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Potbelly-Digital-kitchen-Rollout.jpg Potbelly Corp.
Potbelly Corp. has rolled out its Potbelly Digital Kitchen to about 40 restaurants.

Potbelly notes benefits from ‘digital kitchen’ rollout

Sandwich brand installs platform at 12 stores in Q1, bringing total to 40 with 100 expected by year’s end

Potbelly Corp. added a dozen more stores to its Potbelly Digital Kitchen rollout in the first quarter and expects to have the operations-enhancing platform in 100 restaurants by year’s end, executives said Thursday.

The Chicago-based sandwich brand, which released earning for the first quarter ended March 26, said the digital kitchen investment has smoothed operations, especially for the 39% of its orders that are placed digitally.

Bob Wright, Potbelly CEO and president, said on the call that the brand continued “to see the improvements in our associate experiences, driven by their ability to more easily handle a growing digital business coming through our second production line and improvements in our customer experiences, driven by orders ready on time, accuracy and food-quality scores.”

The PDK, as the digital kitchen is called, was “able to capture labor efficiency with these improvements and finally the digital inline order taking function of PDK is unlocking additional throughput where we previously had capacity constraints during peak periods,” Wright said.

Wright said the PDK platform including digital ordering tablets that staff can use to go deeper into lines of customers during high-capacity hours when lines form at some shops.

“We're very pleased with what that means for those PDK shops that are — I won't say high volume — capacity-constrained,” Wright explained. “You can have a mid-volume shop that's got a significant amount of lunch business or certain days of the week where dinner is very strong and that that inline order taker solution is helping us a great deal.”

Both the employee and customer experiences in the Potbelly Digital Kitchen restaurants are also improved, Wright added.

Not only are they enjoying a much easier time of managing all that digital business,” he said, “the system feeds those orders to our associates in the proper order. And it's smart enough to know that a very large order needs to get fed to them sooner than a small order, even if they both need to be delivered at the same time. … It is also giving us the chance to give our customers a little more clarity if there's a massive amount of digital business going through the back line.”

Wright said the company is using digital channels to promote special items, such as digital-only meatball subs in the first quarter, to its app users and loyalty club members.

“We remain keenly focused on food and marketing innovation to further expand these promotional efforts in the coming quarters,” he said.

Steve Cirulis, Potbelly’s chief financial officer, said second-quarter average weekly unit volumes were expected in the range of $25,250 to $25,750 and same-store sales were expected between 10% to 12%.

For the first quarter ended March 26, Potbelly reported a net loss of $1.3 million, or 5 cents a share, down from a loss of $7.9 million, or 28 cents a share, in the same period a year ago. Revenues increased 20% to $118.3 million in the quarter from $98.2 million in the prior-year quarter.

Potbelly posted a first-quarter increase in same-store sales of 22.2%, “driven by strength in traffic and digital marketing, as well as continued momentum in central business district (CBD) and airport shops,” the company said.  Average weekly unit volumes in the quarter were $23,881.

As of March 26, Potbelly had 426 restaurants, including 373 company-owned and 53 franchised units. The company was founded in 1977.

In March, Potbelly said it had refranchised eight New York City restaurants to United One Group as part of a development deal that calls for 13 new units over the next eight years.

Wright said the brand has a long-term goal of refranchising 25% of its company-owned units.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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