Opportunities ahead, and a prototype to back
Potbelly opened a “Shop of the Future” model earlier this month in Chicago’s Logan Square neighborhood. The hero feature is a new streamlined ordering process that includes a cohesive menuboard that presents all of Potbelly’s menu items in one area. There are also glass counters to allow guests to follow along and see their food being made. Additionally, consumers complete their order and payment first.
Ascetically, the restaurant separates the ordering process from the dining room to improve in-store experience.
Johnson said the layout reduces the capital investment by about 25 percent for operators (a big lure for potential franchisees), and reduces the payback period for a new restaurant by about a year.
Overall, the design reflects what’s changing within Potbelly’s day-to-day stores. Off-premises and digital channels boosted 18 percent in Q3, driven by the company’s DoorDash national delivery rollout in early July. The company recently added Grubhub.
The digital elements represented 21.6 percent of Potbelly’s sales last quarter, which is an all-time high. Potbelly has put together 15 consecutive periods of positive comps growth on the digital side between catering, delivery, and pickup. “So, it’s not a flash in the pan,” he said.
It wasn’t that long ago, either, Potbelly mixed just 17 percent, Johnson added. The company now has a dedicated catering website and offers delivery in every shop, every day, every single hour that they’re opened, he said.
Also, Potbelly installed pickup shelves systemwide.
The other main switch for Potbelly was a menu optimization effort that led to a 580-basis point improvement in check versus Q3 2018, driven by a combination of price and mix.
Essentially, Potbelly brought new concept menuboards to stores over the winter that included a pick-your-pair option (bundled a half sandwich with a choice of salad, soup, or mac and cheese), as well as a make-a-meal section (combines a guest’s choice of chops and a fountain drink or chips and a shake). Potbelly’s center panel went from 55 price points to 18, an undertaking Johnson previously called “one heck of a complicated thing.” At first launch, Potbelly had 680 unique menuboards in terms of size. It needed to reprogram the point of sale, redo its app, website, change the loyalty program, and update the catering and delivery functionality for how customers pay.
Yet even with all those guest-centric updates in place, Potbelly is still not as differentiated as it needs to be, Johnson said. That’s where the consultant comes into the picture.
“We felt we needed an outside-in perspective to develop the perspective-based consumer insights that create a winning strategy,” he said. “In working with this firm over the past 16 weeks, we have been fundamentally addressing the strategic question of where are we going to play and how are we going to win.”
The consulting work is impacting Potbelly’s P&L by about $3 million this year. Johnson offered a glimpse at some early findings, but wouldn’t divulge further details just yet.
He said Potbelly expects to launch a “couple of large-scale tests” in the first half of 2020 and roll out the successful elements in the second part of the year. The strategy “will leverage the core strength of what the Potbelly brand represents,” Johnson said. Not a radical departure, but one to emphasize core equities the brand currently isn't getting credit for.
It also includes significant competitive benchmarking, he said. “Suffice to say that we identified some opportunities to improve the in-shop customer experience. We have rallied our operators to address these gaps by focusing on the fundamentals to improve the customer experience,” Johnson said.
He said Potbelly had to make a quantum shift with its culture. Before, it was very insulated—an inside-looking company with no outside perspective. It was making decisions without consumer insights and fact-based competitive benchmarking.
“So, this now allows us to be a heck of a lot more focused on our brand position, our menu offering. And the experience that we offer is now aligned to the needs of the consumer,” Johnson said.