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Ancora Advisors Quick Thesis On Potbelly's $PBPB

Ancora Advisors LLC is a significant shareholder of Potbelly Corporation ("Potbelly" or "Company"), owning approximately 4% of the outstanding shares. We believe Potbelly has the potential to be a very attractive investment at the current valuation, underpinned by robust store level return on invested capital ("ROIC"), a strong balance sheet, a quality brand and product, and significant growth runway.  However, while the Company targets 25%+ shop level ROIC, it has been unable to translate strong unit level returns to acceptable shareholder returns.

Since going public in October 2013, investors have experienced nothing but losses as owners of Potbelly.  Over every measurable period, Potbelly has underperformed the market, dramatically for the most part.  We believe management and the board's focus on growth at the expense of returns is the primary driver of the underperformance, and we outline some key areas where a change in strategy is needed to put the Company on a path that will reward rather than punish shareholders.  If the board remains convinced that it now has the appropriate strategy in place, we would strongly urge it to immediately pursue a sale / going private transaction, as we do not believe the current strategy would be attractive for current or potential public/minority shareholders over any investable timeframe.

Since the IPO, we believe there has been a lack of accountability by this board with regards to driving value for shareholders.  By slowing low or negative returning owned store growth and shifting to a franchise based model, the Company can produce meaningfully higher FCF / share than the current consensus projections, particularly should the proceeds from a re-franchising transaction be used to repurchase stock. Adopting the franchise strategy could realistically double the share price by 2020.

Considering the majority of this board has overseen the significant under-performance of Potbelly's shares, and has shown such a lack of conviction in the Company's operating plan (as evidenced by minimal purchases of stock), shareholders deserve representation on the board by professionals that actually have a real vested interest in maximizing shareholder value.  We would be happy to assist the board in identifying acceptable board candidates, and we reserve the right to potentially pursue board representation at next year's annual meeting if necessary.