Potbelly (PBPB) plans major European expansion

Chicago-based sandwich chain Potbelly has signed a “big deal” with a franchisee to expand into a “large European capital” by the early part of 2015, the company's chief executive said today.

CEO Aylwin Lewis, speaking at an Executives' Club of Chicago forum, said Potbelly will eventually have more shops outside of North America than in, all of which will be run by franchisees. In an interview following the event, Lewis declined to say how many stores the company plans to open in Europe or in which cities. He said details will be announced early next year.

CEO Aylwin Lewis

The stores would be the company's first in Europe and are part of Lewis' plan to build “a Potbelly global nation one neighborhood at a time.” The sandwich chain, which had 347 stores as of Sept. 28, expanded into the Middle East in 2012, where it operates a dozen franchise stores in Kuwait, Bahrain and the United Arab Emirates.

The company has said it plans eventually to operate more than 1,000 U.S. stores.

10-month chart

Lewis said the overseas stores will import about 80 percent of Potbelly's domestic menu and add items depending on the location. In its Middle East stores, for example, Potbelly offers a handful of menu items not found in U.S. stores, including baked onion rings, mozzarella sticks, jalapeno poppers, beef bacon cheese fries and chicken strips.

The news comes amid a rough year for the company, which went public in October 2013. Executives have said Potbelly projects flat to negative low-single-digit comparable store sales for the year, which has sent company shares downward. Same-store sales, a benchmark measure of a chain's financial health, declined 2.2 percent in the first quarter and 1.6 percent in the second quarter before rebounding to .5 percent growth in the most-recent quarter, which ended Sept. 28.

Shares of Potbelly stock debuted at $14 per share and rose more than 120 percent on its first day of trading to just more than $30 per share. Since then, it's been all downhill. Potbelly stock was trading at $11.90 mid-day today, down more than 50 percent for the year.

Since Lewis took over as CEO in June 2008, the company has more than doubled its number of stores, the majority of which are corporate-owned. A handful of domestic stores and all its international locations are operated by franchisees.