What must certificates representing ownership interests in a Potbelly Sandwich Works franchise recite?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
4.01 Organizational Documents. If you are, or at any time become, a business corporation, partnership, limited liability company or other legal entity, you and each of your Owners represent, warrant and agree that: (a) you are duly organized and validly existing under the laws of the state of your organization, and, if a foreign business corporation, partnership, limited liability company or other legal entity, you are duly qualified to transact business in the state in which the Development Area is located; (b) you have the authority to execute and deliver this SDAA and to perform your obligations hereunder; (c) you have provided to us true and complete copies of your articles of incorporation, partnership agreement, bylaws, subscription agreements, and all other then current documents relating to your ownership, organization, capitalization, management and control, any or all of which documents we may require to recite (or be amended to recite) that the issuance, transfer or pledge of any direct or indirect legal or beneficial ownership interest is restricted by the terms of this SDAA; (d) your activities are restricted to those necessary solely for the development, ownership and operation of Potbelly Shops in accordance with this SDAA and any other agreements entered into with us or any of our Affiliates; and (e) all certificates representing direct or indirect legal or beneficial ownership interests in you, whether now or hereafter issued, must bear a legend in conformity with applicable law reciting or referring to such restrictions.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, if a franchisee is a business corporation, partnership, limited liability company, or other legal entity, all certificates representing direct or indirect legal or beneficial ownership interests must bear a legend in conformity with applicable law. This legend should either recite or refer to the restrictions on the issuance, transfer, or pledge of any direct or indirect legal or beneficial ownership interest as outlined in the SDAA (Shop Development and Area Agreement).
This requirement ensures that any potential transfer of ownership interests is subject to the franchisor's approval and the terms of the SDAA. It allows Potbelly Sandwich Works to maintain control over who becomes an owner and ensures that all owners are aware of and bound by the franchise agreement's terms.
For a prospective franchisee, this means that if they operate their Potbelly Sandwich Works franchise through a legal entity, they must ensure that all ownership certificates contain the necessary legal legend. This is not just a formality; failure to comply could potentially lead to issues with the franchisor regarding ownership transfers or compliance with the franchise agreement. Franchisees should consult with legal counsel to ensure the legend meets all applicable legal requirements and accurately reflects the restrictions outlined in the SDAA.