Q3 2021 Potbelly Corp Earnings Call
Good morning, everyone and welcome to Potbelly Corporation's third quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as.
As a reminder, this conference is being recorded.
I would now like to turn the call over to MS idea Dixon Potbellies Chief Legal Officer. Please go ahead.
Good morning, everyone and welcome to our third quarter 2021 earnings call.
Our presenters today are Bob right, our President and Chief Executive Officer, and Steve <unk>, Our senior Vice President and Chief Financial Officer.
Please note that we have provided a set of Powerpoint slides that will accompany our prepared remarks.
You may access these slides on the Investor Relations section of our website.
After our prepared remarks, well open the call for your questions.
I'd like to call your attention to our cautionary statements on slide two.
Note that certain comments made in this call will contain forward looking statements regarding future events or the future financial performance of the company.
Any such statements, including our outlook for 2021 or any other future periods should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date.
Forward looking statements involve significant risks and uncertainties and events or results could differ materially from those presented due to a number of risks and uncertainties.
Additional detailed information concerning these risks regarding our business and the factors that could cause actual results to differ materially from the forward looking statements.
Other information that will be giving today can be found in our most recent annual report on Form 10-K.
Under the headings risk factors and management's discussion and analysis of financial condition and results of operations.
And in our subsequent filings with the Securities and Exchange Commission, which are available at SEC Gov.
During the call. There will also be a discussion of financial metrics that do not conform to U S generally accepted accounting principles or GAAP.
Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the Investor presentation and press release issued yesterday evening, both of which are available in the investors tab of our website.
I'll now turn the call over to Bob.
Thank you Lydia good morning, everyone and thank you for joining us today.
I Hope you and your families have remained safe and healthy since our last update as always I want to begin by thanking our potbelly family for their continued dedication strong work ethic and commitment our top priority is to provide our customers with a great safe and fun dining experience and your loyalty makes this possible.
2021 has continued to exceed our expectations on a number of levels, including the most recent quarter, so let's get into the highlights and our expectations for the last quarter of the year.
Beginning on slide three starting with the topline revenues totaled $101.7 million, an increase of 40% compared to the third quarter 2020.
With same store sales, increasing by 33, 7% as compared to the pandemic impacted Q3 2020.
Same store traffic, which measures transactions improved by 21, 3% compared to a year ago.
This improvement was largely driven by higher volumes across all of our channels led by dine in sales, which were up 15% sequentially. Despite the impact of the Delta variance.
Importantly, our sales and traffic were also driven by the continued implementation of our strategic initiatives during the quarter.
Namely, our new menu rollout, which was launched nationwide in August our new Tech stack, which launched in early July and our continued successful investment in digital media and marketing.
Average unit volumes or <unk> were up 4% sequentially and have continued to trend in the right direction throughout the year.
In fact on an annualized basis Q3, <unk> reached approximately $1.050 million and it's important to note that we achieved these volumes despite the lagging recovery of our CBD and airport shops.
In terms of performance by shop type, we saw continued strength across our urban suburban drive thru and University locations, while our CBD and airport shops made meaningful progress towards recovery.
As we said last quarter as well. These currently lagging shop types continue to trend in the right direction and offer further upside for potbelly is overall growth moving forward.
Top line strength led to positive EBITDA and adjusted EBITDA for the second consecutive quarter.
We also had our third consecutive quarter of shop level profitability, albeit slightly lower sequentially due to a market driven labor and other inflationary pressures.
It's worth noting that despite the significant environmental margin pressures, we were able to keep the impact to only an 80 basis point degradation of shop profit quarter over quarter.
Steve will cover this in more detail in his section later in the call.
We completed the staffing of our executive leadership team with the appointment of David Daniels as our Chief marketing Officer in mid August.
David brings over 20 years of direct restaurant and CPG experience, leading some of the world's best selling brands.
Bill and his first few months, David is already making an impact on advancing the potbelly brand vision digital marketing and customer loyalty strategy that will drive further brand awareness and traffic growth.
