Atlanta’s RaceTrac to buy Potbelly sandwich chain in $566M deal
RaceTrac said Wednesday it will scoop up a popular Midwest chain of sandwich shops.
The Atlanta-based convenience retailer plans to buy Potbelly Corp. in an all-cash deal valued at $566 million, according to a news release.
Founded in Chicago in 1977, Potbelly is known for its toasted sandwiches, salads and milkshakes. Today, it has 445 locations across the U.S., with plans to grow to 2,000.
Potbelly does not currently operate restaurants in Georgia but has announced plans to expand to the greater Atlanta area.
RaceTrac is one of Atlanta’s largest private companies, with 800 RaceTrac and RaceWay fuel center locations in 14 states, along with 1,200 Gulf locations across the U.S.
It’s not clear yet exactly what RaceTrac plans for Potbelly. A spokesperson declined comment. The acquisition is expected to close in the fourth quarter, subject to closing conditions and regulatory approvals.
“We are proud of Potbelly’s legacy as a beloved neighborhood sandwich shop,” Natalie Morhous, CEO and board chairman of RaceTrac, said in the release. “Together, we’ll serve guests in even more meaningful ways.”
For the second quarter, Potbelly reported net income of about $2.5 million, down from nearly $32 million during the same period a year ago, when the company reported an income tax benefit.
Potbelly’s total revenues, including sandwich shop sales and franchise fees, grew about 3% to almost $124 million compared to the same time period last year. The company’s expenses also increased more than 3% year-over-year to $120 million.
RaceTrac’s deal comes as other convenience chains such as Buc-ee’s and Wawa, known for grab-and-go and made-to-order foods, are expanding in states including Georgia.
There is a slim profit margin for fuel sales, so store operators often look to grow in-store sales, especially on food and beverage, according to the National Association of Convenience Stores.
Gross margins on fuel over the past few years have averaged about 40 cents per gallon, NACS spokesperson Jeff Lenard said in an email. But after expenses, such as credit card fees, that dips to about 15 to 20 cents per gallon, he said.
“So on a 10-gallon fill-up, the average size, you can make upwards of $2,” Lenard said. “But food service carries higher margins — and higher risks to manage costs. Most retailers say that food service is the future of convenience stores.”
Lenard called RaceTrac’s acquisition a bit of a “wow” moment for the industry. Recent deals more typically involve purchasing other convenience stores, he said.
“It brings together two elements that are growing in importance in retail, specifically in c-stores: great food service with a neighborhood feel,” Lenard said.
Lenard said food service has more than doubled its share of in-store sales at convenience stores, from 11.9% in 2004 to 27.7% in 2024.
RaceTrac first began offering fresh food in 2004, such as sandwiches, salads and fruit, according to the company’s website. In 2012, it expanded with frozen yogurt, more coffee options and seating for guests.
A RaceTrac subsidiary, Hero Sub Inc., will commence a tender offer to acquire outstanding shares of Potbelly for $17.12 per share in cash, according to the release.
“With RaceTrac’s resources, we will unlock new opportunity for this incredible brand while staying true to the neighborhood sandwich shop experience that makes Potbelly special,” Bob Wright, president and CEO of Potbelly, said in the release.
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