POTBELLY CORP

Illinois · 109 · Indiana · 9

Texas · 58 · Massachusetts · 5

Michigan · 29 · Oregon · 5

Virginia · 24 · Kansas · 3

District of Columbia · 20 · Oklahoma · 2

Minnesota · 20 · Kentucky · 1

Wisconsin · 14 · Missouri · 1

Maryland · 13

Ohio · 13

Arizona · 10

Colorado · 10

Total · 346

Initial lease terms for our company-operated properties are generally ten years, with the majority of the leases providing for an option to renew for two additional five-year terms. Nearly all of our leases provide for a minimum annual rent, and some of our leases call for additional rent based on sales volume at the particular location over specified minimum levels. Generally, the leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. For additional information regarding our leases, see Note 8 in Item 8.

As of December 29, 2024, we leased office space in Chicago, Illinois for our corporate headquarters.

• New shops, once opened, may not be profitable, and the results that we have experienced in the past may not be indicative of future results.
• Opening new shops in existing markets may negatively affect sales at our existing shops.
• Our failure to manage our growth effectively could harm our business and operating results.
• Our inability to successfully implement our business strategy, including expansion of our franchising efforts, could negatively impact our business and future profitability and growth.
• Our push to a more fully franchised business model presents a number of disadvantages and risks.
• The success of our franchisees is important to our future growth.
• Our inability to successfully and sufficiently raise menu prices could result in a decline in profitability.
• New information or attitudes regarding diet and health could result in changes in regulations and consumer eating habits that could adversely affect our revenues.
• Evolving consumer preferences and tastes may adversely affect our business.
• Our ability to raise capital in the future may be limited, which could make us unable to fund our capital requirements.
• We may engage in merger and acquisition activities or strategic partnerships, which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our business, results of operations, and financial condition.
• Risks Related to Macroeconomic and Industry Conditions
• Local conditions, adverse weather conditions, natural disasters, acts of violence, terrorism or civil unrest, could adversely affect our business.
• Increased commodity, energy and other costs could decrease our shop-level profit margins or cause us to limit or otherwise modify our menus, which could adversely affect our business.
• Shortages or interruptions in the supply or delivery of fresh food products could adversely affect our operating results.
• We have a limited number of suppliers for our major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution programs in the U.S. If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations.
• Our business operations and future development could be significantly disrupted if we lose key members of our management team.
• Inability to attract, train and retain top-performing personnel could adversely impact our financial results, business and ability to operate our shops.
• Unionization activities, employment-related claims or labor disputes may disrupt our operations and affect our profitability.
• If we are unable to staff and retain qualified restaurant management and operating personnel in an increasingly competitive market, we may be unable to effectively operate and grow our business and revenues, which could materially adversely affect our financial performance.
• Risks Related to Information Technology Systems, Cybersecurity and Data Privacy
• If we are unable to protect the personal information that we gather or fail to comply with privacy and data protection laws and regulations, we could be subject to civil and criminal penalties, suffer reputational harm and incur substantial costs.
• Information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.
• Security breaches of confidential customer information in connection with our electronic processing of credit and debit card transactions may adversely affect our business.
• Our inability or failure to execute on a comprehensive business continuity plan at our restaurant support centers following a disaster or force majeure event could have a material adverse impact on our business.
• Risks Related to Legislation and Regulations
• Legislation and regulations requiring the display and provision of nutritional information for our menu offerings, and new information or attitudes regarding diet and health or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our results of operations.
• We are subject to many federal, state and local laws with which compliance is both costly and complex.
• Failure to obtain and maintain required licenses and permits or to comply with food control regulations could lead to the loss of our food service licenses and, thereby, harm our business.
• Restaurant companies have been the target of class action lawsuits and other proceedings alleging, among other things, violations of federal and state workplace and employment laws. Proceedings of this nature are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.
• We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business.
• Changes in accounting standards or the recognition of impairment or other charges may adversely affect our future results of operations.
• Risks Related to our Indebtedness
• Limitations in our Revolving Facility may limit our ability to invest in the ongoing needs of our business and if we are unable to comply with our financial covenants, our liquidity and results of operations could be harmed.
• We may be unable to obtain additional debt or other financing on favorable terms or at all.
• General Risk Factors
• Economic conditions in the United States could materially affect our business, financial condition and results of operations.
• Because many of our shops are concentrated in local or regional areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas.
• Damage to our reputation or lack of acceptance of our brand in existing or new markets could negatively impact our business, financial condition and results of operations.
• Our inability or failure to recognize, respond to and effectively manage the immediacy of social media could have a material adverse impact on our business.
• Our marketing programs may not be successful.
• Changes to estimates related to our property, right-of-use assets for operating leases and equipment or operating results that are lower than our current estimates at certain shop locations may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.
• Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.
• We have experienced and continue to experience labor cost inflation. If we are unable to offset higher labor costs, our cost of doing business will significantly increase, which could materially adversely impact our financial performance.
• Failure of our internal control over financial reporting could adversely affect our business and financial results.
• Risks Related to Environmental Social and Governance Issues
• Risks Related to Ownership of Our Common Stock
• Our business could be negatively affected as a result of actions of activist stockholders.
• Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them.
• Provisions in our certificate of incorporation and bylaws and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock.
• It is not possible to predict the aggregate proceeds resulting from sales made under the Sales Agreement.
• We may not be able to access sufficient funds under the Sales Agreement when needed.
• Because we have no plans to pay regular cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.