Franchise, and field marketing as well as consumer insights and innovation.
Turning to slide four as I mentioned in early August we rolled out our new and improved menu to all of our shops nationwide.
You can see the new menu layout here. Some of the key features include. The addition of skinny size sandwiches across the menu larger original in big sizes with more meat and more cheese expanded pick your pair options and some new sandwich offerings, including the all new Chicken club Steakhouse beef and Abo, Turkey with our hands.
<unk> fresh avocado.
We're pleased to report that the launch is performing in line with tested results and delivering a very healthy blend of traffic and check growth.
The social media response to the new menu has been extremely favorable as you can see here.
On slide five is a recap of the new Tech stack that we launched in July, including New mobile App website digital ordering integration and perks loyalty program integration.
We touched on the tech stack a bit in our last quarterly call and can confirm that the benefits have made a positive impact on our results and importantly, consumer reaction continues to be very positive.
The new design is better aligned to our branding more authentic as well as more user friendly for our loyal customers.
On slide six I'd like to highlight the success of our continued investment in digital media and marketing Q.
Q3 advertising spend was 0.9% of revenue.
An increase of 0.6% over the same quarter a year ago we.
We've leveraged our placements to highlight the very best aspects of Potbellies experience, namely our high quality menu offerings, and our goodbyes customer experiences.
We were also able to market our customer facing initiatives such as the new menu and tech stack are testing control methodology confirms that we're driving awareness traffic and sales that deliver favorable returns.
Confident that the power of the Potbelly brand coupled with the outstanding customer experiences delivered by our associates makes the continued investment in marketing and impactful part of our growth strategy going forward.
I'll now turn the call over to Steve can provide more details on the financials and sales trends Steve.
Thanks, Bob and good morning, everyone. Please turn to slide seven of the presentation, where we will discuss the progression of our <unk> and same store sales for the third quarter 2021, and the month of October.
Reviewing trends in <unk> over the last few quarters, we are seeing ongoing acceleration as we progress through 2021, and notably we achieved weekly <unk> of over $20000 for both the third quarter and the month of October. In addition, this was our highest quarterly <unk> since 2016.
Company operated same store sales continued to show significant improvement over 2020 levels.
Given the current year quarter over quarter, a UV expansion. We are pleased with our same store sales increase of 33, 7% for the quarter and 27% for the month of October.
Further demonstrating our businesses year over year recovery.
Breaking down Q3 same store sales our average check grew by 10, 2% while traffic grew by 21, 3% compared to the third quarter of 2020.
Turning to slide eight I'll walk you through key areas of our income statement and specific financial performance for Q3 with a slightly different presentation as compared to the past two quarters.
To highlight a recovery momentum I'll review our performance this quarter against the sequential quarter of Q2, 2021, as well as some year over year results during.
During the third quarter total revenues of $101 $7 million increased 40% compared to the prior year period.
Given by strong recovery versus the Covid impacted Q3 2020.
As well as solid performance of our strategic initiatives Bob shared earlier.
It's worth noting that labor shortages and some COVID-19 related temporary shop closures put some pressure on sales.
We delivered our second consecutive quarter of positive EBITDA and adjusted EBITDA in the third quarter.
EBITDA was relatively flat at <unk> $9 million and was up sharply compared to a significant EBITDA loss in the third quarter of 2020.
Adjusted EBITDA was $2 $7 million for the third quarter, an improvement on the $1 9 million for the second quarter, driven primarily by increased sales and lower G&A expenses.
We are pleased to report this is our fifth consecutive quarter of adjusted EBITDA growth even in the face of the macroeconomic challenges, we like our industry faced in the quarter.
Our general and administrative expenses were $7 $6 million in the third quarter of 2021, or seven 5% of total revenue compared to $9 $2 million or nine 5% of total revenue in the second quarter of 2021, and $9 6 million or 13, 2% in the year ago period.
Primary drivers of the decrease include our continued spending discipline and an accrual adjustment for annual incentive bonus.
