Good morning everyone, and welcome to Potbelly Corporation's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Ms. Adiya Dixon, Potbelly's Chief Legal Officer. Please go ahead..

Good morning, everyone, and welcome to our second quarter 2021 earnings call. Our presenters today are Bob Wright, our President and Chief Executive Officer; and Steve Cirulis, 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, we'll open the call for your questions.

I'd like to call your attention to our cautionary statements on Slide 2, and 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.

The 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 and other information that will be given 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 in the investor presentation and press release issued this morning, both of which are available in the Investors tab of our website. I'll now turn the call over to Bob..

Thank you, Adiya. 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. First and foremost, I want to thank our dedicated associates for their ongoing hard work, team spirit and flexibility throughout this ever-changing environment.

Our teams have continued to provide our customers with a great safe experience as we further execute our growth plan. So far, 2021 has exceeded our expectations on a number of levels, and we expect this positive momentum to continue as we go through the second half of the year.

Beginning on Slide 3, I will walk you through the second quarter 2021 key highlights. Starting with the top line. Revenues totaled $97.5 million, an increase of 24.9% compared to the first quarter 2021. With same-store sales increasing by 70% as compared to the pandemic impacted Q2 2020.

Same-store sales on a 2-year comparison basis gained momentum through the quarter as well, ending negative only 0.7%, with June same-store sales turning positive versus 2019. All of our shop types gained sales growth momentum through the quarter.

Suburban and Drive-thru locations continue to exhibit significant and increasing strength, while CBD and airport locations have not yet fully recovered. As I said though, these currently lagging shop types are trending in the right direction and offer an opportunity for further overall growth moving forward.

We experienced improved volume across all sales channels, with a notable positive shift in our on-premise or Dine-In business during the quarter, with sales up 5% sequentially due to lifting of dine-in restrictions and pent-up demand.

Our Digital business remained very strong again this quarter, even as the other on-premise channels continued to recover. The acceleration in sales momentum during the quarter was driven by the ongoing recovery in the operating environment, combined with the impact from our strategic initiatives.

We are very excited to report that a critical operational metric, Average Unit Volume or AUV is also rebounding nicely, up 23.8% compared to the first quarter 2021. Our top line strength led us to significant positive momentum in shop profitability for the second consecutive quarter. Importantly, we also achieved positive EBITDA and adjusted EBITDA.

These enterprise profit achievements are well ahead of previous expectations, where we hadn't expected profitability until the second half of 2021. Our balance sheet continues to strengthen as well. We expanded our net cash position by $2 million.

This strengthening of our balance sheet supports our remaining deferred cash expenses and also allows us to continue to invest in the business. We added another key leadership position with the appointment of Larry Strain as our Chief Development Officer in May.

Larry brings over 25 years of experience in real estate and franchise development to Potbelly, which is critical as we pivot to our next phase of growth. We're very excited that Larry is now a part of the team. We have only one outstanding leadership role to fill, the Chief Marketing Officer.

I expect to have some good news to share on that front in the near future. I want to be clear that we aren't simply riding the wave of recovery in our business, though. Rather, we are taking very calculated and proactive actions to accelerate our near and long-term growth through our Traffic-Driven Profitability strategy.

We made significant progress on these initiatives throughout the first half of the year, but I'd like to highlight 2 of the more substantial ones that we completed over the last few months. First, we've completed the testing phase of the new Simplified Menu with very successful results.

We're happy to report that we will be rolling out the new menu to the rest of our company-owned and franchise locations in the coming weeks. Second, turning to Slide 4, subsequent to the end of Q2, we launched our refresh Tech Stack, which includes a new mobile app, website, digital ordering integration and Perks loyalty program integration.

The pictures on the slide provide a visual of the new website, app and Perks program. And importantly, the platform's new design is better aligned to our branding, more authentic, as well as more user-friendly for our loyal customers. We'll get into a little more detail on the Tech Stack later in the presentation when we discuss our strategic pillars.

Now I'll turn the call over to Steve to provide more details on the financials and the sales trends.

Steve?.

Thanks, Bob, and good morning, everyone. Please turn to Slide 5 of the presentation, where you can see the progression of our AUV and same-store sales for the second quarter 2021 and the month of July.

Looking at the trends in AUV over the last few quarters, we see that it has rebounded nicely in 2021 and during the second quarter, as well into July, surpassing the 2019 average.

