UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN

PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the registrant  ☒                             Filed by a party other than the registrant  ☐

Check the appropriate box:

Potbelly Corporation

(Name of registrant as specified in its charter)

Payment of the filing fee (check the appropriate box):

April 2, 2019

Dear Fellow Shareholder:

You are cordially invited to attend our Annual Meeting of Shareholders (including any adjournments or postponements thereof, the “Annual Meeting”) on May 16, 2019. We will hold the meeting at 8:00 a.m., local time, at the Potbelly Corporation corporate offices located at 111 North Canal Street, 16^th Floor, Chicago, Illinois 60606. Included with this letter are the notice of annual meeting of shareholders, a proxy statement detailing the business to be conducted at the Annual Meeting, and a proxy card. You may also find electronic copies of these documents online at www.proxyvote.com.

Regardless of whether you plan to be with us at the Annual Meeting, it is important that your voice be heard. Please vote promptly by following the instructions in this Proxy Statement or in the Notice of Internet Availability of Proxy Materials that was sent to you.

Sincerely,

111 North Canal Street, Suite 850

Chicago, Illinois 60606

NOTICE OF ANNUAL MEETING OF

SHAREHOLDERS

TO BE HELD ON MAY 16, 2019

To our Shareholders:

The 2019 Annual Meeting of Shareholders (including any adjournments or postponements thereof, the “Annual Meeting”) of Potbelly Corporation (the “Company”) will be held on May 16, 2019, at 8:00 a.m. local time, at the Potbelly Corporation corporate offices located at 111 North Canal Street, 16^th Floor, Chicago, Illinois 60606 for the following purposes:

These items of business are more fully described in the Proxy Statement accompanying this Notice.

The Board of Directors (the “Board”) has set the close of business on March 26, 2019 as the record date for determining shareholders of the Company entitled to notice of and to vote at the Annual Meeting. A list of the shareholders of record as of the record date will be available for inspection by shareholders, for any purpose germane to the Annual Meeting, at the Company’s offices and at the offices of American Stock Transfer & Trust Company LLC, the Company’s independent share transfer agent, during normal business hours for a period of 10 days prior to the Annual Meeting. The list will also be available for inspection by shareholders at the Annual Meeting.

All shareholders are cordially invited to attend the Annual Meeting in person. EVEN IF YOU CANNOT ATTEND THE ANNUAL MEETING, PLEASE TAKE THE TIME TO PROMPTLY VOTE YOUR PROXY BY CAREFULLY FOLLOWING THE INSTRUCTIONS ON THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS. ALTERNATIVELY, IF YOU HAVE REQUESTED WRITTEN PROXY MATERIALS, PLEASE SIGN, DATE AND RETURN THE PROXY CARD IN THE RETURN ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.

Important Notice of Internet Availability of Proxy Materials for the Annual Meeting to be Held on May 16, 2019: The Proxy Statement for the Annual Meeting and the Annual Report on Form 10-K for the fiscal year ended December 30, 2018 are available at www.proxyvote.com.

By order of the Board of Directors,

Matthew Revord

Senior Vice President, Chief Legal Officer, Chief People Officer and Secretary

April 2, 2019

IMPORTANT

TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, WE URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE PRE-PAID ENVELOPE PROVIDED, OR VOTE BY TELEPHONE OR THE INTERNET AS INSTRUCTED ON THE PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE THE PROXIES YOU APPOINTED CAST YOUR VOTES.

PROXY STATEMENT

Table of Contents

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PROXY STATEMENT

The Board of Directors (the “Board of Directors” or “Board”) of Potbelly Corporation, a Delaware corporation (the “Company”), is using this Proxy Statement to solicit your proxy for use at our 2019 Annual Meeting of Shareholders (including any postponements or adjournments thereof, the “Annual Meeting”). References in this Proxy Statement to “Potbelly,” the “Company,” “we,” “us,” “our” and similar terms refer to Potbelly Corporation.

We are sending this Proxy Statement, the enclosed proxy card and our Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (collectively, the “Proxy Materials”) on or about April 2, 2019, to our shareholders of record as of the close of business on March 26, 2019, the record date. Shareholders of record at the close of business on the record date will be entitled to vote at the Annual Meeting. As of the record date, 24,100,611 shares of our common stock, $0.01 par value per share, were outstanding. Shareholders are entitled to one vote for each share of common stock held. A majority of these shares present in person or represented by proxy at the Annual Meeting will constitute a quorum for the transaction of business.

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

Annual Meeting Information

Matters to be Voted on at the Annual Meeting and Board Recommendations

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2018 Board Highlights

The following tables provide summary information about our current Board of Directors. Pete Bassi, Ann-Marie Campbell and Harvey Kanter are currently members of the Board of Directors but have decided not to stand for re-election, and therefore are not director nominees. The Board anticipates appointing Dan Ginsberg to the role of Chairman of the Board once Mr. Bassi’s current term has ended at the Annual Meeting. Mr. Ginsberg has been a member of our Board of Directors since 2014 and currently is a member of the Audit Committee and of the Nominating and Corporate Governance Committee.

		Strong Board Refreshment Strong Board Diversity

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GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Important notice regarding the Internet availability of proxy materials for the Annual Meeting

This Proxy Statement, the proxy card and our Annual Report on Form 10-K for the fiscal year ended December 30, 2018 are available online at www.proxyvote.com. Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials to our shareholders of record as of the close of business on March 26, 2019, the record date. All shareholders will have the ability to access our proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com) or to request to receive a printed set of our proxy materials. Instructions on how to access our proxy materials over the Internet or request a printed copy of our proxy materials may be found in the Notice of Internet Availability of Proxy Materials. In addition, shareholders may request to receive proxy materials in printed form or by email on an ongoing basis by calling 1-800-579-1639 or via email to sendmaterial@proxyvote.com.

Why am I receiving these materials?

Our Board of Directors is soliciting proxies in connection with the Annual Meeting. The Company will bear the cost of preparing, printing and mailing the materials in connection with this solicitation of proxies. In addition to mailing these materials, the Company’s officers and other employees may, without being additionally compensated, solicit proxies personally and by mail, telephone or electronic communication. The Company will reimburse banks and brokers for their reasonable out-of-pocket expenses related to forwarding proxy materials to beneficial owners of stock or otherwise in connection with this solicitation. On or about April 2, 2019, we expect to begin mailing these proxy materials to shareholders of record as of the close of business on March 26, 2019, the record date.

You are receiving this Proxy Statement as a shareholder of the Company. We request that you promptly use the enclosed proxy card to vote, by telephone, Internet, or mail, in the event you desire to express your support of or opposition to the proposals.

THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF THE SEVEN DIRECTOR NOMINEES NAMED IN PROPOSAL 1, “FOR” PROPOSALS 2, 3 AND 5, AND “EVERY YEAR” FOR PROPOSAL 4.

Where and when is the Annual Meeting?

We will hold the Annual Meeting on May 16, 2019, at 8:00 am, Central Time, at the Potbelly Corporation corporate offices located at 111 North Canal Street, 16^th Floor, Chicago, Illinois 60606.

What am I being asked to vote on at the Annual Meeting?

We are asking our shareholders to consider the following proposals at the Annual Meeting:

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Who can vote?

Shareholders of record at the close of business on March 26, 2019, the record date, may vote at the Annual Meeting.

As of the record date, there were 24,100,611 shares of our common stock outstanding.

How many votes do I have?

You have one vote for each share of our common stock that you owned as of the record date. These shares include shares held by you as a “shareholder of record” and as a “beneficial owner.”

What is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?

If your shares are registered directly in your name with our transfer agent, you are considered the “shareholder of record” with respect to those shares. We have sent these proxy materials directly to you.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of the shares held in street name. Your broker, bank or other nominee who is considered the shareholder of record with respect to those shares has forwarded these proxy materials to you. Because only shareholders of record are entitled to vote at the Annual Meeting, as the beneficial owner, you must direct your broker, bank or other nominee on how to vote your shares by using the voting instruction form included in the mailing or by following their instructions for voting by telephone or the Internet.

What is a proxy?

If you legally designate another person to vote the shares you own at a meeting of shareholders according to your instruction, that person is your proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated two of our officers to serve as proxies for the Annual Meeting. These officers are Alan Johnson and Matthew Revord.

How can I vote my shares?

Shareholders of Record. Shareholders of record may vote their shares or submit a proxy to have their shares voted by one of the following methods:

Beneficial Owners. If you are the beneficial owner of your shares (that is, you hold your shares in “street name” through an intermediary such as a broker, bank or other nominee), you will receive a voting instruction form from your bank, broker or other nominee.

Your bank, broker or other nominee will not vote your shares on Proposals 1, 3, 4 or 5 unless you provide them instructions on how to vote your shares. You should instruct your bank, broker or other nominee how to vote your shares by following the

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directions provided by your bank, broker or other nominee. Alternatively, you may obtain a “legal proxy” from your bank, broker or other nominee and bring it with you to hand in with a ballot in order to be able to vote your shares in person at the Annual Meeting. If you choose to vote in person at the meeting, you must bring the following: (i) proof of identification, (ii) an account statement or letter from the bank, broker or other nominee indicating that you are the beneficial owner of the shares and (iii) a signed legal proxy from the shareholder of record giving you the right to vote the shares. The account statement or letter must show that you were the beneficial owner of the shares on March 26, 2019, the record date for the Annual Meeting.

General. If you submit your proxy using any of the methods above, Alan Johnson or Matthew Revord will vote your shares in the manner you indicate. You may specify whether your shares should be voted for all, some, or none of the nominees for director, for, against or abstain from voting for Proposals 2, 3, 5 and any other proposals properly introduced at the Annual Meeting, and for every year, every two years, or every three years or abstain from voting for Proposal 4. If you vote by telephone or Internet and choose to vote with the recommendation of our Board of Directors, or if you vote by mail, sign your proxy card, and do not indicate specific choices, your shares will be voted FOR the election of each of the seven director nominees (Proposal 1), FOR ratification of the appointment of Deloitte & Touche LLP to serve as our independent public accounting firm (Proposal 2); FOR the non-binding resolution to approve our 2018 named executive officer compensation (Proposal 3); to consider future advisory votes to approve named executive officer compensation EVERY YEAR (Proposal 4); and FOR approval of the Potbelly Corporation 2019 Long-Term Incentive Plan (Proposal 5).

If a matter to be considered at the Annual Meeting is timely submitted pursuant to Rule 14a-4(c)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), your proxy will authorize Alan Johnson or Matthew Revord to vote your shares in their discretion with respect to any such matter subsequently raised at the Annual Meeting. At the time this Proxy Statement was filed, we knew of no matters to be considered at the Annual Meeting other than those referenced in this Proxy Statement.

How can I revoke my proxy?

You may revoke a proxy in any one of the following three ways:

If I have already voted by proxy on one or more proposals, can I change my vote?

Yes. To change your vote by proxy, simply sign, date and return the enclosed proxy card or voting instruction form in the accompanying postage pre-paid envelope, or vote by proxy via telephone or the Internet in accordance with the instructions on the proxy card or voting instruction form. We strongly urge you to vote by proxy “FOR” the election of each of the seven director nominees named in Proposal 1, “FOR” Proposals 2, 3, and 5, and “EVER YEAR” on Proposal 4. Only your latest dated proxy will count at the Annual Meeting.

What “quorum” is required for the Annual Meeting?

In order to have a valid shareholder vote, a quorum must exist at the Annual Meeting. At the Annual Meeting a quorum exists when shareholders holding a majority of the issued and outstanding shares entitled to vote are present in person or represented by proxy at the meeting.

