Burgers and Blueberries?

May 8, 2012

They don’t like to admit it, but today’s consumers are still influenced by advertising perceptions. Key marketing terms can drive those perceptions toward better-for-you emotional drivers, craveability and real attitude and usage trends.

Recently, Burger King launched their “Fresh Menu,” which adds several new items including salads, premium chicken tenders and smoothies. McDonald’s recent earnings report indicates that the focused and increased effort by Burger King toward this new and fresh promotion has allowed them to gain some share from McDonald’s and has given Burger King some renewed momentum. 

McDonald’s, on the other hand, has been promoting a more “wholesome” menu and recently added “sweet, plump, fresh blueberries by the bushel” to their menu promotions. They are combined with crunchy walnuts, real banana and two full servings of whole grains in Blueberry Banana Nut Oatmeal, and with yogurt and granola—“a half cup of dairy and a full serving of whole grains”—in the Blueberry Yogurt Crunch. The effort shows an emphasis on more healthful offerings combining seasonal berries with “low-fat” yogurt and the “wholesome crunch of granola.”

Although these efforts may only have a small impact on consumer menu choices, these brands are providing the important alternatives that give consumers better options when dining away-from-home. 

This may be a small step, but nonetheless, a step in the right direction.

McDonald's Blueberry Ad (English)


McDonald's Blueberry advertisement (Español)

Wings: A fan favorite beyond March Madness, says Technomic

April 18, 2012

Chicago, March 14, 2012, PRNewswire – Even if your favorite college basketball team falls out of contention, the March tourneys still provide an excellent excuse to gather around a platter of your favorite chicken wings. But the excuses don’t end with March. Wings have remained a year-round favorite, exhibiting substantial innovation and room for growth according to recent research from restaurant consultants Technomic. 

“Wings and sports have long been a winning combination—and more than 10 percent of all wing-based limited-time offers are game-day promotions,” says Technomic Executive Vice President Darren Tristano. “However, wings’ overall appeal comes from their ability to suit consumers’ desire for customization, including traditional and global flavor options from sweet to super hot, and for portion flexibility, serving as snacks, starters, entrées and sides. And they are fun finger foods that are easy to share, so they lend a social aspect.”

In its new Category Close-Up: Wings report, Technomic delves into its MenuMonitor online menu-tracking resource and finds that 36 percent of the Top 500 restaurant chains offer wings, and that number has grown year after year.

Of particular note is the extent to which restaurants have innovated in the wing category:

  • Wing flavors and sauces found on menus range from Buffalo and barbecue to the tequila-lime-barbecue at Quaker Steak & Lube and the Raspberry Ice—a sweet and tangy blend of raspberry and horseradish—at Hurricane Grill &Wings.
  • Buffalo/hot sauces are the most commonly menued wing sauces. Among these types, the less-spicy mild and medium sauces have declined as Buffalo and “extra-hot” varieties have grown. 
  • Wing concepts offer an average of 18 different sauces. Hurricane Grill lists more than 30, as does Wild Wing Café. Variety is also found at chains not focused on wings—Beef ‘O’ Brady’s and Cheeseburger in Paradise, for example, each offer 12 options.
  • Sweet-style barbecue sauces are more popular than spicy-style barbecue sauces, though preferences vary heavily by region. Consumer preference for sweet sauces indicates opportunity for flavors such as sweet and sour, honey-chipotle and maple-brown sugar.
  • Fully 28 percent of wing-focused limited-time offers promote new wing flavors, offering operators a compelling method to drive sales while testing new wing varieties.
  • Boneless wings are on the rise. And, interestingly, as restaurants have added them, the incidence of traditional wings has not decreased. Operators have found boneless wings appeal to a new consumer—one who does not enjoy the finger-licking aspect of traditional wings.

Chicken wings are among the most popular menu items, but also one of the most difficult to classify and analyze. Technomic’s Category Close-Up: Wings provides restaurants and industry suppliers with a thorough review of wing menu trends, pricing, sizing, sauces, accompaniments and limited-time offers, in addition to consumer perceptions of the leading wing chains and other related consumer research.  

To learn more about this report, please visit Technomic.com or contact one of the individuals listed below.


Press Inquiries: Darren Tristano, 312-506-3850, or dtristano@technomic.com

Purchasing Details: Heather Nelson, 312-506-3855, or hnelson@technomic.com

About Technomic

Technomic provides clients with the facts, insights and consulting support they need to enhance their business strategies, decisions and results. Its services include numerous publications and digital products, as well as proprietary studies and ongoing research on all aspects of the food industry.

