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Posted on Mon, Nov. 28, 2005

'Fast casual' sandwich chain tests N. Texas market

FORT WORTH -- North Texans love their sandwiches, and the newest player on the scene is Potbelly Sandwich Works, a Chicago-based sandwich chain known for its homemade-style sandwiches and desserts.

In the past 17 months, Potbelly has opened 10 storefronts in Fort Worth and Dallas, most recently in south Fort Worth. That makes North Texas the company's third-largest market after Chicago and Washington, D.C., company officials said.

Since 1977, Potbelly has gained a foothold mainly among Midwesterners with its milkshakes and its service. The company has gone national in only the past few years. It now operates 99 stores mostly in Illinois, Michigan, Ohio and Washington, D.C., with plans to open soon in Denver.

Owners declined to elaborate on further expansion plans in the Metroplex, preferring to wait and see how the existing locations fare, said David Selby, Potbelly's vice president of marketing.

Of course, the North Texas market is a good testing ground. The Metroplex has among the most restaurants per capita of any major U.S. metro area, and experts say it is ideal for gauging audience reception.

"Certainly, the ability to succeed in D-FW says something strong about your concept," Selby said.
With competition high, concept is crucial, Selby said. Potbelly's overall look is inspired by the urban downstairs pub; giant air vent tubes clutch a ceiling of elaborate tiles, and black-and-white stills of old Chicago hang from wood-paneled walls.

An antique, cast-iron potbelly stove greets patrons as they enter. Such stoves, used to heat homes and businesses in late 1800s, have become an emblem of family and togetherness, Selby said.
The menu offers meat and vegetable sandwiches on baked Italian rolls along with pizza, soups, homemade desserts and yogurt smoothies.

"To thrive in this competitive arena, we have to be very focused on providing a superior product and customer service," Selby said.

With competitors such as Blimpie, Quiznos and Subway, the barrier for sandwich chains seems high. Not true, says Jay Goldstein, restaurant consultant and president of Advanced Restaurant Consulting in Dallas.
Potbelly falls into the restaurant subgenre known as "fast causal," offering fast, made-to-order service in a sit-down environment with upscale or themed decor. Other fast-casual eateries include are Chipotle, Pei Wei and Baja Fresh.

Fast casual is gaining ground as a growing base of customers want healthy food made quickly and inexpensively priced. It's a sharp turn from quick-service restaurants, such as Burger King or McDonald's, which generally pack more salt, sugar and fat.

Still, some quick-service restaurants are going upscale themselves. McDonald's now offers "premium" chicken sandwiches made from finer ingredients, and Jack in the Box has rolled out a sandwich made with Italian ciabatta.

Goldstein said that further proves that the fast-causal concept is a legitimate player with staying power.
"What's happened is that restaurant owners have taken the curbside, get-it-and-go method of a shop in an urban city, say, like New York City and transported it to the suburban lifestyle," he said.
Despite its growth, he said, fast casual will not replace full-service casual such as Chili's, Pappasitos or T.G.I.F.

Potbelly officials declined to share revenue or growth projections. But one need only look at the company's publicly traded sandwich peers to view growth potential.

Profits for Panera Bread Co., (ticker: PNRA) based in Richmond Heights, Mo., shot up after the company's move in 2004 to build and open more shops. Gross revenue this year is expected to exceed the $123 million posted in 2004, according to Thomson Financial. Panera's stock has risen in 2005, hovering around $70 last week and up from $40 at this time last year.

Also growth-minded is Cosci Inc., known for its fast-casual breakfast and lunch fare in several Northern states. The Deerfield, Ill., company announced its intention to add 90 restaurants, boosting its locations to 485, by 2009, according to Thomson Financial.

What does this mean for the mom-and-pop sandwich shops?

Damon Carney, co-owner of the Tin Cup in Arlington, said he's not worried.

His shop specializes in soup and sandwiches and draws a sizable lunch crowd. The Tin Cup lures new patrons by word of mouth, usually curious folks looking to try out the signature blueberry tea or potato sticks.
"We learn our customers' names and try to remember them," Carney said.

Maintaining a first-name basis with customers, along with an interesting and tasty menu, is a chief way the small independents will survive, he said.

ONLINE: www.potbelly.com