Year over year G&A as a percent of sales decreased substantially due to our restructuring efforts late last year and our ongoing expense discipline.
As Bob mentioned, our Q3 shop level margin, a non-GAAP measure step back only 80 basis points from Q2 to nine 8% inclusive of cost and wage pressures.
Break down the key components of shop margins, starting with cost of goods sold.
Cost of goods sold Cogs expenses were $28 $2 million or 27, 9% of shop sales compared to $26 $3 million or 27, 2% of shop sales in the second quarter of 2021.
And $27 million or 28, 7% in the third quarter of 2020.
The increase in Cogs on an absolute and percentage basis quarter over quarter was due to higher costs associated with increased volume and higher discounting associated with the launch of our new webinar as well as overall cogs inflation or.
Our successful maintenance of Cogs margins and year over year improvement occurred in the face of substantial supply chain and cost of materials headwinds.
Our ongoing strategic cost initiative has yielded $2 $8 million in savings in 2020 through a combination of SKU reductions in shop process improvements and pricing partnership with our vendors.
Labor expenses were $33 $1 million or 32, 8% of shop sales compared to $32.0 million or 33.0% of shop sales in the second quarter.
The increase on an absolute dollar basis was primarily driven by current labor market headwinds.
Bellies, taking aggressive measures to recruit new workers, including referral bonus programs pay band modifications and investing in our applicant tracking system.
We believe that we're trending better than the industry, but the environment, obviously remains fluid.
As we continue to combat this challenging market dynamics, we will remain extremely proactive in our recruiting and staff retention efforts.
Other operating expenses were $16 $3 million or 16, 2% of shop sales compared to $14 $7 million or 15, 2% of shop sales in the second quarter.
The increase was due to costs associated with the launch of our new web and App as well as shop repairs and maintenance associated with our new menu launch.
Turning to our balance sheet.
We ended the quarter with total liquidity of $28 $3 million, including $9 $8 million of cash on hand, and $18 $5 million available on our credit facility.
Net cash decreased roughly $7.0 million on a sequential basis, primarily due to timing of payroll and capital expenditures. We also paid approximately 2.0 a million dollars of $11 $3 million of 2020 deferred cash payments in the quarter, bringing.
Bringing the cumulative amount paid to approximately $8.0 million.
Most of the remaining $3 3 million dollar balances related to repayment of payroll taxes deferred under the cares act, which will be paid in Q4.
The combination of inflationary headwinds the deferred payments mentioned earlier and investments in our five pillar growth strategy have us on track to be a cash flow generator during 2022.
Additionally, as I'm sure you saw on yesterday's filing we announced a $40 million ATM program.
This move further strengthens our financial flexibility under the $70 million shelf filed earlier this year.
We have no immediate plans to sell shares back into the market. However, the ATM is a prudent step and good corporate hygiene at this time as it provides additional financing flexibility that we lapped during the most challenging months of the pandemic.
Turning to slide nine clearly, we've seen dramatic improvement across all our shop types as compared to 2020.
As we all painfully recall Q2 2020 was the peak of the pandemic with Lockdown orders in place. So it's no surprise that Q2, 2021 rebounded so dramatically.
We continued to experience strong same store sales in Q3 across all shop types recognizing of course that same store sales percent will likely moderate even as au vs increase because of the significantly depressed sales early in the pandemic.
An important note on our CBD and airport shops, we are pleased with the sequential improvement in their shop types, while recognizing the benefit of their full recovery is yet to come.
October same store sales are strong and consistent with the trend we saw at the end of September.
Slide 10 shows how our revenue by channel mix has evolved over the course of 2021.
In the third quarter, we saw a meaningful increase in shop sales, reaching nearly 60% of sales due to pent up demand from consumers returning to dining rooms. This is despite the delta brand impact, which was sharply during the second half of the quarter.
Also worth noting is the durability of our digital business as we retained 82% of our digital business is a mix of sales from the Q1 peak, while also growing digital sales, 6% in dollar terms since the beginning of the year.