As Bob already mentioned, company-operated same-store sales increased by 70% for the quarter, which was a dramatic improvement compared to the first quarter 2021 decline of 3.1%.

It is important to note that the strong rebound early in the quarter significantly impacted the overall Q2 average due to a boost in sales when COVID restrictions were lifted, which drastically increased Dine-In and total Average Unit Volume.

July same-store sales continued to trend positively at positive 34.4%, and although, we expect positive comps as we go through the balance of 2021, they won't likely be at the high levels we experienced in the early months of the second quarter.

Breaking down same-store sales, our average check grew by 6.0%, while traffic grew by 60.3%, which was a 65.4 percentage point improvement over the first quarter of 2021. Turning to Slide 6, I'll walk you through our income statement and specific financial performance for quarter 2.

Like we have done in the past 2 quarters, we're going to highlight our performance this quarter against the sequential quarter or Q1 of 2021, as that provides a more consistent view of our recovery momentum. During the second quarter, total revenues increased 24.9% sequentially to $97.5 million due to improvement in volumes in same-store traffic.

Our General and Administrative expenses were $9.2 million in the second quarter 2021 or 9.5% of total revenue, compared to $7.4 million or 9.5% of total revenue in the first quarter of 2021. The increase in G&A in absolute terms was primarily due to higher bonus accrual, stock compensation accrual, and marketing expenses.

G&A as a percentage of revenue was stable due to volume leverage.

EBITDA improved significantly to positive $1.0 million from an EBITDA loss of negative $10.0 million in the first quarter, and adjusted EBITDA was $1.9 million for the second quarter, a substantial improvement compared to the negative $6.6 million for the first quarter, driven primarily by increased sales and shop level cost controls.

Cost of Goods Sold Expenses were $26.3 million or 27.2% of shop sales compared to $21.5 million or 27.7% of shop sales in the first quarter of 2021. The increase in COGS on an absolute basis was due to higher sales.

The decrease in COGS as a percentage of shop sales was primarily the result of cost efficiencies, vendor rebates and mark-up on third-party delivery. Labor expenses were $32.0 million or 33.0% of shop sales compared to $28.6 million or 36.9% of shop sales in the first quarter.

This increased dollar cost was primarily driven by higher costs associated with increased volume and higher staffing levels. The decrease in labor as a percentage of sales is the result of efficiencies created by our improved labor scheduling and allocation model.

Occupancy expenses were $13.6 million in the second quarter or 14.0% of shop sales compared to $13.6 million or 17.5% of shop sales in the first quarter. The decrease in occupancy expenses as a percentage of revenue was primarily attributable to increased sales leverage.

It is also worth noting that occupancy expenses are down $1 million compared to Q2 of 2020, reflecting the real estate optimization work we did last year. Other expenses were $14.7 million or 15.2% of shop sales compared to $13.3 million or 17.2% of shop sales in the first quarter.

The increase in other expenses on an absolute basis was driven by fees associated with the continued strength in third-party delivery sales. The decrease as a percentage of shop sales was due primarily to sales leverage. Turning to our balance sheet.

We ended the quarter with $11.8 million of cash on hand and $23.5 million available on our credit facilities. Net cash increased roughly $2 million on a sequential basis due to positive cash flow.

Our strengthening balance sheet, sales leverage, and continued margin expansion affords us the flexibility to not only continue to work through our onetime deferred payments, but also to fund our ongoing operations and strategic growth initiatives. Turning to Slide 7.

We show same-store net sales by shop type and are pleased to report that we are seeing continued recovery across all shop types. Our Drive-thru, Suburban, Urban and University locations are leading the recovery and are trending above 2019's pre-pandemic levels. I'll remind you that our suburban shops make up about 60% of our company units.

Again, CBD and airport locations are lagging, but are making notable improvement on a sequential basis. Slide 8 shows how our revenue by channel mix has evolved so far over the course of 2021.

In the second quarter, we saw a meaningful pickup in In-Shop sales concurrent with lifting of dining restrictions in our core markets and pent-up demand from consumers returning to dining rooms. Also worth noting is the rebound in our catering business. Counted as a digital channel here, catering sales nearly doubled in the quarter.

As we have previously discussed, over the long-term, we believe we will see a blend of Digital and In-Shop service modes as the overall environment normalizes. Potbelly's digital investments and flexible shop design that includes 2 production lines, enables us to successfully service both of these sales channels.

I will now turn the call back over to Bob..