Source: Technomic, Inc.

Broth-Based Beverage Boon?

April 4, 2012

Some restaurant operators are beginning to redefine the traditional “cup of soup.” With the growth in fast casual and on-the-go consumers’ continued need for convenience and portability, servings of soup are now moving from spoon to drinkable containers. Broth-based soups have found their way on to several menus.

Fast-casual growth chain Freshii offers a spicy lemongrass, classic chicken and 100% vegetable broth served in a collared coffee cup to go.

Lettuce Entertain You chain Wow Bao offers Thai Herb Broth infused with fresh ginger and lemongrass which can be carried and sipped like a cup of tea.

These soup beverages are low in calories and priced between $1.29 and $2.29 providing consumers with a bell-warming, hot cup of comfort with a price and calorie count that is easy to stomach!

Investing snapshot: Cosi Inc. — How does Cosi fare in the growing fast-casual restaurant space?

April 3, 2012

Investing snapshot: Cosi Inc.

Investing snapshot: Cosi Inc. — How does Cosi fare in the growing fast-casual restaurant space?

By Kristin Samuelson, Chicago Tribune reporter

The player: Cosi Inc. (COSI)

Exchange: Nasdaq

Headquarters: Deerfield

Revenue: $75.9 million for the first nine months of 2011, down from $84.3 million a year earlier, when sales of 13 company-owned restaurants and closures accounted for $8.4 million.

52-week stock range: $1.45/56 cents

Friday’s close: $1.02

Key business: Incorporated in 1998, this fast-casual restaurant specializes in freshly baked flatbread and signature Squagels and serves soups, sandwiches, salads, pizza, coffee, beer and wine.

By the numbers: About 2,000 employees and 80 company-owned and 56 franchised restaurants in 17 U.S. states, the District of Columbia and the United Arab Emirates.
Fourth-quarter earnings release: 3 p.m. March 29

The scoop

  • The Nasdaq on Aug. 23 threatened Cosi with delisting because its share price had been less than $1 for 30 days, and it gave the company until Feb. 21 to close above that for 10 straight trading days. Cosi regained compliance Feb. 17.
  •  Cosi Chief Executive James Hyatt resigned Aug. 23. In December, Carin Stutz, whose experience includes executive stints at the parent of Chili’s and Maggiano’s, Applebee’s International Inc. and Wendy’s International, took over.
  • Activist investor Brad Blum, who helped turn around Olive Garden in the mid-1990s, was CEO of Burger King Holdings Inc. and Romano’s Macaroni Grill, and whose Blum Growth Fund LLC has a 6.8 percent stake in the company, has developed a better relationship with Stutz than he had with interim CEO Mark Demilio.

The buzz

RJ Hottovy, senior restaurant analyst at Chicago-based Morningstar Inc., said “the fast-casual space has been the sweet spot of the overall restaurant industry over the past several years,” citing its superior quality to fast food at reasonable prices.

And though he does not cover Cosi, he said it has not kept up with the biggest players, Chipotle and Panera Bread, because it cannot match their quality, peak hours output and consistency.
“The assembly-line production that Chipotle and Panera, for the most part, operate, I think that’s where Cosi has really struggled,” Hottovy said. “Chipotle and Panera have done a good job of standardizing the experience. It’s a different ordering process every time you walk into a Cosi.”

Darren Tristano, executive vice president at Chicago-based food research and consultancy Technomic, said he hopes Cosi will benefit from the expanding bakery cafe segment of fast casual.
“Brands like Panera not only compete with Cosi, but build a (consumer) need for brands like Cosi” by developing awareness of this type of restaurant, Tristano said.
Tristano added that Cosi has “quality food … they just haven’t delivered the number many investors are looking for.

“(Cosi is) not well capitalized to be able to aggressively invest in the brand,” Tristano said. “Most other bakery cafes have been adding net units, which means they’ve opened more units than they’ve closed.”

But Tristano likes developments such as the shift in leadership that “might breathe some new life into the organization,” especially the positioning of Blum, who has a formal consulting role with the company.

View the full article on chicagotribune.com

Leveraging Today’s Value Mindset – M&C Report

April 2, 2012

Leveraging Today's Value Mindset

Leveraging Today’s Value Mindset

Consumers are more reliant on value than ever before, and the definition of value has grown beyond simply price to include many elements of the dining occasion.

