Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 24, 2023 | Oct. 22, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 24, 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, $0.01 par value | |
Trading Symbol | PBPB | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 29,358,757 | |
Entity Central Index Key | 0001195734 | |
Document Fiscal Year Focus | 2023 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 24, 2023 | Dec. 25, 2022 |
Current assets | ||
Cash and cash equivalents | $ 30,938 | $ 15,619 |
Accounts receivable, net of allowances of $50 and $16 as of September 24, 2023 and December 25, 2022, respectively | 7,897 | 6,420 |
Inventories | 3,585 | 3,990 |
Prepaid expenses and other current assets | 5,637 | 4,501 |
Total current assets | 48,057 | 30,530 |
Property and equipment, net | 45,148 | 44,477 |
Right-of-use assets for operating leases | 148,336 | 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 | 3,465 | 3,647 |
Total assets | 251,281 | 245,171 |
Current liabilities | ||
Accounts payable | 8,955 | 10,718 |
Accrued expenses | 32,113 | 30,826 |
Short-term operating lease liabilities | 27,536 | 27,395 |
Current portion of long-term debt | 1,250 | 0 |
Total current liabilities | 69,854 | 68,939 |
Long-term debt, net of current portion | 20,918 | 8,550 |
Long-term operating lease liabilities | 146,414 | 160,968 |
Other long-term liabilities | 4,436 | 2,441 |
Total liabilities | 241,622 | 240,898 |
Commitments and contingencies (Note 11) | ||
Equity | ||
Common stock, $0.01 par value—authorized 200,000 shares; outstanding 29,350 and 28,819 shares as of September 24, 2023 and December 25, 2022, respectively | 389 | 384 |
Warrants | 2,219 | 2,566 |
Additional paid-in-capital | 460,543 | 455,831 |
Treasury stock, held at cost, 10,058 and 9,924 shares as of September 24, 2023, and December 25, 2022, respectively | (116,638) | (115,388) |
Accumulated deficit | (336,532) | (338,916) |
Total stockholders’ equity | 9,981 | 4,477 |
Non-controlling interest | (322) | (204) |
Total equity | 9,659 | 4,273 |
Total liabilities and equity | $ 251,281 | $ 245,171 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Sep. 24, 2023 | Dec. 25, 2022 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowances | $ 50 | $ 16 |
Common stock (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 200,000 | 200,000 |
Common stock, outstanding (in shares) | 29,350 | 28,819 |
Treasury stock (in shares) | 10,058 | 9,924 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Revenues | ||||
Total revenues | $ 120,768 | $ 117,649 | $ 365,660 | $ 331,823 |
Sandwich shop operating expenses, excluding depreciation | ||||
Food, beverage and packaging costs | 32,901 | 34,814 | 100,424 | 94,952 |
Labor and related expenses | 34,188 | 36,031 | 108,556 | 105,405 |
Occupancy expenses | 12,653 | 13,559 | 39,046 | 41,209 |
Other operating expenses | 21,277 | 19,743 | 62,686 | 56,977 |
Franchise support, rent and marketing expenses | 1,553 | 115 | 3,359 | 361 |
General and administrative expenses | 11,894 | 9,554 | 33,558 | 26,899 |
Depreciation expense | 3,044 | 2,922 | 8,902 | 9,089 |
Pre-opening costs | 59 | 0 | 114 | 0 |
Loss on Franchise Growth Acceleration Initiative activities | 110 | 0 | 1,073 | 0 |
Impairment, loss on disposal of property and equipment and shop closures | 458 | 1,616 | 2,161 | 3,980 |
Total expenses | 118,137 | 118,354 | 359,879 | 338,872 |
Income (loss) from operations | 2,631 | (705) | 5,781 | (7,049) |
Interest expense, net | 853 | 354 | 2,531 | 1,037 |
(Gain)/loss on extinguishment of debt | 0 | (10,191) | 239 | (10,191) |
Income before income taxes | 1,778 | 9,132 | 3,011 | 2,105 |
Income tax expense (benefit) | 129 | (4) | 186 | 148 |
Net income | 1,649 | 9,136 | 2,825 | 1,957 |
Net income attributable to non-controlling interest | 154 | 107 | 442 | 267 |
Net income attributable to Potbelly Corporation | $ 1,495 | $ 9,029 | $ 2,383 | $ 1,690 |
Net income per common share attributable to common stockholders: | ||||
Basic (in USD per share) | $ 0.05 | $ 0.31 | $ 0.08 | $ 0.06 |
Diluted (in USD per share) | $ 0.05 | $ 0.31 | $ 0.08 | $ 0.06 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 29,324 | 28,726 | 29,143 | 28,563 |
Diluted (in shares) | 30,028 | 28,867 | 29,915 | 28,947 |
Sandwich shop sales, net | ||||
Revenues | ||||
Total revenues | $ 118,340 | $ 116,449 | $ 359,995 | $ 328,873 |
Franchise royalties, fees and rent income | ||||
Revenues | ||||
Total revenues | $ 2,428 | $ 1,200 | $ 5,665 | $ 2,950 |
Condensed Consolidated Statem_2
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 (in shares) at Dec. 26, 2021 | 28,380 | ||||||
Beginning balance at Dec. 26, 2021 | $ (2,417) | $ 380 | $ (114,577) | $ 2,566 | $ 452,570 | $ (343,261) | $ (95) |
Net income | (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 (in shares) at Dec. 26, 2021 | 28,380 | ||||||
Beginning balance at Dec. 26, 2021 | (2,417) | $ 380 | (114,577) | 2,566 | 452,570 | (343,261) | (95) |
Net income | 1,957 | ||||||
Ending balance (in shares) at Sep. 25, 2022 | 28,791 | ||||||
Ending balance at Sep. 25, 2022 | 909 | $ 384 | (115,331) | 2,566 | 455,012 | (341,571) | (151) |
Beginning balance (in shares) at Mar. 27, 2022 | 28,461 | ||||||
Beginning balance at Mar. 27, 2022 | (10,027) | $ 381 | (114,856) | 2,566 | 453,245 | (351,174) | (189) |
Net income | 708 | 574 | 134 | ||||
Shares issued under equity compensation plan (in shares) | 235 | ||||||
Shares issued under equity compensation plan | (326) | $ 2 | (325) | (3) | |||
Distributions to non-controlling interest | (56) | (56) | |||||
Stock-based compensation expense | 820 | 820 | |||||
Ending balance (in shares) at Jun. 26, 2022 | 28,696 | ||||||
Ending balance at Jun. 26, 2022 | (8,881) | $ 383 | (115,181) | 2,566 | 454,062 | (350,600) | (111) |
Net income | 9,136 | 9,029 | 107 | ||||
Shares issued under equity compensation plan (in shares) | 95 | ||||||
Shares issued under equity compensation plan | (150) | $ 1 | (150) | (1) | |||
Distributions to non-controlling interest | (147) | (147) | |||||
Stock-based compensation expense | 951 | 951 | |||||
Ending balance (in shares) at Sep. 25, 2022 | 28,791 | ||||||
Ending balance at Sep. 25, 2022 | $ 909 | $ 384 | (115,331) | 2,566 | 455,012 | (341,571) | (151) |
Beginning balance (in shares) at Dec. 25, 2022 | 28,819 | 28,819 | |||||
Beginning balance at Dec. 25, 2022 | $ 4,273 | $ 384 | (115,388) | 2,566 | 455,831 | (338,916) | (204) |
Net income | (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 | ||||||
Ending balance at Mar. 26, 2023 | $ 4,356 | $ 386 | (115,725) | 2,253 | 457,918 | (340,243) | (233) |
Beginning balance (in shares) at Dec. 25, 2022 | 28,819 | 28,819 | |||||
