The chain is planning for more menu innovation this year, based on ‘adjacent’ products that generate incremental traffic, sales, and growth
Consumers are always going to experience pressures and those pressures will always have some type of impact on the restaurant industry, Potbelly chief executive officer Bob Wright told attendees at the recent ICR Conference in Orlando, Fla. He’s familiar with macroeconomic cycles more than most, having served in the industry since joining Domino’s Pizza in the early 1990s.
His deep experience is also why he’s bullish about his company’s current value positioning.
“We are prepared to answer (consumers’) call,” he said.
Indeed, as the industry dipped into a discounting battle in 2024, Potbelly instead introduced a $7.99 combo offering one of three sandwich choices, with chips and a drink. The combo drove higher value perception and frequency, Wright said, without damaging the brand through deep discounting. He added that the $7.99 combo has also helped Potbelly gain market share, including and especially at lunch.
“Lunch is one of the easiest dayparts to pull back from. At $9, you hit a limit where people start bringing in their own lunch, so we created that additional $7.99 combo and our value scores are significantly higher. Our franchisees love it because it includes our three most efficient proteins (Skinny Chicken, turkey, or ham). We believe it’s going to be a layer (platform) for us for a while,” he said.
The chain’s recent menu innovations have extended beyond its value offerings. In September, Potbelly introduced new Craft Refreshers in partnership with Tractor Beverage Company. In November, the chain added two new sandwiches – the Cubano and the Sweet Heat Pork BBQ – to its permanent menu while also expanding its sauces.
Subsequently, Potbelly’s preliminary fourth quarter results showed same-store sales growth of 0.2% to 0.3%, exceeding expectations and triggering a double-digit jump in its share price.
“Both (sandwich introductions) helped us with adjacent potential and were warmly accepted by consumers,” Wright said. “We also added not only a Sweet Heat BBQ sauce, but three other sauces. It seems like a small thing, but customization is so important to our customers.”
What exactly is “adjacent potential?” Menu additions that fit the Potbelly brand. This work will become an even bigger focus area in 2025 as the company presses the gas on menu innovation. But the work will also be intentional. Potbelly removed about 60 SKUs out of its shops when COVID hit, for instance, and so any new ingredients have to earn a spot. To do so, menu offerings now have to go through a stage-gate process in which they’re introduced in phases to assess popularity and progress. The stage-gate process is common at other brands, including Chipotle, but was first introduced at Potbelly last year.
“We’re very careful about SKU creep and the real test of doing any of this is incrementality,” Wright said. “If we can’t get incremental traffic, incremental sales, incremental growth out of these ideas, then they might be interesting but they’re not relevant and we’re going to stay away from them.”
As Potbelly continues to ramp up its stage-gate process, it is also relying more heavily on consumer and operational data. As an example, the chain now measures if a product launch creates too much waste or if an ingredient can be used in other ways (as is the case with the two new pork sandwiches).
“We’re overly pragmatic about the things we invest in and what the returns are, and we think adjacency, yet distinction, are going to be really important with menu items,” Wright said. “The Craft Refreshers – those are adjacent, whereas adding a coffee product would be a big stretch for our brand. We have ovens that cook great pizzas, but that’s not an adjacent occasion or product for us. Customers aren’t going to give the brand credit for a food item if that food item doesn’t naturally fit, and that’s how we’re making informed decisions.
“To continue to push incrementality, you have to push the menu a little harder and that’s what we plan on doing.”
Contact Alicia Kelso at [email protected]
