0001195734-23-000081 | 10-Q | XBRL Viewer

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Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 26, 2023	Apr. 23, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 26, 2023
Document Transition Report	false
Entity File Number	001-36104
Entity Registrant Name	Potbelly Corporation
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	36-4466837
Entity Address, Address Line One	111 N. Canal Street
Entity Address, Address Line Two	Suite 325
Entity Address, City or Town	Chicago
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60606
City Area Code	312
Local Phone Number	951-0600
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	PBPB
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		29,150,046
Entity Central Index Key	0001195734
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 26, 2023	Dec. 25, 2022
Current assets
Cash and cash equivalents	$ 25,596	$ 15,619
Accounts receivable, net of allowances of $28 and $16 as of March 26, 2023 and December 25, 2022, respectively	7,259	6,420
Inventories	3,541	3,990
Prepaid expenses and other current assets	4,322	4,501
Assets classified as held-for-sale	1,248	0
Total current assets	41,966	30,530
Property and equipment, net	42,543	44,477
Right-of-use assets for operating leases	156,809	160,891
Indefinite-lived intangible assets	3,404	3,404
Goodwill	2,122	2,222
Restricted cash	749	0
Deferred expenses, net and other assets	3,296	3,647
Total assets	250,889	245,171
Current liabilities
Accounts payable	10,412	10,718
Accrued expenses	26,865	30,826
Short-term operating lease liabilities	27,279	27,395
Current portion of long-term debt	1,250	0
Total current liabilities	65,806	68,939
Long-term debt, net of current portion	21,297	8,550
Long-term operating lease liabilities	156,428	160,968
Other long-term liabilities	3,002	2,441
Total liabilities	246,533	240,898
Commitments and contingencies (Note 11)
Equity
Common stock, $0.01 par value—authorized 200,000 shares; outstanding 29,048 and 28,819 shares as of March 26, 2023 and December 25, 2022, respectively	386	384
Warrants	2,253	2,566
Additional paid-in-capital	457,918	455,831
Treasury stock, held at cost, 9,966 and 9,924 shares as of March 26, 2023, and December 25, 2022, respectively	(115,725)	(115,388)
Accumulated deficit	(340,243)	(338,916)
Total stockholders’ equity	4,589	4,477
Non-controlling interest	(233)	(204)
Total equity	4,356	4,273
Total liabilities and equity	$ 250,889	$ 245,171

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 26, 2023	Dec. 25, 2022
Statement of Financial Position [Abstract]
Accounts receivable, net of allowances	$ 28	$ 16
Common stock (in USD per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	200,000,000	200,000,000
Common stock, outstanding (in shares)	29,048,000	28,819,000
Treasury stock (in shares)	9,966,000	9,924,000
Assets classified as held-for-sale	$ 1,248	$ 0
Restricted cash	$ 749	$ 0

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 26, 2023	Mar. 27, 2022
Revenues
Total revenues	$ 118,270	$ 98,221
Sandwich shop operating expenses, excluding depreciation
Labor and related expenses	36,502	33,253
Occupancy expenses	13,310	13,845
Other operating expenses	20,484	18,105
Franchise support, rent and marketing expenses	591	120
General and administrative expenses	9,969	8,518
Depreciation expense	2,971	3,136
Pre-Opening Costs	22	0
Loss on Franchise Growth Acceleration Initiative activities	949	0
Impairment, loss on disposal of property and equipment and shop closures	1,045	1,319
Total expenses	118,463	105,604
Loss from operations	(193)	(7,383)
Interest expense, net	667	327
Loss on extinguishment of debt	239	0
Loss before income taxes	(1,099)	(7,710)
Income tax expense	105	177
Net loss	(1,204)	(7,887)
Net income attributable to non-controlling interest	123	26
Net loss attributable to Potbelly Corporation	$ (1,327)	$ (7,913)
Net loss per common share attributable to common stockholders:
Basic (in USD per share)	$ (0.05)	$ (0.28)
Diluted (in USD per share)	$ (0.05)	$ (0.28)
Weighted average shares outstanding:
Basic (in shares)	28,907	28,396
Diluted (in shares)	28,907	28,396
Product
Revenues
Total revenues	$ 116,947	$ 97,431
Sandwich shop operating expenses, excluding depreciation
Food, beverage and packaging costs	32,620	27,308
Franchise royalties, fees and rent income
Revenues
Total revenues	$ 1,323	$ 790

Condensed Consolidated Statements of Equity (Deficit) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Treasury Stock	Warrants	Additional Paid-In- Capital	Accumulated Deficit	Non- Controlling Interest
Beginning balance at Dec. 26, 2021	$ (2,417)	$ 380	$ (114,577)	$ 2,566	$ 452,570	$ (343,261)	$ (95)
Beginning balance (in shares) at Dec. 26, 2021		28,380
Net income (loss)	(7,887)					(7,913)	26
Shares issued under equity compensation plan (in shares)		81
Shares issued under equity compensation plan	(278)	$ 1	(279)
Distributions to non-controlling interest	(120)						(120)
Stock-based compensation expense	675				675
Ending balance (in shares) at Mar. 27, 2022		28,461
Ending balance at Mar. 27, 2022	(10,027)	$ 381	(114,856)	2,566	453,245	(351,174)	(189)
Beginning balance at Dec. 25, 2022	$ 4,273	$ 384	(115,388)	2,566	455,831	(338,916)	(204)
Beginning balance (in shares) at Dec. 25, 2022	28,819	28,819
Net income (loss)	$ (1,204)					(1,327)	123
Shares issued under equity compensation plan (in shares)		70
Shares issued under equity compensation plan	(337)	$ 1	(337)		(1)
Distributions to non-controlling interest	(152)						(152)
Issuance of common shares and warrants, net of fees (in shares)		159
Proceeds from exercise of warrants	865	$ 1		(313)	1,177
Stock-based compensation expense	$ 911				911
Ending balance (in shares) at Mar. 26, 2023	29,048	29,048
Ending balance at Mar. 26, 2023	$ 4,356	$ 386	$ (115,725)	$ 2,253	$ 457,918	$ (340,243)	$ (233)

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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- Definition

Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.

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+ Details

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2023	Mar. 27, 2022
Cash flows from operating activities:
Net loss	$ (1,204)	$ (7,887)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	2,971	3,136
Noncash lease expense	6,127	6,487
Deferred income tax	1	5
Stock-based compensation expense	911	675
Asset impairment, loss on disposal of property and equipment and shop closures	843	1,319
Loss on Franchise Growth Acceleration Initiative activities	936	0
Loss on extinguishment of debt	224	0
Other operating activities	85	67
Changes in operating assets and liabilities:
Accounts receivable, net	(847)	(1,116)
Inventories	274	186
Prepaid expenses and other assets	136	(171)
Accounts payable	(507)	1,039
Operating lease liabilities	(6,923)	(7,055)
Accrued expenses and other liabilities	(3,684)	(4,424)
Net cash used in operating activities:	(657)	(7,739)
Cash flows from investing activities:
Purchases of property and equipment	(3,312)	(1,378)
Proceeds from sale of refranchised shops	96	0
Net cash used in investing activities:	(3,216)	(1,378)
Cash flows from financing activities:
Payment of debt issuance costs	(2,204)	(40)
Proceeds from exercise of warrants	865	0
Employee taxes on certain stock-based payment arrangements	(47)	(33)
Distributions to non-controlling interest	(152)	(120)
Net cash provided by financing activities:	14,599	4,257
Net increase (decrease) in cash and cash equivalents and restricted cash	10,726	(4,860)
Cash and cash equivalents and restricted cash at beginning of period	15,619	14,353
Cash and cash equivalents and restricted cash at end of period	26,345	9,493
Supplemental cash flow information:
Income taxes paid	55	0
Interest paid	787	159
Supplemental non-cash investing and financing activities:
Unpaid liability for purchases of property and equipment	978	460
Unpaid liability for employee taxes on certain stock-based payment arrangements	305	246
Term loan credit facility
Cash flows from financing activities:
Borrowings under revolving credit facility	25,000	0
Repayments under revolving credit facility	(313)	0
Revolving credit facility
Cash flows from financing activities:
Borrowings under revolving credit facility	14,600	10,000
Repayments under revolving credit facility	$ (23,150)	$ (5,550)

Organization and Other Matters

3 Months Ended

Mar. 26, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Other Matters

Business

Potbelly Corporation, a Delaware corporation, together with its subsidiaries (collectively referred to as "the Company", "Potbelly", "we", "us" or "our"), owns and operates 373 company-owned shops in the United States as of March 26, 2023. Additionally, Potbelly franchisees operate 53 shops domestically.