Votes withheld, abstentions and broker-non votes (discussed below under “—What is the effect of abstentions and broker non-votes?”) will be counted as present or represented for purposes of determining whether a quorum exists. In the absence of a quorum, the Annual Meeting may be adjourned by a majority of the votes entitled to be cast either present in person or represented by proxy or by any officer entitled to preside at the Annual Meeting.

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What vote is required to approve each proposal?

How are the voting results determined?

For the election of directors, your vote may be cast “for” each of the nominees or your vote may be “withheld” with respect to one or more of the nominees. The nominees receiving the largest number of “for” votes will be elected as directors, up to the maximum number of directors to be chosen for election. Each of Proposals 2, 3 and 5 will pass if the total votes cast “for” such proposal exceed the total number of votes cast “against” and “abstain” for such proposal. For Proposal 4, your vote may be cast for “every year,” “every two years,” “every three years” or “abstain.” Proposal 4 is an advisory vote and is not binding on the Company or the Board, and the Board will consider the frequency receiving the most votes cast at the Annual Meeting to be the preference of our shareholders. The Board may decide that it is in the best interests of the Company and our shareholders to hold future advisory votes more or less frequently than the frequency preferred by our shareholders.

What is the effect of abstentions and broker non-votes?

Because the election of directors is determined on the basis of a plurality of the votes cast, abstentions have no effect on the outcome of the election of seven nominees to the Board of Directors (Proposal 1), although abstentions will result in directors receiving fewer votes. Similarly, because the advisory vote regarding the frequency of future advisory votes to approve named executive compensation (Proposal 4) requires shareholders to either indicate a preference between three options (“every year,” “every two years” or “every three years”) or choose to “abstain,” abstentions will only result in fewer votes being cast for the other three options.

Because the approval of a majority of shares present and entitled to vote is required to ratify the appointment of Deloitte & Touche LLP as our independent public accountants for the fiscal year ending December 29, 2019 (Proposal 2), to approve on an advisory basis, the non-binding resolution to approve our 2018 named executive officer compensation (Proposal 3), and to adopt the Potbelly Corporation 2019 Long-Term Incentive Plan (Proposal 5), abstentions have the effect of a vote against those proposals.

Broker non-votes occur when brokers do not have discretionary voting authority to vote certain shares held in “street name” on particular “non-routine” proposals, including the election of directors, and the “beneficial owner” of those shares has not instructed the broker to vote on those proposals. Shares registered in the name of a broker, bank or other nominee, for which proxies are voted on some, but not all matters, will be considered to be represented at the Annual Meeting and voted only as to those matters for which the broker, bank or other nominee has authority to vote. Broker non-votes will have no direct effect on the outcome of the election of directors, on the advisory resolution on executive compensation, on the frequency of future advisory votes on executive compensation or to the approval of our long-term incentive plan.

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Will my shares be voted if I do nothing?

If your shares are registered in your name, you must sign and return a proxy card in order for your shares to be voted, unless you vote via telephone or the Internet or vote in person at the Annual Meeting. If you submit (including by telephone or Internet) your proxy card with no instructions on how to vote, your shares will be voted in accordance with the recommendations of the Board.

If your shares of our common stock are held in “street name,” your bank, broker or other nominee has enclosed a proxy card or voting instruction form with this Proxy Statement. We strongly encourage you to authorize your bank, broker or other nominee to vote your shares by following the instructions provided on the proxy card or voting instruction form. If you sign (including electronic confirmation in the case of Internet or telephone voting) your broker voting instruction form with no instructions on how to vote, your stock will be voted in the broker’s discretion only with respect to “routine” matters but will not be voted with respect to “non-routine” matters. The only routine matter on the ballot for the Annual Meeting is the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 29, 2019 (Proposal 2).

Please return your proxy card or voting instruction form to your bank, broker or other nominee by proxy by signing, dating and returning the enclosed proxy card or voting instruction form in the accompanying postage pre-paid envelope or vote by proxy via telephone or the Internet in accordance with the instructions in the proxy card or voting instruction form. Please contact the person responsible for your account to ensure that a proxy card or voting instruction form is voted on your behalf.

We strongly urge you to vote by proxy “FOR” the election of each of the seven director nominees named in Proposal 1, “FOR” Proposals 2, 3, and 5, and “EVERY YEAR” on Proposal 4 by signing, dating and returning the enclosed proxy card today in the envelope provided. You may also vote by proxy by telephone using the toll-free number on the proxy card or by Internet using the website address on the proxy card. If your shares are held in “street name,” you should follow the instructions on the voting instruction form provided by your bank, broker or other nominee, and provide specific instructions to your bank, broker or other nominee to vote as described above.

What are the fiscal year end dates?

This Proxy Statement provides information about the matters to be voted on at the Annual Meeting and additional information about Potbelly and its executive officers and directors. Some of the information is provided as of the end of our 2016, 2017 or 2018 fiscal years as well as some information being provided as of a more current date. Our fiscal year 2016 ended on December 25, 2016; our fiscal year 2017 ended on December 31, 2017; and our fiscal year 2018 ended on December 30, 2018.

Where can I find the voting results?

We intend to announce preliminary voting results at the Annual Meeting. We will disclose the preliminary results in a Current Report on Form 8-K, which we expect to file on or before May 22, 2019. You can obtain a copy of the Form 8-K by logging on to our website at http://investors.potbelly.com/financial-information/sec-filings, or through the SEC’s EDGAR system at www.sec.gov. Information on our website does not constitute part of this Proxy Statement.

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ANNUAL MEETING PROCEDURES

Admission to the Annual Meeting

Only shareholders of the Company or their duly authorized proxies may attend the Annual Meeting. Proof of ownership of our shares must be presented in order to be admitted to the Annual Meeting. If your shares are held in the name of a bank, broker or other nominee and you plan to attend the Annual Meeting in person, you must bring a brokerage statement, the proxy card mailed to you by your bank or other nominee or other proof of ownership as of the record date, March 26, 2019, to be admitted to the Annual Meeting. Otherwise, proper documentation of a duly authorized proxy must be presented. This proof can be a brokerage statement or letter from a bank, broker or other nominee indicating ownership on the record date, a proxy card, or a valid, legal proxy provided by your bank, broker or other nominee.

After the chairman of the meeting opens the Annual Meeting, further entry will be prohibited. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting. The use of mobile phones during the Annual Meeting is also prohibited. All persons attending the Annual Meeting will be required to present a valid government-issued picture identification, such as a driver’s license or passport, to gain admittance to the Annual Meeting.

Appraisal Rights

Shareholders do not have appraisal rights under Delaware law in connection with the matters to be voted on at the Annual Meeting.

Shareholder List

A list of our shareholders as of the close of business on March 26, 2019 will be available for inspection during business hours for ten days prior to the Annual Meeting at our principal executive offices located at 111 North Canal Street, Suite 850, Chicago, Illinois 60606 and at the offices of American Stock Transfer & Trust Company, LLC, our independent share transfer agent.

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CORPORATE GOVERNANCE

Overview

All of our corporate governance materials, including our corporate governance guidelines, our ethics code of conduct and Board committee charters, are published under the Governance section of our Investor website at http://investors.potbelly.com/corporate-governance/governance-documents. Information on our website does not constitute part of this Proxy Statement. These materials are also available in print to any shareholder without charge upon request made by telephone at (312) 951-0600 or by mail to our principal executive offices at Potbelly Corporation, 111 North Canal Street, Suite 850, Chicago, Illinois 60606, Attention: Corporate Secretary. The Board of Directors regularly reviews these materials, Delaware law, the rules and listing standards of the Nasdaq Global Select Market (“NASDAQ”) and SEC rules and regulations, as well as best practices suggested by recognized governance authorities, and modifies the materials as it believes is warranted.

Director Independence

Our Board of Directors reviews the independence of the current and potential members of the Board of Directors in accordance with independence requirements set forth in the NASDAQ rules and applicable provisions of the Exchange Act. During its review, the Board of Directors considers transactions and relationships between each director and potential director, as well as any member of his or her immediate family, and the Company and its affiliates, including those related-party transactions contemplated by Item 404(a) of Regulation S-K under the Exchange Act. The Board of Directors must affirmatively determine that the director has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company, that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The purpose of this review is to determine whether any such relationships or transactions exist that are inconsistent with a determination that the director is independent. Our Board of Directors has determined that all nominees except Alan Johnson, our President and Chief Executive Officer, are “independent” as such term is defined by NASDAQ rules, our corporate governance standards and the federal securities laws.

Corporate Environmental and Social Responsibility

We are committed to improving the world by improving the communities we serve. That means being a responsible community member in each of our neighborhoods and always looking for ways to reduce our footprint and improve our relationships with people. We believe it is important to conduct our business in an ethical, legal and socially responsible manner and have undertaken a number of initiatives to reduce our environmental impact and to ensure a healthy and safe workplace. We expect our suppliers and business partners to adhere to these ideals and to promote these values, and have adopted a Supplier Code of Conduct specifying the standards and principles we expect all of our suppliers to adhere to. A copy of the Supplier Code of Conduct and related information can be found in the “Corporate Responsibility” section of the “About Us” page of our website at www.potbelly.com.

Ethics Code of Conduct

We have a written ethics code of conduct that applies to our directors, officers and employees. A copy of this code is available at http://investors.potbelly.com/corporate-governance/governance-documents. We will disclose information regarding any amendment to or waiver from the provision of this code by posting it on the same portion of our website.

Conflicts of Interest

Pursuant to our ethics code of conduct and our related party transaction policy, each director and executive officer has an obligation not to engage in any transaction that could be deemed a conflict of interest. Our directors may not engage in any transaction that could impact their independence on the Board of Directors. See “Related Party Transactions,” on page 48 of this Proxy Statement.

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Structure of the Board of Directors

Our certificate of incorporation provides that our Board of Directors shall consist of not more than twelve directors, with the exact number as determined from time to time by resolution of the Board. Our Board of Directors currently consists of ten members: Pete Bassi, Joseph Boehm, Ann-Marie Campbell, Susan Chapman-Hughes, Sue Collyns, Dan Ginsberg, Marla Gottschalk, Alan Johnson, Harvey Kanter and Benjamin Rosenzweig. All current directors, except for Pete Bassi, Ann-Marie Campbell and Harvey Kanter, are nominees for election for a term expiring at our 2020 Annual Meeting of Shareholders (the “2020 Annual Meeting”). Mr. Bassi, Ms. Campbell and Mr. Kanter have each given notice to the Board of his or her intent to not stand for re-election, as each will be retiring from service as a director effective upon the conclusion of his or her current term at the Annual Meeting. Our certificate of incorporation provides that if a director is removed or if a vacancy occurs, the vacancy may be filled by a majority of the directors then in office, even if less than a quorum.

Board Leadership Structure

Mr. Bassi currently serves as our Chairman of the Board. The Board appointed Mr. Bassi to the role of Chairman in August of 2017. Prior to that appointment, Mr. Bassi served as Lead Director and the role of Chairman of the Board and CEO were combined. Mr. Bassi has given notice to the Board of his intent not to stand for re-election to the Board at the Annual Meeting. The Board anticipates appointing Dan Ginsberg to the role of Chairman of the Board once Mr. Bassi’s term has ended at the Annual Meeting. Mr. Ginsberg has been a member of our Board of Directors since 2014 and currently is a member of the Audit Committee and of the Nominating and Corporate Governance Committee. Our Board of Directors has carefully considered its leadership structure and believes at this time that the Company and its shareholders are best served by having the offices of Chairman of the Board and CEO held by different individuals. As part of our corporate governance principles, and as required in our Bylaws, in the event the Chairman of the Board and CEO positions are ever recombined, or the Chairman of the Board is not otherwise independent, the Board of Directors shall appoint an independent director to serve as lead independent director. The Bylaws also provide that the chairperson of each of our committees will rotate at least once every three years. Our Board of Directors believes that these and other features of our Board structure provide for substantial independent oversight of the Company’s management.

