Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common stock, $0.01 Par Value – ~~28,965,043~~30,003,391 shares as of ~~October 31, 2014~~May 1, 2015


	September 28, 2014			December 29, 2013			March 29, 2015			December 28, 2014
ASSETS
Current assets
Cash and cash equivalents	$	69,403		$	69,579		$	61,726		$	63,005
Accounts receivable, net of allowances of $26 and $6 as of September 28, 2014 and December 29, 2013, respectively		4,563			2,991
Accounts receivable, net of allowances of $23 and $19 as of March 29, 2015 and December 28, 2014, respectively								5,211			4,016
Inventories		2,447			2,263			2,598			2,768
Deferred income taxes, current								473			507
Prepaid expenses and other current assets		8,876			6,965			9,851			9,922

Total current assets		85,289			81,798			79,859			80,218
Property and equipment, net		83,401			78,983			89,804			85,704
Intangible assets, net		3,404			3,404
Indefinite-lived intangible assets								3,404			3,404
Goodwill		1,428			1,428			1,428			1,428
Deferred income taxes		17,181			17,297
Deferred income taxes, non-current								17,860			17,860
Deferred expenses, net and other assets		3,147			3,170			3,479			3,333

Total assets	$	193,850		$	186,080		$	195,834		$	191,947


LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	3,317		$	2,078		$	3,096		$	3,301
Accrued expenses		17,802			16,337			21,939			16,349
Accrued income taxes		1,512			216			343			226
Current portion of long-term debt		74			74			986			1,008

Total current liabilities		22,705			18,705			26,364			20,884
Long-term debt, net of current portion		955			1,018
Deferred rent and landlord allowances		13,374			12,288			14,615			14,012
Other long-term liabilities		717			796			704			726

Total liabilities		37,751			32,807			41,683			35,622

Equity
Common stock, $0.01 par value—authorized, 200,000,000 shares; outstanding 29,043,925 and 29,148,029 shares as of September 28, 2014, and December 29, 2013, respectively		295			291
Common stock, $0.01 par value—authorized, 200,000,000 shares; outstanding 28,710,056 and 28,934,700 shares as of March 29, 2015, and December 28, 2014, respectively								299			298
Warrants		909			909			909			909
Additional paid-in-capital		388,063			383,077			393,579			391,972
Treasury stock, held at cost, 471,290 and no shares as of September 28, 2014, and December 29, 2013, respectively		(5,797	)		—
Treasury stock, held at cost, 1,161,776 and 827,090 shares as of March 29, 2015, and December 28, 2014, respectively								(14,652	)		(10,246	)
Accumulated deficit		(227,576	)		(231,232	)		(226,343	)		(226,874	)

Total stockholders’ equity		155,894			153,045			153,792			156,059
Non-controlling interest		205			228			359			266

Total equity		156,099			153,273			154,151			156,325

Total liabilities and equity	$	193,850		$	186,080		$	195,834		$	191,947

See accompanying notes to the unaudited condensed consolidated financial statements.


	For the 13 Weeks Ended					For the 39 Weeks Ended					For the 13 Weeks Ended
	September 28, 2014		September 29, 2013			September 28, 2014		September 29, 2013			March 29, 2015		March 30, 2014
Revenues
Sandwich shop sales, net	$	84,340	$	77,747		$	241,131	$	224,214		$	85,397	$	73,523
Franchise royalties and fees		335		274			1,045		737			371		358

Total revenues		84,675		78,021			242,176		224,951			85,768		73,881


Expenses
Sandwich shop operating expenses
Cost of goods sold, excluding depreciation		24,044		23,014			69,066		65,767			24,345		21,086
Labor and related expenses		23,772		21,223			68,637		62,217			24,600		21,460
Occupancy expenses		10,467		9,295			30,629		26,826			11,347		9,979
Other operating expenses		8,847		7,946			25,696		23,058			9,657		8,158
General and administrative expenses		7,623		8,293			24,310		24,298			8,831		7,822
Depreciation expense		5,039		4,460			14,540		13,284			5,151		4,717
Pre-opening costs		314		364			839		1,083			541		252
Impairment and loss on disposal of property and equipment		1,315		250			2,192		329			348		848

Total expenses		81,421		74,845			235,909		216,862			84,820		74,322

Income from operations		3,254		3,176			6,267		8,089
Income (loss) from operations												948		(441	)
Interest expense		42		97			124		330			61		42
Other expense		—		—			—		2

Income before income taxes		3,212		3,079			6,143		7,757
Income tax expense		1,260		905			2,476		2,792
Income (loss) before income taxes												887		(483	)
Income tax expense (benefit)												351		(191	)

Net income		1,952		2,174			3,667		4,965
Net income (loss)												536		(292	)
Net income attributable to non-controlling interest		5		9			11		24			5		9

Net income attributable to Potbelly Corporation		1,947		2,165			3,656		4,941
Dividend declared to common and preferred stockholders		—		(49,854	)		—		(49,854	)
Accretion of redeemable convertible preferred stock to maximum redemption value		—		(4,796	)		—		(15,097	)
Net income (loss) attributable to Potbelly Corporation											$	531	$	(301	)

Net income (loss) attributable to common stockholders	$	1,947	$	(52,485	)	$	3,656	$	(60,010	)

Net income (loss) per common share attributable to common stockholders:
Net income (loss) per share:
Basic	$	0.07	$	(12.29	)	$	0.12	$	(14.12	)	$	0.02	$	(0.01	)
Diluted	$	0.06	$	(12.29	)	$	0.12	$	(14.12	)	$	0.02	$	(0.01	)
Weighted average shares outstanding:
Basic		29,358,822		4,268,953			29,284,058		4,250,819			28,905,084		29,150,824
Diluted		30,044,456		4,268,953			30,463,093		4,250,819			29,675,032		29,150,824

See accompanying notes to the unaudited condensed consolidated financial statements.

Condensed Consolidated ~~Statements~~Statement of ~~Redeemable Convertible Preferred Stock and~~ Equity (Deficit)

See accompanying notes to the unaudited condensed consolidated financial statements.


