Potbelly Corporation (NASDAQ:PBPB) Q3 2023 Earnings Call Transcript

Todd Brooks: That’s great. And one final one and then I’ll jump back in queue. You just touched on Perks as an engine. Are we I know — I’ve asked this in the past, are we closer to maybe getting some quantification on what Perks means to Potbelly either size of membership or continued commentary about membership growth rates. Just wondering, if we can get a better understanding of how important of an engine it is? Thanks.

Bob Wright: Yes, especially when it’s again, we are very pleased with just how powerful Perks continues to be for us. And when you see that shift to our own channels over the DSPs. Perks is at the heart of that, and we’re seeing growth in there. The other thing that we’re very excited about is the growth in Perks acquisition and in fact the growth in the rate of Perks acquisition. We are seeing year-over-year a 60% increase, 60% plus increase in the acquisition rate for Perks members coming through those promotional activities. Now, it’s still our job to convert those to more and more frequent users. We still nurture that relationship. We’ve got the nurturing flows that we’ve talked about in the past. But filling the funnel, which is the biggest first step for us has shown a lot of momentum here in the last well in the last quarter, but in the last six months too. So, we’re really pleased with that acquisition rate.

Operator: The next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead.

Jeremy Hamblin: Thanks. And I’ll add my congratulations on terrific results. I want to start with your labor costs. You had pretty impressive year-over-year improvement. But I think even from a sequential standpoint, 150 basis points lower than Q2. Wanted to just understand the factors involved in seeing that type of improvement. Is that the Digital Kitchen and kind of changes in the make line that we’re starting to see that kind of transform the business. But any color that you could add to what you’re seeing there would be appreciated.

Steve Cirulis: Great. Welcome, Jeremy. Thanks for the question. Yes. I’ll start. I think just to give you the headlines in terms of the shift we we’ve seen. Some of it comes from some of the sales leverage we get, obviously, on the fixed element of labor, that’s a benefit to us. But also, I think primarily, where we see a lot of benefit is in the management of the hours at the shop level and the continued optimization of our hours-based labor guide. Also, I think labor inflation for us has been, fairly consistent, certainly off its peak from, probably about 18 months ago. And that having that visibility is helpful. We’ve also experienced, turnover rates, which are certainly lower than from the data we’ve seen, lower than that of the fast casual industry. And so, all of those elements, I think would be contributing factors to that improvement on the labor line that we’re seeing.

Bob Wright: Yes, Jeremy, nothing like the continued momentum on the top-line, really stable associate and management turnover and retention and we get the efficiency that goes with that. You asked specifically about PDK. The rate of our continued implementation of PDK is really just isn’t rapid enough to influence the entire portfolio that quickly. But what we are seeing is we continue to see the savings that we seek out of the labor that goes with that efficiency on the back line. We capture most of that in the first two or three weeks after inning PDK, getting those behaviors changed and then that becomes the new normal. And the better part of that, as we’ve said in previous quarters, we are continuing to expand the rollout of PDK and we do it by prioritizing those most capacity constrained shops.