Our Board of Directors recognizes that depending on future circumstances, other leadership models may become more appropriate. Accordingly, our Board of Directors will continue to periodically review its leadership structure.

Director Biographies

The following is a list of our current directors and candidates for director, their ages as of December 31, 2018, their occupation during the last five years and certain other biographical information:

Experience

Pete Bassi, 69, has served as our director since January 2009. Mr. Bassi will retire from the Board upon the conclusion of his current term at the Annual Meeting. Mr. Bassi retired in 2005 as Chairman of Yum! Restaurants International (“YRI”), the international division of Yum! Brands, Inc., where he served as President beginning in July 1997 and was in charge of YRI’s Asian business prior to that. From 2015 to 2018, Mr. Bassi served on the board of Mekong Capital; from 2002 to 2009, he served on the board of The Pep Boys—Manny, Moe & Jack; from 2008 to 2010, he served on the board of El Pollo Loco, Inc.; and from 2013 to 2015, he served on the board of AmRest Holdings SE. Mr. Bassi currently serves on the boards of BJ’s Restaurants, Inc., and Yum China Holdings, Inc.

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Skills and Qualifications

Our Board of Directors believes Mr. Bassi’s qualifications to serve as a member of our Board include his extensive experience in the restaurant industry and his years of experience in his leadership roles as a director and executive officer.

Experience

Joseph Boehm, 32, has served as our director since October 2017. Mr. Boehm has been a Portfolio Manager at Ancora Advisors, LLC, a registered investment advisor, since April 2014. Prior to his current role, Mr. Boehm was an Analyst at Sigma Capital Management, a hedge fund, from February 2013 through March 2014. From 2010 to 2013, Mr. Boehm was an associate at Deutsche Bank, an investment bank.

Skills and Qualifications

Our Board of Directors believes Mr. Boehm’s qualifications to serve as a member of our Board include his financial industries experience.

Experience

Ann-Marie Campbell, 53, has served as our director since August 2014. Ms. Campbell will retire from the Board upon the conclusion of her current term at the Annual Meeting. Ms. Campbell has been Executive Vice President – U.S. Stores for The Home Depot, a home improvement supplies company, since February 2016. Ms. Campbell has worked for The Home Depot since 1985, steadfastly progressing from District Manager to Division President, prior to assuming her current position. From 2015 to 2016, Ms. Campbell served on the board of Barnes & Noble, Inc. Ms. Campbell serves on the board of Georgia State University’s Robinson College of Business and of Catalyst, a nonprofit dedicated to expanding opportunities for women and business.

Skills and Qualifications

Our Board of Directors believes Ms. Campbell’s qualifications to serve as a member of our Board include her extensive experience in merchandising, sales and marketing.

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Experience

Susan Chapman-Hughes, 50, has served as our director since May 2014. Since February 2018, Ms. Chapman-Hughes has been Global Head of Digital Capabilities, Transformation and Operations, Global Commercial Services for American Express Company, a financial services corporation. Prior to assuming her current role, Ms. Chapman-Hughes was Senior Vice President, US Large Market, Global Corporate Payments for American Express from December 2014 through February 2018; she was Senior Vice President, US Account Development, Global Corporate Payments from November 2013 through December 2014; and she was the Senior Vice President, Global Real Estate & Workplace Enablement for American Express from July 2010 through November 2013. Before joining American Express Company, Ms. Chapman-Hughes was the Global CAO/Global Head of Operations and Strategy, Citi Realty Services for Citigroup, Inc. Ms. Chapman-Hughes serves on the board of trustees of the National Trust for Historic Preservation and the board of directors of A Better Chance, each of which is a national nonprofit organization.

Skills and Qualifications

Our Board of Directors believes Ms. Chapman-Hughes’s qualifications to serve as a member of our Board include her real estate knowledge and her general management, innovation, financial and digital experience.

Experience

Sue Collyns, 52, has served on our Board of Directors since May 2018. Ms. Collyns is currently the Chief Financial Officer of Beachbody LLC, a direct and multi-level marketer of the nation’s most popular fitness brands and weight-loss solutions. Ms. Collyns joined Beachbody, LLC in September 2014. Prior to joining Beachbody, from July 2012 to August 2014, Ms Collyns was the CFO of Dun and Bradstreet Credibility Corp., a technology based subscription company offering web solutions for businesses seeking advice on strengthening their credit score and business reputation. Between December 2011 and June 2012, Ms. Collyns was a consultant to various companies in the technology and restaurant industries. From September 2001 to November 2011, Ms. Collyns was the Chief Financial Officer, the Chief Operating Officer and Company Secretary of California Pizza Kitchen. Prior to 2001, Ms. Collyns held various finance, strategic planning and auditing roles with Sony/BMG Entertainment, Lion/Pepsi, GlaxoSmithkline Pharmaceuticals and PricewaterhouseCoopers. Ms. Collyns also served on the Board of Directors for Zoës Kitchen and was a member of its nominating and governance committee and audit chair from February 2014 to the company’s sale in November 2018.

Skills and Qualifications

Our Board of Directors believes Ms. Collyns’s qualifications to serve as a member of our Board includes her extensive restaurant experience as well as her expertise in finance, investor relations, mergers and acquisitions and strategic planning.

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Experience

Dan Ginsberg, 66, has served as our director since February 2014. Mr. Ginsberg was Chief Executive Officer of Dermalogica, a U.S.-based skincare brand, from January 2011 through his retirement in August 2014 and has a comprehensive background in branding strategy, marketing and advertising. Mr. Ginsberg’s previous roles include Chief Executive Officer of Red Bull, NA until 2007. Before his Red Bull service, Mr. Ginsberg had been an advertising and marketing executive who held executive positions at agencies such as NW Ayer and Cunningham & Walsh, and Chief Marketing Officer at Hardee’s.

Skills and Qualifications

Our Board of Directors believes Mr. Ginsberg’s qualifications to serve as a member of our Board includes his extensive executive officer experience as well as his marketing and branding expertise.

Experience

Marla Gottschalk, 58, has served as our director since November 2009. Ms. Gottschalk was Chief Executive Officer of The Pampered Chef Ltd., a marketer of kitchen tools, food products and cookbooks for preparing food in the home, from May 2006 until December 2013 and its President and Chief Operating Officer from December 2003 until May 2006. Ms. Gottschalk joined Pampered Chef from Kraft Foods, Inc., where she worked for 14 years in various management positions, including Senior Vice President of Financial Planning and Investor Relations for Kraft, Executive Vice President and General Manager of Post Cereal Division and Vice President of Marketing and Strategy of Kraft Cheese Division. Ms. Gottschalk is currently a member of the board of directors of Underwriters Laboratories, a world leader in safety testing and certification, a strategic board advisor for Ocean Spray Cranberries, Inc., and sits on the board of directors for Big Lots, Inc. She has previously served as a director of GATX Corp. and as a director of Visteon Corp.

Skills and Qualifications

Our Board of Directors believes Ms. Gottschalk’s qualifications to serve as a member of our Board include her extensive experience with global companies, her expertise in the food industry and her years of experience in operations and strategic management.

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Experience

Alan Johnson, 59, has served as our President and Chief Executive Officer and a director since November 2017. Mr. Johnson was previously the founder of AJ Consulting, a consulting services firm, from September 2015 through November 2017. Prior to that, he was the Chief Executive Officer of BevMo!, a specialty retailer of alcoholic beverages and related products, from April 2007 through September 2015. From 2005 to 2007, Mr. Johnson served as Chief Operating Officer and Chief Financial Officer of Forth & Towne, a division of Gap Inc. Prior to his service with Gap Inc., Mr. Johnson held various executive leadership positions, including at Walt Disney Parks & Resorts, Regal Theaters, PepsiCo and Pizza Hut International. Mr. Johnson is on the Board of Directors of Saucey, a wine, beer and spirits on-demand delivery start-up. Mr. Johnson has over 30 years of executive leadership experience across a variety of blue chip organizations.

Skills and Qualifications

Our Board of Directors believes Mr. Johnson’s qualifications to serve as a member of our Board include his role as Chief Executive Officer and President, his leadership experience as an executive at publicly-traded companies in the restaurant and retail sectors and his extensive experience in the retail industry.

Experience

Harvey Kanter, 57, has served as our director since August 2015. Mr. Kanter will retire from the Board upon the conclusion of his current term at the Annual Meeting. Mr. Kanter is President and Chief Executive Officer of Destination XL Group, Inc., a big & tall men’s apparel retailer, having assumed the role on April 1, 2019 after serving as advisor to the acting CEO since February of 2019. Mr. Kanter is also Chairman of the Board for Blue Nile, Inc., an online retailer of diamonds and fine jewelry. Mr. Kanter has been with Blue Nile since March 2012, previously serving as its Chief Executive Officer and President. Prior to joining Blue Nile, from January 2009 through March 2012, he was the Chief Executive Officer and President of Moosejaw Mountaineering and Backcountry Travel, Inc., a premium outdoor apparel and gear retailer. Mr. Kanter serves on the board of directors for Blue Nile, Inc. (and certain of its subsidiaries), as a brand ambassador for the Fred Hutch Cancer Research Institute, and as an advisory board member to the Seattle University Executive MBA Program.

Skills and Qualifications

Our Board of Directors believes Mr. Kanter’s qualifications to serve as a member of our Board include his deep retail industry experience, brand expertise and leadership skills.

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Experience

Benjamin Rosenzweig, 33, has served as our director since April 2018. Mr. Rosenzweig is a partner at Privet Fund Management, LLC. Mr. Rosenzweig joined Privet Fund Management LLC in September 2008. He has been an independent director of Cicero Inc., a provider of desktop activity intelligence, since February 23, 2017; Hardinge Inc., a designer, manufacturer and distributor of machine tools, since October 14, 2015; and PFSweb, Inc., a global commerce service provider, since May 2013. Mr. Rosenzweig served on the Board of Directors of StarTek, Inc., a customer engagement business process outsourcer, from May 2011 to December 2018. During his time on the Board for StartTek, Mr. Rosenzweig was chairman of the audit committee. He served as a director of RELM Wireless Corporation, a manufacturer of wireless communications equipment, from September 2013 to September 2015. Prior to joining Privet in September 2008, Mr. Rosenzweig served as an investment banking analyst in the Corporate Finance group of Alvarez and Marsal, where he completed multiple distressed mergers and acquisitions, restructurings, capital formation transactions and similar financial advisory engagements across several industries.

Skills and Qualifications

Our Board of Directors believes Mr. Rosenzweig’s qualifications to serve as a member of our Board include his financial advisory experience across multiple industries.

Board Meetings

Our Board of Directors held fifteen meetings during fiscal 2018. In 2018, each of our directors attended at least 75% of the aggregate number of meetings held by the Board of Directors, and held by the committees on which the director served, when such director was a member of the Board of Directors or such committee. Under our corporate governance guidelines, each director is expected to make every effort to attend each Board meeting and each meeting of any committee on which he or she sits.

The Company’s directors are encouraged to attend our annual meeting of shareholders, but we do not currently have a policy relating to directors’ attendance at these meetings. All of our directors serving at the time attended our 2018 Annual Meeting of Shareholders.

Board Committees

Our Board of Directors has established three standing committees to assist it with its responsibilities. The composition and responsibilities of each committee are described below. The membership and responsibilities of each committee comply with the listing requirements of NASDAQ. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors. A new chairperson of each committee is appointed at least once every three years. In the future, the Board may establish other committees, as it deems appropriate in accordance with our Bylaws, to assist it with its responsibilities.

