Potbelly Corp. is paring back its planned closures to between 25 and 30 units after successful lease negotiations with landlords, company executives said Thursday.
The Chicago-based fast-casual company earlier in the COVID-19 pandemic had warned that as many as 100 of its more than 400 sandwich restaurants would need to be closed.
Bob Wright, Potbelly CEO and president, said in a third-quarter earnings call that, while the pace of COVID-19 pandemic recovery has slowed slightly, the company is taking “calculated steps to optimize” the brand’s shop footprint.
The company reopened 14 shops in the third quarter and expects to reopen 10 more in the fourth quarter.
Meanwhile, Potbelly has been engaged in lease renegotiations over the past six months.
“This program has been highly successful, and we are nearing the end of the process,” Wright said. “From a big picture perspective, we’re lowering our expected closures to just 25 to 30 shops. And we have renegotiated 280 leases as of November.”
Steve Cirulis, Potbelly’s chief financial officer, said, “We’ve been pleased with the nature of those discussions.” Termination fees to date have totaled about $2 million, he said, and the total is expected to be about $3 million.
“The benefits from lease abatements, restructuring savings and shop loss total more than $15 million on a go-forward basis,” Cirulis said. The shops expected to be closed had a trailing, pre-COVID 12-month revenue of $13 million to $15 million, he added.
Cirulis said Potbelly would be reorganizing and restructuring its corporate team to increase efficiencies from now through the end of the year.
Cirulis said the company expects to save $3.5 million to $4 million in general and administrative costs as the company enters 2021.
“This will be accomplished through corporate expense optimization, staff reductions, consolidation of our franchise and company locations support services into one unit, and through other expense rationalization,” Wright said in a statement. “No expense reductions are expected at the shop level.”
For the third quarter ended Sept. 27, Potbelly’s net loss widened to $13.4 million, or 56 cents a share, from $2.4 million, or 10 cents a share, in the same period a year ago. Revenues fell 30% to $72.7 million from $104.2 million in the prior-year quarter.
Potbelly's ame-store sales trends continued to improve, ending the third quarter at down 21%. October same-store sales were a negative 19.4%, the company said.
Potbelly, founded in 1977, has more than 400 company-owned shops in the United States, and more than 40 franchised restaurants.
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