Potbelly sandwiches in another store location for Dallas

Nation's Restaurant News, Oct 18, 2004 by Ron Ruggless

DALLAS -- Potbelly Sandwich Works of Chicago recently opened its third store here, adding another major metropolitan area to the 61-unit chain's portfolio.

According to Bryant Keil, the chain's 39-year-old chairman, who bought the original Potbelly in Chicago in 1996, Texas seemed like a good market for the concept, which sells upscale sandwiches that are anything but cookie-cutter.

Potbelly currently is in seven other states and the District of Columbia as well.

"I didn't think there was an offering similar to ours in the state of Texas," Keil said. "I toured a lot of cities, and I saw more opportunity in the Dallas area than anywhere. They say Dallas is a tough restaurant town, but I saw that as an interesting challenge."

The first store in the Dallas area opened north of downtown in June, and two more units subsequently have opened in the suburbs of Addison and Plano in recent months.

The first store has drawn lines of customers, leading Waltrina Stovall, a restaurant reviewer for the Dallas Morning News, to warn readers: "At high noon you should expect a crowd; we couldn't find a place to park on one attempt. Guess it proves you don't need a gimmick to win diners, just good food at good prices."

Those are the kinds of reviews that Keil wants to read. "We think Potbelly is a good value in a neat environment," he said.

Potbelly's menu features soups, sandwiches, desserts, malts, shakes and yogurt smoothies, and all sandwiches are priced at $3.79, unless customers want to order additional meats.

Keil said check averages are about $6.50, and average unit volumes are around $1.4 million. Average stores measure about 2,200 square feet and typically have about 60 seats, he added.

The decor reflects some of Potbelly Sandwich Works' history in Chicago, where it debuted in 1977 as a small antiques store that also offered sandwiches to boost business. The chain's stores still feature signs, music and memorabilia from the era.

After Keil bought the concept in 1996 he slowly expanded to eight more stores. "We're doing it one store at a time," he said. "Each store has its own little soul. We were cautious for many years. I only opened one store in 1997, one in 1998 and two in 1999.

"We've grown a lot in the last couple of years, but it's mostly because of the homework that we have done that allowed us to do that," he added. "I've always thought it was better to be ahead of the curve with procedures. I never wanted to play catch up. We started running the company as a much larger one in terms of systems, training and strategy, and it has paid off."

He eventually sought venture capital, drawing the attention of Maveron LLC, a Seattle-based venture-capital firm created by Howard Schultz, who also is chairman of Starbucks Coffee Co., and his partner, Dan Levitan. Both serve on Potbelly's board, as do Ned Jannotta of William Blair & Co., Bob Kagle of Benchmark Capital and Jerry Gallagher of Oak Investment Partners.

The company now has stores in Illinois, Indiana, Michigan, Minnesota, Texas, Wisconsin and Washington, D.C.

Keil said the next market for expansion likely would be Ohio.

All Potbelly stores currently are company owned, however. "While we're getting a number of franchise requests, it's just not something we are going to do right now," Keil said. "It's nice to control your destiny. Franchising is a method for raising money, and right now we're adding stores effectively [without franchising]."

Keil also said the workplace culture and polite and considerate employees are what make Potbelly popular.

"We have nice people working in our stores," he said. When hiring, Keil added, "we don't look for anybody who has a Ph.D. in sandwich making. We're not looking for restaurant jobs in their work history."

The company plans to have more than 70 stores open by year-end. "It's very challenging," Keil said. "It's becoming a little complicated, but it's going well."