Basis of Presentation

The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Potbelly Corporation and its subsidiaries and the notes thereto included in our Annual Report on Form 10-K for the year ended December 25, 2022. The unaudited condensed consolidated financial statements included herein have been prepared by us without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to the SEC rules and regulations. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly our balance sheet as of March 26, 2023 and December 25, 2022, our statement of operations for the quarter ended March 26, 2023 and March 27, 2022, the statement of equity for the quarter ended March 26, 2023 and March 27, 2022, and our statement of cash flows for the quarter ended March 26, 2023 and March 27, 2022 have been included. The condensed consolidated statements of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.

We do not have any components of other comprehensive income recorded within our consolidated financial statements and therefore, do not separately present a statement of comprehensive income in our condensed consolidated financial statements.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Potbelly Corporation; its wholly owned subsidiary, Potbelly Illinois, Inc. (“PII”); PII’s wholly owned subsidiaries, Potbelly Franchising, LLC and Potbelly Sandwich Works, LLC (“PSW”); seven of PSW’s wholly owned subsidiaries and PSW’s six joint ventures, collectively, the “Company.” All intercompany balances and transactions have been eliminated in consolidation. For our six consolidated joint ventures, "non-controlling interest" represents the non-controlling partner’s share of the assets, liabilities and operations related to the joint venture investments. Potbelly has ownership interests ranging from 51-80% in these consolidated joint ventures.

Fiscal Year

We use a 52/53-week fiscal year that ends on the last Sunday of the calendar period. Approximately every five or six years a 53rd week is added. Fiscal year 2023 consists of 53 weeks and fiscal year 2022 consists of 52 weeks. The fiscal quarters ended March 26, 2023 and March 27, 2022 each consisted of 13 weeks.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates include amounts for long-lived assets and income taxes. Actual results could differ from those estimates.

Franchise Growth Acceleration Initiative

On March 2, 2022, we announced our Franchise Growth Acceleration Initiative, which included a plan to grow our franchise units domestically through multi-unit shop development area agreements, which may include refranchising certain company-operated shops. Deals for refranchised shops will include commitments for developing new shops to fully penetrate existing markets for which we collect development agreement fees from the franchisee.

All gains and losses recognized on sales of shops and other expenses incurred to execute a refranchising transaction are included in Loss on Franchising Growth Acceleration Initiative activities in the condensed consolidated statement of operations. Development agreement fees received are recorded in the consolidated balance sheets as accrued expenses or other long-term liabilities, and amortized over the term of the franchise agreement once the shops are opened. During the first quarter of 2023, we executed our first refranchising transaction, which is further discussed in Note 8.

Restricted Cash

As of March 26, 2023, we had restricted cash related to funds held in a money market account as collateral for letters of credit to certain lease agreements.

The reconciliation of cash and cash equivalents and restricted cash presented in the condensed consolidated balance sheets to the total amount shown in our condensed consolidated statements of cash flows is as follows:


	March 26,		December 26,
	2023		2022
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	25,596	$	15,619
Restricted cash, noncurrent	749		—
Total cash, cash equivalents and restricted cash shown on statement of cash flows	$	26,345	$	15,619

Potbelly Brand Fund

We maintain the Potbelly Brand Fund (the "Brand Fund") for the purpose of collecting and administering funds to be used for advertising, customer research, marketing technology, agencies, and other activities that promote the Potbelly brand in order to deliver sales at our shops. Company-operated and franchised shops both contribute to the Brand Fund based on a percentage of sales.

Beginning in the first quarter of fiscal year 2022, we manage these advertising and marketing expenses through the Brand Fund using the funds contributed by our shops. We manage these funds separately from our general operating expenses, but we are not obligated to maintain the funds in separate accounts or entities. We may spend more or less in any fiscal period than the amounts contributed to the Brand Fund, and we may choose to roll over any unused contributions to the following fiscal period or return them to our shops.

Brand Fund contributions made by company-operated shops are eliminated from the consolidated financial statements. Franchisee contributions are included within franchise royalties and fees in the condensed consolidated statements of operations.

Expenses incurred by the Brand Fund are recorded to company-operated and franchised shops based on a percentage of sales. Company-operated Brand Fund expense is included within other operating expenses in our condensed consolidated statements of operations. Franchisee Brand Fund expense is presented within franchise support, rent and marketing expenses in our condensed consolidated statements of operations.

Recent Accounting Pronouncements

We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on the condensed consolidated financial statements.

Revenue

3 Months Ended

Mar. 26, 2023

Revenue from Contract with Customer [Abstract]

Revenue

We primarily earn revenue at a point in time for sandwich shop sales, which can occur in person at the shop, over our online or app platform, or through a third-party platform. Sales taxes collected from customers are excluded from revenues and the obligation is included in accrued liabilities until the taxes are remitted to the appropriate taxing authorities. We have other revenue generating activities outlined below.

For the quarter ended March 26, 2023, revenue recognized from all revenue sources on point in time sales was $117.9 million, and revenue recognized from sales over time was $0.4 million. For the quarter ended March 27, 2022, revenue recognized from all revenue sources on point in time sales was $97.9 million and revenue recognized from sales over time was $0.3 million.

Franchise Revenue, including Rent Income

We earn an initial franchise fee, a franchise development agreement fee and ongoing fees for royalties and Brand Fund contributions under our franchise agreements. Initial franchise fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. As such, these franchise fees are recognized over the contractual term of the franchise agreement. We record a contract liability for the unearned portion of the initial franchise fees. Franchise development agreement fees represent the exclusivity rights for a geographical area paid by a third party to develop Potbelly shops for a certain period of time. Franchise development agreement fee payments received by us are recorded in the consolidated balance sheets as accrued expenses or other long-term liabilities, and amortized over the term of the franchise agreement once the shops are opened. Royalties and Brand Fund contributions are based on a percentage of sales and are recorded as revenue as they are earned and become receivable from the franchisee.

We also earn rent income from properties leased by Potbelly and subleased to franchisees. Rent income is recognized on a straight-line basis over the operating lease terms. See Note 6 for further detail.

Gift Card Redemptions / Breakage Revenue

Potbelly sells gift cards to customers, records the sale as a contract liability and recognizes the associated revenue as the gift card is redeemed. A portion of these gift cards are not redeemed by the customer ("breakage"), which is recognized as revenue as a percentage of customers gift card redemptions. The expected breakage amount recognized is determined by a historical data analysis on gift card redemption patterns. We recognize gift card breakage income within net sandwich shop sales in the consolidated statements of operations.