Audit Committee

The purpose of the Audit Committee is set forth in the Audit Committee charter and is primarily to assist the Board in overseeing:

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The Audit Committee currently consists of Ms. Chapman-Hughes, Ms. Collyns, Mr. Ginsberg, and Ms. Gottschalk, and the chairperson is Ms. Chapman-Hughes. Our Board of Directors has affirmatively determined that each of these Audit Committee members meets the independence criteria applicable to directors serving on the Audit Committee under NASDAQ and SEC rules. Our Board of Directors has also determined that each of these Audit Committee members meet the requirements for financial literacy under the applicable NASDAQ rules and that each is an “audit committee financial expert” under SEC rules. Our Board of Directors has adopted a written charter under which the Audit Committee operates. A copy of the charter, which satisfies the applicable standards of the SEC and NASDAQ, is available on our website at http://investors.potbelly.com/corporate-governance/governance-documents.

The Audit Committee held four meetings during fiscal year 2018.

Nominating and Corporate Governance Committee

The purpose of the Nominating and Corporate Governance Committee is set forth in the Nominating and Corporate Governance Committee charter and is primarily to:

The Nominating and Corporate Governance Committee consists of Mr. Bassi, Mr. Boehm, Ms. Chapman-Hughes, Mr. Ginsberg and the chairperson is Mr. Bassi. Our Board of Directors has affirmatively determined that each of these Nominating and Corporate Governance Committee members meets the independence criteria applicable to directors serving on the Nominating and Corporate Governance Committee under NASDAQ and SEC rules. Our Board of Directors has adopted a written charter under which the Nominating and Corporate Governance Committee operates. A copy of the charter, which satisfies the applicable standards of the SEC and NASDAQ, is available on our website at http://investors.potbelly.com/corporate-governance/governance-documents.

The Nominating and Corporate Governance Committee held ten meetings during fiscal year 2018.

Compensation Committee

The purpose of the Compensation Committee is set forth in the Compensation Committee charter and is primarily to:

For more information regarding the process and procedures regarding the determination of director compensation, see “Director Compensation” and such information regarding named executive officer compensation, see “Compensation Discussion and Analysis.”

The Compensation Committee consists of Ms. Campbell, Ms. Gottschalk, Mr. Kanter, and Mr. Rosenzweig, and the chairperson is Ms. Campbell. Our Board of Directors has affirmatively determined that each of these Compensation Committee members meets the independence criteria applicable to directors serving on the Compensation Committee under NASDAQ and SEC rules. Our Board of Directors has adopted a written charter under which the Compensation Committee operates. A copy of the charter, which satisfies the applicable standards of the SEC and NASDAQ, is available on our website at http://investors.potbelly.com/corporate-governance/governance-documents.

The Compensation Committee held six meetings during fiscal year 2018.

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Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is, or has at any time been, an officer or employee of the Company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board or our Compensation Committee during fiscal 2018. No directors served on our Compensation Committee in 2018 other than Ms. Campbell, Ms. Gottschalk, Mr. Kanter and Mr. Rosenzweig, the directors currently serving on such committee.

Board’s Role in Risk Oversight

The entire Board of Directors is engaged in risk management oversight. At the present time, the Board of Directors has not established a separate committee to facilitate its risk oversight responsibilities. The Board of Directors expects to continue to monitor and assess whether such a committee would be appropriate. The Audit Committee assists the Board of Directors in its oversight of our risk management and the process established to identify, measure, monitor, and manage risks, in particular major financial risks. The Compensation Committee assesses risks arising from our compensation policies and practices. The Board of Directors receives regular reports from management, as well as from the Audit Committee and Compensation Committee, regarding relevant risks and the actions taken by management to address those risks.

Policy for Director Recommendations

Our Nominating and Corporate Governance Committee is responsible for reviewing and making recommendations to our Board of Directors regarding nominations of candidates for election as a director of the Company. The Nominating and Corporate Governance Committee identifies new director candidates through a variety of sources. The committee will consider director candidates recommended by shareholders in the same manner it considers other candidates, but it has no obligation to recommend such candidates. A shareholder that wants to recommend a candidate for election to the Board of Directors should send a recommendation in writing to Potbelly Corporation, 111 North Canal Street, Suite 850, Chicago, Illinois 60606, Attention: Corporate Secretary. Such recommendation should describe the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as director.

Shareholders may also nominate directors at the annual meeting by adhering to the advance notice procedure described under “Shareholder Proposals for the 2020 Annual Meeting” on page 51 of this Proxy Statement.

The Nominating and Corporate Governance Committee works with the Board on an annual basis to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board and the Nominating and Corporate Governance Committee will take into account factors such as the individual’s general understanding of disciplines relevant to the success of a publicly traded company; understanding of Potbelly’s business; education and professional background, including current employment and other board memberships; reputation for integrity; and any other factors they consider to be relevant. Pursuant to the provisions of our Corporate Governance Guidelines, the Board will endeavor to reflect the diversity of Potbelly’s shareholders, employees and customers and the communities it serves. Additionally, in determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board.

If the Nominating and Corporate Governance Committee determines that an additional or replacement director is required, the committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation and engagement of an outside search firm to gather additional information. From time to time for a fee, Potbelly has used the executive search firm, Spencer Stuart, to identify and evaluate or assist in identifying and evaluating potential candidates for election as directors.

Communication with the Board

Shareholders and other parties interested in communicating directly with one or more individual directors or with the non-management directors as a group, may do so by writing to the individual director or group, c/o Potbelly Corporation, 111 North Canal Street, Suite 850, Chicago, Illinois 60606, Attention: Corporate Secretary. The Board has directed our corporate secretary to forward shareholder communications to our chairman and any other director to whom the communications are directed. In order to facilitate an efficient and reliable means for directors to receive all legitimate communications directed to them regarding our governance or operations, our corporate secretary will use his discretion to refrain from forwarding the following: sales literature; defamatory material regarding us and/or our directors; incoherent or inflammatory correspondence, particularly when such correspondence is repetitive and was addressed previously in some manner; and other correspondence unrelated to the Board of Director’s corporate governance and oversight responsibilities.

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DIRECTOR COMPENSATION

Director Compensation Plan

Our Board of Directors approved a director compensation plan pursuant to the Potbelly Corporation 2013 Long-Term Incentive Plan. Under the director compensation plan in effect for 2018, each non-employee Director who was a member of the Board of Directors as of the 2018 Annual Meeting of Shareholders was eligible to receive $135,000 in annual compensation. Each non-employee Director may elect between the following forms of payment for his or her annual compensation: (1) the non-employee Director receives RSUs having a grant date Fair Market Value of $135,000 (with a grant date on or before the end of the respective second fiscal quarter); or (2) the non-employee Director receives: (a) $60,000 in cash (half of which will be paid on or before the end of the respective second fiscal quarter and half of which will be paid on or before the end of the respective fiscal year); plus (b) RSUs having a grant date Fair Market Value of $75,000 (with a grant date on or before the end of the respective second fiscal quarter).

Pursuant to the director compensation plan, the non-executive Chairman of the Board receives an additional $80,000 retainer, the Audit Committee Chair receives an additional $15,000 retainer, and the Compensation Committee Chair and the Nominating and Corporate Governance Chair each receives an additional $7,500 retainer. The non-executive Chairman of the Board, the Lead Director (if applicable), the Audit Committee Chair, the Compensation Committee Chair and the Nominating and Corporate Governance Committee Chair may each elect between the following forms of payment for such additional retainer: (1) RSUs having a grant date Fair Market Value equal to such additional retainer amount (with a grant date on or before the end of the respective second fiscal quarter); or (2) Cash in an amount equal to one-half such additional retainer amount (half of which will be paid on or before the end of the respective second fiscal quarter and half of which will be paid on or before the end of the respective fiscal year); plus RSUs having a grant date Fair Market Value of half of such additional retainer amount (with a grant date on or before the end of the respective second fiscal quarter).

RSUs shall vest as follows: fifty percent (50%) on the first anniversary of the grant date, and fifty percent (50%) on the second anniversary of the grant date.

2018 Director Compensation

The following table summarizes the amounts earned and paid to our non-employee members of our Board of Directors for 2018. Mr. Johnson, our President and Chief Executive Officer, receives no additional compensation for his service on our Board of Directors:

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Director Stock Ownership Guidelines

The Board believes that all directors should hold a significant equity interest in Potbelly. Toward this end, the Board expects that all directors own, or acquire within five years of first becoming a director, shares of Potbelly common stock (including restricted shares, but not options, under Potbelly’s equity-linked incentive plans) having a market value of at least four times the annual cash compensation for directors (excluding any additional retainer received for service as Chairman of the Board or Lead Director, or as Chair of any Board committee) offered to directors (regardless of whether the director elects to receive such compensation in cash).

As of December 30, 2018, all directors met or exceeded the stock ownership guidelines to which they were subject.

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PROPOSAL 1

Election of Directors

Seven candidates will be elected at the Annual Meeting to serve for a one-year term that will expire at the 2020 Annual Meeting and until their successors shall have been elected and qualified. The election of directors requires the affirmative vote of a plurality of our shares of common stock present in person or by proxy at the Annual Meeting.

Our Board of Directors has nominated Joseph Boehm, Susan Chapman-Hughes, Sue Collyns, Dan Ginsberg, Marla Gottschalk, Alan Johnson, and Benjamin Rosenzweig for election as directors. Directors Pete Bassi, Ann-Marie Campbell and Harvey Kanter have each given notice to the Board of intent to not stand for re-election, as each will be retiring from the Board of Directors effective upon the conclusion of his or her current term at the Annual Meeting. The Board of Directors is not aware that any nominee will be unwilling or unable to serve as a director. All nominees have consented to be named in this Proxy Statement and to serve as a director of the Company if elected. Proxies may not be voted for a greater number of persons than the number of nominees named in this Proxy Statement.

The Board’s nominees possess the requisite experience and skills to successfully oversee the Company’s strategy and business, in the Board’s view. The Board, and its nominees, are dedicated to analyzing objectively the Company’s strategy, business operations, capital allocation and configuration and acting to maximize shareholder value.

For more information on the structure of our Board of Directors and our Board members and nominees, see “Corporate Governance.” The qualifications and experience of each nominee that led our Board and the Nominating and Corporate Governance Committee to conclude that such nominee should serve or continue to serve as director are discussed at the end of each of the nominees’ biographies.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THESE NOMINEES.

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PROPOSAL 2

Ratification of Appointment of Independent Registered Public Accounting Firm

The Audit Committee of our Board of Directors is responsible for recommending, for shareholder approval, our independent registered public accounting firm. The Audit Committee has selected the accounting firm of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 29, 2019. Deloitte & Touche LLP has served as our independent registered public accounting firm since before our Initial Public Offering and has also provided non-audit services from time to time.

Although ratification is not required by our Bylaws or otherwise, our Board of Directors is submitting the selection of Deloitte & Touche LLP to our shareholders for ratification because we value our shareholders’ views on our independent registered public accounting firm and as a matter of good corporate practice. The Audit Committee will consider the outcome of this vote in its decision to appoint an independent registered public accounting firm but is not bound by our shareholders’ vote. Even if the selection of Deloitte & Touche LLP is ratified, the Audit Committee may change the appointment at any time during the year if it determines a change would be in the best interests of the Company and our shareholders.