	For the 39 Weeks Ended						For the 13 Weeks Ended
	September 28, 2014			September 29, 2013			March 29, 2015			March 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,667		$	4,965
Net income (loss)							$	536		$	(292	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		14,540			13,284			5,151			4,717
Deferred income tax		116			1,683			34			(364	)
Deferred rent and landlord allowances		1,086			258			602			344
Stock compensation expense		2,022			2,370
Asset impairment and loss on disposal of property and equipment		2,192			329
Amortization of stock compensation expense								538			488
Asset impairment, store closure and disposal of property and equipment								399			848
Amortization of debt issuance costs		53			46			18			18
Changes in operating assets and liabilities:
Accounts receivable, net		(1,572	)		(735	)		(1,195	)		(871	)
Inventories		(184	)		(215	)		170			81
Prepaid expenses and other assets		(2,125	)		(1,475	)		(155	)		(1,641	)
Accounts payable		1,235			602			(52	)		1,324
Accrued and other liabilities		2,264			3,267			4,107			1,864

Net cash provided by operating activities		23,294			24,379			10,153			6,516


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(20,544	)		(21,265	)		(8,163	)		(6,536	)

Net cash (used in) investing activities		(20,544	)		(21,265	)		(8,163	)		(6,536	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of Series F warrants		—			2

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable								(21	)		(20	)
Proceeds from exercise of stock options		3,780			—			1,284			8
Payment of payroll taxes related to stock-based compensation awards		(812	)		—			(214	)		—
Treasury stock repurchase		(5,797	)		—			(4,406	)		—
Payment of costs associated with initial public offering		—			(533	)
Distribution to non-controlling interest		(34	)		—
Payments on note payable		(63	)		(59	)
Contributions from non-controlling interest								88			—

Net cash (used in) financing activities		(2,926	)		(590	)		(3,269	)		(12	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(176	)		2,524

NET (DECREASE) IN CASH AND CASH EQUIVALENTS								(1,279	)		(32	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		69,579			22,595			63,005			69,579

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	69,403		$	25,119		$	61,726		$	69,547


Supplemental cash flow information:
Income taxes paid	$	867		$	727		$	17		$	356
Interest paid		124			261			58			42
Supplemental non-cash investing and financing activities:
Unpaid liability for purchases of property and equipment	$	3,059		$	2,561		$	4,138		$	1,626
Accretion of redeemable convertible preferred stock to maximum redemption value	$	—		$	15,097
Accrued dividend payable	$	—		$	49,854

See accompanying notes to the unaudited condensed consolidated financial statements

Potbelly Corporation (the “Company” or “Potbelly”), through its ~~wholly owned~~wholly-owned subsidiaries, operates Potbelly Sandwich Works sandwich shops in 2327 states and the District of Columbia. As of ~~September 28,~~March 29, 2015 and March 30, 2014, the Company had ~~319~~339 and 305 company-operated shops, respectively. During the 13 weeks ended March 29, 2015, the Company opened seven new company-operated shops and closed two shops. During the 3913 weeks ended ~~September 28,~~March 30, 2014, the Company opened 23nine new company-operated shops and closed no shops.

The Company also sells and administers franchises of ~~new~~ Potbelly Sandwich Works sandwich shops. The first domestic and international franchise locations administered by the Company opened during February 2011. As of ~~September 28, 2014, 14~~March 29, 2015, 17 franchised shops were in operation domestically and 12 franchised shops were in operation internationally. During the 3913 weeks ended ~~September 28,~~March 29, 2015, the Company did not open or close any franchised shops. During the 13 weeks ended March 30, 2014, the Company opened ~~four~~two franchised shops and closed ~~one~~no franchised ~~shop.~~shops.

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 the Company’s Annual Report on Form 10-K for the year ended December ~~29, 2013.~~28, 2014. The unaudited condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the SEC’s 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 the Company’s financial position as of December ~~29, 2013 and September~~ 28, 2014 and March 29, 2015, its statement of operations for the 13 ~~and 39~~ weeks ended ~~September~~March 30, 2014 and March 29, ~~2013 and September 28, 2014~~2015 and its statement of cash flows for the 3913 weeks ended ~~September~~March 30, 2014 and March 29, ~~2013 and September 28, 2014~~2015 have been included. The consolidated statements of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.

The Company does not have any components of other comprehensive income (loss) recorded within its consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements.

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 (“LLC”) and 1618 of LLC’s wholly owned subsidiaries and the LLC’s ~~two~~three joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For ~~the Company’s~~ consolidated joint ventures, non-controlling interest represents ~~the~~a non-controlling ~~partners’~~partner’s share of the assets, liabilities and operations related to ~~their respective~~the three joint venture investments. The Company has ownership interests ranging from ~~65-75%~~65-80% in these consolidated joint ventures.

The Company uses 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 years 2014 and 2015 each consist of 52 weeks. The fiscal quarters ended March 30, 2014 and March 29, 2015 each consisted of 13 weeks.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, primarily related to the long-lived assets and income taxes, ~~stock-based compensation and common stock equity valuations,~~ that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar year. Approximately every five or six years a 53rd week is added. Fiscal 2013 and 2014 each consist of 52 weeks. The fiscal quarters ended September 29, 2013 and September 28, 2014 each consisted of 13 weeks.

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 Company assesses potential impairments to its long-lived assets, which includes property and equipment, whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Shop-level assets are grouped at the individual shop-level for the purpose of the impairment assessment. Recoverability of an asset is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. 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 exceeds the fair value of the asset. After performing a periodic review of our shops during the first fiscal quarter of 2015, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance of shop profitability. We performed an impairment analysis related to these shops and recorded impairment charges of $0.3 million for the 13 weeks ended March 29, 2015 related to the excess of the carrying amounts recorded on our balance sheet over the identified shops’ estimated fair values. The fair value of the shop assets was 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. 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 each quarter of 2014, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance of shop profitability. We performed an impairment analysis related to these shops and recorded impairment charges of $1.3 million and $2.1 million for the 13 and 39 weeks ended September 28, 2014, respectively, related to the excess of the carrying amounts recorded on our balance sheet over the identified shops’ estimated fair values.

In ~~the third~~ fiscal ~~quarter of~~ 2014, the Company established a non-qualified deferred compensation plan, “Potbelly Non-Qualified Deferred Compensation Plan,” which allows highly compensated employees to defer a portion of their base salary and variable compensation each plan year. The Company maintains a rabbi trust to fund obligations under the deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds. The investments in the rabbi trust are designated as trading securities and carried at fair value. Fair market value of investments in the rabbi trust is measured using Level 1 inputs (quoted prices for identical assets in active markets). As of ~~September 28, 2014,~~March 29, 2015, the fair value of the investments in the rabbi trust was ~~$16~~$53 thousand, which is included in other assets in the condensed consolidated balance sheet. The associated liability is recorded within other long-term liabilities in the condensed consolidated balance sheet. The Company records trading gains and losses in general and administrative expenses in the condensed consolidated statement of operations, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect its exposure to liabilities for payment under the deferred plan. For the three months ended ~~September 28, 2014,~~March 29, 2015, the Company recorded an immaterial amount of unrealized losses on investments held in the rabbi trust.