We recognized gift card breakage income of $0.2 million and $0.2 million for the quarter ended March 26, 2023 and March 27, 2022, respectively, which is recorded within net sandwich shop sales in our condensed consolidated statements of operations.

Loyalty Program

We offer a customer loyalty program for customers using the Potbelly Perks application at the point of sale. The customer will typically earn 10 points for every dollar spent, and the customer will earn a free entrée after earning 1,000 points. We defer revenue associated with the estimated selling price of points earned by Potbelly Perks members towards free entrées as each point is earned, and a corresponding liability is established in deferred revenue. The deferral is based on the estimated value of the product for which the reward is expected to be redeemed, net of estimated unredeemed points. Once a customer earns a free entrée, that entrée reward will expire after 30 days. Any point in a customer’s account that does not go toward earning a full entrée will expire after the customer's account has been inactive for a year. The breakage amount recognized is estimated based on a historical data analysis of loyalty reward redemptions and is recognized in net shop sandwich sales in the consolidated statement of operations. When points are redeemed, we recognize revenue for the redeemed product and reduce accrued expenses.

Contract Liabilities

We record current and noncurrent contract liabilities in accrued expenses and other long-term liabilities, respectively, for initial franchise fees, gift cards, and loyalty programs. We have no other contract liabilities or contract assets recorded.

The opening and closing balances of our current and noncurrent contract liabilities from contracts with customers were as follows:


	Current Contract Liability		Noncurrent Contract Liability
	(Thousands)		(Thousands)
Beginning balance as of December 25, 2022	$	7,008	$	1,677
Ending balance as of March 26, 2023	6,553		2,229
Increase (Decrease) in contract liability	$	(455)	$	552

The aggregate value of remaining performance obligations on outstanding contracts was $8.8 million as of March 26, 2023. We expect to recognize revenue related to contract liabilities as follows (in thousands), which may vary based upon franchise activity as well as gift card redemption patterns:


Years Ending	Amount
2023	$	5,786
2024	479
2025	378
2026	202
2027	142
Thereafter	1,795
Total revenue recognized	$	8,782

For the quarter ended March 26, 2023, the amount of revenue recognized related to the December 25, 2022 liability ending balance was $1.3 million. For quarter ended March 27, 2022, the amount of revenue recognized related to the December 26, 2021 liability ending balance was $1.1 million. This revenue is related to the recognition of gift card redemptions and upfront franchise fees. For the quarter ended March 26, 2023 and March 27, 2022, we did not recognize any revenue from obligations satisfied (or partially satisfied) in prior periods.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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+ Details

Fair Value Measurement	3 Months Ended
Fair Value Measurement	Mar. 26, 2023
Fair Value Disclosures [Abstract]
Fair Value Measurement	Fair Value Measurement The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate fair values due to the short maturities of these balances. The book value of the long-term and short-term debt under the Credit Agreement, which is further discussed in Note 7, is considered to approximate its fair value as of March 26, 2023 as the interest rates are considered in line with current market rates. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Assets recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as leasehold improvements, property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired. We assess potential impairments to our long-lived assets, which includes property and equipment and lease right-of-use assets, on a quarterly basis or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Shop-level assets and right-of-use assets are grouped at the individual shop-level for the purpose of the impairment assessment. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The fair value of the shop assets is determined using the discounted future cash flow method of anticipated cash flows through the shop’s lease-end date using fair value measurement inputs classified as Level 3. The fair value of right-of-use assets is estimated using market comparative information for similar properties. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. After performing a periodic review of our shops during the quarter ended March 26, 2023, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance. We performed an impairment analysis related to these shops and recorded an impairment charge of $0.7 million for the quarter ended March 26, 2023.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Earnings (Loss) Per Share

3 Months Ended

Mar. 26, 2023

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Earnings (Loss) Per ShareBasic and diluted income (loss) per common share attributable to common stockholders are calculated using the weighted average number of common shares outstanding for the period. Diluted income (loss) per common share attributable to common stockholders is computed by dividing the income (loss) allocated to common stockholders by the weighted average number of fully diluted common shares outstanding. In periods of a net loss, no potential common shares are included in diluted shares outstanding as the effect is anti-dilutive. For the quarters ended March 26, 2023 and March 27, 2022, we had a loss per share, and therefore potentially dilutive shares were excluded from the calculation.

The following table summarizes the loss per share calculation:


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Net loss attributable to Potbelly Corporation	$	(1,327)	$	(7,913)
Weighted average common stock outstanding-basic	28,907		28,396
Plus: Effect of potentially dilutive stock-based compensation awards	—		—
Plus: Effect of potential warrant exercise	—		—
Weighted average common shares outstanding-diluted	28,907		28,396
Loss per share available to common stockholders-basic	$	(0.05)	$	(0.28)
Loss per share available to common stockholders-diluted	$	(0.05)	$	(0.28)
Potentially dilutive shares that are considered anti-dilutive:
Shares	2,831		1,735

Income Taxes	3 Months Ended
Income Taxes	Mar. 26, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesThe interim tax provision is determined using an estimated annual effective tax rate and is adjusted for discrete taxable events that occur during the quarter. We regularly assess the need for a valuation allowance related to our deferred tax assets, which includes consideration of both positive and negative evidence related to the likelihood of realization of such deferred tax assets to determine, based on the weight of the available evidence, whether it is more-likely-than-not that some or all of our deferred tax assets will not be realized. In our assessment, we consider recent financial operating results, projected future taxable income, the reversal of existing taxable differences, and tax planning strategies. We recorded a full valuation allowance against our net deferred tax assets during the first quarter of 2019, resulting in a non-cash charge to income tax expense of $13.6 million. We continue to maintain a valuation allowance against all of our deferred tax assets as of March 26, 2023. We did not provide for an income tax benefit on our pre-tax income (loss) for the quarter ended March 26, 2023 and March 27, 2022. We assess the likelihood of the realization of our deferred tax assets each quarter and the valuation allowance is adjusted accordingly.On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law. The IRA has not had a material impact on our condensed consolidated financial statements.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

Leases

3 Months Ended

Mar. 26, 2023

Leases [Abstract]

Leases

We determine if an arrangement is a lease at inception of the arrangement. We lease retail shops and warehouse and office space under operating leases. Our leases generally have terms of ten years and most include options to extend the leases for additional five-year periods. For leases with renewal periods at our option, we determine the expected lease period based on whether the renewal of any options are reasonably assured at the inception of the lease. In addition, we lease certain properties from third parties that we sublease to franchisees. We remain primarily liable to the landlord for the performance of all obligations in the event that the sublessee does not perform its obligations under the lease. All of our subleases are classified as operating leases with fixed and variable income.

Lessee Disclosures

We did not terminate any leases during the quarter ended March 26, 2023.

Operating lease term and discount rate were as follows:



	March 26, 2023		March 27, 2022
Weighted average remaining lease term (years)	6.54		7.06
Weighted average discount rate	8.37	%	8.06	%

Certain of our operating lease agreements include variable payments that are passed through by the landlord, such as common area maintenance and real estate taxes, as well as variable payments based on percentage rent for certain of our shops. Pass-through charges and payments based on percentage rent are included within variable lease cost.