The following table sets forth the fees pertaining to audit services for the fiscal years ended December 30, 2018 and December 31, 2017 and for other services during those fiscal years:

Policy on Audit Committee Approval of Audit and Non-Audit Services

The Audit Committee’s policy is to approve all audit and permissible non-audit services prior to the engagement of our independent registered public accounting firm to provide such services. The Audit Committee annually approves, pursuant to detailed approval procedures, certain specific categories of permissible non-audit services. Such procedures include the review of (i) a detailed description by our independent registered public accounting firm of the particular services to be provided and the estimated fees for such services and (ii) a regular report to the committee regarding the services provided and the fees paid for such services. The Audit Committee must approve on a project-by-project basis any permissible non-audit services that do not fall within a pre-approved category and any fees for pre-approved permissible non-audit services that materially exceed the previously approved amounts. In making the determinations about non-audit services, the Audit Committee considers whether the provision of non-audit services is compatible with maintaining the auditor’s independence.

All services provided to the Company by Deloitte & Touche LLP in fiscal 2018 and fiscal 2017 and related fees were pre-approved by the Audit Committee.

Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting and to be available to respond to your questions. They have advised us that they do not presently intend to make a statement at the Annual Meeting, although they will have the opportunity to do so.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

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AUDIT COMMITTEE REPORT

With regard to the fiscal year ended December 30, 2018, the Audit Committee has (i) reviewed and discussed with management our audited consolidated financial statements as of December 30, 2018 and for the year then ended; (ii) discussed with Deloitte & Touche LLP, the independent auditors, the matters required by the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301, Communications with Audit Committees; (iii) received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding Deloitte & Touche LLP’s communications with the Audit Committee regarding independence; and (iv) discussed with Deloitte & Touche LLP their independence.

Based on the review and discussions described above, the Audit Committee recommended to our Board of Directors of the Company that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2018 for filing with the SEC.

Susan Chapman-Hughes, Chairman

Sue Collyns

Dan Ginsberg

Marla Gottschalk

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PROPOSAL 3

Advisory Vote on a Resolution To Approve Our 2018 Named Executive Officer Compensation

We are asking shareholders to approve, on an advisory basis, a non-binding resolution (commonly referred to as a “say-on-pay” resolution) to approve the Company’s 2018 named executive officer compensation as reported in this Proxy Statement.

We urge shareholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which describes how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and our Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in aligning the interests of our officer team with those of shareholders.

We have committed to holding say-on-pay votes at each year’s annual meeting; the Compensation Committee will evaluate the frequency of future say-on-pay votes following this year’s annual meeting and the outcome of the advisory vote called for in Proposal 4, below. In accordance Section 14A of the Exchange Act and as a matter of good corporate governance, we are asking shareholders to approve the following advisory resolution at the Annual Meeting:

“RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed under the “Compensation Discussion and Analysis” and “2018 Compensation Tables” headings of this proxy statement.”

This resolution is non-binding on the Board of Directors. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding executive compensation.

THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE “FOR” THE RESOLUTION TO APPROVE OUR 2018 NAMED EXECUTIVE OFFICER COMPENSATION

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PROPOSAL 4

Advisory Vote on the Frequency of Future Advisory Votes to Approve our Named Executive Officer Compensation

In addition to the say-on-pay vote, we are asking you to cast an advisory vote as required by Section 14A of the Exchange Act on whether future advisory votes to approve our named executive officer compensation should occur every year, every two years or every three years.

While the Company’s executive compensation programs are designed to promote a long-term connection between pay and performance, the Board recognizes that executive compensation disclosures are made annually. Holding an annual advisory vote on our named executive officer compensation provides the Company with more direct and immediate feedback on our compensation disclosures. However, shareholders should note that because the advisory vote on named executive officer compensation occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change our named executive officer compensation programs in consideration of any one year’s advisory vote on named executive officer compensation by the time of the following year’s annual meeting of shareholders. We believe that an annual advisory vote on named executive officer compensation is consistent with our practice of seeking input and engaging in dialogue with our shareholders on corporate governance matters (including the Company’s practice of having all directors elected annually and annually providing shareholders the opportunity to ratify the Audit Committee’s selection of independent auditors) and our executive compensation philosophy, policies and practices.

This advisory vote on the frequency of future advisory votes on named executive officer compensation is non-binding on the Board of Directors. Shareholders will be able to specify one of four choices for this proposal on the proxy card: every one year, every two years, every three years or abstain. Shareholders are not voting to approve or disapprove the Board’s recommendation. Although non-binding, the Board and the Compensation Committee will carefully review the voting results. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis if circumstances were to warrant it.

THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE TO CONSIDER FUTURE ADVISORY VOTES TO APPROVE OUR NAMED EXECUTIVE OFFICER COMPENSATION “EVERY YEAR.”

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PROPOSAL 5

Approval of the Potbelly Corporation 2019 Long-Term Incentive Plan

The Board recommends approval of the Potbelly Corporation 2019 Long-Term Incentive Plan (the “Plan”). We are submitting the Plan to our shareholders for approval in order to update our plan terms for certain technical matters and to increase the number of shares that we will have available for issuance for equity awards. The number of share available for issuance under the Plan is equal to the sum of (1) 1,200,000 shares plus (2) the number of shares that are available under the Amended and Restated Potbelly Corporation 2013 Long-Term Incentive Plan (the “Prior Plan”) immediately prior to the date that the Plan is approved by our shareholders (the “approval date”) (and any shares that are subject to outstanding awards under the Prior Plan immediately prior to the approval date and that terminate by reason of expiration, forfeiture, cancellation, or otherwise, without the issuance of such shares, or that are settled in cash). As of March 26, 2019, there were 579,186 shares available for issuance under the Prior Plan and 1,114,008 shares were subject to outstanding awards under the Prior Plan. If our shareholders approve the Plan, no new awards can be made under the Prior Plan. The Board believes approval of the Plan is necessary to enable us to continue to attract, retain and motivate our officers and employees.

A summary of the principal features of the Plan is provided below, but it is qualified in its entirety by reference to the full text of the Plan that is attached to this Proxy Statement as Appendix A.

Background

The purpose of the Plan is to (a) align the interests of our shareholders and the recipients of awards under the plan by increasing the proprietary interest of such recipients in the our growth and success; (b) advance our interests by attracting and retaining qualified employees, outside directors and other persons providing services to us and/or our related companies; and (c) motivate such persons to act in the long-term best interests of our shareholders.

The Board approved the Plan on March 29, 2019. Approval of the Plan will result in 1,200,000 additional shares available for issuance in the form of equity awards, as described in greater detail below. No other material changes were made from the Prior Plan, provided that if the Plan is approved by our shareholders and becomes effective, we will be able to make awards under the Plan through its 2029 expiration date, while the Prior Plan expires in 2028.

On March 26, 2019, the closing price of a share of our common stock on NASDAQ was $8.60.

If the Plan is not approved by the Company’s shareholders, the Company will continue to operate the Prior Plan in accordance with its existing terms.

Summary of Plan

Administration. The Plan generally is administered by the Compensation Committee of our Board of Directors. The Compensation Committee selects award recipients under the Plan who will thereby become participants, the types of awards to be granted and the applicable terms, conditions, performance criteria, restrictions and other provisions of such awards, not inconsistent with the plan. The Compensation Committee also has the authority to conclusively interpret the Plan. Subject to the applicable securities exchange rules and applicable law, the Compensation Committee may delegate all or any portion of its responsibilities or powers under the Plan to persons selected by it.

Authorized Shares. We have reserved 1,200,000 shares of our common stock for issuance pursuant to the Plan. In addition, the number of shares that are available under the Prior Plan immediately prior to the approval date (and any shares that are subject to outstanding awards under the Prior Plan immediately prior to the approval date and that terminate by reason of expiration, forfeiture, cancellation, or otherwise, without the issuance of such shares, or that are settled in cash) will be available for issuance under the Plan. If the Plan is approved by our shareholders, no awards can be made under the Prior Plan. A share of common stock issued in connection with any award under the Plan shall reduce the total number of shares of common stock available for issuance under the Plan by one; provided, however, that shares issued in connection with Full Value Awards (described below) granted under the Plan shall reduce the total number of shares of common stock available for issuance under the Plan by a ratio of 2:1. Any shares of our common stock covered by an award (1) under the Plan or (2) granted under the Prior

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Plan that is outstanding on the approval date (and immediately prior to approval), in each case, that terminates by reason of expiration, forfeiture, cancellation, or otherwise, without the issuance of shares, or that are settled in cash, (collectively “Recycled Shares”) will again be available for awards under the Plan. Recycled Shares shall be added back to the number of shares of common stock reserved for issuance under the Plan on the same basis that they were charged to the number of shares reserved for issuance under the Plan or the Prior Plan, as applicable, at the time the award relating thereto it was granted. The following shares of common stock may not again be made available for issuance under the Plan: (i) shares of common stock not issued or delivered as a result of the net settlement of an outstanding award; (ii) shares delivered to or withheld to pay the exercise price of an option or Stock Appreciation Right (“SAR”) or to pay the withholding taxes with respect to an award; or (iii) shares of common stock repurchased on the open market with the proceeds of the exercise price of an option.

Additional Limits. The following additional limits will apply to awards under the Plan: (a) no more than 1,200,000 shares of common stock may be subject to incentive stock options (“ISOs”) granted under the Plan; (b) the maximum number of shares of common stock that may be covered by options and SARs granted to any one participant in any one calendar year may not exceed 400,000 shares of common stock; and (c) the maximum number of shares of common stock that may be delivered pursuant to any Full Value Award granted to any one participant during any calendar year, regardless of whether settlement of the award is to occur prior to, at the time of, or after the time of vesting, may not exceed 400,000 shares of common stock. The aggregate value of all awards granted under the Plan to any outside director shall not exceed (y) $300,000 in total value in any one calendar year or (z) in the event such outside director is first appointed or elected to the Board in such calendar year, $400,000 in total value.

Adjustments. In the event of a corporate transaction, including a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination or other corporate transaction, that affects our common stock such that the Compensation Committee determines that an adjustment is warranted in order to preserve the benefits or prevent the enlargement of benefits of awards under the Plan, the Compensation Committee will make adjustments to awards in a manner that it determines to be equitable in its discretion. Actions that the Compensation Committee may take are: (i) adjustment of the number and kind of shares which may be delivered under the Plan (including adjustments to the individual limitations described above); (ii) adjustment of the number and kind of shares subject to outstanding awards; (iii) adjustment of the exercise price of outstanding options and SARs; and (iv) any other adjustments that the Compensation Committee determines to be equitable, which may include, without limitation, (A) replacement of awards with other awards which the Compensation Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (B) cancellation of the award in return for cash payment of the current value of the award, determined as though the award is fully vested at the time of payment, provided that in the case of an option or SAR, the amount of such payment may be the excess of the value of the shares of common stock subject to the option or SAR at the time of the transaction over the exercise price.

Eligibility. The Compensation Committee may grant awards under the Plan to any officer, director, employee, consultant, independent contractor or agent of the Company and/or a related company, and persons who are expected to become an officer, director, employee, consultant, independent contractor or agent of the Company or a related company. Awards to a person who is expected to become a service provider to the Company or a related company cannot be effective prior to the date on which such person’s service begins. ISOs may only be granted to employees of the Company and its corporate related companies which satisfy certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”). As of March 26, 2019, we had approximately 7,000 employees and ten directors, all of whom would be eligible to participate in the Plan if selected by the Compensation Committee.

Types of Awards. The Plan will provide for grants of options (including nonqualified stock options (“NQOs”) and ISOs), SARs, and Full Value Awards.

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Special Vesting Rules. Except for (a) awards granted under the Plan with respect to shares of common stock which do not exceed, in the aggregate, five percent of the total number of shares of common stock reserved for issuance pursuant to the Plan, (b) awards granted in lieu of other compensation, and (c) awards that are a form of payment of earned performance awards or other incentive compensation provided that the performance period relating to such performance or incentive awards was at least one year, if a participant’s right to become vested in an award is conditioned on the completion of a specified period of service with us or our affiliates being required, then the required period of service shall be at least one (1) year, except if accelerated in the event of the participant’s death or disability, or involuntary termination.