We are particularly excited about our digital retention.
Even as our customers return to in shop dining in greater numbers.
As we have previously discussed over the long term, we anticipate a blend of digital and in shop service modes as the overall environment progresses towards normalization.
I will now turn the call back over to Bob.
Thanks, Steve moving to slide 11, I'd like to first provide a quick recap of our achievements in the first three quarters of 2021, followed by the priorities for the final quarter of the year.
We've achieved three consecutive quarters of shop level profitability, and our suburban drive thru and urban shop same store sales are all above 2019 levels with our CBD in airport locations, making consistent sequential progress we've completed the rebuilding of our senior management team with the additions of Scott Swain Larry strain.
David Daniels we.
We successfully implemented the new tech stack as we discussed earlier as well as the nationwide launch of the new menu and the successful expansion of our digital media and marketing efforts.
While we are extremely proud of our accomplishments for the year, we still have plenty of work left to do.
We have a number of priorities that we are squarely focused on for the fourth quarter and as we look into next year as Steve already mentioned and as everyone is aware labor continues to be a challenge for the restaurant industry and the broader economy.
From an availability standpoint, as well as on the cost side.
To ensure we stay ahead of the curve we have several programs in place to both motivate our associates as well as attract new employees to potbelly.
We're leveraging performance based bonuses to recognize our employees for their hard work and drive retention.
We're also introducing referral bonuses to encourage employees to participate in the hiring process in a small yet meaningful way.
Our second priority is to continue to drive <unk> growth.
We will keep making selective investments in digital marketing aimed at attracting new perks loyalty members increased traffic as well as user frequency through targeted campaigns.
And we'll continue to fine tune the tech stack with enhancements that support convenience conversion and higher checks.
On the inflationary side, we're taking several mitigating actions to help offset margin pressure.
This includes strategic price increases and adjusting our contracting approach with our vendor partners to manage food cost inflation.
On the labor side, we continue to leverage our previously announced hours base Labor guide to manage staffing to peak business needs, while controlling labor throughout the day.
Including overtime, along with wage systems to ensure proper controls.
Finally, we will build on our five pillar strategy and we are in the process of finalizing our three year value driving objectives.
On Slide 12, we show a quick snapshot of the status of our various five pillar initiatives much of which I've already covered.
That said the slide provides a powerful visual for what has been completed and what remains to be done I.
I couldnt be prouder of our franchisees and associates, both in the field and at the support center or how they have embraced and successfully implemented so many important initiatives.
On slide 13, we are providing a glimpse into our three year strategic growth plan that will become the foundation of Potbellies value creation model.
We're building on the solid foundation of our five pillar strategy and our unique brand position 2021, unifying objective has been traffic driven profitability and we're proud of the performance we've shared regarding that objective.
We will always view these goals is foundational to success in the restaurant business.
I'm excited that we're extending our vision now to include objectives that will once again drive value for our stakeholders. The plan is still being finalized, but what I can tell you is that the value driving objectives are one accelerating <unk> meaningfully above historical levels to expanding margins back to preview.
Hi ranges and three escalating new unit development as we transition to a more franchise system.
We understand that you were all anxious to hear the detailed objectives and we're also excited to share more information. Once the plan is complete we intend to provide further updates on our goals in early 2022.
With that I will now turn the call back over to the operator, so we can address your questions operator.
Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your hand.
Set before pressing the star keys, one moment, please while we poll for questions.
Yeah.
Our first question comes from the line of Matt Curtis with William Blair. Please proceed with your question.
Hi, good morning, and thanks for taking the question.
So I guess my first one is on the commodity and wage environment, which is obviously top of mind right now.
Could you tell us how much.
Worse, we'll things likely be in the fourth quarter versus the third quarter both in terms of.
The Cogs line as well as labor.
Yes.
Yes, Matt first of all thanks. Thanks for the question I'll, let Steve expand on that a little bit, but we you know we really see some of the fourth quarter trends as a continuation of what we've seen so far this year and especially in third quarter.