The components of lease cost were as follows (in thousands):


		For the Quarter Ended
	Classification	March 26, 2023	March 27, 2022
Operating lease cost	Occupancy, General and administrative expenses and Franchise support, rent and marketing expenses	9,842	10,305
Variable lease cost	Occupancy and Franchise support, rent and marketing expenses	3,541	3,462
Total lease cost		13,383	13,767

Supplemental disclosures of cash flow information related to leases were as follows (in thousands):


	For the Quarter Ended
	March 26, 2023	March 27, 2022
Operating cash flows rent paid for operating lease liabilities	10,698	10,594
Operating right-of-use assets obtained in exchange for new operating lease liabilities	2,883	3,382
Reduction in operating right-of-use assets due to lease terminations and modifications	—	—

As of March 26, 2023, we had no real estate leases entered into that had not yet commenced.

Maturities of lease liabilities were as follows (in thousands) as of March 26, 2023:


			Operating Leases
Remainder of 2023			31,133
2024			40,930
2025			38,145
2026			34,247
2027			28,662
2028			22,128
Thereafter			46,447
Total lease payments			241,692
Less: imputed interest			(57,985)
Present value of lease liabilities			183,707

Lessor Disclosures

We recognized $0.1 million in franchise rent income, which is included in franchise royalties, fees and rent income in the condensed consolidated statement of operations. We incurred $0.1 million in expenses associated with these leases, which are included in franchise support, rent and marketing expenses in the condensed consolidated statement of operations. The components of lease income were as follows (in thousands):


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Number of subleases	8		—

Operating lease income	$	120	$	—
Variable lease income	14		—
Franchise rent income	$	134	$	—

Leases

Lessee Disclosures

We did not terminate any leases during the quarter ended March 26, 2023.

Operating lease term and discount rate were as follows:



	March 26, 2023		March 27, 2022
Weighted average remaining lease term (years)	6.54		7.06
Weighted average discount rate	8.37	%	8.06	%

The components of lease cost were as follows (in thousands):


		For the Quarter Ended
	Classification	March 26, 2023	March 27, 2022
Operating lease cost	Occupancy, General and administrative expenses and Franchise support, rent and marketing expenses	9,842	10,305
Variable lease cost	Occupancy and Franchise support, rent and marketing expenses	3,541	3,462
Total lease cost		13,383	13,767

Supplemental disclosures of cash flow information related to leases were as follows (in thousands):


	For the Quarter Ended
	March 26, 2023	March 27, 2022
Operating cash flows rent paid for operating lease liabilities	10,698	10,594
Operating right-of-use assets obtained in exchange for new operating lease liabilities	2,883	3,382
Reduction in operating right-of-use assets due to lease terminations and modifications	—	—

As of March 26, 2023, we had no real estate leases entered into that had not yet commenced.

Maturities of lease liabilities were as follows (in thousands) as of March 26, 2023:


			Operating Leases
Remainder of 2023			31,133
2024			40,930
2025			38,145
2026			34,247
2027			28,662
2028			22,128
Thereafter			46,447
Total lease payments			241,692
Less: imputed interest			(57,985)
Present value of lease liabilities			183,707

Lessor Disclosures


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Number of subleases	8		—

Operating lease income	$	120	$	—
Variable lease income	14		—
Franchise rent income	$	134	$	—

Debt and Credit Facilities

3 Months Ended

Mar. 26, 2023

Debt Disclosure [Abstract]

Debt and Credit Facilities

The components of long-term debt were as follows (in thousands):


	March 26, 2023		December 25, 2022
Revolving credit facility	$	—	$	8,550
Term loan credit facility	24,688		—
Unamortized debt issuance costs	(2,141)		—
Less: current portion of long-term debt	(1,250)		—
Total long-term debt	$	21,297	$	8,550

Term Loan Credit Facility

On February 7, 2023 (the “Closing Date”), we entered into a credit and guaranty agreement (the “Credit Agreement”) with Sagard Holdings Manager LP as administrative agent (the “Administrative Agent”). The Credit Agreement provides for a term loan facility with an aggregate commitment of $25 million (the “Term Loan”). Concurrent with entry into the Credit Agreement, we repaid in full and terminated the obligations and commitments under our existing senior secured credit facility (the “Former Credit Facility”). Upon termination of the Former Credit Facility, we recognized a loss on extinguishment of debt of $0.2 million. The remaining proceeds from the Term Loan were used to pay related transaction fees and expenses, and for general corporate purposes.

The Credit Agreement is scheduled to mature on February 7, 2028. We are required to make principal payments equal to 1.25% of the initial principal of the Term Loan on the last business day of each fiscal quarter. If not previously paid, any remaining principal balance must be repaid on the maturity date.

Loans under the Credit Agreement will initially bear interest, at the Company’s option, at either the term SOFR plus 9.25% per annum or base rate plus 8.25% per annum.

As of March 26, 2023, the effective interest rate was 15.07%.

We may prepay the Term Loan in agreed-upon minimum principal amounts, subject to prepayment fees equal to (a) if the prepayment occurs on or prior to the one (1) year anniversary of the Closing Date, a customary make-whole amount plus 3.00% of the outstanding principal balance of the Term Loan, (b) if the prepayment occurs after such one (1) year anniversary and prior to the two (2) year anniversary of the Closing Date, 3.00% of the outstanding principal balance of the Term Loan, (c) if the prepayment occurs after such second anniversary of the Closing Date and prior to the three (3) year anniversary of the Closing Date 1.00% of the outstanding principal balance of the Term Loan and (d) thereafter, no prepayment fee.

Subject to certain customary exceptions, obligations under the Credit Agreement are guaranteed by the Company and all of the Company’s current and future wholly owned material domestic subsidiaries and are secured by a first-priority security interest in substantially all of the assets of the Company and its subsidiary guarantors.

The Credit Agreement contains customary representations and affirmative and negative covenants. Among other things, these covenants restrict the Company’s and certain of its subsidiaries’ ability to incur indebtedness, make certain investments, pay dividends or repurchase stock, and make dispositions and acquisitions. In addition, the Credit Agreement requires that the Company and its wholly-owned subsidiaries maintain certain total net leverage ratios as set forth in the Credit Agreement, an average liquidity amount that shall not be less than $10 million, maximum capital expenditures per year as set forth in the Credit Agreement and fixed charge coverage ratios as set forth in the Credit Agreement.

The Credit Agreement also contains customary events of default. If an event of default occurs, the Administrative Agent and lenders are entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, termination of commitments thereunder and all other actions permitted to be taken by a secured creditor.

In connection with entering into the Credit Agreement, we paid $2.2 million in debt issuance costs, all of which were capitalized. During the quarter ended March 26, 2023, we amortized $0.1 million of debt issuance costs using the effective interest method, which is included in interest expense in the condensed consolidated statement of operations. As

of March 26, 2023, we had $24.7 million outstanding under the Credit Agreement. We are currently in compliance with all financial debt covenants.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-Name Accounting Standards Codification
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+ Details

Franchise Growth Acceleration Initiative

3 Months Ended

Mar. 26, 2023

Other Industries [Abstract]

Franchise Growth Acceleration Initiative

The following is a summary of the activities recorded as a result of the Franchise Growth Acceleration initiative during the quarter ended March 26, 2023 and March 27, 2022:


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Number of shops sold to franchisees	8		—

Proceeds from sale of company-operated shops	$	100	$	—
Net assets sold	(512)		—
Goodwill related to the company-operated shops sold to franchisee	(21)		—
Loss on sale of company-operated shops, net	(433)		—

Adjustment to recognize held-for-sale assets at fair value	(503)		—
Other expenses(a)	(13)		—
Loss on Franchise Growth Acceleration Initiative activities	$	(949)	$	—

______________________________

(a)These costs primarily include professional service fees and travel expenses incurred to execute the refranchise transaction.

Refranchise Transactions

On March 6, 2023, we finalized a multi-unit development agreement along with our first refranchising deal in New York City. This agreement included a development commitment for 13 new shops over the next eight years, and the refranchise of eight shops, the ownership of which was fully transferred to the franchisee on March 6, 2023. We recognized a loss of $0.4 million related to the sale of these shops calculated based on the purchase price of the assets held at the company-operated shops less the net assets disposed of, including an allocated portion of goodwill.

Assets held-for-sale

As of March 26, 2023, we had assets held-for-sale of $1.2 million, primarily consisting of property and equipment held at company-operated shops that we plan to sell within the next year to new or existing franchisees. Long-lived assets that meet the held-for-sale criteria are reported at the lower of their carrying value or fair value less estimated costs to sell. During the quarter ended March 26, 2023, we recorded an adjustment of $0.5 million to recognize the held-for-sale assets at fair value, which is included in loss on Franchising Growth Acceleration Initiative activities in the condensed consolidated statement of operations. The estimated fair value of the assets held-for-sale is based upon Level 2 inputs, which includes a sales agreement.

Capital Stock	3 Months Ended
Capital Stock	Mar. 26, 2023
Equity [Abstract]
Capital Stock	Capital StockOn May 8, 2018, we announced that our Board of Directors authorized a stock repurchase program for up to $65.0 million of our outstanding common stock. The program permits us, from time to time, to purchase shares in the open market (including in pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Securities and Exchange Act of 1934, as amended) or in privately negotiated transactions. The number of common shares actually repurchased, and the timing and price of repurchases, will depend upon market conditions, SEC requirements and other factors. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. For the quarter ended March 26, 2023, we did not repurchase any shares of our common stock under the stock repurchase program. We do not have plans to repurchase any common stock under our stock repurchase program at this time. On February 9, 2021, we closed on a Securities Purchase Agreement (the "SPA") for the sale by us of 3,249,668 shares of our common stock at a par value of $0.01 per share and the issuance of warrants to purchase 1,299,861 shares of common stock at an exercise price of $5.45 per warrant for gross proceeds of $16.0 million, before deducting placement agent fees and offering expenses of approximately $1.0 million. The warrants are initially exercisable commencing August 13, 2021 through their expiration date of August 12, 2026. The proceeds received from the SPA were allocated between shares and warrants based on their relative fair values at closing. The warrants were valued utilizing the Black-Scholes method. During the quarter ended March 26, 2023, 158,767 warrants were exercised at the exercise price of $5.45 per warrant. As of March 26, 2023, we had 1,141,094 warrants outstanding that are exercisable through August 12, 2026. On November 3, 2021, we entered into a certain Equity Sales Agreement (the "Sales Agreement") with William Blair & Company, L.L.C., as agent ("William Blair") pursuant to which we may sell shares of our common stock having an aggregate offering price of up to $40.0 million (the "Shares"), from time to time, in our sole discretion, through an "at the market" equity offering program under which William Blair will act as sales agent. As of March 26, 2023, we have not sold any shares under the Sales Agreement.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Stock-Based Compensation

3 Months Ended

Mar. 26, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock options

We have awarded stock options to certain employees including our senior leadership team. The number of options and exercise price of each option is determined by an independent committee designated by our Board of Directors. The options granted are generally exercisable over a 10-year period from the date of the grant. Outstanding options expire on various dates through the year 2028. The range of exercise prices for the outstanding options as of March 26, 2023 is $9.47 and $20.53 per option, and the options generally vest in one-fourth and one-fifth increments over four and five-year periods, respectively.

A summary of stock option activity is as follows:


Options	Shares (Thousands)	Weighted Average Exercise Price		Aggregate Intrinsic Value (Thousands)		Weighted Average Remaining Term (Years)
Outstanding—December 25, 2022	473	$	12.22	$	—	1.46
Granted	—	—
Exercised	—	—
Canceled	(49)	9.52
Outstanding—March 26, 2023	424	12.53		$	—	1.27
Exercisable—March 26, 2023	424	$	12.53	$	—	1.27

Stock-based compensation related to stock options is measured at the grant date based on the calculated fair value of the award, and is recognized as expense over the requisite employee service period, which is generally the vesting period of the grant with a corresponding increase to additional paid-in capital. We did not recognize stock-based compensation expense related to stock options for the quarter ended March 26, 2023. As of March 26, 2023, we do not have unrecognized stock-based compensation expense related to stock options. We record stock-based compensation expense within general and administrative expenses in the condensed consolidated statements of operations.

Restricted stock units

We award restricted stock units ("RSUs") to certain employees and certain non-employee members of our Board of Directors. Prior to 2021, the Board of Director grants had a vesting schedule of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date. Beginning with the annual grant made in the second quarter of 2021, the Board of Director grants fully vest on the first anniversary of the grant date, or upon termination from the Board of Directors for any reason other than for cause, a pro rata portion of the shares vest on the termination date. The employee grants vest in one-third increments over a three-year period.

A summary of RSU activity is as follows:


RSUs	Number of RSUs (Thousands)	Weighted Average Fair Value per Share
Non-vested as of December 25, 2022	908	$	4.25
Granted	185	5.49
Vested	(111)	8.18
Canceled	(43)	6.31
Non-vested as of March 26, 2023	939	$	4.38

For the quarter ended March 26, 2023, we recognized stock-based compensation expense related to RSUs of $0.6 million. For the quarter ended March 27, 2022, we recognized stock-based compensation expense related to RSUs of $0.6 million. As of March 26, 2023, unrecognized stock-based compensation expense for RSUs was $4.4 million, which will be recognized through fiscal year 2024.

Performance stock units

We award performance share units ("PSUs") to certain of our employees. We have PSUs that have certain vesting conditions based upon our stock price and relative stock performance. We also have PSUs that are based solely on stock price.

Because these PSUs are subject to service and market vesting conditions, we determine the fair market value of each grant using a Monte Carlo simulation model. Participants are entitled to receive a specified number of shares of our common stock contingent on achievement of a stock return on our common stock. For the quarter ended March 26, 2023, we recognized stock-based compensation expense for PSUs with market vesting conditions of $0.3 million.

A summary of activity for PSUs with market vesting conditions for the quarter ended March 26, 2023 is as follows:


PSUs	Number of PSUs (Thousands)	Weighted Average Fair Value per Share
Non-vested as of December 25, 2022	275	9.34
Granted	92	3.63
Vested	—	—
Canceled	(40)	6.24
Non-vested as of March 26, 2023	327	7.74

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 26, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies We are subject to legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. We accrue for such liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, our estimates of the outcomes of these matters and our experience in contesting, litigating and settling other similar matters. In the opinion of management, the amount of ultimate liability with respect to those actions should not have a material adverse impact on our financial position or results of operations and cash flows. Many of the food products we purchase are subject to changes in the price and availability of food commodities, including, among other things, beef, poultry, grains, dairy and produce. We work with our suppliers and use a mix of forward pricing protocols for certain items including agreements with our supplier on fixed prices for deliveries at a time in the future and agreements on a fixed price with our suppliers for the duration of those protocols. We also utilize formula pricing protocols under which the prices we pay are based on a specified formula related to the prices of the goods, such as spot prices. Our use of any forward pricing arrangements varies substantially from time to time and these arrangements tend to cover relatively short periods (i.e., typically twelve months or less). Such contracts are used in normal purchases of our food products and not for speculative purposes, and as such are not required to be evaluated as derivative instruments.