Transferability. Awards under the plan generally may not be transferred except through will or by the laws of descent and distribution; provided, however, that unless otherwise provided by the Compensation Committee, awards (other than an ISO) may be transferred to or for the benefit of the participant’s family (including, without limitation, to a trust or partnership for the benefit of a participant’s family) in accordance with rules established by the Compensation Committee.

Change in Control. In the event that (i) a participant is employed or in service on the date of a Change in Control (as defined in the Plan) and the participant’s employment or service, as applicable, is terminated by us, our successor or a related company that is the participant’s employer for reasons other than cause (as defined in the Plan) within 24 months following the Change in Control, or (ii) the Plan is terminated by us or our successor following a Change in Control without provision for the assumption, continuation or substitution of outstanding awards under the Plan, all options, SARs and related awards which have not otherwise expired will become immediately exercisable and all other awards will become fully vested; provided, however, that all awards with conditions and restrictions relating to the attainment of performance goals shall become vested assuming the higher of (A) achievement of all relevant performance goals at the target level of performance (pro-rated based upon the length of time within the performance period that has elapsed prior to the Change of Control) or (B) actual achievement of the performance goals as of the date of the Change of Control. A participant’s employment or service will be deemed to have been terminated by us or our successor for reasons other than for cause if the participant terminates employment or service after a substantial adverse alteration in the nature of the participant’s status or responsibilities from those in effect immediately prior to the Change in Control or a material reduction in the participant’s annual base salary and target bonus, or in the case of an outside director his annual compensation, as in effect immediately prior to the Change in Control. Special rules apply if, upon a Change in Control, awards in other shares or securities are substituted for outstanding awards under the Plan and if, immediately prior to the Change in Control, the participant becomes an employee or a director of, as applicable, the successor to us.

Amendment and Termination. The Board of Directors may, at any time, amend or terminate the Plan, and the Board of Directors or the Compensation Committee may amend any award agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected participant (or, if the participant is not then living, the affected beneficiary), adversely affect the rights of any participant or beneficiary under any award granted under the Plan prior to the date such amendment is adopted by the Board of Directors (or the Compensation Committee, if applicable). Adjustments to the Plan and awards on account of business transactions (as described above) are not subject to the foregoing prohibition. The provisions of the Plan that prohibit repricing of options and SARs or exchanges of an option or SAR for another award or cash payment if the exercise price is below fair market value on the date of the repricing or exchange cannot be amended unless the amendment is approved by our shareholders.

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U.S. Federal Income Tax Implications of the Plan

The discussion that follows is a summary, based on U.S. federal tax laws and regulations presently in effect, of some significant U.S. federal income tax considerations relating to awards under the Plan. The applicable laws and regulations are subject to change, and the discussion does not purport to be a complete description of the federal income tax aspects of the Plan. This summary does not discuss state, local or foreign laws.

Stock Options. The tax treatment of a stock option depends on whether the option is an NQO or an ISO.

The grant of an NQO will not result in taxable income to the participant. Except as described below, the participant will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares of stock acquired over the exercise price for those shares of common stock, and we will be entitled to a corresponding deduction.

The grant of an ISO will not result in taxable income to the participant. The exercise of an ISO will not result in taxable income to the participant provided that the participant was, without a break in service, an employee of us and our eligible subsidiaries (determined under tax rules) during the period beginning on the date of the grant of the ISO and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is disabled, as that term is defined in the Code).

The excess of the fair market value of the shares of common stock at the time of the exercise of an ISO over the exercise price is an adjustment that is included in the calculation of the participant’s alternative minimum taxable income for the tax year in which the ISO is exercised. For purposes of determining the participant’s alternative minimum tax liability for the year of disposition of the shares of common stock acquired pursuant to the ISO exercise, the participant will have a basis in those shares of common stock equal to the fair market value of the shares of common stock at the time of exercise.

If the participant does not sell or otherwise dispose of the shares of common stock within two years from the date of the grant of the ISO or within one year after receiving the transfer of such shares of common stock, then, upon disposition of such shares of common stock, any amount realized in excess of the exercise price will be taxed to the participant as capital gain, and we will not be entitled to any deduction for Federal income tax purposes.

If the foregoing holding period requirements are not met, the participant will generally realize ordinary income, and a corresponding deduction will be allowed to us, at the time of the disposition of the shares of common stock, in an amount equal to the lesser of (a) the excess of the fair market value of the shares of common stock on the date of exercise over the exercise price, or (b) the excess, if any, of the amount realized upon disposition of the shares of common stock over the exercise price.

Special rules apply if an option is exercised through the exchange of previously acquired stock

SARs. A participant will not be deemed to have received any income upon the grant of a SAR. Generally, when a SAR is exercised, the excess of the market price of common stock on the date of exercise over the exercise price will be taxable to a participant as ordinary income. We are entitled to a deduction in the year of exercise equal to the amount of income taxable to the individual.

Full Value Awards. The federal income tax consequences of a Full Value Award will depend on the type of award. The tax treatment of the grant of shares of common stock depends on whether the shares are subject to a substantial risk of forfeiture (determined under Code rules) at the time of the grant. If the shares are subject to a substantial risk of forfeiture, the participant will not recognize taxable income at the time of the grant and when the restrictions on the shares lapse (that is, when the shares are no longer subject to a substantial risk of forfeiture), the participant will recognize ordinary taxable income in an amount equal to the fair market value of the shares at that time. If the shares are not subject to a substantial risk of forfeiture or if the participant elects to be taxed at the time of the grant of such shares under Code Section 83(b), the participant will recognize taxable income at the time of the grant of shares in an amount equal to the fair market value of such shares at that time, determined without regard to any of the restrictions. If the shares are forfeited before the restrictions lapse, the participant will be entitled to no deduction on account thereof. The participant’s tax basis in the shares is the amount recognized by him or her as income attributable to such shares. Gain or loss recognized by the participant on a subsequent disposition of any such shares is capital gain or loss if the shares are otherwise capital assets.

In the case of other Full Value Awards, such as restricted stock units or performance stock units, the participant generally will not have taxable income upon the grant of the award provided that there are restrictions on such awards that constitute a substantial risk of forfeiture under applicable Code rules. Participants will generally recognize ordinary income when the restrictions on awards lapse, on the date of grant if there are no such restrictions or, in certain cases, when the award is settled. At that time, the participant will recognize taxable income equal to the cash or the then fair market value of the shares issuable in payment of

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such award, and such amount will be the tax basis for any shares received. In the case of an award which does not constitute property at the time of grant (such as an award of units), participants will generally recognize ordinary income when the award is paid or settled.

We generally will be entitled to a tax deduction in the same amount, and at the same time, as the income is recognized by the participant.

Section 162(m) and Section 280G. Compensation that qualifies as “Performance-Based Compensation” is excluded from the $1 million deductibility cap of Code Section 162(m), and therefore remains fully deductible by the Company paying it. The Tax Reform and Jobs Act of 2017 (the “Act”) eliminated the Performance-Based Compensation exception of Code Section 162(m) for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible (assuming that it would have had the exception not been eliminated). Although an exception applies for certain awards in effect in place as of November 2, 2017, we do not believe that awards under the Plan will be covered by the exception.

Compensation to certain employees resulting from the earning or vesting of awards in connection with a change in control or termination following a change in control also may be non-deductible under Code Sections 4999 and 280G.

The foregoing provides only a general description of the application of federal income tax laws to certain awards under the Plan. This discussion is intended for the information of shareholders considering how to vote at the Annual Meeting and not as tax guidance to participants in the Plan, as the consequences may vary with the types of awards made, the identity of the recipients and the method of payment or settlement.

New Plan Benefits

The number of options, SARs and Full Value Awards that will be granted under the Plan is not currently determinable.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE POTBELLY CORPORATION 2019 LONG-TERM INCENTIVE PLAN.

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Equity Compensation Plan Information

The following table presents certain information related to our equity incentive plans under which our equity securities are authorized for issuance as of December 30, 2018:

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EXECUTIVE OFFICERS

In addition to Alan Johnson, our President and Chief Executive Officer, whose biography is included under the heading “Director Biographies,” our executive officers, their ages as of December 30, 2018, and a brief account of their business experience follows:

Experience

Thomas Fitzgerald has been our Senior Vice President and Chief Financial Officer since December 2018. Prior to joining Potbelly, Mr. Fitzgerald served on the Board of Directors for Charming Charlie, Inc., a fashion and accessories retailer, from March 2017 through March 2018 and was employed as their President and Chief Financial Officer from 2015 through 2017, and as their Chief Administrative Officer and Chief Financial Officer from 2013 through 2015. Charming Charlie, Inc. filed for bankruptcy in December of 2017 and emerged from Chapter 11 bankruptcy protection in April of 2018. Prior to joining Charming Charlie, Mr. Fitzgerald was Chief Administrative Officer for Sears Canada, Inc. from 2011 to 2012. Mr. Fitzgerald’s prior roles included COO of Liz Claiborne–Direct Brands, CFO Burlington Coat Factory, COO and CFO Bath & Body Works, and various leadership positions over his sixteen years at PepsiCo.

Experience

Julie Younglove-Webb has been our Senior Vice President and Chief of Restaurant Operations since December 2018, having served as our Senior Vice President of Operations since May 2015. Ms. Younglove-Webb joined Potbelly in 2008 as a General Manager, assuming various operations roles before reaching her current position. Prior to joining Potbelly, Ms. Younglove-Webb was Senior Vice President and General Manager of Sears Essentials at Sears Holding Corporation, a role she assumed in 2005 after Sears’ acquisition of KMart Corporation. Prior to that acquisition, Ms. Younglove-Webb held various roles of increasing responsibility beginning when she joined KMart in 1999 as Manager, Information Technology and culminating with her role as Vice President, Marketing.

Experience

Brandon Rhoten has been our Senior Vice President and Chief Marketing Officer since June 2018. He is responsible for all marketing activities, including brand marketing, digital & social media and consumer insights. Mr. Rhoten joined Potbelly from Papa John’s International, Inc., where he served as Global Chief Marketing Officer from May 2017 through May 2018. Prior to Papa John’s, Mr. Rhoten was Vice President of Advertising, Media and Digital/Social at Wendy’s International from May 2011 through May 2017. Mr. Rhoten started his career in marketing at the advertising agency Gyro.

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Experience

Matthew Revord has been our Senior Vice President, Chief Legal Officer, Chief People Officer and Secretary since May 2018 and oversees all legal matters and human resources matters of the Company. In February 2014 Mr. Revord became the Company’s Chief Legal Officer having joined Potbelly in January 2007 as our Senior Vice President, General Counsel and Secretary. From January 2002 to January 2007, Mr. Revord served as Deputy General Counsel of Brunswick Corporation and General Counsel of Brunswick New Technologies.

Experience

Jeff Welch has been our Senior Vice President, Development since April 2018. Mr. Welch previously served on the Board of Directors for Papa Murphy’s International from 2015 through 2017. Mr. Welch was an independent consultant, providing retail and restaurant consulting services, from February 2014 through April 2018. Prior to that, from April 2004 through February 2014, Mr. Welch was President of the international group for Krispy Kreme. Prior to that, he was at The Home Depot, where he led international real estate. He has held senior roles with PepsiCo Restaurants International (now known as Yum! Brands) culminating as VP of Franchising and Business Development for Europe, Africa, and the Middle East.