Basic and diluted income (loss) per ~~common~~ share ~~attributable to common stockholders is~~are calculated using the weighted average number of ~~common~~ shares outstanding for the period. For the 13 and 39 weeks ended September 29, 2013, diluted (loss) per common share attributable to common stockholders was computed by dividing the (loss) allocated to common stockholders utilizing the two-class method by the weighted average number of fully diluted common shares outstanding. In periods with net income attributable to common stockholders, the Company’s redeemable convertible preferred stock were all considered participating securities requiring the two-class method to calculate basic and diluted earnings per share. However, in periods of a net (loss) attributable to common stockholders, the redeemable convertible preferred stock were excluded from the computation of basic earnings per share due to the fact that they were not required to fund losses and the redemption amount was not reducedperiod as a result of losses. For the 13 and 39 weeks ended September 29, 2013, the dilutive securities did not include stock options awarded to employees that had a performance condition requiring the completion of an initial public offering of common stock, as that performance condition was not satisfied at the reporting date and the holders of these options had no rights in our undistributed earnings until that time. On October 9, 2013, the Company completed an initial public offering. Effective upon the closing of such offering, all of the shares of preferred stock and non-voting common stock converted into common stock. As a result of the conversion, for subsequent reporting periods, the Company no longer utilized the two-class method in its calculation of diluted income (loss) per common share attributable to common stockholders. For the 13 and 39 weeks ended September 28, 2014, diluted income (loss) per common share attributable to common stockholders was calculated using income available to common shareholders divided by diluted weighted-average shares of common stock outstanding during the period.

For the 13 and 39 weeks ended September 29, 2013, the Company’s potential common stock instruments such as common stock options and warrants were not included in the computation of diluted (loss) per common share as the effect of including these shares in the calculation would have been anti-dilutive.

The Company recognized income tax expense of ~~$2.5~~$0.4 million on pre-tax income of ~~$6.1~~$0.9 million, or an effective tax rate of ~~40.3%~~39.6%, for the 3913 weeks ended ~~September 28, 2014,~~March 29, 2015, compared to an income tax ~~expense~~benefit of ~~$2.8~~$0.2 million on pre-tax ~~income~~loss of ~~$7.8~~$0.5 million, or an effective tax rate of ~~36.0%~~39.5%, for the 3913 weeks ended ~~September 29, 2013.~~March 30, 2014. The difference between the statutory rate and the effective tax rate is primarily attributable to state income taxes offset by certain federal and state tax credits. ~~The increase in the effective tax rate primarily relates~~

Notes to ~~the expiration of certain federal income tax credits for 2014 that were available in prior years as well as provision to return adjustments.~~Unaudited Condensed Consolidated Financial Statements

On October 9, 2013, the Company completed an initial public offering. Effective upon the closing of such offering, all shares of preferred stock and non-voting common stock converted into common stock. The terms of the non-voting common stock provided that all shares of non-voting common stock would convert into voting common stock on a 1:1 basis immediately prior to the closing of an underwritten IPO or sale of the Company. The redeemable convertible preferred stock included down-round provisions which would adjust the conversion price for any additional stock issued without consideration or for a consideration per share less than the respective conversion price for one or more of the series of preferred stock in effect immediately prior to the issuance of such additional stock. Each share of common stock has the same relative rights and was identical in all respects to each other share of common stock. Each holder of shares of common stock is entitled to one vote for each share held by such holder at all meetings of stockholders.

On August 1, 2014, the Company’s Board of Directors authorized a share repurchase program of up to $35.0 million of the Company’s common stock. Under this program, the Company may, from time to time, 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 Exchange Act of 1934, as amended) or in privately negotiated transactions. During the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, the Company repurchased ~~471,290~~334,686 shares of its common stock for approximately ~~$5.8~~$4.4 million in open market transactions. As of ~~September 28, 2014,~~March 29, 2015, the remaining dollar value of authorization under the share repurchase program was ~~$29.2~~$20.4 million. Repurchased shares are included as treasury stock in the Condensed Consolidated Balance Sheets and the Condensed Consolidated ~~Statements~~Statement of ~~Redeemable Convertible Preferred Stock and~~ Equity.

Throughout the 3913 weeks ending ~~September 28, 2014,~~March 29, 2015, the Company issued ~~292,767~~253,479 stock options under the 2013 Long-Term Incentive Plan to eligible employees and key executives. The fair value of the options was determined using the Black-Scholes option pricing model. The weighted average ~~common stock~~ fair value of options granted during the 3913 weeks ended ~~September 28, 2014~~March 29, 2015 was ~~$19.58~~$6.37 per share, as estimated using the following weighted average assumptions: expected life of options – seven years; volatility- ~~49.36%~~45.65%; risk-free interest rate – ~~1.28%~~1.90%; and dividend yield – 0.00%. The Company used the simplified method for determining the expected life of the options. Due to the lack of historical data as a newly public company, the Company calculated the specific stock price volatility using a blended volatility rate based on comparable publicly traded companies.

A summary of activity for the 3913 weeks ended ~~September 28, 2014~~March 29, 2015 is as follows:

During the 39 weeks ended September 28, 2014, the Company issued 28,240 shares of unrestricted common stock to certain non-employee members of its Board of Directors. The unrestricted stock had a weighted average grant-date share price of $15.29 upon issuance. The Company recorded $0.4 million in stock-based compensation expense, with a corresponding increase to additional paid-in capital, related to the issuance of common stock.

In accordance with ASC Topic 718,Compensation—Stock Compensation, stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an 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. For each of the 13 ~~and 39~~ weeks ended ~~September 28,~~March 29, 2015 and March 30, 2014, the Company recognized stock-based compensation expense of $0.6 million and $2.0 million, respectively, which includes $32 thousand and $0.4 million related to the unrestricted common stock granted during 2014, respectively. For the 13 and 39 weeks ended September 29, 2013, the Company recognized stock-based compensation expense of $1.2 million and $2.4 million, respectively.$0.5 million. As of ~~September 28, 2014,~~March 29, 2015, the unrecognized stock-based compensation expense was ~~$6.0~~$6.1 million, which will be recognized through fiscal year ~~2018.~~2019. The Company records stock-based compensation expense within general and administrative expenses in the consolidated statements of operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2013.~~28, 2014. This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and involves numerous risks and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and generally contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “strives,” “goal,” “estimates,” “forecasts,” “projects” or “anticipates” or similar expressions. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included in our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2013,~~28, 2014, for a discussion of factors that could cause our actual results to differ from those expressed or implied by forward-looking statements.

