Sandwich brand alters rewards in January in push to increase digital sales
Potbelly Corp. modified its Perks loyalty program in January, allowing members to earn rewards faster and offering more menu items for redemption, executives said Thursday.
The Chicago-based sandwich brand, which released earnings for the fourth quarter ended Dec. 31, explained the changes to its loyalty program that were executed in January, after the quarter ended.
In the fourth quarter, digital business was about 40% of sales, an increase of about 150 basis points from the same period last year, executives said, and the recent changes were intended to increase that.
“Previously, Perks could only be redeemed after 1,000 points were earned, which we believe could take too long and too many visits,” said Bob Wright, Potbelly CEO and president, on an analysts call. “Now redemptions can begin at only 200 points. Not only that, we now also offer, 12 different menu items for redemption including entrees, sides and desserts.”
Loyalty members can also accelerate the rate with which they earn reward coins, as their status moves up levels, he said.
“We're excited by the reception thus far,” Wright said, “and have already seen substantial redemptions for the new menu options. While digital is an area of strength for Potbelly, we're not standing still.”
Wright added that “we continue to see a shift in our digital business away from third-party channels and toward Potbelly-owned app, web and Perks originated orders. Specifically, on Perks, our effort to increase Perks loyalty program member acquisition and activation continues to bear fruit, as we grew Perks acquisition by an impressive 87% during the fourth quarter.”
The company is continuing to roll out its Potbelly Digital Kitchen software, which increases labor efficiencies, executives said. Steven Cirulis, Potbelly’s chief financial officer, said the PDK could help in expanding the brand’s catering business as well.
Cirulis said Potbelly is continuing in its refranchising efforts, selling four chops in Columbus, Ohio, in the quarter and 12 restaurants in the Seattle, Wash., area.
“We don't we don't necessarily have a target for refranchising,” Cirulis said. “We got a few deals done in the fourth quarter, which make us pretty excited given the additional unit counts that will come with those on the franchise side. …. As we go forward with refranchising, it's going to be much more selective in terms of the deals that we might do.
For the fourth quarter ended Dec. 31, Potbelly’s net income was $2.7 million, or nine cents a share, nearly flat to the $2.7 million, or nine cents a share, in the same period a year ago. Revenues were up 4.7% to $125.7 million, from $120.2 million in the prior-year quarter.
Fourth-quarter same-store sales growth was 6.3% with traffic growth as a major driver, the company said.
Potbelly, founded in 1977, has more than 425 restaurants in the United States, including more than 80 franchised shops.
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