Each consumer’s interpretation of his or her personal economic situation is rarely static, so how they choose to spend hard-earned discretionary dollars is always changing as well. Unfortunately, one category of discretionary expenditures that can quickly be adjusted is restaurant use. In uncertain times, people modify what they spend during each visit or even reduce the number of restaurant visits. Yet at the same time, they still crave restaurant food and the social experience of dining out.

Given this consumer mindset, how do concepts formulate a winning business strategy?

Defining the New Value Equation
Consumers indicate that individual restaurant success depends on the ability to create, communicate and deliver value. However, the definition of value is not simple and straightforward. The precise meaning varies not only from person to person, but even within a single individual, depending on the specific meal occasion and what he or she expects during that visit.

In a general way, value can be broken down to an equation: value = (menu + experience) / price.

However, consumers weigh menu, experience and price attributes in different ways. For example, some demographic differences appear when looking at the importance levels that consumers give restaurant touchpoints or attributes.

Technomic’s Consumer Restaurant Brand Metrics—an ongoing program that gathers consumer feedback on 55 different attributes that capture a restaurant experience, from the quality of the food to the reputation of the brand—represents 1,000 nationally representative consumers and more than 25,000 restaurant visits.

We selected 10 attributes that represent the key elements of the value equation: price, menu and experience, and analyzed consumers’ importance ratings by age and income. The attributes that rose to the top in almost every instance were food taste/flavor, pleasant service and good value through low prices.

However, different age groups do not rate these attributes equally. While each cohort rates food taste as very important (or a top two box on a scale of 1 to 5), almost all of those age 55 and older (97%) say it is important, while about 95% of those 35–54 and 90% of those 18–34 say the same. Likewise, the data indicates the older the consumer, the more apt he or she is to say that pleasant service is important.
Those in different income groups also do not rate the top attributes equally. Again, each group rates food taste, pleasant service and price value as the most important. They rank them in that order, too, except those who earn less than $25,000, who rank good value through low prices before pleasant service.

Consumers with a household income between $50,000 and $99,999 rate the importance of each of these attributes higher than those in other income levels, followed closely by those in the $25,000–$49,999 group. If a concept is courting these customers, it must be sure to execute well on all of these attributes.

Value Tactics
Many restaurants communicate value price-point perceptions, simply aiming to show that their price is better than their competitors’. Examples include value menus, such as the Dollar Menu at McDonald’s and Taco Bell’s overall pricing strategy, and daily specials such as Hooters’ Wingsday Wednesday, when the $8.99 platter of its signature item is $5.99. Similarly, offering large portions, as they do at The Cheesecake Factory and Maggiano’s Little Italy, can communicate value. All-you-can-eat options have a similar appeal.

Other ways to indicate that a restaurant or menu item is “worth it” is to offer a unique flavor (as at fast-casual Mexican chain La Salsa, whose limited-time Green Chile Chicken Burrito highlights an ingredient that adds an authentic Southwestern appeal), a sense of indulgence (such as Kenny’s Burger Joint’s Naughty Mommy, with Stoli Strawberry, Navan vanilla cognac, amaretto, cheesecake, strawberry and vanilla ice cream) or an element that is considered premium (for instance, those that include high-end brands such as Ghirardelli or Crown Royal or people with a reputation for excellence such as Wolfgang Puck).

Consumers are looking to do more in less time, and their value definition is often grounded in minutes and even seconds. At some restaurants, including In-N-Out and Chipotle units, employees use hand-held technology to take orders. Customers then pay and receive their orders when they reach the window or counter. At Cracker Barrel, a prominent chalk board displays menu items that can be prepared and served in just a few minutes. Likewise, restaurants are adding value by offering portable menu items with sound packaging, separate registers and grab-and-go cases, and online and mobile ordering.

Restaurants that focus on the overall experience create value by showing customers they have nothing to worry about over the course of their dining occasion. Marketing messages tend to focus on how the guest will feel, and examples of food, hospitality and ambiance are mixed in to reinforce that commitment. A good example is Bonefish Grill, whose marketing features upscale touchpoints like a chef in his white jacket presenting delicious-looking food to cozy couples and groups of friends.

Similarly, restaurants ranging from family-style eatery Egg & I to high-end steakhouse Capitol Grille have positioned themselves to offer businesses and community groups a quiet and private space for meetings.