Potbelly is a fast-growing neighborhood sandwich concept offering toasty warm sandwiches, signature salads and other fresh menu items served by engaging people in an environment that reflects the Potbelly brand. Our combination of product, people and place is how we deliver on our passion to be “The Best Place for Lunch.” Our sandwiches, salads and hand-dipped milkshakes are all made fresh to order and our cookies are baked fresh each day. Our employees are trained to engage with our customers in a genuine way to provide a personalized experience. Our shops feature vintage design elements and locally-themed décor inspired by the neighborhood that we believe create a lively atmosphere. Through this combination, we believe we are creating a devoted base of Potbelly fans that return again and again and that we are expanding one sandwich shop at a time.

We believe that a key to our past and future success is our culture. It is embodied inThe Potbelly Advantage, which is an expression of our Vision, Mission, Passion and Values, and the foundation of everything we do. Our Vision is for our customers to feel that we are their “Neighborhood Sandwich Shop” and to tell others about their great experience. Our Mission is to make people really happy, to make more money and to improve every day. Our Passion is to be “The Best Place for Lunch.” Our Values embody both how we lead and how we behave, and form the cornerstone of our culture. We use simple language that resonates from the frontline associate to the most senior levels of the organization, creating shared expectations and accountabilities in how we approach our day-to-day activities. We strive to be a fun, friendly and hardworking group of people who enjoy taking care of our customers, while at the same time taking care of each other.

13 Weeks Ended ~~September 28, 2014~~March 29, 2015 Compared to 13 Weeks Ended ~~September 29, 2013~~March 30, 2014

The following table presents information comparing the components of net income (loss) for the periods indicated (dollars in thousands):


	For the 13 Weeks Ended																	For the 13 Weeks Ended
	September 28, 2014		% of Revenues			September 29, 2013			% of Revenues			Increase (Decrease)			Percent Change			March 29, 2015		% of Revenues			March 30, 2014			% of Revenues			Increase (Decrease)			Percent Change
Revenues
Sandwich shop sales, net	$	84,340		99.6	%	$	77,747			99.6	%	$	6,593			8.5	%	$	85,397		99.6	%	$	73,523			99.5	%	$	11,874			16.2	%
Franchise royalties and fees		335		0.4			274			0.4			61			22.3			371		0.4			358			0.5			13			3.6

Total revenues		84,675		100.0			78,021			100.0			6,654			8.5			85,768		100.0			73,881			100.0			11,887			16.1

Expenses
Sandwich shop operating expenses
Cost of goods sold, excluding depreciation		24,044		28.4			23,014			29.5			1,030			4.5			24,345		28.4			21,086			28.5			3,259			15.5
Labor and related expenses		23,772		28.1			21,223			27.2			2,549			12.0			24,600		28.7			21,460			29.0			3,140			14.6
Occupancy expenses		10,467		12.4			9,295			11.9			1,172			12.6			11,347		13.2			9,979			13.5			1,368			13.7
Other operating expenses		8,847		10.4			7,946			10.2			901			11.3			9,657		11.3			8,158			11.0			1,499			18.4
General and administrative expenses		7,623		9.0			8,293			10.6			(670	)		(8.1	)		8,831		10.3			7,822			10.6			1,009			12.9
Depreciation expense		5,039		6.0			4,460			5.7			579			13.0			5,151		6.0			4,717			6.4			434			9.2
Pre-opening costs		314		0.4			364			0.5			(50	)		(13.7	)		541		0.6			252			0.3			289			114.7
Impairment and loss on disposal of property and equipment		1,315		1.6			250			0.3			1,065			426.0			348		0.4			848			1.1			(500	)		(59.0	)

Total expenses		81,421		96.2			74,845			95.9			6,576			8.8			84,820		98.9			74,322			100.6			10,498			14.1

Income from operations		3,254		3.8			3,176			4.1			78			2.5
Interest expense		42		*			97			0.1			(55	)		(56.7	)
Income (loss) from operations																			948		1.1			(441	)		(0.6	)		1,389			315.0
Interest expense, net																			61		0.1			42			0.1			19			45.2

Income before income taxes		3,212		3.8			3,079			3.9			133			4.3
Income tax expense		1,260		1.5			905			1.2			355			39.2
Income (loss) before income taxes																			887		1.0			(483	)		(0.7	)		1,370			283.6
Income tax expense (benefit)																			351		0.4			(191	)		(0.3	)		542			283.8

Net income		1,952		2.3			2,174			2.8			(222	)		(10.2	)
Net income (loss)																			536		0.6			(292	)		(0.4	)		828			283.6
Net income attributable to non-controlling interests		5		*			9			*			(4	)		(44.4	)		5			*		9				*		(4	)		(44.4	)

Net income attributable to Potbelly Corporation		1,947		2.3			2,165			2.8			(218	)		(10.1	)
Dividend declared to common and preferred stockholders		—		—			(49,854	)		(63.9	)		49,854			100.0
Accretion of redeemable convertible preferred stock to maximum redemption value		—		—			(4,796	)		(6.1	)		4,796			100.0
Net income (loss) attributable to Potbelly Corporation																		$	531		0.6	%	$	(301	)		(0.4	)%	$	832			276.4	%

Net income (loss) attributable to common stockholders	$	1,947		2.3	%	$	(52,485	)		(67.3	)%	$	54,432			103.7	%

Total revenues increased by ~~$6.7~~$11.9 million, or ~~8.5%~~16.1%, to ~~$84.7~~$85.8 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$78.0~~$73.9 million during the 13 weeks ended ~~September 29, 2013.~~March 30, 2014. The increase in revenues primarily consisted of an increase of ~~$6.2~~$8.1 million in sales from shops not yet in our company-operated comparable store sales base ~~a $0.1 million increase in franchise revenues~~ and a ~~$0.4~~$3.8 million, or ~~0.5%~~5.4%, increase in company-operated comparable store sales. The increase in company-operated comparable store sales resulted from ~~an increase~~increases in average check from certain menu price increases and menu mix, ~~partially offset by a reduction in~~delivery income as well as traffic.

Cost of goods sold increased by ~~$1.0~~$3.2 million, or ~~4.5%~~15.5%, to ~~$24.0~~$24.3 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, compared to ~~$23.0~~$21.1 million during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to the increase in revenues. As a percentage of revenues, cost of goods sold decreased to 28.4% during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~29.5%~~28.5% during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily driven by certain menu price ~~increases as well as volume-based rebates from certain vendors.~~increases.

Labor and related expenses increased by ~~$2.5~~$3.1 million, or ~~12.0%~~14.6%, to ~~$23.8~~$24.6 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$21.2~~$21.5 million during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to new shop openings. As a percentage of revenues, labor and related expenses ~~increased~~decreased to ~~28.1%~~28.7% during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~27.2%~~29.0% during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily driven by ~~incremental training~~lower manager labor, partially offset by higher associate labor, performance-based manager bonuses and ~~shop-level staffing investments, as well as wage inflation in certain states as a result~~an additional field incentive program to reward employees for tenure and development of ~~statutory minimum wage increases.~~others.