Beginning balance at Dec. 25, 2022 | $ 4,273 | $ 384 | (115,388) | 2,566 | 455,831 | (338,916) | (204) |
Net income | $ 2,825 | ||||||
Ending balance (in shares) at Sep. 24, 2023 | 29,350 | 29,350 | |||||
Ending balance at Sep. 24, 2023 | $ 9,659 | $ 389 | (116,638) | 2,219 | 460,543 | (336,532) | (322) |
Beginning balance (in shares) at Mar. 26, 2023 | 29,048 | ||||||
Beginning balance at Mar. 26, 2023 | 4,356 | $ 386 | (115,725) | 2,253 | 457,918 | (340,243) | (233) |
Net income | 2,381 | 2,216 | 165 | ||||
Shares issued under equity compensation plan (in shares) | 243 | ||||||
Shares issued under equity compensation plan | (771) | $ 3 | (772) | (2) | |||
Distributions to non-controlling interest | (166) | (166) | |||||
Issuance of common shares and warrants, net of fees (in shares) | 18 | ||||||
Proceeds from exercise of warrants | 96 | (34) | 130 | ||||
Stock-based compensation expense | 1,305 | 1,305 | |||||
Ending balance (in shares) at Jun. 25, 2023 | 29,309 | ||||||
Ending balance at Jun. 25, 2023 | 7,201 | $ 389 | (116,497) | 2,219 | 459,351 | (338,027) | (234) |
Net income | 1,649 | 1,495 | 154 | ||||
Shares issued under equity compensation plan (in shares) | 41 | ||||||
Shares issued under equity compensation plan | (141) | $ 0 | (141) | 0 | |||
Distributions to non-controlling interest | (242) | (242) | |||||
Issuance of common shares and warrants, net of fees (in shares) | 0 | ||||||
Proceeds from exercise of warrants | 0 | 0 | 0 | ||||
Stock-based compensation expense | $ 1,192 | 1,192 | |||||
Ending balance (in shares) at Sep. 24, 2023 | 29,350 | 29,350 | |||||
Ending balance at Sep. 24, 2023 | $ 9,659 | $ 389 | $ (116,638) | $ 2,219 | $ 460,543 | $ (336,532) | $ (322) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 24, 2023 | Sep. 25, 2022 | |
Cash flows from operating activities: | ||
Net income | $ 2,825 | $ 1,957 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation expense | 8,902 | 9,089 |
Noncash lease expense | 18,890 | 19,511 |
Deferred income tax | (82) | 14 |
Stock-based compensation expense | 3,408 | 2,446 |
Asset impairment, loss on disposal of property and equipment and shop closures | 824 | 3,980 |
Loss on Franchise Growth Acceleration Initiative activities | 1,030 | 0 |
(Gain)/loss on extinguishment of debt | 224 | (10,191) |
Other operating activities | 331 | 205 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (1,499) | (2,286) |
Inventories | 227 | (169) |
Prepaid expenses and other assets | (934) | (491) |
Accounts payable | (2,019) | 1,352 |
Operating lease liabilities | (20,473) | (21,163) |
Accrued expenses and other liabilities | 2,847 | (3,236) |
Net cash provided by operating activities: | 14,501 | 1,018 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (12,252) | (4,914) |
Proceeds from sale of refranchised shops | 1,362 | 0 |
Net cash used in investing activities: | (10,890) | (4,914) |
Cash flows from financing activities: | ||
Payment of debt issuance costs | (2,204) | (176) |
Proceeds from exercise of warrants | 961 | 0 |
Employee taxes on certain stock-based payment arrangements | (1,251) | (702) |
Distributions to non-controlling interest | (560) | (323) |
Net cash provided by financing activities: | 12,458 | (951) |
Net increase (decrease) in cash and cash equivalents and restricted cash | 16,069 | (4,847) |
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 | 31,688 | 9,506 |
Supplemental cash flow information: | ||
Income taxes paid | 428 | 139 |
Interest paid | 2,349 | 662 |
Supplemental non-cash investing and financing activities: | ||
Gain (loss) on extinguishment of debt and accrued interest | (224) | 10,191 |
Unpaid liability for purchases of property and equipment | 859 | 573 |
Unpaid liability for employee taxes on certain stock-based payment arrangements | 38 | 52 |
Term loan credit facility | ||
Cash flows from financing activities: | ||
Borrowings under revolving credit facility | 25,000 | 0 |
Repayments under revolving credit facility | (938) | 0 |
Revolving Credit Facility | ||
Cash flows from financing activities: | ||
Borrowings under revolving credit facility | 14,600 | 30,550 |
Repayments under revolving credit facility | $ (23,150) | $ (30,300) |
Organization and Other Matters
Organization and Other Matters | 9 Months Ended |
Sep. 24, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Other Matters | 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 361 company-operated shops in the United States as of September 24, 2023. Additionally, Potbelly franchisees operate 69 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 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, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported within. . 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; 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 consisted of 52 weeks. The fiscal quarters ended September 24, 2023 and September 25, 2022 each consisted of 13 weeks. The year to date periods ended September 24, 2023 and September 25, 2022 each consisted of 39 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 typically include cash consideration for the sale of the current shops as well as development agreement fees for commitments to develop new shops to fully penetrate existing markets. On an ongoing basis, we collect additional cash consideration for royalties and lease payments. 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. For the year to date ended September 24, 2023, we completed refranchising transactions under the Franchise Growth Acceleration Initiative that resulted in the sale of 20 company-operated shops and commitments to develop 28 additional shops. Further details on the impact of these transactions on our financial statements are described in Notes 8 and 12. Restricted Cash As of September 24, 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: September 24, December 25, Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 30,938 $ 15,619 Restricted cash, noncurrent 749 — Total cash, cash equivalents and restricted cash shown on statement of cash flows $ 31,688 $ 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. We manage these advertising and marketing expenses through the Brand Fund using the funds contributed by our shops. These funds are managed 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 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. |
Revenue
Revenue | 9 Months Ended |