We're looking around the corner to next year as we see some of the contracting opportunities that we talked about.
Paired remarks is where there may be.
There may be an opportunity to manage this a little more closely.
The rate of that inflation is hard to predict honestly, it's been hard to predict up to this point.
Wages do seem like they're settling a little bit but there is no question that the competition for great talent is going to continue to drive that market and we.
We definitely believe that our our people are our biggest asset so staffing appropriately is theres going to be critical and that means we have to manage to the market.
We mentioned.
Some strategic pricing.
We're not eager to take price even as much as we hear from so many other brands that have.
We still believe that that.
The convenience and affordability.
We're always going to be king in the restaurant space. So we are looking at that strategic pricing even in this quarter.
Offset some of those cost inflation elements, but we're doing it very very carefully and kind of planning that out over the next year as well.
Yeah, Thanks, Matt Yeah Bobs right.
Tough to predict but we're.
So we've seen inflation increased quarter over quarter throughout 2021 and with it.
The acceleration in Q3.
Yes.
Most if not all of our peers.
And so it's an effort across the board.
Certainly on the operation side and we are.
We're looking at pricing as a strategic path to making sure that we can keep our margins strong.
But it's also.
And a weapon in our Arsenal should we need to pull it at different times not just in the quarter, but then looking into 2022.
Okay. Thanks for that.
And then I guess I have a few questions on the new menu obviously.
For the customer they're getting more for what they pay than they did before the proportions. There. We've we've found the the blending of those margins and other places on the menu the skinny help that.
Pick your pair certainly helps with that and so we we think we've got a great combination of solution and as as we said in our prepared remarks, it's performing in line with how it was tested.
The the larger portion of it is I would say, it's it's a little more tilted towards average check growth, but I I think it's very very important for.
For all of us to keep in mind that there's a big difference between check growth when you're delivering more for what the customer gets then just straight up price increases which had been so common across the huh across the industry.
Okay understood that just to follow up on that I mean, given that the pricing architecture on the new menu is very different from the old one uhm could you tell us anything about what the margin profile with a new menu it looks like relative to the old one.
Just for the sake of simplicity it might be easier to to think about it in terms of gross margin.
Yeah, the the the power of the hydraulics. It that I just mentioned is that while we may have we may have given up a little bit of margin on a few items by by trying to drive more value into that for the customer.
We found that that food cost margin elsewhere in the menu.
With how we we price some of the other elements to pick your pair of the soups the salads and the simplification of the menu that that pulled so many of those skews off. So you know our shakes are much more simplified them, where they were before there were a lot of savings that were extracted from things that really work <unk>.
Complexity drivers, but not really valued drivers and certainly not topline drivers. So that's that's some of the hydraulics on the food costs now if you expand that to the rest of the margins the beauty of the the check Lyft portion of this.
Is that we see we see the hydraulic to work in the other direction for us on labor.
So you know you <unk>.
When you take into account our hours based Labour guide that we've talked about before.
We now have that in place and we have the mechanics that allow us to address any check increase like we did with the menu or price increases that we may take in the future.
And extract that efficiency out of the labour good and so when when you put it all together, let's just say, we're we're seeing the benefit of the top line and the benefit of the the margin that goes with all of these things working together.
We think it's a part of how we were able to hold the line with the with the margin pressure that we had during the quarter of only 80 basis points.
Okay got it and then it's been impressive to see your recovery across the various location types that you have but on the central business district, which seems to and continuing to leg I'm just curious what percent of your sales next.
Right now is central business district locations, and and could you tell us what the the gap looks like in terms of comps or traffic and those locations right now versus 2019.
Sure I can yeah. We've been taught go ahead state yeah.
Sure Yeah, certainly certainly the C. B D shops are are lagging in their recovery versus the other shop types that we've got we've we have seen however, particularly in Q3 C. B DS are are among the highest for covering shops, you know through the quarter in terms of there in terms of their.
<unk> versus 2019.
They are they are down you know a double digit from from prior.