Occupancy expenses increased by ~~$1.2~~$1.3 million, or ~~12.6%~~13.7%, to ~~$10.5~~$11.3 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$9.3~~$10.0 million during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to new shop openings. As a percentage of revenues, occupancy expenses ~~increased~~decreased to ~~12.4%~~13.2% during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~11.9%~~13.5% during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to ~~increased rent as~~sales leverage (i.e., the ability to spread certain expenses over a ~~result of lease extensions in certain legacy markets, as well as increases in other occupancy-related costs.~~higher revenue base).

Other operating expenses increased by ~~$0.9~~$1.5 million, or ~~11.3%~~18.4%, to ~~$8.8~~$9.7 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$7.9~~$8.2 million during the 13 weeks ended ~~September 29, 2013.~~March 30, 2014. The increase is attributable to new shop openings, ~~and~~increased marketing spend as well as increased fees associated with ~~higher~~ credit card usage in our shops. As a percentage of revenues, other operating expenses increased to ~~10.4%~~11.3% during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~10.2%~~11.0% during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to increased ~~utility costs~~marketing spend as well as costs associated with various other operating expenses, partially offset by the $0.2 million cumulative adjustment recorded for the change in accounting estimate related to gift card breakage. Refer to “Critical Accounting Policies and Estimates” for additional information regarding the change in accounting estimate.expenses.

General and administrative expenses ~~decreased~~increased by ~~$0.7~~$1.0 million, or ~~8.1%~~12.9%, to ~~$7.6~~$8.8 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$8.3~~$7.8 million during the 13 weeks ended ~~September 29, 2013.~~March 30, 2014. The net ~~decrease~~increase is driven primarily by ~~lower~~an increase in our performance-based incentives and higher labor-related costs, and lower costs associated with being a public company, including costs associated with our IPO in the prior year, partially offset by costs associated with our plans to move our corporate headquarters.as well as increased spending on advertising. As a percentage of revenues, general and administrative expenses decreased to ~~9.0%~~10.3% during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from 10.6% during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, driven by the factors above, coupled with sales leverage (i.e., the ability to spread certain costs over a higher revenue base).

Depreciation expense increased by ~~$0.6~~$0.5 million, or ~~13.0%~~9.2%, to ~~$5.0~~$5.2 million during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$4.5~~$4.7 million during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to a higher depreciable base related to new shops and existing shop capital investments. As a percentage of revenues, depreciation ~~increased~~decreased to 6.0% during the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~5.7%~~6.4% during the 13 weeks ended ~~September 29, 2013,~~March 30, 2014, driven ~~partially from an increase in existing shop capital investments that have, on average,~~by lower depreciation associated with new shops with lower build-out costs and longer expected useful lives ~~than new shops.~~for leasehold improvements, as well as leasehold improvements at legacy shops with higher build-out costs and shorter expected useful lives being fully depreciated.

Pre-opening costs ~~decreased~~increased by ~~$0.1~~$0.2 million, or ~~13.7%~~114.7%, to $0.5 million during the 13 weeks ended March 29, 2015, from $0.3 million during the 13 weeks ended ~~September 28,~~March 30, 2014, ~~from $0.4 million~~primarily due to timing of new shop openings during the 13 weeks ended ~~September~~March 29, ~~2013, primarily due to fewer new shops opened during the 13 weeks ended September 28, 2014~~2015 compared to the 13 weeks ended ~~September 29, 2013.~~March 30, 2014.

Impairment and loss on disposal of property and equipment ~~increased~~decreased to ~~$1.3 million during the 13 weeks ended September 28, 2014, from~~ $0.3 million during the 13 weeks ended ~~September~~March 29, ~~2013.~~2015, from $0.8 million during the 13 weeks ended March 30, 2014. After performing a periodic review of our shops during the ~~third~~first quarter of ~~2014,~~2015, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance of shop profitability. We performed an impairment analysis related to these shops and recorded an impairment charge of ~~$1.3 million related to the excess of the carrying amounts recorded on our balance sheet over the identified shops’ estimated fair values.~~

Interest expense decreased by $55 thousand, or 56.7%, to $42 thousand during the 13 weeks ended September 28, 2014, from $0.1 million during the 13 weeks ended September 29, 2013, primarily due to repaying the $14.0 million outstanding under the senior credit facility on October 24, 2013. Interest expense for the 13 weeks ended September 28, 2014 is attributable to interest on the note payable, unused commitment fees and deferred financing fees.

Income tax expense increased by $0.4 million to $1.3 million for the 13 weeks ended September 28, 2014, from $0.9 million during the 13 weeks ended September 29, 2013. For the 13 weeks ended September 28, 2014, our effective tax rate was 39.2%, compared to 29.4% for the 13 weeks ended September 29, 2013. The increase in the effective tax rate primarily relates to the expiration of certain federal income tax credits that were available in prior years, as well as certain provision to return adjustments recorded in the prior year.

~~39 Weeks Ended September 28, 2014 Compared to 39 Weeks Ended September 29, 2013~~

~~The following table presents information comparing the components of net income for the periods indicated (dollars in thousands):~~

Total revenues increased by $17.2 million, or 7.7%, to $242.2 million during the 39 weeks ended September 28, 2014, from $225.0 million during the 39 weeks ended September 29, 2013. The increase in revenues primarily consisted of an increase of $19.2 million in sales from shops not yet in our company-operated comparable store sales base, $0.3 million increase in franchise revenues, partially offset by a $2.3 million, or 1.1%, decrease in company-operated comparable store sales. The decrease in company-operated comparable store sales resulted from a reduction in entrée counts, which were impacted by reduced traffic as well as significantly adverse weather in the first quarter, partially offset by certain menu price increases and menu mix.

Cost of goods sold increased by $3.3 million, or 5.0%, to $69.1 million during the 39 weeks ended September 28, 2014, compared to $65.8 million during the 39 weeks ended September 29, 2013, primarily due to the increase in revenues. As a percentage of revenues, cost of goods sold decreased to 28.5% during the 39 weeks ended September 28, 2014, from 29.2% during the 39 weeks ended September 29, 2013, primarily driven by lower commodity costs, certain menu price increases, as well as volume-based rebates from certain vendors.

Labor and related expenses increased by $6.4 million, or 10.3%, to $68.6 million during the 39 weeks ended September 28, 2014, from $62.2 million during the 39 weeks ended September 29, 2013, primarily due to new shop openings. As a percentage of revenues, labor and related expenses increased to 28.3% during the 39 weeks ended September 28, 2014, from 27.7% during the 39 weeks ended September 29, 2013, primarily driven by deleveraging of the fixed component of these expenses as a result of lower company-operated comparable store sales, incremental training and shop-level staffing investments, as well as wage inflation in certain states as a result of statutory minimum wage increases.