Sep. 24, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue We primarily earn revenue at a point in time for sandwich shop sales, which can occur in person at a shop, through 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 where revenue is generally recognized over time, as outlined below. For the year to date ended September 24, 2023, revenue recognized from all revenue sources on point in time sales was $363.4 million, and revenue recognized from sales over time was $2.2 million. For the year to date ended September 25, 2022, revenue recognized from all revenue sources on point in time sales was $330.6 million and revenue recognized from sales over time was $1.2 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 sandwich shop sales, net in the condensed consolidated statements of operations. We recognized gift card breakage income of $0.6 million and $0.4 million for the year to date ended September 24, 2023 and September 25, 2022, respectively. 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. Once a customer earns a free entrée, that entrée reward will expire after 30 days. 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 deferred revenue liability is established in accrued expenses. The deferral is based on the estimated value of the unredeemed points and free entrées. The estimated value and the estimated redemption rates are based on a historical data analysis of loyalty reward redemptions. Estimated breakage 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 September 24, 2023 6,279 3,502 Increase (decrease) in contract liability $ (729) $ 1,825 The aggregate value of remaining performance obligations on outstanding contracts was $9.8 million as of September 24, 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 $ 2,931 2024 2,772 2025 318 2026 289 2027 256 Thereafter 3,272 Total revenue recognized $ 9,838 For the quarter and year to date ended September 24, 2023, the amount of revenue recognized related to the December 25, 2022 liability ending balance was $0.4 million and $2.5 million, respectively. For the quarter and year to date ended September 25, 2022, the amount of revenue recognized related to the December 26, 2021 liability ending balance was $0.4 million and $2.2 million. This revenue is related to the recognition of gift card redemptions and upfront franchise fees. For the quarters ended September 24, 2023 and September 25, 2022, we did not recognize any revenue from obligations satisfied (or partially satisfied) in prior periods. |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 24, 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 September 24, 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 condensed 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 and year to date ended September 24, 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 $0.2 million and $0.9 million for the quarter and year to date ended September 24, 2023. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 9 Months Ended |
Sep. 24, 2023 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Earnings Per ShareBasic and diluted income per common share attributable to common stockholders are calculated using the weighted average number of common shares outstanding for the period. Diluted income per common share attributable to common stockholders is computed by dividing the income 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. The following table summarizes the earnings per share calculation: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Net income attributable to Potbelly Corporation $ 1,495 $ 9,029 $ 2,383 $ 1,690 Weighted average common stock outstanding-basic 29,324 28,726 29,143 28,563 Plus: Effect of potentially dilutive stock-based compensation awards 295 141 392 329 Plus: Effect of potential warrant exercise 409 — 380 55 Weighted average common shares outstanding-diluted 30,028 28,867 29,915 28,947 Income per share available to common stockholders-basic $ 0.05 $ 0.31 $ 0.08 $ 0.06 Income per share available to common stockholders-diluted $ 0.05 $ 0.31 $ 0.08 $ 0.06 Potentially dilutive shares that are considered anti-dilutive: Shares 437 2,620 367 647 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 24, 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 September 24, 2023. We did not provide for an income tax expense on our pre-tax income for the quarter and year to date ended September 24, 2023 and September 25, 2022. We assess the likelihood of the realization of our deferred tax assets each quarter and the valuation allowance is adjusted accordingly. |
Leases
Leases | 9 Months Ended |
Sep. 24, 2023 | |
Leases [Abstract] | |
Leases | 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 and year to date ended September 24, 2023. The weighted average operating lease term and discount rate were as follows: September 24, September 25, Weighted average remaining lease term (years) 6.27 6.77 Weighted average discount rate 8.74 % 8.17 % 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), which are included in occupancy, general and administrative and franchise support, rent and marketing expense: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Operating lease cost $ 10,231 10,451 $ 30,406 31,041 Variable lease cost 3,825 2,797 11,188 9,649 Short-term lease cost 77 46 234 259 Total lease cost $ 14,133 13,294 $ 41,828 40,949 Supplemental disclosures of cash flow information related to leases were as follows (in thousands): For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Operating cash flows rent paid for operating lease liabilities $ 10,479 10,254 $ 31,685 31,179 Operating right-of-use assets obtained in exchange for new operating lease liabilities 4,745 7,361 8,997 17,537 Reduction in operating right-of-use assets due to lease terminations and modifications $ 1,392 84 $ 2,251 1,347 Maturities of lease liabilities were as follows (in thousands) as of September 24, 2023: Operating Leases Remainder of 2023 $ 10,448 2024 41,928 2025 39,356 2026 35,562 2027 29,730 2028 23,062 Thereafter 49,296 Total lease payments 229,382 Less: imputed interest (55,433) Present value of lease liabilities $ 173,949 As of September 24, 2023, we had no significant real estate leases entered into that had not yet commenced. Lessor Disclosures We recognized $0.8 million and $1.5 million in franchise rent income during the quarter and year to date ended September 24, 2023 respectively, which is included in franchise royalties, fees and rent income in the condensed consolidated statement of operations. During the quarter and year to date ended September 24, 2023, we incurred $0.9 million and $1.6 million in expenses associated with these leases, which are included in franchise support, rent and marketing expenses in the condensed consolidated statement of operations from the inception of the related sublease agreements. The components of lease income were as follows: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Number of subleases 20 — 20 — Operating lease income $ 559 $ — $ 1,159 $ — Variable lease income 266 — 304 — Franchise rent income $ 825 $ — $ 1,463 $ — |