Recommended Roadmap
Restaurants use literally hundreds of interesting value strategies and tactics. However, not every method will be right for every operation. With that in mind, we propose these steps as a roadmap to determining which strategies are worth trying.

Analyze menu pricing and portion sizes against competitors. Keep in mind that the competition does not simply include, say, those that serve the same type of menu. McDonald’s competition includes Burger King and Wendy’s, of course, but it might also look at Subway, Starbucks and even the local convenience store.

Know your target market. As the Consumer Restaurant Brand Metrics data above reveal, different customers rank some attributes higher than others. Beyond age and income, gender also plays a role in restaurant attribute priorities, as do region, population density, ethnic background, whether there are kids involved—the list goes on.

Ask your current customers what they want. This can take any of several forms, including quantitative surveys to determine price flexibility and asking how they use brand and the competition; facilitated focus groups to gain qualitative insights; secondary research from a reputable firm; outreach to email contacts and social media networks; and simply watching and talking to guests in the restaurant.

Identify opportunities to provide value. Use the examples in this article and pay attention to how value is communicated in other concepts to both analyze the competition and spark new ideas. Market your efforts using the attributes and brand-use drivers that your customers find important.

Key Takeaway
Studying your competition, target audience and current customers will enable you to broaden your view of “value” and what it means to consumers. Your company can then address whether it should follow the pack and develop a value message similar to what the majority of operators are using or aim to create a differentiated message using some value strategies that are used less often. The execution may be more challenging than a tried-and-true method, but the results may be increased customer traffic and long-term bottom-line improvement.

Darren Tristano is Executive Vice President of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.

This article came from a print version of M&C Report

Burger King Does Their Homework, Gives Customers What They Want?

April 2, 2012

Burger King launches 10 new menu items in an effort to regain share and increase unit sales. The menu items include a new home-style snack wrap, salads, smoothies and frappe coffees. 

BK has done their homework and the conclusion is:

  • Contemporize restaurants – Update and remodel tired, aging stores
  • Improve packaging – use more contemporary cardboard cartons vs. wrappers
  • Change server uniforms to be more modern
  • Provide customers with the same choices they enjoy at McDonalds

Although these changes may not lead to a rapid turnaround for the burger giant, it certainly is a giant step in the right direction. 

After all, it has often been said that “sometimes the best ideas are borrowed” and “imitation is the greatest form of flattery”. 

We’ll have to wait and see if  this “me-too strategy” works…

Burger King New Menu Items

Restaurants Find Big Profits in Small Plates

April 2, 2012

Restaurants Find Big Profits in Small Plates

Restaurants Find Big Profits in Small Plates

By: Christina Cheddar Berk
News Editor

Americans are grazing on the go, and that’s been good news for restaurants, according to market researcher Technomic.

“Recent consumer research indicates that snacking is becoming a larger part of consumers’ daily lives,” said Darren Tristano, executive vice president at Technomic.

The firm recently examined the snack preferences, attitudes and purchasing behavior of more than 1,500 consumers, and found consumers are snacking significantly more than they were just two years ago.

Almost half — some 48 percent — said they’re now snacking at least twice a day. In 2010, only 25 percent of consumers said they were snacking that frequently.

And a greater portion, about 22 percent of those snacks, is purchased in restaurants, up from 17 percent in 2010.

Certainly consumers have more snacking choices at restaurants than they used to have. Fast-food chains such as McDonald’s [MCD 95.67 -0.13 (-0.14%) ] and Yum Brands’ [YUM 70.61 -0.11 (-0.16%) ] KFC offer snack-sized sandwiches, and restaurants such as Cheesecake Factory [CAKE 29.885 -0.295 (-0.98%) ] and California Pizza Kitchen are offering “small plates” and snacks on their menus.

At California Pizza Kitchen, for example, customers can order off the “Small Cravings” menu, which has items ranging from small servings of salad to more indulgent treats such as the 455-calorie Spicy Chicken Tinga Quesadilla.

Tristano attributed the trend to pressure from nutritional disclosure legislation, which has prompted the foodservice industry to reduce calorie counts in meals.

“As a result, Americans are more inclined to ‘graze’ throughout the day, seeking snacks that provide fuel between traditional meal parts,” he said.

More than a third of consumers have also broadened their definition of what a snack is to include more types of foods, beverages, and restaurant fare.

Restaurant chains also are trying harder to promote inexpensive snack items and bar plates to cater to younger customers, who tend to visit more often for late-night snacks.