Occupancy expenses increased by $3.8 million, or 14.2%, to $30.6 million during the 39 weeks ended September 28, 2014, from $26.8 million during the 39 weeks ended September 29, 2013, primarily due to new shop openings. As a percentage of revenues, occupancy expenses increased to 12.6% during the 39 weeks ended September 28, 2014, from 11.9% during the 39 weeks ended September 29, 2013, due to deleveraging of the fixed component of these expenses as a result of lower company-operated comparable store sales as well as increased rent as a result of lease extensions in certain legacy markets and increases in other occupancy-related costs.

Other operating expenses increased by $2.6 million, or 11.4%, to $25.7 million during the 39 weeks ended September 28, 2014, from $23.1 million during the 39 weeks ended September 29, 2013, primarily due to costs associated with new shop openings and increased fees associated with higher credit card usage in our shops. As a percentage of revenues, other operating expenses increased to 10.6% during the 39 weeks ended September 28, 2014, from 10.3% during the 39 weeks ended September 29, 2013. These increases are primarily due to deleveraging of the fixed component of these expenses as a result of lower company-operated comparable store sales as well as increased utility costs, partially offset by the $0.2 million cumulative adjustment recorded for the change in accounting estimate related to gift card breakage. Refer to “Critical Accounting Policies and Estimates” for additional information regarding the change in accounting estimate.

General and administrative expenses remained consistent at $24.3 million during the 39 weeks ended September 28, 2014 and the 39 weeks ended September 29, 2013. As a percentage of revenues, general and administrative expenses decreased to 10.0% during the 39 weeks ended September 28, 2014, from 10.8% during the 39 weeks ended September 29, 2013, primarily driven by sales leverage (~~i.e.,~~ the ability to spread certain costs over a higher revenue base), lower labor-related expenses and costs associated with being a public company, including costs associated with our IPO in the prior year, offset by an increase in advertising expenses due to approximately $0.4 million related to the launch of the new Flats platform in late May and initial costs associated with our plans to move our corporate headquarters, among other costs.

Depreciation expense increased by $1.2 million, or 9.5%, to $14.5 million during the 39 weeks ended September 28, 2014, from $13.3 million during the 39 weeks ended September 29, 2013, primarily due to a higher depreciable base related to new shops. As a percentage of revenues, depreciation increased to 6.0% during the 39 weeks ended September 28, 2014, from 5.9% during the 39 weeks ended September 29, 2013.

Pre-opening costs decreased by $0.3 million, or 22.5%, to $0.8 million during the 39 weeks ended September 28, 2014, from $1.1 million during the 39 weeks ended September 29, 2013, primarily due to fewer new shops opened in new markets that, on average, have higher pre-opening costs during the 39 weeks ended September 28, 2014 compared to the 39 weeks ended September 29, 2013.

Impairment and loss on disposal of property and equipment increased to $2.2 million during the 39 weeks ended September 28, 2014, from $0.3 million during the 39 weeks ended September 29, 2013. After performing a periodic review of our shops during each fiscal quarter of 2014, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance of shop profitability. We performed an impairment analysis related to these shops and recorded an impairment charge of $2.1 million related to the excess of the carrying amounts recorded on our balance sheet over the identified shops’ estimated fair values.

Interest expense ~~decreased~~increased by ~~$0.2 million,~~$19 thousand, or ~~62.4%~~45.2%, to ~~$0.1 million~~$61 thousand during the 3913 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$0.3 million~~$42 thousand during the 3913 weeks ended ~~September 29, 2013,~~March 30, 2014, primarily due to ~~repaying~~ the ~~$14.0 million outstanding under the senior credit facility on October 24, 2013.~~accretion of certain occupancy-related interest costs. Interest expense for the 13 weeks ended ~~September 28, 2014~~March 29, 2015 is attributable to interest on the note payable, unused commitment fees, occupancy-related interest costs and deferred financing ~~fees.~~fees, partially offset by interest income related to money market funds.

Income tax expense ~~decreased~~increased by ~~$0.3~~$0.6 million ~~or 11.3%,~~ to ~~$2.5~~$0.4 million for the 13 weeks ended March 29, 2015, from a $0.2 million benefit during the 3913 weeks ended ~~September 28, 2014, from $2.8 million during~~March 30, 2014. For the 3913 weeks ended ~~September~~March 29, ~~2013, as a result of lower taxable net income. For the 39 weeks ended September 28, 2014,~~2015, our effective tax rate was ~~40.3%~~39.6%, compared to ~~36.0%~~39.5% for the 3913 weeks ended September 29, 2013. The increase in the effective tax rate primarily relates to the expiration of certain federal income tax credits for 2014 that were available in prior years, as well as certain provision to return adjustments recorded in the prior year.March 30, 2014.

Our primary sources of liquidity and capital resources are cash provided from operating activities, existing cash and cash equivalents and our credit facility. Our primary requirements for liquidity and capital are new shop openings, existing shop capital investments (maintenance and improvements), principal and interest payments on our debt, lease obligations, repurchases of our common stock and working capital and general corporate needs. Our requirement for working capital is not significant since our customers pay for their food and beverage purchases in cash or payment cards (credit or debit) at the time of sale. Thus, we are able to sell certain inventory items before we have to pay our suppliers for such items. Our shops do not require significant inventories or receivables. We believe that these sources of liquidity and capital will be sufficient to finance our continued operations and expansion plans for at least the next twelve months.

The following table presents summary cash flow information for the periods indicated (in thousands):


	For the 13 Weeks Ended
	March 29, 2015			March 30, 2014
Net cash provided by (used in):
Operating activities	$	10,153		$	6,516
Investing activities		(8,163	)		(6,536	)
Financing activities		(3,269	)		(12	)

Net (decrease) in cash	$	(1,279	)	$	(32	)

Net cash provided by operating activities ~~decreased~~increased to ~~$23.3~~$10.2 million for the 3913 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$24.4~~$6.5 million for the 3913 weeks ended ~~September 29, 2013.~~March 30, 2014. The ~~$1.1~~$3.7 million ~~decrease~~increase is primarily attributable to aan increase of $2.6 million in net ~~cash outflow of $1.6 million related to a vendor prepayment with no comparable prepayment made in the 39 weeks ended September 29, 2013,~~shop-level profits as well as ~~$0.2 million~~timing of ~~various net~~the payment of working capital ~~changes. This was~~accounts partially offset by ~~a net cash inflow of $0.7 million related to increased net income before adjustments for interest, income taxes, depreciation and amortization and impairment/disposal of long-lived assets.~~lower impairment expense.