Leases | 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 and year to date ended September 24, 2023. The weighted average operating lease term and discount rate were as follows: September 24, September 25, Weighted average remaining lease term (years) 6.27 6.77 Weighted average discount rate 8.74 % 8.17 % 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), which are included in occupancy, general and administrative and franchise support, rent and marketing expense: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Operating lease cost $ 10,231 10,451 $ 30,406 31,041 Variable lease cost 3,825 2,797 11,188 9,649 Short-term lease cost 77 46 234 259 Total lease cost $ 14,133 13,294 $ 41,828 40,949 Supplemental disclosures of cash flow information related to leases were as follows (in thousands): For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Operating cash flows rent paid for operating lease liabilities $ 10,479 10,254 $ 31,685 31,179 Operating right-of-use assets obtained in exchange for new operating lease liabilities 4,745 7,361 8,997 17,537 Reduction in operating right-of-use assets due to lease terminations and modifications $ 1,392 84 $ 2,251 1,347 Maturities of lease liabilities were as follows (in thousands) as of September 24, 2023: Operating Leases Remainder of 2023 $ 10,448 2024 41,928 2025 39,356 2026 35,562 2027 29,730 2028 23,062 Thereafter 49,296 Total lease payments 229,382 Less: imputed interest (55,433) Present value of lease liabilities $ 173,949 As of September 24, 2023, we had no significant real estate leases entered into that had not yet commenced. Lessor Disclosures We recognized $0.8 million and $1.5 million in franchise rent income during the quarter and year to date ended September 24, 2023 respectively, which is included in franchise royalties, fees and rent income in the condensed consolidated statement of operations. During the quarter and year to date ended September 24, 2023, we incurred $0.9 million and $1.6 million in expenses associated with these leases, which are included in franchise support, rent and marketing expenses in the condensed consolidated statement of operations from the inception of the related sublease agreements. The components of lease income were as follows: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Number of subleases 20 — 20 — Operating lease income $ 559 $ — $ 1,159 $ — Variable lease income 266 — 304 — Franchise rent income $ 825 $ — $ 1,463 $ — |
Debt and Credit Facilities
Debt and Credit Facilities | 9 Months Ended |
Sep. 24, 2023 | |
Debt Disclosure [Abstract] | |
Debt and Credit Facilities | Debt and Credit Facilities The components of long-term debt were as follows (in thousands): September 24, December 25, Revolving credit facility $ — $ 8,550 Term loan credit facility 24,062 — Unamortized debt issuance costs (1,894) — Less: current portion of long-term debt (1,250) — Total long-term debt $ 20,918 $ 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 September 24, 2023, the effective interest rate was 14.94%. 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. |
Franchise Growth Acceleration I
Franchise Growth Acceleration Initiative | 9 Months Ended |
Sep. 24, 2023 | |
Other Industries [Abstract] | |
Franchise Growth Acceleration Initiative | Franchise Growth Acceleration Initiative The following is a summary of the refranchising activities recorded as a result of the Franchise Growth Acceleration Initiative during the quarter and year ended September 24, 2023 and September 25, 2022: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Number of shops sold to franchisees 12 — 20 — Proceeds from sale of company-operated shops $ 1,269 $ — $ 1,369 $ — Net assets sold (1,283) — (1,796) — Goodwill related to the company-operated shops sold to franchisee (79) — (100) — Loss on sale of company-operated shops, net (93) — (527) — Adjustment to recognize held-for-sale assets at fair value — — (503) — Other expenses (a) (17) — (43) — Loss on Franchise Growth Acceleration Initiative activities $ 110 $ — $ 1,073 $ — ______________________________ (a) These costs primarily include professional service fees and travel expenses incurred to execute the refranchise transaction. |
Capital Stock
Capital Stock | 9 Months Ended |
Sep. 24, 2023 | |
Equity [Abstract] | |
Capital Stock | Capital Stock On 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 September 24, 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 currently exercisable until 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 September 24, 2023, no warrants were exercised. For the year to date ended September 24, 2023, 176,272 warrants were exercised at the exercise price of $5.45 per warrant. As of September 24, 2023, we had 1,123,589 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 September 24, 2023, we have not sold any shares under the Sales Agreement. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 24, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 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 September 24, 2023 is $10.59 and $20.53 per option, and the options generally vest in one-fourth and one-fifth increments over four A summary of stock option activity for the year to date ended September 24, 2023 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 (345) 11.64 Outstanding—September 24, 2023 128 $ 13.78 $ — 1.62 Exercisable—September 24, 2023 128 13.78 $ — 1.62 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 or year to date ended September 24, 2023 or the quarter ended September 25, 2022. For the year to date ended September 25, 2022, we recognized stock-based compensation expense related to stock options of less than $0.1 million. As of September 24, 2023, we did 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. Grants of RSUs to our Board of Directors 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 generally vest in one-third increments over a three-year period. A summary of RSU activity for the year to date ended September 24, 2023 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 599 7.42 Vested (610) 5.06 Canceled (69) 6.45 Non-vested as of September 24, 2023 828 $ 7.12 For the quarter and year to date ended September 24, 2023, we recognized stock-based compensation expense related to RSUs of $0.8 million and $2.4 million, respectively. For the quarter and year to