Experience

Maryann Byrdak has been our Senior Vice President, Information Technology since March 2018. Ms. Byrdak joined Potbelly in August 2015 as Vice President of Information Technology. Prior to joining Potbelly, from June 2006 through July 2015, Ms. Byrdak held various positions at Office Depot, Inc. (previously OfficeMax Incorporated), an office supply retailing company, culminating with Senior Director, IT.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis section is intended to provide our shareholders with a clear understanding of our compensation philosophy, objectives and practices; our compensation setting process; our executive compensation program components; and the decisions with respect to the 2018 compensation of each of our Named Executive Officers (“NEOs”). For 2018 our NEOs were:

Executive Summary

Performance Overview for 2018. Fiscal year 2018 was a transition year for our business and our leadership team as we realigned our strategies to return to sustainable and long-term profitable growth. Our objectives for 2018 were to learn what it takes to positively impact same store sales and drive industry-beating traffic trends. We made the investments required and tested new ideas to drive brand awareness, interest and purchase intent and to support our topline, margin, profitability and growth goals. While we achieved meaningful progress toward our objectives, we recognized that there is still work to be done as our actions did not translate into share price performance in 2018.

Our incentive compensation plans worked as intended in 2018. The payouts under those plans were strongly aligned with our financial and stock price performance—demonstrating our commitment to structure an executive compensation program that pays for performance.

2018 Pay Actions. As a result of the above, our 2018 executive compensation was significantly impacted. There were no base salary increases for any of our named executive officers. In addition, aside from new-hire equity awards, none of our named executive officers received equity grants in 2018. Finally, cash bonuses to our named executive officers were limited.

Executive Leadership Transitions. Alan Johnson, our President and Chief Executive Officer, joined us in November of 2017, making fiscal year 2018 the first full year Mr. Johnson was in the position. The past year included several important changes to the senior leadership team reporting to the CEO. Tom Fitzgerald joined the Company as our Chief Financial Officer in December 2018 after Michael Coyne, our former Chief Financial Officer, resigned effective September 2018 to pursue other opportunities. Brandon Rhoten joined the Company in June 2018 as our Chief Marketing Officer and Jeff Welch joined the Company in April 2018 as our Senior Vice President, Development. In addition, two members of our senior leadership team assumed significant additional responsibilities. Julie Younglove-Webb was promoted to Chief Restaurant Operations Officer, from her prior position as Senior Vice President, Operations, and Matthew Revord, our Chief Legal Officer and Secretary, acquired the additional responsibility for the human resources department as our Chief People Officer. All bring exceptional qualifications to their important roles.

Compensation Philosophy and Objectives

Our compensation philosophy is to pay for performance, rewarding employees when performance targets are met. Merit increases, annual incentive compensation, equity awards, and incremental paid time off are all tied to performance and results. Our compensation programs are designed to attract, retain, motivate, and reward employees. Our pay program is designed to compensate employees commensurate with the scope and influence of the employee’s role and the extent to which an employee contributes to the achievement of key initiatives and financial targets, and demonstrates our values. All of our compensation programs are designed to align and reward actions that we believe contribute to our competitiveness and encourage superior performance.

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We evaluate our executives on a scale of one through five. A score of three means the executive is a “Contributor,” four is a “High Contributor” and five is a “Star.” Annual cash compensation varies based on the executive’s score, other individual performance measures, Company performance, and contributions to Potbelly.

Executive pay is tied to both the Company’s and the individual’s annual performance. Merit increases, annual incentive compensation, equity compensation, when granted, and paid time off are generally awarded in March or April of each year, following completion of the first quarter annual performance review cycle, the annual financial audit, and approval from the Compensation Committee. The employment agreements of our named executive officers specify each executive’s annual incentive bonus target under our current bonus program. In addition, at the discretion of the Compensation Committee in the case of our Chief Executive Officer, and at the discretion of our Chief Executive Officer and upon the approval of the Compensation Committee in the case of our other executive officers, there may be an increase or decrease applied to the annual bonus awarded to an executive, including the other named executive officers, in order to account for exceptional circumstances. However, it is anticipated that such bonuses would only be awarded under unusual circumstances to further the objectives of our compensation program.

Elements of Executive Compensation

The following table provides information regarding the elements of our executive compensation program.

Other Compensation Policies. In addition to the principal compensation elements described above, we provide our executive officers with access to the same benefits we provide all of our full-time employees. Our officers also receive certain limited perquisites and other personal benefits that we believe are reasonable and consistent with our compensation objectives. These perquisites have been identified in the “Summary Compensation Table.” We also provide sign-on bonuses and new-hire equity awards (subject to a time-based vesting period) when the Compensation Committee determines it is necessary and appropriate to advance the Company’s interests, including attracting top executive talent from other companies. Sign-on bonuses and new-hire equity awards are an effective means of offsetting the compensation opportunities executives forfeit when they leave a former employer to join the Company.

Our Executive Compensation Process

Compensation for our named executive officers is comprised of base salary, target value of long-term incentive, and target annual incentive bonus. Executive compensation is designed to be competitive with peer companies and market data, as explained below under “Role of Market Data and Our Peer Group.”

Roles and Responsibilities of the Compensation Committee, Compensation Consultant and the CEO in Setting Named Executive Officer Compensation. The Compensation Committee is currently comprised of four independent directors and reports to the Board. In accordance with its obligations as set forth in its charter, the Compensation Committee retains independent consultants and counsel to assist it in evaluating compensation as well as working with the CEO and the CFO to set performance goals. The Compensation Committee determines and approves executive compensation annually, with base salaries, bonus payments (for performance the prior fiscal year), performance goals for long-term incentive grants and annual incentive bonuses approved during the first quarter of the fiscal year. This process allows the Compensation Committee to consider comprehensive information, including the Company’s performance and each named executive officer’s during the prior fiscal year, when making final compensation decisions.

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In 2018, Aon Hewitt, which provides occasional consulting services to the Compensation Committee, advised the Compensation Committee on the appropriateness and competitiveness of our compensation programs relative to market practice, our strategy and our internal processes, Aon Hewitt also consulted with the Compensation Committee on restructuring our executive officer long-term incentive with consulting services concerning the introduction of performance share units, which the Company introduced as a new form of equity for executive officers beginning with grants in fiscal year 2019. Aon Hewitt attended Compensation Committee meetings when requested and works with management as necessary to gather and review information required to carry out its obligations.

Mr. Johnson, our CEO, and other members of the management team support the Compensation Committee in the executive compensation process and regularly attend portions of committee meetings. Mr. Johnson provides the Compensation Committee with his perspective regarding the performance of his executive leadership team, including the other named executive officers. Mr. Johnson makes recommendations to the Compensation Committee on the full range of annual executive compensation decisions, except with regard to his own compensation. In accordance with NASDAQ rules, Mr. Johnson was not present when his compensation for fiscal 2018 was being discussed and does not vote on executive compensation matters, and neither Mr. Johnson nor other members of management attended executive sessions of the Compensation Committee.

Role of Market Data and Our Peer Group. As part of the annual executive compensation process, the Compensation Committee reviews compensation levels and practices for executives holding comparable positions at peer group companies and also considers broader compensation survey data. Our market for executive recruiting is generally other restaurant or retail concepts. For non-operations executives, we recruit from the general restaurant industry. In evaluating the competitiveness of our executive compensation program, we compare our executive’s compensation against the restaurant industry, specifically the limited-service restaurant segment, and national and local competitors to help ensure we are competitive, focusing on items such as equity awards, merit pay, incentive pay and paid time off.

The Compensation Committee does not explicitly benchmark our executive officers’ compensation to the peers, but the peer group data is one of multiple reference points used to evaluate our executive compensation programs.

2018 Peer Group. Our peer group consists of casual dining, fine dining, quick casual and quick service restaurants. The Compensation Committee and independent directors considered the peer group in connection with the fiscal 2018 executive compensation decisions. The Compensation Committee reviews the composition of the peer group periodically and will make adjustments to the peer group in response to changes in the size of business operations of the Company and of companies in the peer group, companies in the peer group being acquired or taken private, and other companies in the restaurant industry becoming public. The table below lists the companies that were considered for fiscal 2018.

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Base Salary

The Compensation Committee generally reviews and approves base salaries annually during the first quarter of the fiscal year, with new salaries becoming effective in mid-April. For fiscal 2018, the Compensation Committee reviewed and approved the base salaries shown below (and with respect to Mr. Johnson, the Compensation Committee recommended, and the independent directors approved).

Annual Incentive Plan

The Company has established the Support Center Annual Incentive Plan to provide annual cash incentive compensation to executives. The graphic below illustrates the weighting of the metrics and the calculation of the objective component of the Annual Incentive Plan.

This plan sets a threshold, target, and maximum level for each of these metrics applicable to all executive officers, and the amounts paid are based on the actual results achieved by the Company. The targets are set for the year by the Compensation Committee based on recommendations from the CEO and the CFO and are communicated to executives at the beginning of each year. To be eligible for an award under the plan, the named executive officer must receive an annual individual performance appraisal rating of “Contributor” or higher. The threshold, target and maximum criteria and actual fiscal year 2018 results for Total Company Revenue and Adjusted EBITDA are as follows:

The chart below sets forth the threshold, target, and maximum percentages of base salary for awards under the Support Center Annual Incentive Plan in 2018, together with the actual bonus levels paid to our NEOs, based on actual Company results.

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Other Cash Bonuses

For fiscal year 2018, the Company did not achieve the threshold level for either of the metrics. Accordingly, no annual cash incentive awards were paid to the named executive officers under the Support Center Annual Incentive Plan for fiscal 2018 performance, however discretionary cash bonuses were awarded based on the named executive officer’s individual performance ratings.

Mr. Johnson’s employment agreement provides that for fiscal year 2018, Mr. Johnson’s target level shall be 100% of base salary, but that his annual cash incentive award for fiscal year 2018 shall not be less than $543,750. Accordingly, the independent members of the Board awarded Mr. Johnson an annual bonus in the amount of $543,750. Mr. Johnson evaluated the performance of the other NEOs and presented those evaluations to the Compensation Committee during its meetings in the first quarter of 2019. The evaluations included an analysis of each executive’s performance against his or her strategic priorities and operational initiatives. The Compensation Committee concurred with Mr. Johnson’s recommendation to pay modest discretionary cash bonuses to Ms. Younglove-Webb, Mr. Rhoten and Mr. Revord. For Ms. Younglove-Webb and Mr. Revord the bonus was paid in consideration of the additional responsibilities they each assumed during 2018. Ms. Younglove-Webb was promoted to the position of Chief Restaurant Operations Officer and assumed responsibility for training and off-premise aspects of shop operations and Mr. Revord acquired the title of Chief People Officer, responsible for the human resources function. Mr. Rhoten’s bonus was in recognition of the several marketing initiatives he spearheaded since joining the Company in June 2018. In addition, Mr. Coyne and Mr. Revord received a discretionary cash bonus of $200,000 and $150,000, respectively, during fiscal year 2018 in recognition of their contributions while the Company was exploring a potential sale.

Long-Term Incentive Awards

Equity awards represent an important component of our named executive officer compensation. We believe long-term incentive awards align the interests of our shareholders and our named executive officers by increasing the proprietary interest of our named executive officers in the Company’s growth and success; advance the Company’s interests by attracting and retaining qualified employees over time; and motivate our executives to act in the long-term best interests of our shareholders. Long-term incentive awards are currently granted under our Amended and Restated 2013 Long-Term Incentive Plan (the “2013 Long-Term Incentive Plan”), which replaced the Potbelly Corporation 2004 Incentive Plan (the “2004 Incentive Plan”) (provided that outstanding awards under the 2004 Incentive Plan will continue to be subject to the terms of the 2004 Incentive Plan). The 2013 Long-Term Incentive Plan provides for grants of options (including nonqualified stock options and incentive stock options), stock appreciation rights, and full value awards (including restricted stock units and performance stock units). The 2013 Long-Term Incentive Plan is administered by the Compensation Committee. We have adopted the 2019 Long-Term Incentive Plan which, if approved by our shareholders, will replace the 2013 Long-Term Incentive Plan. A description of the 2019 Long-Term Incentive Plan is included in Proposal 5.