Thanks, Steve. Moving to Slide 9. At the start of the year, we said 2021 would be a story of 2 distinct tabs. So far, in the first half, our expectations have been exceeded on numerous fronts. We've achieved sequential revenue growth for 4 consecutive quarters with momentum building for the balance of 2021.

We had shop-level profitability for the past 2 quarters ahead of our initial forecast. We also achieved positive EBITDA and adjusted EBITDA much earlier than we originally projected. This was driven primarily by strong top-line growth and expanding margins in our Suburban and Drive-thru shops.

Finally, we made tangible progress in advancing our Traffic-Driven Profitability strategy, particularly the new menu with nationwide rollout expected in coming weeks, and the new Tech Stack, which launched last month.

The priorities for the second half of this year are outlined on the right side of the slide, starting with strengthening our unit level economics across our portfolio mix.

We're in the final stages of fine-tuning our unit growth strategy, and I can't emphasize enough how important this is and will be to drive Potbelly's sustainable growth in the future.

We aim to accelerate shop-level profitability throughout the second half of the year and anticipate continued strength in comparable sales growth for the next 2 quarters.

While we're pleased to have exceeded our expectations in the first half, we still expect the majority of our adjusted EBITDA to be generated in the second half, and we expect enterprise-level profitability as well.

Importantly, we expect continued positive cash flow from operations through the second half of the year, which supports paying the $5.3 million in remaining cash expenses in the second half of 2021, as well as continued investments in the business.

Finally, the 3 to 5 new franchise shops we set out to open in 2021 are on track with new locations already opened in Tampa, Florida and Cary, North Carolina. On Slide 10, as always, we'll briefly remind you of our brand position, The Sandwich Shop with the craveable quality and good vibes of a first-class dive.

We're continually energized by our brand position and believe it resonates with both our loyal and prospective customers and positions Potbelly well for growth. On Slide 11, we'll briefly discuss our strategic focus, which has its foundation in our brand position.

Our strategy quite simply is to bring to life the very best attributes of the Potbelly brand represented by our 5 pillars with a unifying objective of Traffic-Driven Profitability. Implementation is well underway from most of the initiatives with acceleration across the course of the year.

There are 5 core pillars to our strategy and on Slide 12, we'll review the progress we've made on several of the initiatives to drive traffic, reward loyal customers, and prepare for future growth. Starting with the menu.

The ultimate objective of the new Simplified Menu is to improve traffic and enhance the customer experience where it matters the most, our food, all the while driving customers' perceptions of value and simplifying our operations.

All of these objectives were validated in the testing phases, in addition to increasing sales driven by both check and transaction growth. As I mentioned at the start of the call, we'll be rolling out the new menu to the rest of our company-owned and franchise shops in the coming weeks.

As a reminder, menu simplification includes consolidating the menu boards and a wider price ladder, as well as other product enhancements like making every sandwich on the menu available in our skinny variety and half sized salads outside of our popular Pick-Your-Pair offering.

We also have large-sized options with more meat, cheese and toppings, and we're very excited about some of the new variety on our menu, including our new Avo Turkey sandwich and our new Steakhouse Beef sandwich, among others. As I noted earlier in the call, we launched our Tech Stack in early July.

The Tech Stack upgrade has been focused on elevating our brand position and digital experience, bringing the good vibes of visiting our shops to the digital space, improving the customer experience, and deepening our one-to-one relationship with our customers.

The app and web interface allows for easier reordering and provides us with better leverage from our Perks Loyalty Program with greater control over our data and more flexibility for future enhancements.

So far, we've received great reviews from our customers about the new experience and believe that it further leverages our upgraded Perks Loyalty Program. We also saw a positive impact from differential pricing with third-party delivery, which was initially implemented last quarter.

On the marketing side, we've continued to execute on scaled media campaigns. Our new digital brand creative direction celebrates our food and drives awareness and drives traffic. Importantly, we continue to be very pleased by the customer response to our advertising and sales list we're seeing from our new media investments.

Additionally, we continue to make progress with our Perks Loyalty Program during the quarter by adding 142,000 members, an increase of 4% year-over-year, and Perk sales increased by 35% year-over-year.

Some of the loyalty promotions we ran included promotions around Mother's Day and Father's Day, as well as one from National Chocolate Chip Cookie Day and a customer favorite at Potbelly, Double Points Thursday.