This may be why at some restaurants, the snack menus are available only at specific times. Uno Chicago Grill, for example, offers a “Snack Hours Menu” from 4 p.m. to 7 p.m. and again after 10 p.m. This menu includes traditional bar food, such as buffalo chicken wings, as well as mini sandwiches such as hamburger and lobster sliders.

According to Technomic, small sandwiches are common on snack menus and have evolved from a simple snack to a downsized gourmet version of signature full-sized versions.

But convenience may be a key element of the snack craze. Sixty-two percent of consumers reported they purchased the snack at a restaurant on impulse.

View the full article at CNBC.com

McDonald’s woos cash-strapped customers

March 30, 2012

McDonald's woos cash-strapped customers

McDonald’s woos cash-strapped customers

by Sally Herships
Marketplace for Thursday, March 8, 2012

Kai Ryssdal: From the drive-thru window at McDonald’s comes this glimpse into the personal finances of recession and what it means for businesses. The burger chain reported February sales this morning. They were up, but not as much as the experts had been guessing. Blame a still-weak economy and people still looking for bargains.

So the omnipresent fast food king is gonna try to focus our attention on its low prices to get more of us in the door. The dollar menu’s not enough, it seems. Next month, the Extra Value Menu arrives.

Sally Herships explains.

Sally Herships: For restaurant lovers, the following news is about as welcome as stale, soggy cold French fries.

Darren Tristano: With higher gas prices and lower disposable income, it’s becoming increasingly difficult for Americans to dine out.

Darren Tristano is a food industry consultant with Technomic. Sad news for diners, but Tristano says it does solve a minor menu mystery. Normally we expect menus to be organized by type of dish, like appetizers, entrees and desserts. But not McDonald’s new Extra Value Menu. It will include everything from coffee to McNuggets.

Tristano: So they’re trying to focus the menu based more along the lines of price versus types of products.

And remember McDonald’s already has a dollar menu and value meals. Tristano says the restaurant is adding another value based option because consumers are changing. We used to be embarrassed to use coupons in front of our friends. But he says the recession did away with that.

RJ Hottovy: Customers’ fixation on the word “value” right now is important.

RJ Hottovy is senior restaurant analyst at Morningstar. He says as upscale newcomers like Panera and Chipotle are opening their doors, the fast food industry is declining. If McDonald’s wants new customers, it’ll have to steal them away from its competitors, which are also discounting. So, Hottovy says, it’s critical that the fast food king lets hungry customers know it’s offering low-priced options like McNuggets.

Hottovy: These are also are also pretty high-margin products, things that help drive the bottom line.

The new menu is available beginning March 26th.

Read full transcript at American Public Media: Marketplace Money

Snacking is Gaining Further Traction, Becoming a Consumer Lifestyle

March 29, 2012

Snacking is Gaining Further Traction, Becoming a Consumer Lifestyle

Snacking is Gaining Further Traction, Becoming a Consumer Lifestyle

CHICAGO, March 12, 2012 – PRNewswire – Consumers are snacking significantly more now than they were just two years ago. Almost half (48 percent) of consumers polled say they’re now snacking at least twice a day, compared to 25 percent in 2010. Restaurants are capitalizing on the growing snacking occasion by offering quick, portable, smaller-portioned, low-priced food and drink in a myriad of ways to continue gaining share of snack purchases. Restaurants now claim 22 percent of consumers’ snacking occasions, up from 17 percent in 2010.

“Recent consumer research indicates that snacking is becoming a larger part of consumers’ daily lives,” says Technomic Executive Vice President Darren Tristano. “Pressure from the nutritional disclosure legislation has prompted the foodservice industry to reduce calorie counts in meals. As a result, Americans are now more inclined to “graze” throughout the day, seeking snacks that provide fuel between traditional meal parts.”

To help operators and others aligned with the foodservice industry more effectively identify opportunities for growth and gain a competitive advantage, Technomic has developed the Snacking Occasion Consumer Trend Report.

Interesting findings include:

— Major chains are using late-night hours to promote value-oriented snack
items and bar plates to cater to younger customers who visit more often
for late-night snacks.
— More than a third (37 percent) of consumers have broadened their
definition of snacks to include more types of foods, beverages, and
restaurant fare.
— The mini sandwich, slider or wrap has evolved from a simple snack item
to a downsized gourmet version of signature full-sized offerings.
— Impulse purchases of snacks are up from two years ago. Sixty-two percent
reported that most of the snacks they purchased for away-from-home
consumption were impulse purchases.
— More than 33 percent of consumers expect to eat more healthful snacks in
the coming year, indicating greater importance for operators to offer
and promote better-for-you snacks.

