“Simply put, we are gaining share,” Johnson said. “It is critical to understand that we achieve this with a low advertising spend and the lowest rate of discounting this year. I'm also excited to report that this momentum has carried into the first quarter of 2020. A healthy majority of our markets are running at positive comps through the first half of Q1.”
The CEO said Potbelly’s improved Q4 numbers were driven in part by menu optimization and digital efforts.
The brand rolled out a menu optimization initiative in early 2019, including a pick your pay and meal deal option. Johnson said that by the end of the year, 25 percent of customers used the option and that optimization grew average check by 410 basis points year-over-year.
Digitally, perk membership has grown nearly 40 percent to 1.7 million, representing about 17 percent of business. The restaurant is still on track to launch a new perks program in the second half of 2020. The brand also spent 2019 launching third-party delivery partnerships; off-premises sales grew from 19.4 percent in Q4 2018 to 24.4 percent in 2019.
“I believe that we'll get to the end of the first quarter and report the fact that we delivered the first positive comp in over four years,” Johnson said. “I think that's real progress. It's been driven by off-premises. We hit record growth, record mix. … Whether that's upgrading the app, whether that's investing in the website, whether that's investing in partners, a lot of the growth has come from that, but it's not the only place where we've seen growth. Menu optimization has been a huge success for us.”
The brand projected a growth of 0.5 percent to 2 percent in comp sales for 2020. There will be 12 to 13 openings, including four company-operated locations that were delayed in 2019 (three are now open and the other will open in Q2). Eight to ten corporate locations are expected to close.
The chain signed four franchise deals for 42 shops, which are expected to open over the next five to seven years. If the deal comes to fruition, it would double Potbelly’s franchise footprint. The company is also searching for a new chief financial officer after Tom Fitzgerald left in December to become Planet Fitness’ chief financial officer.
“We entered 2020 with positive momentum, and we're excited to get moving on the Aurora test, which we expect will significantly accelerate our pace of change and become a multiplier on our strategic action that we've already taken to-date,” Johnson said. “I think it is critical for our business to understand that our plan is aggressive, well-informed, and capital light. Our confidence is bolstered by very clear evidence that our strategy is working and the momentum we built in the fourth quarter has clearly carried over into Q1.”