As we've already noted, the upgraded Perks program was part of the Tech Stack launch in July, and we're eager to leverage the new technology to really customize one-to-one relationship building and segmented campaigns well beyond our previous capability.

Lastly, franchise-focused development, which is the pillar that we know you all are anxiously awaiting to hear more about. In May, we appointed Larry Strain as our Chief Development Officer.

We continue to have a healthy pipeline of inquiries for potential franchisees given the brand recognition of Potbelly, the fact that we are significantly under penetrated across much of the United States, and the various industry connections, given our leadership team's combined depth of restaurant experience.

We still expect to open a total of 3 to 5 new franchise shops in 2021, and we'll be communicating our franchise plans in more detail for 2022 and beyond in the near future.

I can assure you, the team continues to place a premium on execution of our Traffic-Driven Profitability strategic plan, and we look forward to providing you with regular updates in the future. With that, I will now turn the call back over to the operator, so we can address your questions.

Operator?.

[Operator Instructions] And our first question comes from Joshua Long with Piper Sandler..

I wanted to see if we might be able to dig into some of the human capital initiatives and better supporting your Simplified Menu, the Tech Stack, some of the marketing initiatives as well and in prior quarters, you've talked extensively about just the importance of your human capital, people-led strategy that's really executing at the store level.

And so hopefully, you might be able to provide an update there..

Yes, Joshua, thank you for the question and certainly we have a lot going on. We wanted to focus on some of the bigger news items from our strategy and how that's developed. But I can assure you that the initiatives that support our people creating good vibes, pillar of our strategy, have seen a lot of activity as well.

The labor crisis that you hear about across the country is certainly affecting us in some ways, although we continue to have a great deal of success in staffing our locations. In fact, last month, we hired more associates than we've been able to hire in several months. And that's terrific news given our sales patterns.

We've continued to invest in the training materials. We completely redeveloped the training materials in support of the new menu. The implementation support that we provide for initiatives like the Tech Stack, as well as the new menu have really caused us to step up our game and how we're communicating and training our people in our shops.

And I think we've shared in the past that we implemented that new bonus program, aligning our managers' and our shift leaders' personal financial outcomes with the outcomes of the business. And we're very excited that we're two quarters into that with a very high degree of engagement with our managers.

They're loving the notion that they're working off of a scorecard. They understand what a win looks like, and it's aligned to the business goals. And we've paid out some of the most handsome bonuses in the field that the company has been able to pay in a long time. So tremendous amount of engagement there. There's always work to do with people.

We mentioned last quarter, bringing Scott Swayne onboard as our Chief People Officer. And I think that especially as we turn towards more franchising, you'll see us continue to focus on the infrastructure type items that can create scalability of many of those systems.

We have those in place, but we want to make sure that they're as ready to go for our franchise growth as many of our other items are, too. And Scott's leading our way on that as we finish out the rest of our strategic planning for next year..

That's very exciting for that update. And thinking about the appointment of Larry Strain on the Chief Development side on the franchising business, exciting to see the executive team continue to be built out. I realize that you said you had one more spot to fill but just curious on how you think about bringing Larry onto the team.

And then what the next steps are, obviously, the numbers are speaking for themselves in terms of driving sales, improving profitability, and I'm sure that attracts a lot of new potential franchisees to the system.

But just curious if you could talk through kind of what that process is like and how you think bringing Larry on really helps to accelerate your long-term goals of franchising?.

Well, I can tell you, we were excited about bringing Larry on and he's been with us only for a few weeks, and we're more excited than ever. He's very talented, franchising and real estate development expert, 25 years in the business. He's got experience in 2 rapid growing brands, as well as other fast food brands.

And we're going to share a framework with you probably as we get things settled, maybe in the fourth quarter when we have our conversation about Q3. We won't be giving guidance on growth or anything until the beginning of next year, but what we'd like to do is share how we're thinking about that growth.

And we've begun to look at all of the elements that are going to drive exciting growth for us with franchising. The #1 thing though, I always stay focused on, if Larry was on the call, he'd say the same thing, the unit-level economics are the secret to success.

It's the ultimate unlock for growth and with our strengthening unit-level economics that we're seeing already, and we're still in that recovery mode. We've got the top line, the margins and the investment economics are going to be very, very attractive. We believe that we can be selective with the people that we bring on.

And again, with his experience, the rest of the team, I think we can be very intentional and planful as we think about how to develop.