Organization and Other Matters (Policies)

3 Months Ended

Mar. 26, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business

BusinessPotbelly Corporation, a Delaware corporation, together with its subsidiaries (collectively referred to as "the Company", "Potbelly", "we", "us" or "our"), owns and operates 373 company-owned shops in the United States as of March 26, 2023. Additionally, Potbelly franchisees operate 53 shops domestically.

Basis of Presentation

Principles of Consolidation

Fiscal Year

Use of Estimates

Franchise Growth Acceleration Initiative

Restricted Cash

As of March 26, 2023, we had restricted cash related to funds held in a money market account as collateral for letters of credit to certain lease agreements.


	March 26,		December 26,
	2023		2022
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	25,596	$	15,619
Restricted cash, noncurrent	749		—
Total cash, cash equivalents and restricted cash shown on statement of cash flows	$	26,345	$	15,619

Potbelly Brand Fund

Recent Accounting Pronouncements

Recent Accounting PronouncementsWe reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on the condensed consolidated financial statements.

Organization, Consolidation and Presentation of Financial Statements (Tables)

3 Months Ended

Mar. 26, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Cash and Cash Equivalents


	March 26,		December 26,
	2023		2022
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	25,596	$	15,619
Restricted cash, noncurrent	749		—
Total cash, cash equivalents and restricted cash shown on statement of cash flows	$	26,345	$	15,619

Revenue (Tables)

3 Months Ended

Mar. 26, 2023

Revenue from Contract with Customer [Abstract]

Summary of Current and Noncurrent Contract Liabilities from Contracts with Customers

The opening and closing balances of our current and noncurrent contract liabilities from contracts with customers were as follows:


	Current Contract Liability		Noncurrent Contract Liability
	(Thousands)		(Thousands)
Beginning balance as of December 25, 2022	$	7,008	$	1,677
Ending balance as of March 26, 2023	6,553		2,229
Increase (Decrease) in contract liability	$	(455)	$	552

Summary of Expected Revenue Recognition Related to Contract Liabilities

We expect to recognize revenue related to contract liabilities as follows (in thousands), which may vary based upon franchise activity as well as gift card redemption patterns:


Years Ending	Amount
2023	$	5,786
2024	479
2025	378
2026	202
2027	142
Thereafter	1,795
Total revenue recognized	$	8,782

Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 26, 2023

Earnings Per Share [Abstract]

Summary of Loss Per Share Calculation

The following table summarizes the loss per share calculation:


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Net loss attributable to Potbelly Corporation	$	(1,327)	$	(7,913)
Weighted average common stock outstanding-basic	28,907		28,396
Plus: Effect of potentially dilutive stock-based compensation awards	—		—
Plus: Effect of potential warrant exercise	—		—
Weighted average common shares outstanding-diluted	28,907		28,396
Loss per share available to common stockholders-basic	$	(0.05)	$	(0.28)
Loss per share available to common stockholders-diluted	$	(0.05)	$	(0.28)
Potentially dilutive shares that are considered anti-dilutive:
Shares	2,831		1,735

Leases (Tables)

3 Months Ended

Mar. 26, 2023

Leases [Abstract]

Schedule of Weighted Average Lease Terms and Discount Rates

Operating lease term and discount rate were as follows:



	March 26, 2023		March 27, 2022
Weighted average remaining lease term (years)	6.54		7.06
Weighted average discount rate	8.37	%	8.06	%

Components of Lease Cost

The components of lease cost were as follows (in thousands):


		For the Quarter Ended
	Classification	March 26, 2023	March 27, 2022
Operating lease cost	Occupancy, General and administrative expenses and Franchise support, rent and marketing expenses	9,842	10,305
Variable lease cost	Occupancy and Franchise support, rent and marketing expenses	3,541	3,462
Total lease cost		13,383	13,767

Supplemental disclosures of cash flow information related to leases were as follows (in thousands):


	For the Quarter Ended
	March 26, 2023	March 27, 2022
Operating cash flows rent paid for operating lease liabilities	10,698	10,594
Operating right-of-use assets obtained in exchange for new operating lease liabilities	2,883	3,382
Reduction in operating right-of-use assets due to lease terminations and modifications	—	—

Maturities of Lease Liabilities

Maturities of lease liabilities were as follows (in thousands) as of March 26, 2023:


			Operating Leases
Remainder of 2023			31,133
2024			40,930
2025			38,145
2026			34,247
2027			28,662
2028			22,128
Thereafter			46,447
Total lease payments			241,692
Less: imputed interest			(57,985)
Present value of lease liabilities			183,707

Components of Lease Income

The components of lease income were as follows (in thousands):


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Number of subleases	8		—

Operating lease income	$	120	$	—
Variable lease income	14		—
Franchise rent income	$	134	$	—

Debt and Credit Facilities (Tables)

3 Months Ended

Mar. 26, 2023

Debt Disclosure [Abstract]

Component of Long-term Debt

The components of long-term debt were as follows (in thousands):


	March 26, 2023		December 25, 2022
Revolving credit facility	$	—	$	8,550
Term loan credit facility	24,688		—
Unamortized debt issuance costs	(2,141)		—
Less: current portion of long-term debt	(1,250)		—
Total long-term debt	$	21,297	$	8,550

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

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+ Details

Franchise Growth Acceleration Initiative (Tables)

3 Months Ended

Mar. 26, 2023

Other Industries [Abstract]

Schedule of Franchise Growth Acceleration Initiative

The following is a summary of the activities recorded as a result of the Franchise Growth Acceleration initiative during the quarter ended March 26, 2023 and March 27, 2022:


	For the Quarter Ended
	March 26, 2023		March 27, 2022
Number of shops sold to franchisees	8		—

Proceeds from sale of company-operated shops	$	100	$	—
Net assets sold	(512)		—
Goodwill related to the company-operated shops sold to franchisee	(21)		—
Loss on sale of company-operated shops, net	(433)		—

Adjustment to recognize held-for-sale assets at fair value	(503)		—
Other expenses(a)	(13)		—
Loss on Franchise Growth Acceleration Initiative activities	$	(949)	$	—

______________________________

(a)These costs primarily include professional service fees and travel expenses incurred to execute the refranchise transaction.

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 26, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity

A summary of stock option activity is as follows:


Options	Shares (Thousands)	Weighted Average Exercise Price		Aggregate Intrinsic Value (Thousands)		Weighted Average Remaining Term (Years)
Outstanding—December 25, 2022	473	$	12.22	$	—	1.46
Granted	—	—
Exercised	—	—
Canceled	(49)	9.52
Outstanding—March 26, 2023	424	12.53		$	—	1.27
Exercisable—March 26, 2023	424	$	12.53	$	—	1.27

Summary of RSU Activity

A summary of RSU activity is as follows:


RSUs	Number of RSUs (Thousands)	Weighted Average Fair Value per Share
Non-vested as of December 25, 2022	908	$	4.25
Granted	185	5.49
Vested	(111)	8.18
Canceled	(43)	6.31
Non-vested as of March 26, 2023	939	$	4.38

Summary of PSU Activity

A summary of activity for PSUs with market vesting conditions for the quarter ended March 26, 2023 is as follows:


PSUs	Number of PSUs (Thousands)	Weighted Average Fair Value per Share
Non-vested as of December 25, 2022	275	9.34
Granted	92	3.63
Vested	—	—
Canceled	(40)	6.24
Non-vested as of March 26, 2023	327	7.74

Organization and Other Matters - Additional Information (Detail)	3 Months Ended
	Mar. 26, 2023 shop subsidiary jointVenture
Nature Of Business And Basis Of Presentation [Line Items]
Number of shops franchisees operate	53
Number of wholly owned subsidiaries \| subsidiary	7
Number of joint ventures \| jointVenture	6
Minimum
Nature Of Business And Basis Of Presentation [Line Items]
Number of shops Potbelly Corporation owns or operates	373
Ownership interest rate	51.00%
Maximum
Nature Of Business And Basis Of Presentation [Line Items]
Ownership interest rate	80.00%

