positive results. He noted the company has a long list of other ideas it will continue to test. Wright clarified that the recent sales momentum was achieved without increasing marketing spend, which remains around 3% of sales. He views the potential to increase marketing spend in the future as 'dry powder' for the company.

Matt Curtis from William Blair questioned whether the new menu items have driven a discernible transaction lift or caused a trade-off on average ticket. He also asked for color on the initial reaction to the brand relaunch, particularly in the core Los Angeles market.

Answer

CEO Liz Williams stated that the company is seeing increased frequency from existing customers and is also attracting new customers, attributing this to a combination of innovation, operational improvements, and value offers. Regarding the rebrand, she described it as part of a successful mix that is driving an uptick in new customers, but believes its full impact will build over time as more restaurants are remodeled and marketing efforts continue.

Matthew Curtis asked for a breakdown of the average ticket in the quarter between price and mix, and also inquired about the per-plate consumption trends during the third quarter.

Answer

SVP Benjamin Porten stated that the price/mix component was a positive 0.8%, composed of 4.3% in effective price offset by a negative 3.5% mix. He expressed pleasure that mix has stabilized in the low-to-mid single-digit negative range and sees potential for it to turn positive with new initiatives. He clarified that per-plate consumption has remained steady at approximately six plates per person for the last several years, and the new 'light rice' option was implemented after Q3 ended.

Matthew Curtis asked about the embedded comparable sales expectations for the second half of the year within the full-year revenue guidance and requested details on the intellectual property (IP) collaborations planned for the upcoming months.

Answer

Hajime Uba, through interpreter Benjamin Porten, stated that the company does not provide explicit comp guidance but suggested it could be inferred from the revenue guidance when considering the outperformance of new units. CFO Jeff Uttz revealed the upcoming IP pipeline includes returning successful campaigns like Demon Slayer, One Piece, and Peanuts, as well as a new collaboration with Nintendo's Kirby in fiscal 2026, with 7-8 total collaborations planned for that year.

Inquired about the company's liquidity runway, the updated timing for the Coral Gables location opening, and the specifics of recent marketing missteps and subsequent corrections.

Answer

The company believes current liquidity, combined with holiday cash flow and cost savings, is sufficient to get through most of calendar 2025, although they are still seeking to raise additional capital. The Coral Gables opening is now expected in Q4 of fiscal '25. The marketing issue was a reduction in paid digital spend which negatively impacted sales; this has since been reversed.

Matthew Curtis asked for details on the new loyalty program's impact on customer frequency and overall sales during the quarter and its expected future contribution.

Answer

CFO Tricia Tolivar reported that since the launch, loyalty sales as a percentage of total revenue increased by 200 basis points in the quarter. She noted that while it is still early to measure frequency changes, they anticipate a benefit and are encouraged by the initial results from the program's test phase.