And again that that gap continues to shrink perhaps not as quickly as we would we would like I think what's important to notice even though the shops are.
Are not performing to their 20th 19 levels you know our overall volume as Bob talked about earlier is beyond 29th 2019 level. So you know we we look forward to the day that that's C. B DS are are fully recovered because it's it's you know additional additional momentum for our business <unk>.
Fire to the prior to the pandemic, you know C B DS, which make up only 18, 19% of our shop count made up about 20.
A little north of 20% of our of our revenue base. That's that's certainly a little bit lower now, but again, we're we're we're continuing to recover it and looking forward to.
To the continued momentum and that and that and that real estate time.
Okay I'm at the only thing I would add is the only thing I would add to that is it we are seeing that pace as Steve mentioned start to start to come back and I think it's important that we we certainly see this and we want to continue to remind our investor community. The same thing.
Because the business is so different than it was prepandemic. There's this this entire layer of digital business and the massive attrition of restaurants in the central business districts, we don't need full recovery of.
The traffic and the C V D as in order to get full recovery of our revenue.
And we're starting to see the signs of that in in many of the individual shops in that portfolio, but the portfolio as a whole is really starting to move.
There's no question that we we we I think we saw that proven as well as you know when the Delta variant was was causing some of that returned to office to retreat.
But even still we've held the line with that game and expect it to start coming back as people start moving back in.
Okay I got it and then I guess the longer term or a bigger picture question you you've talked about the long term plans to significantly significantly grow a V.
Just curious <unk> does that involve.
Sort of the day part mix moving away from the focus on lunch or does or is it really more on leaning further into multichannel or improved site selection I was just wondering if she could flushed out for us a little bit.
Sure. We see we you know we we're starting with the base that we have now as we mentioned the volumes over $20000 a week and that includes what we.
We use the word drag or lag with C V D's, but I'd also say that's a massive potential for continued topline average unit volume growth.
We we are focused on the things that you're hearing us talk about all ready the the digital layer of our business, we see as a large potential upside for us going forward.
Now with the new Tech stack, we have in place, where we're just getting started with our ability to really late into our perks program to develop the nurture flows. It allows us to connect with those customers on a much more frequent basis, we celebrated yesterday national Sandwich day yesterday with a digital only offer.
That will will certainly talk about next quarter, but let's just say we were very very pleased with our ability to drive the business through those digital channels and proved it to ourselves again yesterday with National Sandwich day.
So perks as a big piece digital is a big piece, 0.9% of our revenue invested in this digital marketing we've been unbelievably disciplined about ensuring there are returns for those investments and we have that test and control methodology locked in place. We're gonna continue to to use that but you know it it it's not hard to.
See how we we compare so unfavourably to the industry in terms of our spend on marketing.
And that's in investment that can deliver a lot of additional topline for us.
You add to that the the overall operations focus that we have and we we continue to see our customers happy with how we're delivering the the pot belly promised the menu that's been layered in there and of course, bringing back of some food innovation and exciting you know exciting.
Additions to that menu that that maintain the simplicity of the menu. It's it's really a lot about the fundamentals. Your your point directly about Dayparts lunch and dinner is where we win.
And it's you know it's difficult to see breakfast being in a future anytime in the near future. It can be a big distraction. It can be terribly unprofitable. If you don't have the right volumes and so we're gonna stay focused where we are.
And the last element I would add is that we think catering coming back to.
Two levels beyond what it was before again leaning on that digital technology. We have is a way that we can unlock a lot of additional sales as well.
Okay understood I guess just to follow up on digital I I I heard from your prepared remarks that you've retained 82% of digital sales from pick in dollars I believe could you give us an update on weird your digital <unk>.
<unk> right now and how this tragic recently and then I guess related play.
How where perks membership stands right now.
Sure I can take the first part Matt on the bottom talk about perks that yeah.
Yeah, no our our our digital mix continues to be durable in that we believe we're seeing kind of a more permanent.