Organization and Other Matters - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 26, 2023	Dec. 25, 2022	Mar. 27, 2022	Dec. 26, 2021
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$ 25,596	$ 15,619
Restricted cash, noncurrent	749	0
Total cash, cash equivalents and restricted cash shown on statement of cash flows	$ 26,345	$ 15,619	$ 9,493	$ 14,353

Revenue - Additional Information (Detail)	3 Months Ended
Revenue - Additional Information (Detail)	Mar. 26, 2023 USD ($) point	Mar. 27, 2022 USD ($)
Disaggregation Of Revenue [Line Items]
Amount of revenue recognized	$ 118,270,000	$ 98,221,000
Gift card breakage income	$ 200,000	200,000
Loyalty points earned per dollar spent \| point	10
Cost of loyalty reward (in points) \| point	1,000
Expiration period of loyalty reward	30 days
Aggregate value of remaining performance obligation on outstanding contracts	$ 8,782,000
Revenue recognized related to prior periods	1,300,000	1,100,000
Revenue recognized from obligations satisfied (or partially satisfied) in prior periods	0	0
Point in time sales
Disaggregation Of Revenue [Line Items]
Amount of revenue recognized	117,900,000	97,900,000
Over time sales
Disaggregation Of Revenue [Line Items]
Amount of revenue recognized	$ 400,000	$ 300,000

Revenue - Summary of Current and Noncurrent Contract Liabilities from Contracts with Customers (Detail) $ in Thousands	3 Months Ended
	Mar. 26, 2023 USD ($)
Current Contract Liability
Beginning balance	$ 7,008
Ending balance	6,553
Increase (Decrease) in contract liability	(455)
Noncurrent Contract Liability
Beginning balance	1,677
Ending balance	2,229
Increase (Decrease) in contract liability	$ 552

Revenue - Summary of Expected Revenue Recognition Related to Contract Liabilities (Detail) $ in Thousands	Mar. 26, 2023 USD ($)
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 8,782
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-09-26
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-12-26
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-03-27
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 5,786
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-12-31
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 479
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-12-30
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-12-31
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 378
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2025-12-29
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2025-12-31
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 202
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2026-12-28
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2026-12-31
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 142
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2027-12-31
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Revenue, remaining performance obligations	$ 1,795

Fair Value Measurement (Detail) $ in Millions	3 Months Ended
Fair Value Measurement (Detail) $ in Millions	Mar. 26, 2023 USD ($)
Fair Value Disclosures [Abstract]
Impairment charge	$ 0.7

Earnings (Loss) Per Share - Additional Information (Detail)	3 Months Ended
	Mar. 27, 2022 shares
Common Share Options
Loss Per Share [Line Items]
Potential common shares included in diluted shares outstanding (in shares)	0

Earnings (Loss) Per Share - Summary of Loss Per Share Calculation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 26, 2023	Mar. 27, 2022
Loss Per Share [Line Items]
Net loss attributable to Potbelly Corporation	$ (1,327)	$ (7,913)
Weighted average common shares outstanding-basic (in shares)	28,907	28,396
Plus: Effect of potentially dilutive stock-based compensation awards	0	0
Plus: Effect of potential warrant exercise	0	0
Weighted average common shares outstanding-diluted (in shares)	28,907	28,396
Income (loss) per share available to common stockholders-basic (in USD per share)	$ (0.05)	$ (0.28)
Income (loss) per share available to common stockholders-diluted (in USD per share)	$ (0.05)	$ (0.28)
Common share options
Loss Per Share [Line Items]
Potentially dilutive shares that are considered anti-dilutive (in shares)	2,831	1,735

Income Taxes - (Detail) $ in Millions	Mar. 31, 2019 USD ($)
Income Tax Disclosure [Abstract]
Deferred tax assets, valuation allowance	$ 13.6

Leases - Additional Information (Detail)	3 Months Ended
Leases - Additional Information (Detail)	Mar. 26, 2023 USD ($) store	Mar. 27, 2022 USD ($)
Leases [Abstract]
Operating leases, terms	10 years
Renewal term	5 years
Number of leases terminated \| store	0
Additional operating leases payments related to shops not yet open, amount	$ 0
Total revenues	$ 118,270,000	$ 98,221,000

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

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Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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+ Details

Leases - Operating Lease Term and Discount Rate (Detail)	Mar. 26, 2023	Mar. 27, 2022
Leases [Abstract]
Weighted average remaining lease term (years)	6 years 6 months 14 days	7 years 21 days
Weighted average discount rate	8.37%	8.06%

Leases - Components of Lease Cost (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2023	Mar. 27, 2022
Lessee Lease Description [Line Items]
Total lease cost	$ 13,383	$ 13,767
Occupancy, General and administrative expenses and Franchise support, rent and marketing expenses
Lessee Lease Description [Line Items]
Operating lease cost	9,842	10,305
Occupancy and Franchise support, rent and marketing expenses
Lessee Lease Description [Line Items]
Variable lease cost	$ 3,541	$ 3,462

Leases - Supplemental Disclosures of Cash Flow Information Related to Leases (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 26, 2023	Mar. 27, 2022
Leases [Abstract]
Operating cash flows rent paid for operating lease liabilities	$ 10,698	$ 10,594
Operating right-of-use assets obtained in exchange for new operating lease liabilities	2,883	3,382
Reduction in operating right-of-use assets due to lease terminations and modifications	$ 0	$ 0

Leases - Maturities of Lease Liabilities (Detail) $ in Thousands	Mar. 26, 2023 USD ($)
Operating Leases
Remainder of 2023	$ 31,133
2024	40,930
2025	38,145
2026	34,247
2027	28,662
2028	22,128
Thereafter	46,447
Total lease payments	241,692
Less: imputed interest	(57,985)
Present value of lease liabilities	$ 183,707

Leases - Lessor Operating Leases (Details) $ in Thousands	3 Months Ended
Leases - Lessor Operating Leases (Details) $ in Thousands	Mar. 26, 2023 USD ($) lease	Mar. 27, 2022 USD ($) lease
Leases [Abstract]
Franchise support, rent and marketing expenses	$ 100
Number of subleases \| lease	8	0
Operating lease income	$ 120	$ 0
Variable lease income	14	0
Franchise rent income	$ 134	$ 0

Debt and Credit Facilities - Component of Long-term Debt (Detail) - USD ($) $ in Thousands	Mar. 26, 2023	Dec. 25, 2022
Debt Instrument [Line Items]
Total long-term debt	$ 21,297	$ 8,550
Unamortized debt issuance costs	(2,141)	0
Less: current portion of long-term debt	(1,250)	0
Revolving credit facility
Debt Instrument [Line Items]
Total long-term debt	0	8,550
Term loan credit facility
Debt Instrument [Line Items]
Total long-term debt	$ 24,688	$ 0

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Debt and Credit Facilities - Additional Information (Detail) $ in Thousands		3 Months Ended
	Feb. 07, 2023 USD ($)	Mar. 26, 2023 USD ($)	Mar. 27, 2022 USD ($)
Debt Instrument [Line Items]
Loss on extinguishment of debt		$ (239)	$ 0
Debt Instrument, Interest Rate, Effective Percentage		15.07%
Term loan credit facility
Debt Instrument [Line Items]
Credit facility agreement, maximum principal amount	$ 25,000
Principal payments as a percentage of initial principal of term loan	0.0125
Debt issuance costs	$ 2,200
Amortization of debt issuance costs		$ 100
Debt covenant, minimum average liquidity	$ 10,000
Term loan credit facility \| Prepayment Percentage One
Debt Instrument [Line Items]
Prepayment as a percentage of principal amount outstanding	0.0300
Term loan credit facility \| Prepayment Percentage Two
Debt Instrument [Line Items]
Prepayment as a percentage of principal amount outstanding	0.0300
Term loan credit facility \| Prepayment Percentage Three
Debt Instrument [Line Items]
Prepayment as a percentage of principal amount outstanding	0.0100
Term loan credit facility \| Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Credit facility agreement, interest rate	9.25%
Term loan credit facility \| Base Rate
Debt Instrument [Line Items]
Credit facility agreement, interest rate	8.25%
Revolving credit facility
Debt Instrument [Line Items]
Loss on extinguishment of debt	$ 200

Franchise Growth Acceleration Initiative (Details) $ in Thousands	3 Months Ended
	Mar. 26, 2023 USD ($) store	Mar. 27, 2022 USD ($) store	Mar. 06, 2023 store
Other Industries [Abstract]
Additional franchises \| store			13
Number of shops sold to franchisees \| store	8	0
Proceeds from sale of company-operated shops	$ 100	$ 0
Net assets sold	(512)	0
Goodwill related to the company-operated shops sold to franchisee	(21)	0
Loss on sale of company-operated shops, net	(433)	0
Adjustment to recognize held-for-sale assets at fair value	(503)	0
Other expenses	(13)	0
Loss on Franchise Growth Acceleration Initiative activities	$ (949)	$ 0

Capital Stock (Detail) - USD ($)			3 Months Ended
Capital Stock (Detail) - USD ($)	Nov. 03, 2021	Feb. 09, 2021	Mar. 26, 2023	Dec. 25, 2022	May 08, 2018
Equity Class Of Treasury Stock [Line Items]
Stock repurchase program, authorized amount					$ 65,000,000
Common stock, par value (in USD per share)			$ 0.01	$ 0.01
Proceeds from exercise of warrants			$ 865,000
Warrants outstanding			1,141,094
Warrants
Equity Class Of Treasury Stock [Line Items]
Placement agent fees and offering expenses		$ 1,000,000
Proceeds from exercise of warrants			$ (313,000)
Common Stock
Equity Class Of Treasury Stock [Line Items]
Issuance of common shares and warrants, net of fees (in shares)			159,000
Proceeds from exercise of warrants			$ 1,000
Securities purchase agreement
Equity Class Of Treasury Stock [Line Items]
Issuance of common shares and warrants, net of fees (in shares)		3,249,668
Common stock, par value (in USD per share)		$ 0.01
Securities purchase agreement \| Warrants
Equity Class Of Treasury Stock [Line Items]
Issuance of common shares and warrants, net of fees (in shares)		1,299,861
Exercise price of warrants (in USD per share)		$ 5.45
Proceeds from securities purchase agreement		$ 16,000,000
Securities purchase agreement \| Common Stock
Equity Class Of Treasury Stock [Line Items]
Issuance of common shares and warrants, net of fees (in shares)			158,767
William Blair [Member]
Equity Class Of Treasury Stock [Line Items]
Proceeds from exercise of warrants	$ 40,000,000

Stock-Based Compensation - Additional Information (Detail) - USD ($)	3 Months Ended			6 Months Ended
	Mar. 26, 2023	Mar. 27, 2022	Dec. 26, 2021	Jun. 27, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized stock-based compensation expense (less than)	$ 911,000	$ 675,000
Common share options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of options outstanding, lower limit (in USD per share)	$ 9.47
Exercise price of options outstanding, higher limit (in USD per share)	$ 20.53
Common share options \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vesting period (in years)	4 years
Common share options \| Minimum \| Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%
Common share options \| Minimum \| Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%
Common share options \| Minimum \| Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%
Common share options \| Minimum \| Tranche Four
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%
Common share options \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercisable period from the date of grant	10 years
Options vesting period (in years)	5 years
Recognized stock-based compensation expense (less than)	$ 0
Unrecognized stock compensation expense	$ 0
Common share options \| Maximum \| Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Common share options \| Maximum \| Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Common share options \| Maximum \| Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Common share options \| Maximum \| Tranche Four
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Common share options \| Maximum \| Tranche Five
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%
Restricted stock units (RSUs) \| Non-employee board of directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vesting period (in years)			3 years
Recognized stock-based compensation expense (less than)	$ 600,000	$ 600,000
Unrecognized stock compensation expense	$ 4,400,000
Restricted stock units (RSUs) \| Non-employee board of directors \| Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.00%			50.00%
Restricted stock units (RSUs) \| Non-employee board of directors \| Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.00%			50.00%
Restricted stock units (RSUs) \| Non-employee board of directors \| Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.00%
Performance stock units \| Market vesting conditions
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized stock-based compensation expense (less than)	$ 300,000

Stock-Based Compensation - Summary of Stock Option Activity (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 26, 2023	Jun. 26, 2022	Dec. 25, 2022
Shares (Thousands)
Beginning balance (in shares)	473
Granted (in shares)	0
Exercised (in shares)	0
Canceled (in shares)	(49)
Ending balance (in shares)	424
Exercisable (in shares)	424
Weighted Average Exercise Price
Outstanding at beginning balance (in USD per share)	$ 12.22
Granted (in USD per share)	0
Exercised (in USD per share)	0
Canceled (in USD per share)	9.52
Outstanding at ending balance (in USD per share)	12.53
Exercisable (in USD per share)	$ 12.53
Options outstanding aggregate intrinsic value	$ 0		$ 0
Options exercisable aggregate intrinsic value	$ 0
Weighted Average Remaining Term (Years)
Options outstanding	1 year 3 months 7 days	1 year 5 months 15 days
Options exercisable	1 year 3 months 7 days

Stock-Based Compensation - Summary of RSU Activity (Detail) - Restricted stock units (RSUs) shares in Thousands	3 Months Ended
	Mar. 26, 2023 $ / shares shares
Number of RSUs (Thousands)
Non-vested beginning balance (in shares) \| shares	908
Granted (in shares) \| shares	185
Vested (in shares) \| shares	(111)
Canceled (in shares) \| shares	(43)
Non-vested ending balance (in shares) \| shares	939
Weighted Average Fair Value per Share
Weighted average fair value beginning balance (in USD per share) \| $ / shares	$ 4.25
Granted (in USD per share) \| $ / shares	5.49
Vested (in USD per share) \| $ / shares	8.18
Canceled (in USD per share) \| $ / shares	6.31
Weighted average fair value ending balance (in USD per share) \| $ / shares	$ 4.38

Stock-Based Compensation - Summary of PSU Activity (Detail) - Performance stock units shares in Thousands	3 Months Ended
	Mar. 26, 2023 $ / shares shares
Number of RSUs (Thousands)
Non-vested beginning balance (in shares) \| shares	275
Granted (in shares) \| shares	92
Vested (in shares) \| shares	0
Canceled (in shares) \| shares	(40)
Non-vested ending balance (in shares) \| shares	327
Weighted Average Fair Value per Share
Weighted average fair value beginning balance (in USD per share) \| $ / shares	$ 9.34
Granted (in USD per share) \| $ / shares	3.63
Vested (in USD per share) \| $ / shares	0
Canceled (in USD per share) \| $ / shares	6.24
Weighted average fair value ending balance (in USD per share) \| $ / shares	$ 7.74