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Potbelly’s Sandwich Works in Chicago Begins Franchising

I’m a local Chicagoan so Potbelly’s Sandwich Works news is interesting to me.  As you’ve probably heard, Potbelly is now franchising their potbelly stove themed restaurant.  Their web site lists the total cost to open between $500k-$750k with a heavy $40k franchise fee.

I predicted this early in 2009 after I noticed job posting listing franchising experience and a little snooping.

A previous insider comment to a blog post on Potbelly has always stuck in my head which makes me pause about the opportunity.  I’m pretty sure I know the person who wrote the comment:

Potbelly is another stab in the dark venture that suffers from ridiculous logistical design, high labor costs, exorbitant pricey locations, and excessive buildout costs.  Is there any wonder thay GREw so much.  did you expect them to just sit on the 100,000,000 raised by Starbuck’s Maveron Group.  funny, potbelly has turned one quarterly profit in about 6 years and had three presidents in three years.  The lines which everyone seems to think are the sign of success are a sign of basic incompetency and presume people will continue to buy into hype for a three day old bun baked by Turano (same as the other great success story Quizno’s ) and generic low quality meat that’s run through a conveyor oven which can’t be delivered or catered without serious degradation in quality.  other than the expensive logo vanity packaging someone and the illusion of quality based on 500,000 of faux antiques, please explain what is original or significant quality.  the sandwiches are the smallest, the most expensive per ounce, and the worst produced in terms of speed and efficiency than any I have ever seen and the lines aren’t looking too long these days.  Nothing angers me more than a hot concept  and has never managed to turn a profit.  Think Cosi, Planet Hollywood, etc.  that’s why the restaurant business gets a bad rap.  Anyone with a brain could say hmmm lowest check average, slowest production line, highest rent, most labor and they don’t make money?  Duh!

About Ryan Knoll

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  1. In a rather disappointing tone I am sad to report that PotBellys appears to be doing 11th hour desperation tinkering with their menu looking to add new menu items to drive sales. For instance various grilled chicken sandwiches. Now menu enhancement is not a bad thing but given they are trying to roll out franchising they would then be moving forward with untested menu items that may significantly drive up food costs. More the way they are gathering data is very, very unsophisticated and to my analysis very amateurish and in some ways offensive.

    I am sad to say after reviewing some of there survey techniques I believe they do not understand their market potential and have misidentified their customer base.

    Lastly all concepts should consider the effect additional menu items has on your current sales. Often you simply poach your own sales without an incremental sales count that offset increases in inventory and equipment.


  2. The sent out a survey to their customers basically asking them how important it was to have a grilled chicken sandwich, and then to rate several types of them.

    However there were several questions related to what radio stations you listen to (obviously trying to figure out where to advertise) etc etc and what came out of that is they obviously think their audience is fairly liberal and listens primarily to music. Totally absent form their list of choices were talk radio stations in the same market, with both large and small footprints.

    Also the choices they presented for sandwich combination totally missed the health aspect of eating a grilled chicken sandwich. Not surprising given the PotBelly veggie sandwich has an enormous amount of calories.

    My point is, I know many loyal PotBelly fans who would have been totally offended by this survey. I found it rather obnoxious and presumptive myself and i have a rather thick skin.

    So the mistake I believe they made was being presumptive about who their customer base actually is.

    Normally in an on line survey, which this was you identify the questions you will ask based on qualifiers and adapt the survey to the client’s responses.

    After just a few questions it was pointless for me to remain in their survey.
    they had a forced rating system where you rated sandwiches combinations from least to most desirable, however in my case I would not eat any of them simply because of dietary restrictions. And yet, following the survey I found my self rating a sandwich I would never eat highly when I was totally indifferent to the sandwich (you had to fill it out to move on in the survey).

    The other major issue is they are surveying current customers – great, but the idea of new menu items os to wither increase the frequency of visits form your existing customer base or to drive new customers.

    However the reality is, few people actually switch from “their” sandwich, and tend to eat the same thing over and over. So input on additional selections form your existing customer base may be counter productive.

    The king of surveys is McDonalds. They are always looking to add new customers not give old ones another menu option.

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