Net cash used in investing activities ~~decreased~~increased to ~~$20.5~~$8.2 million for the 3913 weeks ended ~~September 28, 2014,~~March 29, 2015, from ~~$21.3~~$6.5 million for the 3913 weeks ended ~~September 29, 2013.~~March 30, 2014. The ~~decrease~~increase was primarily due to ~~two fewer company-operated~~capital expenditures for future shop openings, maintaining our existing shops and certain other projects, including costs associated with our plans to move our Company headquarters during the 3913 weeks ended ~~September 28, 2014~~March 29, 2015 as compared to the same period in ~~2013 and partially offset by an increase in existing shop capital investments during the 39 weeks ended September 28, 2014 as compared to the same period in 2013.~~2014.

Net cash used in financing activities was ~~$2.9~~$3.3 million for the 3913 weeks ended ~~September 28, 2014, as~~March 29, 2015, compared to ~~$0.6 million~~$12 thousand for the 3913 weeks ended ~~September 29, 2013.~~March 30, 2014. The increase in net cash used was driven by the ~~$5.8~~$4.4 million of treasury stock repurchased during the 3913 weeks ended ~~September 28, 2014,~~March 29, 2015, with no comparable transactions during the 3913 weeks ended ~~September 29, 2013,~~March 30, 2014, offset by ~~$3.0~~$1.1 million in cash proceeds received by us related to the exercise of stock options, net of payroll taxes paid, during the 3913 weeks ended ~~September 28, 2014, with no comparable~~March 29, 2015, compared to $8 thousand in cash proceeds received during the 3913 weeks ended ~~September 29, 2013.~~March 30, 2014.

On August 1, 2014, our Board of Directors authorized a share repurchase program of up to $35.0 million of the Company’s common stock. Under this program, we may, from time to time, 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 Exchange Act) or in privately negotiated transactions. During the 13 weeks ended ~~September 28, 2014,~~March 29, 2015, we repurchased ~~471,290~~334,686 shares of common stock for approximately ~~$5.8~~$4.4 million in open market transactions. At ~~September 28, 2014,~~March 29, 2015, the remaining dollar value of authorization under the share repurchase program was ~~$29.2~~$20.4 million.

On September 21, 2012, we entered into a five-year revolving credit facility agreement with JPMorgan Chase Bank, N.A. that expires in September 2017 and provides for borrowings up to $35.0 million to fund capital expenditures for new shops, renovations

and maintenance of existing shops, and to provide ongoing working capital for other general and corporate purposes. We will be entitled to incur additional incremental increases in the revolving credit facility of up to $25.0 million that will be included in the credit facility if no event of default exists and certain other requirements are met. The credit facility contains customary representations, warranties, negative and affirmative covenants, including a requirement to maintain a maximum leverage ratio, as defined, of 2.25:1 and a minimum debt service coverage ratio, as defined, of 1.5:1. The credit facility also limits the restricted payments (primarily distributions and equity repurchases) that we may make, unless we obtain certain waivers or amendments from our lender. We were in compliance with these restrictions and conditions as of ~~September 28, 2014.~~March 29, 2015. The credit facility is secured by substantially all assets of the Company. Borrowings under the credit facility bear interest at our option at either (i) a Eurocurrency rate determined by reference to the applicable LIBOR rate plus an applicable margin or (ii) a prime rate as announced by JPMorgan Chase plus an applicable margin. As of ~~September 28, 2014,~~March 29, 2015, we had no amounts outstanding under the credit facility.

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical accounting policies are those that management believes are both most important to the portrayal of our financial condition and operating results, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We had no significant changes in our critical accounting estimates since our last annual report. Our critical accounting estimates are identified and described in our annual consolidated financial statements and related notes.

Revenues from our gift cards are deferred and were previously recognized upon redemption or after a period of 36 months of inactivity on gift card balances (“gift card breakage”) and we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions. We monitor our actual patterns of redemption and update our estimates and assumptions regarding redemption as the actual pattern changes. We estimate and record gift card breakage income based on our historical redemption pattern. During the third fiscal quarter of 2014, we updated our analysis of historical gift card redemptions based on approximately three years of historical data and changed our estimate to record gift card breakage income from 36 months to 24 months after the date of issuance for all gift cards that have not been redeemed. In accordance with ASC 250, “~~Accounting Changes and Error Corrections~~~~,” we recorded a cumulative adjustment of $0.2 million, which is included in other operating expenses, representing the effect of this change in accounting estimate.~~

As of ~~September 28, 2014,~~March 29, 2015, we do not have any off-balance sheet arrangements, synthetic leases, investments in special purpose entities or undisclosed borrowings or debt that would be required to be disclosed pursuant to Item 303 of Regulation S-K under the Exchange Act.

We qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period is irrevocable.

In ~~May~~April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The pronouncement changes the criteria for reporting discontinued operations while enhancing disclosures in this area. Pursuant to ASU 2014-08, only disposals representing a strategic shift, such as a major line of business, a major geographical area or a major equity investment, which were not expected to have continuing cash flows should be presented as a discontinued operation. If the disposal does qualify as a discontinued operation under ASU 2014-08, the entity will be required to provide expanded disclosures. ASU 2014-08 is effective for fiscal and interim periods beginning on or after December 15, 2014. Early adoption is permitted. The adoption of ASU 2014-08 is not expected to have a significant impact on our consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The pronouncement is effective for reporting period beginning after December 15, 2016. ~~The~~We are evaluating the expected adoption method of ASU 2014-09 and the adoption is not expected to have a significant impact on ~~the Company’s~~our consolidated balance sheet or consolidated statement of operations.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The pronouncement requires our management to evaluate whether there is substantial doubt about our ability to continue as a going concern. The pronouncement is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated balance sheet or consolidated statement of operations.

For quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2013.~~28, 2014. Our exposures to market risk have not changed materially since December ~~29, 2013.~~28, 2014.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange ~~Act)~~Act of 1934, as amended (“Exchange Act”)) as of ~~September 28, 2014.~~March 29, 2015. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~September 28, 2014,~~March 29, 2015, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the ~~SEC~~Securities and Exchange Commission (the “SEC”) and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended ~~September 28, 2014~~March 29, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q.

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. 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.

A description of the risk factors associated with our business is contained in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2013.~~28, 2014. There have been no material changes to our Risk Factors as previously reported.