date ended September 25, 2022, we recognized stock-based compensation expense related to RSUs of $0.8 million and $2.1 million, respectively. As of September 24, 2023, unrecognized stock-based compensation expense for RSUs was $5.6 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 and year to date ended September 24, 2023, we recognized stock-based compensation expense for PSUs with market vesting conditions of $0.4 million and $1.0 million, respectively. For the quarter and year to date ended September 25, 2022, we recognized stock-based compensation expense for PSUs with market vesting conditions of $0.2 million and $0.4 million, respectively. A summary of activity for PSUs with market vesting conditions for the year to date ended September 24, 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 297 9.79 Vested (18) 4.30 Canceled (40) 6.24 Non-vested as of September 24, 2023 514 $9.59 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 24, 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. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 24, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsOn October 30, 2023, we completed a multi-unit development agreement which included the refranchising of four shops in the greater Columbus, Ohio region. We received $3.3 million in cash proceeds for the sale of these shop assets, and we expect to recognize a gain on the sale the fourth quarter of 2023 of between $2.0 and $3.0 million. |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Pay vs Performance Disclosure | ||||
Net income attributable to Potbelly Corporation | $ 1,495 | $ 9,029 | $ 2,383 | $ 1,690 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Sep. 24, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Organization and Other Matters
Organization and Other Matters (Policies) | 9 Months Ended |
Sep. 24, 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 361 company-operated shops in the United States as of September 24, 2023. Additionally, Potbelly franchisees operate 69 shops domestically. |
Basis of Presentation | 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 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, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported within. . 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 | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Potbelly; 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 | 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 consisted of 52 weeks. The fiscal quarters ended September 24, 2023 and September 25, 2022 each consisted of 13 weeks. The year to date periods ended September 24, 2023 and September 25, 2022 each consisted of 39 weeks. |
Use of Estimates | 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 | 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 typically include cash consideration for the sale of the current shops as well as development agreement fees for commitments to develop new shops to fully penetrate existing markets. On an ongoing basis, we collect additional cash consideration for royalties and lease payments. |
Restricted Cash | Restricted CashAs of September 24, 2023, we had restricted cash related to funds held in a money market account as collateral for letters of credit to certain lease agreements. |
Potbelly Brand Fund | 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. We manage these advertising and marketing expenses through the Brand Fund using the funds contributed by our shops. These funds are managed 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 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. |
Revenue | We primarily earn revenue at a point in time for sandwich shop sales, which can occur in person at a shop, through 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 where revenue is generally recognized over time, as outlined below. 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 sandwich shop sales, net in the condensed consolidated statements of operations. 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. Once a customer earns a free entrée, that entrée reward will expire after 30 days. 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 deferred revenue liability is established in accrued expenses. The deferral is based on the estimated value of the unredeemed points and free entrées. The estimated value and the estimated redemption rates are based on a historical data analysis of loyalty reward redemptions. Estimated breakage 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. |
Organization, Consolidation and
Organization, Consolidation and Presentation of Financial Statements (Tables) | 9 Months Ended |
Sep. 24, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Cash and Cash Equivalents | 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: September 24, December 25, Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 30,938 $ 15,619 Restricted cash, noncurrent 749 — Total cash, cash equivalents and restricted cash shown on statement of cash flows $ 31,688 $ 15,619 |
Revenue (Tables)
Revenue (Tables) | 9 Months Ended |
Sep. 24, 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 September 24, 2023 6,279 3,502 Increase (decrease) in contract liability $ (729) $ 1,825 |
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 $ 2,931 2024 2,772 2025 318 2026 289 2027 256 Thereafter 3,272 Total revenue recognized $ 9,838 |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 9 Months Ended |
Sep. 24, 2023 | |
Earnings Per Share [Abstract] | |
Summary of Loss Per Share Calculation | The following table summarizes the earnings per share calculation: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Net income attributable to Potbelly Corporation $ 1,495 $ 9,029 $ 2,383 $ 1,690 Weighted average common stock outstanding-basic 29,324 28,726 29,143 28,563 Plus: Effect of potentially dilutive stock-based compensation awards 295 141 392 329 Plus: Effect of potential warrant exercise 409 — 380 55 Weighted average common shares outstanding-diluted 30,028 28,867 29,915 28,947 Income per share available to common stockholders-basic $ 0.05 $ 0.31 $ 0.08 $ 0.06 Income per share available to common stockholders-diluted $ 0.05 $ 0.31 $ 0.08 $ 0.06 Potentially dilutive shares that are considered anti-dilutive: Shares 437 2,620 367 647 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 24, 2023 | |
Leases [Abstract] | |
Schedule of Weighted Average Lease Terms and Discount Rates | The weighted average operating lease term and discount rate were as follows: September 24, September 25, Weighted average remaining lease term (years) 6.27 6.77 Weighted average discount rate 8.74 % 8.17 % |