Technomic’s Snacking Occasion Consumer Trend Report examines snack preferences, attitudes and purchasing behavior of more than 1,500 consumers. The Menu Insights section utilizes Technomic’s MenuMonitor online database and analyzes recent snacking developments to reveal menu trends for snacks at the Top 500 and emerging limited- and full-service restaurants. Additionally, data from Technomic’s 2010 Snacking Occasion Consumer Trend Reportis discussed throughout to provide comparison benchmarks for many menu and consumer trends.

View the full article at Hospitality Industry

Warm stove, cold stock at Potbelly

March 28, 2012

Warm stove, cold stock at Potbelly

Warm stove, cold stock at Potbelly

By Kate MacArthur
Potbelly Sandwich Works LLC is prepping to go public, but the throwback chain known for its namesake stove and toasted sandwiches could turn out to be the next Cosi instead of the next Chipotle if it doesn’t get its act together first.

The 35-year-old company founded in Chicago’s Lincoln Park and acquired by Chairman Bryant Keil in 1996 has achieved some proof points of its IPO readiness, including more than $200 million in annual revenue and a management team led by CEO Aylwin Lewis, a veteran retail operator. Yet it falls short on other fundamental benchmarks that would attract public investors and sustain expansion over time, industry watchers say.

Potbelly lags, too, when stacked up against other submarine sandwich sellers. Subway Restaurants, a unit of Doctor’s Associates Inc., now tops McDonald’s Corp. with the most locations in the world and is adding 165 outlets globally every month, on average. Champaign-based Jimmy John’s Franchise LLC is up to 1,329 sites in more than 40 states. Potbelly, meantime, has shrunk to 210 units from a peak of 223 in 2009, according to food industry tracker Technomic Inc.

Darren Tristano, an executive vice president at Chicago-based Technomic, draws comparisons between Cosi Inc. and Chipotle Mexican Grill Inc. When Deerfield-based Cosi went public in 2002, it was seen as a potential rival to Panera Bread Co. and Au Bon Pain Corp. in the higher-priced sandwich and salad segment. Since then, it has had only one profitable quarter and Nasdaq has twice threatened to delist its stock, which closed at $1.02 on March 9.

Denver-based Chipotle, at the other extreme, had set record sales and earnings year after year; its stock has rocketed eighteenfold since it went public six years ago.

Mr. Tristano sees more Cosi in Potbelly than Chipotle. “If you’re in the lead in a Nascar race, you don’t apply the brakes,” he says. “If growth isn’t happening, you have to question why.”
Messrs. Keil and Lewis, a former CEO of Sears Holdings Corp., decline to comment.

Potbelly, which began to franchise two years ago, made a boffo debut in June in New York, where it has five restaurants. The chain operates in 13 states and Washington, though more than a third of its locations are in Illinois. It recently has expanded its menu with a couple of chicken sandwiches and salads. Somewhat tardily, it also added a skinny sandwich version for calorie counters and a big version for the budget-minded. To get more from its real estate, the chain is offering breakfast at some sites. Live musicians still croon to noontime crowds.

Based on Technomic estimates, the average Potbelly generates $1.2 million in annual revenue. While that falls far short of the $2 million-plus-per-unit average at St. Louis-based Panera Bread and Chipotle, it’s twice the figure of Subway and Jimmy John’s.

But Potbelly’s startup costs are much higher than its sub sandwich rivals because its restaurants typically are larger and better furnished—they boast heavy wooden furniture and faux-antique décor versus Formica booths and fake brick wallpaper. Franchisee investments run as much as $767,700, excluding rent or mortgage payments, according to the Potbelly website. Milford, Conn.-based Subway says it charges franchisees $78,600 and up, plus royalties.

Potbelly also costs more to run. Because all its sandwiches are custom-made and toasted, each restaurant requires 16 to 20 workers during peak hours. Jimmy John’s gets by with as few as four or six, analysts say.

“They haven’t attracted franchisee investment and they haven’t put their own capital into new stores,” Mr. Tristano says. “They may be missing the boat.”

The bottom line is that Potbelly’s bottom line might be too thin for investors if the company goes ahead with an IPO by the end of next year, as it now plans, according to insiders.

View the full article on Crain’s chicagobusiness.com