The following table contains information regarding purchases of our common stock made by or on behalf of Potbelly Corporation during the 13 weeks ~~September 28, 2014:~~ended March 29, 2015:

The following exhibits are either provided with this Quarterly Report on Form 10-Q or are incorporated herein by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements		3

	Condensed Consolidated Balance Sheets		3

	Condensed Consolidated Statements of Operations		4

	Condensed Consolidated Statement of ~~Redeemable Convertible Preferred Stock and~~ Equity (Deficit)		5

	Condensed Consolidated Statements of Cash Flows		6

	Notes to Condensed Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1210

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		1915

Item 4.	Controls and Procedures		1915

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		2016

Item 1A.	Risk Factors		2016

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds		2016

Item 6.	Exhibits		2016

	Signature		2117


Options	Shares (Thousands)			Weighted Average Exercise Price		Aggregate Intrinsic Value (Thousands)		Weighted Average Remaining Term (Years)
Outstanding—December 29, 2013		5,030		$	9.41	$	78,575		6.31

Granted		293			19.58
Exercised		(339	)		8.81
Canceled		(105	)		11.64
Outstanding—September 28, 2014		4,879			10.01	$	12,136		5.81

Exercisable—September 28, 2014		3,680			8.99	$	11,910		5.94


Options	Shares (Thousands)			Weighted Average Exercise Price		Aggregate Intrinsic Value (Thousands)		Weighted Average Remaining Term (Years)
Outstanding—December 28, 2014		4,613		$	10.10	$	12,731		5.62


Granted		253			12.98
Exercised		(110	)		9.74
Canceled		(116	)		14.63

Outstanding—March 29, 2015		4,640			10.15	$	18,607		5.61


Exercisable—March 29, 2015		3,570			9.29	$	16,669		4.68


Period	Total Number of Shares Purchased		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)		Maximum Value of Share that May Yet be Purchased Under the Program (2)
	(In thousands, except per share amounts)
June 30, 2014 – July 27, 2014		—		—		—		—
July 28, 2014 – August 24, 2014		81,000		12.30		81,000		34,003,920
August 25, 2014 – September 28, 2014		390,290		12.30		390,290		29,212,534

Total:		471,290				471,290


	Redeemable Convertible Preferred Stock																												Equity (Deficit)
	Series A				Series B				Series C				Series D				Series E				Series F				Total				Common Stock					Treasury Stock			Warrants			Additional Paid-In- Capital			Accumulated Deficit			Non- Controlling Interest			Total Equity (Deficit)
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount
Balance at December 30, 2012		3,697,377	$	52,796		3,290,294	$	46,983		1,646,595	$	23,715		1,250,000	$	18,319		4,194,366	$	79,861		2,007,743	$	28,669		16,086,375	$	250,343		4,233,977		$	42		—		$	1,552		$	—		$	(170,518	)	$	196		$	(168,728	)
Net income		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			—			4,941			24			4,965
Beneficial Conversion Charge.		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			50			(50	)		—			—
Exercise of stock warrants		—		—		—		—		—		—		—		—		—		—		—		—		—		—		117,892			2		—			(610	)		610			—			—			2
Cash dividends declared		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			(49,854	)		—			—			(49,854	)
Changes in redemption value of preferred stock		—		3,582		—		3,188		—		1,609		—		1,251		—		3,523		—		1,944		—		15,097		—			—		—			—			46,824			(61,921	)		—			(15,097	)
Amortization of stock-based compensation		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			2,370			—			—			2,370

Balance at September 29, 2013		3,697,377	$	56,378		3,290,294	$	50,171		1,646,595	$	25,324		1,250,000	$	19,570		4,194,366	$	83,384		2,007,743	$	30,613		16,086,375	$	265,440		4,351,869		$	44		—		$	942		$	—		$	(227,548	)	$	220		$	(226,342	)

Balance at December 29, 2013		—		—		—		—		—		—		—		—		—		—		—		—		—		—		29,148,029		$	291	$	—		$	909		$	383,077		$	(231,232	)	$	228		$	153,273
Net income		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			—			3,656			11			3,667
Issuance of unrestricted common stock		—		—		—		—		—		—		—		—		—		—		—		—		—		—		28,240			—		—			—			432			—			—			432
Exercise of stock options		—		—		—		—		—		—		—		—		—		—		—		—		—		—		338,946			4		—			—			2,964			—			—			2,968
Repurchases of common stock		—		—		—		—		—		—		—		—		—		—		—		—		—		—		(471,290	)		—		(5,797	)		—			—			—			—			(5,797	)
Distribution to non-controlling interest		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			—			—			(34	)		(34	)
Amortization of stock-based compensation		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—			—		—			—			1,590			—			—			1,590

Balance at September 28, 2014		—		—		—		—		—		—		—		—		—		—		—		—		—		—		29,043,925		$	295	$	(5,797	)	$	909		$	388,063		$	(227,576	)	$	205		$	156,099


	Common Stock					Treasury					Additional		Accumulated			Non-Controlling		Total Equity
	Shares			Amount		Stock			Warrants		Paid-In-Capital		Deficit			Interest		(Deficit)
Balance at December 29, 2013		29,148,029		$	291	$	—		$	909	$	383,077	$	(231,232	)	$	228	$	153,273
Net (loss) income		—			—		—			—		—		(301	)		9		(292	)
Exercise of stock options		3,399			—		—			—		8		—			—		8
Amortization of stock-based compensation		—			—		—			—		488		—			—		488

Balance at March 30, 2014		29,151,428		$	291	$	—		$	909	$	383,573	$	(231,533	)	$	237	$	153,477

Balance at December 28, 2014		28,934,700		$	298	$	(10,246	)	$	909	$	391,972	$	(226,874	)	$	266	$	156,325
Net income		—			—		—			—		—		531			5		536
Exercise of stock options		110,042			1		—			—		1,069		—			—		1,070
Repurchases of common stock		(334,686	)		—		(4,406	)		—		—		—			—		(4,406	)
Contributions from non-controlling interest		—			—		—			—		—		—			88		88
Amortization of stock-based compensation		—			—		—			—		538		—			—		538

Balance at March 29, 2015		28,710,056		$	299	$	(14,652	)	$	909	$	393,579	$	(226,343	)	$	359	$	154,151


Period	Total Number of Shares Purchased		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)		Maximum Value of Shares that May Yet be Purchased Under the Program (2)
December 29, 2014 – January 25, 2015		65,386	$	13.29		65,386	$	23.915,021
January 26, 2015 – February 22, 2015		34,400	$	13.97		34,400	$	23,435,353
February 23, 2015 – March 29, 2015		234,900	$	13.06		234,900	$	20,371,123

Total:		334,686				334,686


Exhibit No.		Description

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document


		POTBELLY CORPORATION

Date: ~~November 5, 2014~~	May 6, 2015		By:		/s/ ~~Charles Talbot~~Michael Coyne
				~~Charles Talbot~~Michael Coyne
				Chief Financial Officer
				(Principal Financial Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

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Smaller reporting company