The equity compensation for Mr. Johnson is determined by the Board of Directors (other than Mr. Johnson) upon the recommendation of the Compensation Committee. The equity compensation for our named executive officers (other than Mr. Johnson) is determined by the Compensation Committee upon the recommendation of the CEO. The Compensation Committee did not award any long-term incentive plan awards to named executive officers in 2018, except as described below.

Mr. Johnson received a grant of 200,401 stock options and 78,125 restricted stock units in November of 2017 in connection with the signing of his employment agreement. The stock options vest in four equal annual installments, commencing on the first anniversary of the grant date. The restricted stock units vest in three equal annual installments, commencing on the first anniversary of the grant date. In May of 2018, pursuant to an amendment to his employment agreement, Mr. Johnson’s stock options were modified to increase the original exercise price by 10% from $12.80 per share to $14.08 per share. Mr. Johnson received no equity compensation in 2018, as under the terms of his employment agreement Mr. Johnson was not eligible to receive equity compensation as part of the Company’s long-term incentive compensation program until calendar year 2019.

Mr. Fitzgerald received a grant of 93,359 stock options and 37,353 full value awards in December 2018 in connection with the signing of his employment agreement. In June of 2018, in connection with the signing of his employment agreement, Mr. Rhoten received a grant of 47,513 stock options and 19,157 full value awards. For each of Mr. Fitzgerald and Mr. Rhoten, the stock options vest in four equal annual installments and the restricted stock units vest in three equal annual installments, in each instance commencing on the first anniversary of the grant date. Mr. Coyne, Ms. Younglove-Webb and Mr. Revord did not receive equity awards in 2018.

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In 2018, the Compensation Committee engaged Aon Hewitt to review executive equity compensation and the design of the long-term incentive plan for executive officers. In consultation with Aon Hewitt, the Compensation Committee and the independent members of the Board approved a new long-term incentive structure. Beginning with grants in 2019, the equity mix for executive officers will change from 50% stock options and 50% restricted stock units to 50% performance stock units and 50% restricted stock units. The performance stock units will have a 3-year cliff vesting and will be earned based on our achievement of adjusted EBITDA and same store sales goals over the three-year performance period, with specific targets designated at the beginning of the performance period by the Compensation Committee. To reflect performance above or below target, each metric has a sliding scale that provides for payouts greater than target (up to a maximum 200% payout) or less than the target number if performance results are lower than target (down to a 50% payout for threshold performance, below which the payout would be 0%).

Other Plans

Our named executive officers are eligible to participate in our 401(k) plan. The Company matches 50% of the contributions that our employees, including our named executive officers, make to the 401(k) plan, with a maximum matching contribution of $3,000 per year.

The Company established in fiscal 2014 a non-qualified deferred compensation plan which allows highly compensated employees to defer a portion of their base salary and variable compensation each plan year. The Company matches 50% of the contributions that our highly-compensated employees, including our named executive officers, make to the deferred compensation plan, with a maximum matching contribution of $3,000 per year. If an employee participates in both the 401(k) plan and the non-qualified deferred compensation plan, the total maximum matching contribution is $3,000 per year.

Executive Stock Ownership Guidelines

Our stock ownership guidelines were established for executive officers to encourage them to have a long-term equity stake in the Company and to align their interests with shareholders. The Board expects that all executive officers own, or acquire within the later of (i) August of 2022, and (ii) five years of first becoming an executive officer, shares of Potbelly common stock (including restricted shares, but not options, under Potbelly’s equity-linked incentive plans) having a market value of a multiple of such executive officer’s annual base salary. For the Chief Executive Officer, the multiple shall be four (4) times annual base salary and for all other executive officers the multiple shall be one and one-half (1.5) times annual base salary.

Employment Agreements

The following is a summary of the employment agreements and similar agreements the Company has entered into with each of the named executive officers.

Chief Executive Officer Employment Agreement. Mr. Johnson entered into an employment agreement with the Company effective as of November 29, 2017 and as amended effective May 14, 2018 (collectively, the “Johnson Agreement”) pursuant to which he will serve as our President and Chief Executive Officer. The Johnson Agreement provides for a base salary of $725,000, subject to increase from time to time in the discretion of the Board. The Johnson Agreement provides that beginning with the 2018 calendar year, Mr. Johnson is eligible for an annual bonus amount to be determined by the Compensation Committee. For the 2018 calendar year, Mr. Johnson will be eligible for an annual target bonus of 100% of base salary, with a maximum bonus of 200% of base salary. Such bonus is subject to satisfaction of applicable Company and individual performance targets and, for the 2018 calendar year shall not be less than $543,750 so long as Mr. Johnson’s termination date does not occur prior to December 31, 2018. The Johnson Agreement also provides for the reimbursement of relocation expenses actually incurred, including transportation expenses, temporary housing, moving household goods, real estate commissions and closing costs incurred with the sale of his current residence and with the purchase of a residence in the Chicago area.

Pursuant to the Johnson Agreement, on November 29, 2017, Mr. Johnson was granted 78,125 restricted stock units with a grant date value of $1,000,000 and granted 200,401 stock options with an exercise price of $12.80 and with a Black-Scholes value of $1,000,000. On May 14, 2018, pursuant to an amendment to his employment agreement, Mr. Johnson’s stock options were modified to increase the original exercise price by 10% to $14.08 per share. The increase in the exercise price lowered the fair value of the awards from the fair value calculated based on the original terms of the stock option awards. Under the Johnson Agreement, Mr. Johnson was not eligible for any equity awards under any Company equity incentive plan in calendar year 2018. The Johnson Agreement contemplates that Mr. Johnson may be granted equity awards under the Company’s equity incentive plan beginning with calendar year 2019 with a target award value of $1,000,000, with the actual value of the equity award for any year determined by the Compensation Committee in its sole discretion.

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The Johnson Agreement terminates upon death, disability, termination by us with or without cause or resignation by Mr. Johnson with or without good reason. The Johnson Agreement generally defines “cause” as Mr. Johnson’s (i) willful and continued failure to substantially perform his duties for the Company (other than due to his disability); (ii) willful engagement in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; (iii) engaging in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Board, Mr. Johnson’s credibility and reputation no longer confirm to the standard of the Company’s executives; (iv) indictment for the commission of a crime that constitutes a felony; or (v) a breach of his confidentiality, non-competition, non-interference and intellectual property agreement. The Johnson Agreement generally defines “good reason” as (1) assignment of duties that are materially inconsistent with his position and that result in a substantial diminution of the duties applicable to the position; (2) material reduction in base salary; (3) relocation to a place more than 50 miles from Chicago; or (4) material breach of the agreement by us.

Mr. Johnson is also a party to a confidentiality, noncompetition, noninterference and intellectual property agreement, with the noncompetition and noninterference covenants lasting for one year after termination of employment. For information regarding the severance benefits under the Johnson Agreement as well as the treatment of Mr. Johnson’s outstanding equity awards upon a qualifying termination or a corporate transaction/change in control, see “—Potential Payments Upon Termination of Employment or a Corporate Transaction/Change in Control—Alan Johnson Employment Agreement,” on page 45 of this Proxy Statement.

Named Executive Officer Employment Agreements. Mr. Fitzgerald entered into an employment agreement with the Company effective as of December 3, 2018, pursuant to which Mr. Fitzgerald serves as our Senior Vice President and Chief Financial Officer. Mr. Rhoten serves as our Senior Vice President and Chief Marketing Officer pursuant to an employment agreement with the Company effective as of June 4, 2018. Mr. Coyne (our former Senior Vice President and Chief Financial Officer) and Ms. Younglove-Webb each entered into an employment agreement with the Company effective as of May 1, 2015. Her employment agreement designates Ms. Younglove-Webb as our Senior Vice President, Operations, however she has since been promoted to Senior Vice President and Chief Restaurant Operations Officer. Mr. Revord entered into a new employment agreement effective as of July 25, 2013, and amended effective April 22, 2015, designating him as our Senior Vice President, General Counsel and Secretary. Mr. Revord has since taken on additional responsibilities and currently serves as our Senior Vice President, Chief Legal Officer, Chief People Officer and Secretary.

Each NEOs employment agreement provides for a base salary subject to increase from time to time by the Compensation Committee at the recommendation of our President and Chief Executive Officer. Under the employment agreements, the NEOs are each eligible for annual bonus in accordance with incentive plan metrics recommended by the CEO and CFO and approved by the Compensation Committee. The employment agreements also provide the executives with standard benefits and perquisites. The employment agreements contemplate that the executives may be granted equity awards under our equity incentive plans.

Effective July 18, 2017, Mr. Coyne entered into a Letter Agreement with the Company which provided that, in consideration for his service as interim chief executive officer, the Company agreed to pay him additional compensation of $25,000 per calendar month ($12,500 for any calendar month for which he provides services as interim chief executive officer for 14 days or less). This additional compensation was in addition to Mr. Coyne’s base salary, which remained unchanged. The additional compensation was not treated as base salary, bonus or other compensation for purposes of his employment agreement.

Our NEOs each continue to be parties to a confidentiality, noncompetition, noninterference and intellectual property agreement, with the noncompetition and noninterference covenants lasting for one year after termination of employment.

Executive Officer Retention Awards. On July 17, 2017, the Compensation Committee authorized the Company to enter into retention agreements with each of Mr. Coyne, Ms. Younglove-Webb and Mr. Revord. Subject to the restrictions set forth in the retention agreements, each of Mr. Coyne, Ms. Younglove-Webb and Mr. Revord were eligible to receive a cash retention award in an amount equal to $444,375, $382,500, and $416,250, respectively, in the event he or she remained continuously employed with the Company through December 31, 2018. The retention awards were payable only if the executive (1) remained employed in good standing through the retention date, or was terminated by the Company other than for cause (as defined in the Retention Agreements); and (2) delivered a valid and irrevocable release and waiver in form provided by the Company. The retention payment were payable in one lump sum payment sixty days following the earlier of (i) the executive’s termination date (as defined in the Retention Agreement) or (ii) December 31, 2018. Mr. Coyne resigned from his position prior to December 31, 2018 and was therefore ineligible to receive his retention award. Ms. Younglove-Webb and Mr. Revord earned, and were paid, their respective retention awards in fiscal year 2019, and as a result, these awards are not included in the Summary Compensation Table for fiscal year 2018. For information regarding the retention payments under the Retention Agreements, see “—Potential Payments Upon Termination of Employment or a Corporate Transaction/Change in Control—Executive Retention Agreements,” on page 45 of this Proxy Statement.

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the SEC.

Ann-Marie Campbell, Chairman

Marla Gottschalk

Harvey Kanter

Ben Rosenzweig

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2018 COMPENSATION TABLES

2018 Summary Compensation Table

The following table summarizes compensation for the years ending December 30, 2018, December 31, 2017 and December 25, 2016 earned by our named executive officers.

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Grants of Plan-Based Awards in 2018

The following table sets forth information regarding fiscal 2018 annual incentive bonus awards and equity awards granted to our NEOs for fiscal 2018 performance.

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Outstanding Equity Awards at Fiscal Year-End

The following table summarizes outstanding stock options and stock awards for each named executive officer as of December 31, 2018.