Components of Lease Cost | The components of lease cost were as follows (in thousands), which are included in occupancy, general and administrative and franchise support, rent and marketing expense: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Operating lease cost $ 10,231 10,451 $ 30,406 31,041 Variable lease cost 3,825 2,797 11,188 9,649 Short-term lease cost 77 46 234 259 Total lease cost $ 14,133 13,294 $ 41,828 40,949 Supplemental disclosures of cash flow information related to leases were as follows (in thousands): For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Operating cash flows rent paid for operating lease liabilities $ 10,479 10,254 $ 31,685 31,179 Operating right-of-use assets obtained in exchange for new operating lease liabilities 4,745 7,361 8,997 17,537 Reduction in operating right-of-use assets due to lease terminations and modifications $ 1,392 84 $ 2,251 1,347 |
Maturities of Lease Liabilities | Maturities of lease liabilities were as follows (in thousands) as of September 24, 2023: Operating Leases Remainder of 2023 $ 10,448 2024 41,928 2025 39,356 2026 35,562 2027 29,730 2028 23,062 Thereafter 49,296 Total lease payments 229,382 Less: imputed interest (55,433) Present value of lease liabilities $ 173,949 |
Components of Lease Income | The components of lease income were as follows: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Number of subleases 20 — 20 — Operating lease income $ 559 $ — $ 1,159 $ — Variable lease income 266 — 304 — Franchise rent income $ 825 $ — $ 1,463 $ — |
Debt and Credit Facilities (Tab
Debt and Credit Facilities (Tables) | 9 Months Ended |
Sep. 24, 2023 | |
Debt Disclosure [Abstract] | |
Component of Long-term Debt | The components of long-term debt were as follows (in thousands): September 24, December 25, Revolving credit facility $ — $ 8,550 Term loan credit facility 24,062 — Unamortized debt issuance costs (1,894) — Less: current portion of long-term debt (1,250) — Total long-term debt $ 20,918 $ 8,550 |
Franchise Growth Acceleration_2
Franchise Growth Acceleration Initiative (Tables) | 9 Months Ended |
Sep. 24, 2023 | |
Other Industries [Abstract] | |
Schedule of Franchise Growth Acceleration Initiative | The following is a summary of the refranchising activities recorded as a result of the Franchise Growth Acceleration Initiative during the quarter and year ended September 24, 2023 and September 25, 2022: For the Quarter Ended For the Year to Date Ended September 24, September 25, September 24, September 25, Number of shops sold to franchisees 12 — 20 — Proceeds from sale of company-operated shops $ 1,269 $ — $ 1,369 $ — Net assets sold (1,283) — (1,796) — Goodwill related to the company-operated shops sold to franchisee (79) — (100) — Loss on sale of company-operated shops, net (93) — (527) — Adjustment to recognize held-for-sale assets at fair value — — (503) — Other expenses (a) (17) — (43) — Loss on Franchise Growth Acceleration Initiative activities $ 110 $ — $ 1,073 $ — ______________________________ (a) These costs primarily include professional service fees and travel expenses incurred to execute the refranchise transaction. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 24, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Summary of Stock Option Activity | A summary of stock option activity for the year to date ended September 24, 2023 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 (345) 11.64 Outstanding—September 24, 2023 128 $ 13.78 $ — 1.62 Exercisable—September 24, 2023 128 13.78 $ — 1.62 |
Summary of RSU Activity | A summary of RSU activity for the year to date ended September 24, 2023 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 599 7.42 Vested (610) 5.06 Canceled (69) 6.45 Non-vested as of September 24, 2023 828 $ 7.12 |
Summary of PSU Activity | A summary of activity for PSUs with market vesting conditions for the year to date ended September 24, 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 297 9.79 Vested (18) 4.30 Canceled (40) 6.24 Non-vested as of September 24, 2023 514 $9.59 |
Organization and Other Matter_2
Organization and Other Matters - Additional Information (Detail) | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 jointVenture shop store | Sep. 25, 2022 store | Sep. 24, 2023 jointVenture store shop subsidiary | Sep. 25, 2022 store | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Number of shops Potbelly Corporation owns or operates | shop | 361 | 361 | ||
Number of shops franchisees operate | shop | 69 | 69 | ||
Number of wholly owned subsidiaries | subsidiary | 7 | |||
Number of joint ventures | jointVenture | 6 | 6 | ||
Number of shops sold to franchisees | store | 12 | 0 | 20 | 0 |
Number of additional shops to be developed | store | 28 | |||
Minimum | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest rate | 51% | |||
Maximum | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership interest rate | 80% |
Organization and Other Matter_3
Organization and Other Matters - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands | Sep. 24, 2023 | Dec. 25, 2022 | Sep. 25, 2022 | Dec. 26, 2021 |
Reconciliation of cash, cash equivalents and restricted cash: | ||||
Cash and cash equivalents | $ 30,938 | $ 15,619 | ||
Restricted cash, noncurrent | 749 | 0 | ||
Total cash, cash equivalents and restricted cash shown on statement of cash flows | $ 31,688 | $ 15,619 | $ 9,506 | $ 14,353 |
Revenue - Additional Informatio
Revenue - Additional Information (Detail) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 USD ($) | Sep. 25, 2022 USD ($) | Sep. 24, 2023 USD ($) point | Sep. 25, 2022 USD ($) | |
Disaggregation Of Revenue [Line Items] | ||||
Amount of revenue recognized | $ 120,768 | $ 117,649 | $ 365,660 | $ 331,823 |
Gift card breakage income | $ 600 | 400 | ||
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 | 9,838 | $ 9,838 | ||
Revenue recognized related to prior periods | $ 400 | $ 400 | 2,500 | 2,200 |
Point in time sales | ||||
Disaggregation Of Revenue [Line Items] | ||||
Amount of revenue recognized | 363,400 | 330,600 | ||
Over time sales | ||||
Disaggregation Of Revenue [Line Items] | ||||
Amount of revenue recognized | $ 2,200 | $ 1,200 |
Revenue - Summary of Current an
Revenue - Summary of Current and Noncurrent Contract Liabilities from Contracts with Customers (Detail) $ in Thousands | 9 Months Ended |
Sep. 24, 2023 USD ($) | |
Current Contract Liability | |
Beginning balance | $ 7,008 |
Ending balance | 6,279 |
Increase (decrease) in contract liability | (729) |
Noncurrent Contract Liability | |
Beginning balance | 1,677 |
Ending balance | 3,502 |
