One of the hottest IPO's of the year occurred in October when Potbelly (PBPB +0.00%) hit the market. On its first day of trading Potbelly just short of doubled, on the belief that it very well could be the next Chipotle with its healthy menu offering and inviting atmosphere. One of the first steps of investing successfully is knowing what you own, and for Foolish investors looking to invest in this Chicago-born sandwich shop here are a few key facts about the company you may not be aware of that may serve you in your investment research.
Order a sandwich while you are antiquing
Potbelly Sandwich Works did not start out as a sandwich shop. In fact, it was once an antique shop that was owned and operated by a young couple. Bored by selling antiques and craving a new opportunity, the couple started using their antique stores' potbelly stove to produce warm, toasted sandwiches that were then sold to customers. What originally started as a side business morphed into becoming quite a big deal. Not only did the owners serve sandwiches to customers searching for antiques, but Chicago locals and businessmen began lining up for a potbelly sandwich and to enjoy the charming ambiance during lunchtime.
Both McDonald's and Potbelly became household names
Upon discovering Potbelly Sandwich Works, a young, motivated entrepreneur named Bryant Keil saw huge potential in expanding the neighborhood sandwich shop to other parts of the country. Keil purchased the shop in 1996 from the original owners, and kept Potbelly's uniqueness intact. In just one year, Keil had opened a second Potbelly shop. Keil's approach with expanding Potbelly is similar to Ray Kroc's expansion with McDonald's (MCD 0.98%), (although Keil has made light use of franchise locations). Ray Kroc was the McDonald brothers' first franchisee who started with the company in 1954 and helped the brothers manage their operations. Then, in 1961 Kroc purchased the McDonald's franchise for $2.7 million, just 21 years after the company's founding. Neither Keil nor Kroc were the original founders of their restaurants, but both businessmen saw an opportunity to expand their brands worldwide. Both men also took their companies public without assistance from the original owners. Today, Potbelly operates 286 shops, whereas McDonald's operates over 34,000 restaurants in 116 countries.
"Chicago, Chicago, Chicago -- that's Potbelly's home town"
In 1977, the original owners opened their first antique shop on Lincoln Avenue in Chicago, Illinois. Over the years, this little shop transformed into what we know today as Potbelly. Once Keil bought the small shop from the original owners, Keil carefully studied his options for expanding Potbelly nationwide. Initially, Keil opened Potbelly shops in focused, prime locations throughout Chicago. Keil carefully opened one Potbelly after another to ensure the expansion kept to a steady pace. This strategy allowed most Potbelly restaurants to remain corporate-owned. In fact, in 2011, Potbelly had the most corporate-owned sandwich shops in the country, while its other competitors like Subway have a majority of their stores franchised out. In addition, the Potbelly in Chicago's suburb Glen Ellyn added the first "drive-thru" for customers in late 2007.
More than just a sandwich shop
At Potbelly, customers can look forward to a comfortable, quaint environment with distinctive qualities, unlike what one receives at a typical fast-food chain. Potbelly's interior design encompasses antique pieces and decorations from the original store, giving off an olden-time appearance. Every store also has a potbelly stove, invented and used for toasting foods in the late 1800's to early 1900's. Over the years, Potbelly's menu has expanded from sandwiches and fresh-baked desserts such as cookies to breakfast items, soups, salads, melts, and milkshakes. In addition to its décor, Potbelly also offers live music within the restaurant, and its drive-through experience is also unique from all other fast-food chains--Potbelly employees will actually bring the food out to your car. How convenient!
Keeping it Local
What gives Potbelly its lively atmosphere is its live music. Local musicians from around the community come to play at a Potbelly and have been doing so since 1977 when it was still an antique store. These musicians perform all types of music from rock to folk to blues, and even jazz. It's quite interesting that Potbelly continues to employ local artists even now that it is a publicly traded company and has hundreds of restaurants. This quality makes Potbelly different from all other quick-service restaurants. One can't help but give a hats off to Potbelly for managing to keep local entertainment as part of its culture.
Foolish for Potbelly
Oftentimes a local restaurant will capture your heart and grab your loyalty. It may be the food, it may be the ambiance, it may be the live music, or it could be all of these things. There's an old adage that you should invest in what you know, but all too often these local restaurants we all know and love are one-location mom and pop shops that would not dream of having outside owners. Potbelly gives Foolish investors a chance to invest in something all too rare: a growing restaurant chain with a one of a kind atmosphere, great food, and live music with a mom and pop feel.
