After growing to more than 200 stores since opening its first restaurant in an antique store in 1977, Potbelly is incorporating franchising into its expansion plans for the first time. The Chicago-based chain began its franchising program in late 2009, and after contacting more than 6,000 applicants, it recently signed its first two deals.
“It was time,” said Mike Walters, franchise zone manager for Potbelly. “We believe in a mixed system and that franchising will only make us stronger.”
The fact that Potbelly's first two franchise agreements — with Arturo Daly and Danytsia Enriquez in El Paso, Texas, and Jeff and Susan Gibbs in Toledo, Ohio — were made with married couples is no coincidence. The chain said it is looking for committed couples to grow the business one restaurant at a time in their communities.
Walters spoke to Nation’s Restaurant News recently about the value of Potbelly’s unorthodox strategy of seeking couples as franchise partners.
What makes committed couples, either spouses or life partners, the ideal target for Potbelly’s franchising program?
That’s how our company started. It was a husband-and-wife team in an antique shop, and they got into the sandwich business. They ran it in their neighborhood and created a cult following. We think partner teams enriched in their communities and that know their neighborhood and want to make it a special place is very important.
So that’s the model we’re going after, and Jeff and Susan Gibbs know their community [of Toledo] very well. He’s lived there since he was very young, and Susan’s been a teacher there for over 30 years.
Does having so specific a target discourage otherwise-qualified operators from joining Potbelly?
Definitely not. That’s just our ideal candidate. It’s a two-person model to run the business. So if my brother and I wanted to do it, or if there were two people with just business interests together, we talk to them as well. If it’s two people that know their community and understand their neighborhood, those are people we still take through the process.
What is that process?
It’s a very thorough, 15-step process. We want to make sure we evaluate them to make sure they’re the right candidates, but there also are points during the process where they get to evaluate us. On our “discovery days,” they come in and learn about us and we put them through their interviews. We actually have them come into one of our training shops and work a six-day in-store experience, and they get feedback every single day. It’s about running a great business and also a chance for them to say, “Is this the company I want to do this with?”
Does your current franchise strategy focus solely on single-unit partners, then?
At this time, we’re doing single-unit opportunities only. We’re trying to find franchisees that run a great business, and we want to get the right franchisees. Once they’re in their communities and build a great business, as time goes on, if they’re successful, we’ll re-evaluate.
If people are looking for multiunit deals with us off the bat, we appreciate their interest, but we’re not doing that right now. We want a steady growth process.
What’s the ratio of franchise growth to corporate-store growth that you would like to achieve going forward?
We are going to continue to grow company stores and franchise stores. They’ll go together, but we don’t have a ratio in mind. We believe franchising is the right extension of our concept, and we’ll be focused on medium-size cities for franchising. We don’t plan on having mixed markets, because if franchisees get into certain markets, we want them to be successful. We’re not doing it just to do it.
Many brands have been offering franchise development incentives the past few years to build up their systems as capital markets have tightened. Would that make sense for Potbelly?
The economic state out there and the lending environment are difficult. But it’s not our intention to discount [any fees or royalties]. We’ve focused on our program and the support we can offer our franchisees. When candidates go through the process, we work with a third-party real estate group to help them find an outstanding site for a Potbelly. This group knows us and knows what we look for.
The other thing we’re using to support our partners is a third-party lending group. They’ll help [franchisees] try to find the best loan they’re looking for. Because we want a steady growth pattern, support is our focus, and hopefully we’re offering options that can assist the franchisees.
Contact Mark Brandau at [email protected]