A key to, I think a brand like ours with as much white space as we have is market planning, and real estate planning, and targeting those trade areas that give us the predictability for success and taking advantage of this really once in a lifetime opportunity we have with the market share gap that exists, so that we grow quickly but smartly and put locations where we know we're going to be successful..

Great. Looking forward to tracking that on a go-forward basis. A couple of questions on costs, if I could. In terms of the underlying cost inflation for the basket, I was wondering if, Steve, you might be able to walk through that.

I realize that you've got some other strategic initiatives that are kind of moving some of those maybe margins as we look at them around, but inflation is another topic that is obviously being discussed here in the industry as well.

So curious if you could provide some context around how your basket-shaped up, underlying inflation trends and any sort of contracting or visibility you have into the back half of the year?.

Sure. I think we're facing a lot of the same pressures that you hear other restaurant companies facing. I think we have the benefit of having 90% of our basket sort of locked already. So some of the massive swings that you see don't necessarily impact us as much, although, look, we're not immune to some of the chicken prices and so forth.

We just don't have a lot of chicken on our menu. So it doesn't impact us as much as it might impact others. And there's also some - the movement that we see on the labor side, like Bob suggested, but we've got a lot of thought in place, as we've discussed in prior calls, around managing our labor better with labor allocation models and so forth.

So we feel pretty good about our ability to make sure that we don't have any massive volatility in terms of being caught out on inflation.

We think about it in terms of how we might manage it with pricing, and this new menu gives us the ability to not just provide for some management that way, but also provide the right kind of value for our customers. So we feel like we've got the right kind of mechanisms in place to keep ourselves on the right side of the inflation equation..

Thanks for that and just to clarify that 90% of the basket that's locked.

Is that through the end of the fiscal year?.

That's into next year as well..

Thank you for that and then last one for me. When we think about the real estate optimization plan that you talked about, and I imagine a lot of that work is already done. Maybe it's largely entirely complete, but I wanted to see if you might be able to provide a little bit more context there.

Do we still have any temporarily closed stores? Do we have any more stores that might be on that list to be reviewed? I know you had already cleaned up the portfolio a bit. But just curious on what you've been thinking about as you start to see things recover.

And if there's been any shift in maybe that watchlist of stores but I'm sure you guys are regularly reassessing..

Right. Well, the bulk of the work was completed last year. And then we obviously will revisit leases as they come up and attempts to make the right decision for renewal going forward. But in terms of the major elements that we worked through in prior quarters, that work is done. We just have a handful of temp shops, attempt closures right now.

And we feel like we've turned the corner on that. And you can see in the occupancy percentage that we're seeing the benefits of that work as top-line improves, our occupancy as a percent of sales starts to expand as well.

So that all goes into those shop-level economic numbers that Bob was expressing as being the real engine for how we start to create value here coming out of the pandemic..

[Operator Instructions] And our next question comes from Matt Curtis with William Blair..

It seems like there's a significant step-up in G&A dollars in the second quarter sequentially. It sounds like a lot of that was related to bonus accruals and stock comp and things.

But I'm wondering what the run rate - what run rate we can expect for G&A in the second half, given the recent launch of the Tech Stack as well as the upcoming menu rollout?.

Sure. Yes, you're correct in the reasoning for the step-up in the dollars. We've expressed in the past that our goal is to manage G&A to a sub 9% of sales level or right near that 9% of sales level. And there are certain costs that have come in as the business has expanded and growth has come back in, right.

Some of that results in things that are related to our menu optimization work, hiring new SLP members, those kinds of things. But we're still dedicated to that G&A discipline that we discussed in the past, and we're expecting to hold true through the rest of the year on that G&A rate.

The dollars will kind of move with the business a bit, but we're well beyond the days, I think, of the past where we were far north of the double digits in G&A as a percent of sales..

Okay. Fair enough. And then perhaps relatedly, I wanted to ask you about your expectations for enterprise-level profitability in the second half, excluding deferred expenses. Now based on the presentation, it seems like the deferred expenses might be the $5.3 million figure that is on there somewhere.

But can you describe or otherwise dimensionalize what these deferred expenses are?.

Yes, sure. Look, the deferred expenses are a combination of things that range from severance, from making some of the management changes that we made last year to deferred rents mainly from some of the partnership that we got from our landlord base last year, and as well some payroll taxes that are deferred from 2020.

And the sort of profile of when those hit, it's fairly well blended across the year. I think we're beyond half of those right now, but not too far beyond half of those as we hit the mid-year mark.