Increase (decrease) in contract liability | $ 1,825 |
Revenue - Summary of Expected R
Revenue - Summary of Expected Revenue Recognition Related to Contract Liabilities (Detail) $ in Thousands | Sep. 24, 2023 USD ($) |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue, remaining performance obligations | $ 9,838 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-09-25 | |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Revenue, remaining performance obligations | $ 2,931 |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 3 months |
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 | $ 2,772 |
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 | $ 318 |
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 | $ 289 |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year |
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 | $ 256 |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year |
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 | $ 3,272 |
Revenue, remaining performance obligation, expected timing of satisfaction, period |
Fair Value Measurement (Detail)
Fair Value Measurement (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 24, 2023 | Sep. 24, 2023 | |
Fair Value Disclosures [Abstract] | ||
Impairment charge | $ 200 | $ 900 |
Earnings (Loss) Per Share - Sum
Earnings (Loss) Per Share - Summary of Loss Per Share Calculation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Earnings Per Share [Abstract] | ||||
Net income attributable to Potbelly Corporation | $ 1,495 | $ 9,029 | $ 2,383 | $ 1,690 |
Weighted average common shares outstanding-basic (in shares) | 29,324 | 28,726 | 29,143 | 28,563 |
Plus: Effect of potentially dilutive stock-based compensation awards | 295 | 141 | 392 | 329 |
Plus: Effect of potential warrant exercise | 409 | 0 | 380 | 55 |
Weighted average common shares outstanding-diluted (in shares) | 30,028 | 28,867 | 29,915 | 28,947 |
Income (loss) per share available to common stockholders-basic (in USD per share) | $ 0.05 | $ 0.31 | $ 0.08 | $ 0.06 |
Income (loss) per share available to common stockholders-diluted (in USD per share) | $ 0.05 | $ 0.31 | $ 0.08 | $ 0.06 |
Potentially dilutive shares that are considered anti-dilutive (in shares) | 437 | 2,620 | 367 | 647 |
Income Taxes - (Detail)
Income Taxes - (Detail) $ in Millions | Mar. 31, 2019 USD ($) |
Income Tax Disclosure [Abstract] | |
Deferred tax assets, valuation allowance | $ 13.6 |
Leases - Additional Information
Leases - Additional Information (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Leases [Abstract] | ||||
Operating leases, terms | 10 years | 10 years | ||
Renewal term | 5 years | 5 years | ||
Additional operating leases payments related to shops not yet open, amount | $ 0 | $ 0 | ||
Franchise rent income | 825,000 | $ 0 | 1,463,000 | $ 0 |
Franchise lease expense | $ 900,000 | $ 1,600,000 |
Leases - Operating Lease Term a
Leases - Operating Lease Term and Discount Rate (Detail) | Sep. 24, 2023 | Sep. 25, 2022 |
Leases [Abstract] | ||
Weighted average remaining lease term (years) | 6 years 3 months 7 days | 6 years 9 months 7 days |
Weighted average discount rate | 8.74% | 8.17% |
Leases - Components of Lease Co
Leases - Components of Lease Cost (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Leases [Abstract] | ||||
Operating lease cost | $ 10,231 | $ 10,451 | $ 30,406 | $ 31,041 |
Variable lease cost | 3,825 | 2,797 | 11,188 | 9,649 |
Short-term lease cost | 77 | 46 | 234 | 259 |
Total lease cost | $ 14,133 | $ 13,294 | $ 41,828 | $ 40,949 |
Leases - Supplemental Disclosur
Leases - Supplemental Disclosures of Cash Flow Information Related to Leases (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Leases [Abstract] | ||||
Operating cash flows rent paid for operating lease liabilities | $ 10,479 | $ 10,254 | $ 31,685 | $ 31,179 |
Operating right-of-use assets obtained in exchange for new operating lease liabilities | 4,745 | 7,361 | 8,997 | 17,537 |
Reduction in operating right-of-use assets due to lease terminations and modifications | $ 1,392 | $ 84 | $ 2,251 | $ 1,347 |
Leases - Maturities of Lease Li
Leases - Maturities of Lease Liabilities (Detail) $ in Thousands | Sep. 24, 2023 USD ($) |
Operating Leases | |
Remainder of 2023 | $ 10,448 |
2024 | 41,928 |
2025 | 39,356 |
2026 | 35,562 |
2027 | 29,730 |
2028 | 23,062 |
Thereafter | 49,296 |
Total lease payments | 229,382 |
Less: imputed interest | (55,433) |
Present value of lease liabilities | $ 173,949 |
Leases - Lessor Operating Lease
Leases - Lessor Operating Leases (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 USD ($) store | Sep. 25, 2022 USD ($) store | Sep. 24, 2023 USD ($) store | Sep. 25, 2022 USD ($) store | |
Leases [Abstract] | ||||
Number of subleases | store | 20 | 0 | 20 | 0 |
Operating lease income | $ 559 | $ 0 | $ 1,159 | $ 0 |
Variable lease income | 266 | 0 | 304 | 0 |
Franchise rent income | $ 825 | $ 0 | $ 1,463 | $ 0 |
Debt and Credit Facilities - Co
Debt and Credit Facilities - Component of Long-term Debt (Detail) - USD ($) $ in Thousands | Sep. 24, 2023 | Dec. 25, 2022 |
Debt Instrument [Line Items] | ||
Unamortized debt issuance costs | $ (1,894) | $ 0 |
Less: current portion of long-term debt | (1,250) | 0 |
Total long-term debt | 20,918 | 8,550 |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 0 | 8,550 |
Term loan credit facility | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 24,062 | $ 0 |
Total long-term debt | $ 24,100 |
Debt and Credit Facilities - Ad
Debt and Credit Facilities - Additional Information (Detail) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Feb. 07, 2023 USD ($) | Sep. 24, 2023 USD ($) Rate | Sep. 25, 2022 USD ($) | Sep. 24, 2023 USD ($) Rate | Sep. 25, 2022 USD ($) | Dec. 25, 2022 USD ($) | |
Debt Instrument [Line Items] | ||||||
(Gain)/loss on extinguishment of debt | $ 0 | $ 10,191 | $ (239) | $ 10,191 | ||
Effective interest rate | Rate | 14.94% | 14.94% | ||||
Amortization of debt issuance costs | $ 100 | $ 300 | ||||
Total long-term debt | 20,918 | 20,918 | $ 8,550 | |||
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 covenant, minimum average liquidity | $ 10,000 | |||||
Debt issuance costs | $ 2,200 | |||||
Total long-term debt | $ 24,100 | $ 24,100 | ||||
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] | ||||||
(Gain)/loss on extinguishment of debt | $ 200 |
Franchise Growth Acceleration_3
Franchise Growth Acceleration Initiative (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 24, 2023 USD ($) store | Sep. 25, 2022 USD ($) store | Sep. 24, 2023 USD ($) store | Sep. 25, 2022 USD ($) store | |
Other Industries [Abstract] | ||||
Number of shops sold to franchisees | store | 12 | 0 | 20 | 0 |
Proceeds from sale of company-operated shops | $ 1,269 | $ 0 | $ 1,369 | $ 0 |
Net assets sold | (1,283) | 0 | (1,796) | 0 |
Goodwill related to the company-operated shops sold to franchisee | (79) | 0 | (100) | 0 |
Loss on sale of company-operated shops, net | 93 | 0 | 527 | 0 |
Adjustment to recognize held-for-sale assets at fair value | 0 | 0 | (503) | 0 |
Other expenses | (17) | 0 | (43) | 0 |
Loss on Franchise Growth Acceleration Initiative activities | $ 110 | $ 0 | $ 1,073 | $ 0 |
Capital Stock (Detail)
Capital Stock (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Nov. 03, 2021 | Feb. 09, 2021 | Sep. 24, 2023 | Jun. 25, 2023 | Mar. 26, 2023 | Sep. 24, 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 | $ 0.01 | |||||
Warrants outstanding | 1,123,589 | 1,123,589 | ||||||
Proceeds from exercise of warrants | $ 0 | $ 96,000 | $ 865,000 | |||||
Warrants | ||||||||
Equity Class Of Treasury Stock [Line Items] | ||||||||
Placement agent fees and offering expenses | $ 1,000,000 | |||||||
Proceeds from exercise of warrants | $ 0 | $ (34,000) | $ (313,000) | |||||
Common Stock | ||||||||
Equity Class Of Treasury Stock [Line Items] | ||||||||
Issuance of common shares and warrants, net of fees (in shares) | 0 | 18,000 | 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) | 0 | 176,272 | ||||||
William Blair | ||||||||
Equity Class Of Treasury Stock [Line Items] | ||||||||
Proceeds from exercise of warrants | $ 40,000,000 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 24, 2023 | Sep. 25, 2022 | Jun. 26, 2022 | Sep. 24, 2023 | Sep. 25, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Recognized stock-based compensation expense (less than) | $ 3,408,000 | $ 2,446,000 | |||
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) | $ 10.59 | ||||
Exercise price of options outstanding, higher limit (in USD per share) | $ 20.53 | ||||
Recognized stock-based compensation expense (less than) | $ 0 | $ 0 | $ 0 | 100,000 | |
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% | ||||
Common share options | Minimum | Tranche Two | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 25% | ||||
Common share options | Minimum | Tranche Three | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 25% | ||||
Common share options | Minimum | Tranche Four | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 25% | ||||
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 | ||||
Common share options | Maximum | Tranche One | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 20% | ||||
Common share options | Maximum | Tranche Two | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 20% | ||||
Common share options | Maximum | Tranche Three | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 20% | ||||
Common share options | Maximum | Tranche Four | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 20% | ||||
Common share options | Maximum | Tranche Five | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 20% | ||||
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) | 800,000 | 800,000 | $ 2,400,000 | 2,100,000 | |
Unrecognized stock compensation expense | 5,600,000 | $ 5,600,000 | |||
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% | ||||
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% | ||||
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% | ||||
Performance stock units | Market vesting conditions | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Recognized stock-based compensation expense (less than) | $ 400,000 | $ 200,000 | $ 1,000,000 | $ 400,000 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Stock Option Activity (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | ||
Sep. 24, 2023 | Sep. 25, 2022 | Dec. 25, 2022 | |
Shares (Thousands) | |||
Beginning balance (in shares) | 473 | ||
Granted (in shares) | 0 | ||
Exercised (in shares) | 0 | ||
Canceled (in shares) | (345) | ||
Ending balance (in shares) | 128 | ||
Exercisable (in shares) | 128 | ||
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) | 11.64 | ||
Outstanding at ending balance (in USD per share) | 13.78 | ||
Exercisable (in USD per share) | $ 13.78 | ||
Options outstanding aggregate intrinsic value | $ 0 | $ 0 | |
Options exercisable aggregate intrinsic value | $ 0 | ||
Weighted Average Remaining Term (Years) | |||
Options outstanding | 1 year 7 months 13 days | 1 year 5 months 15 days | |
Options exercisable | 1 year 7 months 13 days |
Stock-Based Compensation - Su_2
Stock-Based Compensation - Summary of RSU Activity (Detail) - Restricted stock units (RSUs) shares in Thousands | 9 Months Ended |
Sep. 24, 2023 $ / shares shares | |
Number of RSUs (Thousands) | |
Non-vested beginning balance (in shares) | shares | 908 |
Granted (in shares) | shares | 599 |
Vested (in shares) | shares | (610) |
Canceled (in shares) | shares | (69) |
Non-vested ending balance (in shares) | shares | 828 |
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 | 7.42 |
Vested (in USD per share) | $ / shares | 5.06 |
Canceled (in USD per share) | $ / shares | 6.45 |
Weighted average fair value ending balance (in USD per share) | $ / shares | $ 7.12 |
Stock-Based Compensation - Su_3
Stock-Based Compensation - Summary of PSU Activity (Detail) - Performance stock units shares in Thousands | 9 Months Ended |
Sep. 24, 2023 $ / shares shares | |
Number of RSUs (Thousands) | |
Non-vested beginning balance (in shares) | shares | 275 |
Granted (in shares) | shares | 297 |
Vested (in shares) | shares | (18) |
Canceled (in shares) | shares | (40) |
Non-vested ending balance (in shares) | shares | 514 |
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 | 9.79 |
Vested (in USD per share) | $ / shares | 4.30 |
Canceled (in USD per share) | $ / shares | 6.24 |
Weighted average fair value ending balance (in USD per share) | $ / shares | $ 9.59 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Oct. 30, 2023 USD ($) store | Dec. 31, 2023 USD ($) | Sep. 24, 2023 USD ($) | Sep. 25, 2022 USD ($) | Sep. 24, 2023 USD ($) | Sep. 25, 2022 USD ($) | |
Subsequent Event [Line Items] | ||||||
Proceeds from sale of shop assets | $ 1,269 | $ 0 | $ 1,369 | $ 0 | ||
Expected gain on sale of shops | $ (93) | $ 0 | $ (527) | $ 0 | ||
Minimum | Forecast | ||||||
Subsequent Event [Line Items] | ||||||
Expected gain on sale of shops | $ 2,000 | |||||
Maximum | Forecast | ||||||
Subsequent Event [Line Items] | ||||||
Expected gain on sale of shops | $ 3,000 | |||||
Subsequent Event | ||||||
Subsequent Event [Line Items] | ||||||
Number of shops refranchised | store | 4 | |||||
Proceeds from sale of shop assets | $ 3,300 |