Shift in the way that consumers like to engage with with our Brandon and I think restaurant Brandon in general as it relates to the the convenience options that exist through you know delivery or or mobile pick up and we're we're sitting at.
35% of our sales coming from digital and that's now that's just off of 37% from Q2 and 41% in Q1, so it hasn't really move that much and even in even in that even in that timeframe summer where most folks are.
Out and about and you see dining typically strength and seasonally and we did see some of that but we also sought.
Persistence in that in that digital business, and and I think our new tech stack and the user experience that has been upgraded through that work makes us even more compelling for the consumer to continue to use digital channels to reach us.
Okay, and then on the perks membership any I'd say.
Yeah man numbers yeah.
Yeah actually we were with David's leadership in marketing we are re tuning the K P is that we see as as the primary lead indicators of just how successful that loyalty program can.
Can be what I can tell Ya currently is that we made it through that the transition from the old provider in the old loyalty engine that we had into the new injure that's part of the new Tech stack.
There was no way to avoid it but when you make a transition that large with the the sort of the underlying software. We did require that all of our loyalty members all of our perks members had to go back into your account and reset their password now.
Now that might not seem like a big deal, but we we have had a high level of engagement with them to make sure that we're following up every other week and we've we've now got our perks participation at a higher level than it was even before that transition as I mentioned, we put in more than one of those nerve.
Sure flows that allows us to communicate individually and uniquely with those perks members and we've also just recently upgraded the the acquisition offer from what was a shake to a free sandwich. Whenever you you come on board that just happened in the last few weeks so.
The the the number of perks members is continuing to grow and the active number of perch members is beyond what it was before we went through that tech stack transition. We're gonna get we're gonna get those K P. I that I mentioned really clear and make sure that we're comfortable with the the internal numbers that we would want to share.
And and make sure that we can still maintain that competitive mm mm dynamic Ah for the brand without sharing too much and and we'll be talking about that in the future.
Okay understood and then finally, I guess I'll <unk> I'll open up it I mean, I know development is on pause right now obviously, but you know longer term in terms of attracting your franchisees to the system could you give us a progress update on where you stand in that process right now.
Yeah, absolutely, we we've been doing a lot of work behind the scenes as is necessary for development. It's all about pipeline and so we have we've done the work to to.
I understand the potential for the market growth in the United States Cross all 210 Dma's.
Uhm, we have targeted the markets that will will first receive our our efforts in terms of sales.
<unk> looked at how we subdivide those markets into.
Packages that that are most appropriate for franchisees to to be able to build out their entire development agreement within a 10 year period or less we you know we won't be signing up franchisees to.
<unk> unit accounts that they they simply can't get done in less than a decade.
In terms of the relationship and the actual sales side, we have staffed with and begun the staffing of our sales team and we have some of them on staff in those.
Those efforts are underway, we were making no news today of course with any franchisee that we're working with are certainly wouldn't name them, but those processes are are being built as well, which is so important to this function. So a lot of the the work has been done there one other one other relationship that we're happy to have.
Put in place in the last quarter as with an architectural engineering firm that will support us directly including construction support management as we begin building again, so all of those component parts of a healthy development organization in the pipeline management that that goes into it or.
Are coming together and that's why we're confident sharing that is one of the key value drivers for 2022 and beyond will be bringing back some of the the court targets early next year.
Okay understood well, thanks very much for answering my lengthy list of questions. This morning.
And congratulations again on the new menu.
Excellent Thanks, Matt.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now one moment, please while we pull for more questions.
Ladies and gentlemen at this time there no other questions in queue I'll now turn the call back over to Mister Bob right for closing remarks.
Thank you all again for your time today, we hopefully as you've heard this morning, we've made solid progress in the first three quarters of 2021, and we'll continue our focus on the objectives that we outline for you today to stay on track and deliver value for all of our stakeholders in the future. We continue to believe in our ability.
To achieve significant growth in the coming years.
So today. Thank you for your interest and your support and Potbelly I Hope you all have a great day.
This concludes today's conference you may disconnect in lines at this time. Thank you all for your participation.
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