And I think the good news with those deferred costs is our balance sheet strength and the underpinning of our operating strength helps us handle that, as well as give us the ability to kind of invest in some of these growth initiatives, that Bob mentioned earlier in the prepared remarks..

Okay. Got it. Thanks for that. And then I guess my next question is probably piggybacking on one of Josh's questions. Having - apology guys for a while, it seems like you haven't taken price in quite a while, and that's for obvious reasons over the last 1 year, 1.5 years or so.

But I mean, many of your competitors have recently started to take price to offset things like wage inflation.

So I'm curious on your thoughts around menu price heading into the second half against the backdrop of your upcoming new menu rollout?.

Yes, Matt, I think when you think about the history of the brand, there were significant price takes for years and numbers that were in the low single digits to mid-single digits with for whatever reason and expectation that we could capture all of that and not give up the traffic. Well, we know that doesn't work.

And you look at our history and you see the traffic losses that went with those price increases. So we have been very diligent and quite careful in the last 12 months, especially because of the pandemic. But we have taken some subtle price increases during that period of time.

Frankly, the work that we've done on the menu, as we've indicated, our testing has proven that we get a nice balance of check and traffic lift that goes with that new menu. So to me, that is a far more healthy relationship with the customer than simply taking price on the food that we're already selling.

We've re-engineered that so that we're getting additional check. We really like the margins on that new menu. We're very pleased with how that blends out.

That's where a lot of the testing came in, as where people would shop on this new menu so that our margins can be maintained, and yet we get the check that gives us the same leverage as price without the customer just taking pain on price increases.

We think going forward, it's also a structure that allows us to be very smart with how we can surgically take price when we need to and do so in a way that's in alignment with the customers' expectations for our brand. So we've thought very carefully about the exact pricing that we're taking to market with this national rollout as well.

And looking at every nickel and every dime that makes sense for the menu, but at the same time, understand the pressures we're getting, particularly on labor with some of the legislative wage increases. So all that to say, not more traditional price, but certainly some check growth that's given us the same leverage that we love..

Okay. That makes sense. And last one for me is, I guess, on marketing. It looks like you've had a lot of success with your digital marketing initiatives over the last few months, certainly.

Could you describe how you're planning to use your various media channels to promote the upcoming menu launch?.

Yes. That's one of the exciting things about having the Tech Stack in first. So we've been very pleased with our digital advertising and still at a very low spend level. So, as we've been quite open about, we think that proving that success has been a part of our plan this year, certainly taking advantage of the sales lift has been part of our plan.

And I think I shared last quarter that we've been very focused on traditional measurement of sales lift with pre-post meta control type measurements, not just tracking the digital activity itself, looking for the top-line lift.

That's all been done with paid social media, that's at our spend level and our size and our geographic footprint, there's no question that's the best place to do that. So now that we have the Tech Stack, and we own some of our connection with our new web and our app, we have multiple platforms to celebrate this new menu and to draw customers into it.

And we will do that. You'll see the menu celebrated on the web and on the app, as we do that we'll also continue to do what we did in our test markets with our paid social media to bring that to life. There will be some more traditional LSM elements to create some local excitement and some enthusiasm for that.

And then the last lever, of course, is our Perks program, which customer facing the Perks program kind of continues to work the way that it did before the Tech Stack launch.

But as we've shared, the engine that runs that Perks program is - well, it's a completely different partner with a lot more capabilities for us to dig into that data and create those one-to-one relationships. So we're going to lean on that very heavily in the early stages of the menu rollout.

We're going to create quite a bit of attraction for our users, both our active, current and lapsed users with a layered approach to give them reasons to come try this great food and find the great value that we've implemented. And so yes, it's a rather integrated plan.

If we can fill this last chair with our CMO, I know we can make that plan a lot better, but I'm very, very proud of the team and the work that they've done to get us to this point with the rollout as well as the proof on the digital..

Good luck going forward with the menu launch..

Thank you..

Mr. Wright, there are no further questions at this time. I'll turn the call back to you for closing remarks..

Well, thank you, everyone, for your time again today. We're just over halfway through 2021, which has far outperformed our expectations. Hopefully, you see that in today's discussion. We fully expect this momentum to continue throughout the second half.

And I want you to know, our confidence in Potbelly's future is resolute with significant growth potential in front of us. We thank you for your interest and support in Potbelly. I certainly hope you have a great day..

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines..