In the context of the Potbelly Sandwich Works SDAA, what is the relationship between the Franchisor and the Developer?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
5. RELATIONSHIP OF THE PARTIES.
5.01 Independent Contractors.
Neither this SDAA nor the dealings of the parties pursuant to this SDAA shall create any fiduciary relationship or any other relationship of trust or confidence. Franchisor and Developer, as between themselves, are and shall be independent contractors. Nothing contained in this SDAA, or arising from the conduct of the parties hereunder, is intended to make either party a general or special agent, joint venturer, partner or employee of the other for any purpose whatsoever. You must conspicuously identify yourself in all dealings with customers, lessors, contractors, suppliers, public officials, personnel and others as the owner of development rights granted hereunder and must place such other notices of independent ownership on such forms, business cards, stationery, advertising and other materials as we require at any time and from time to time.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to the 2025 Potbelly Sandwich Works Franchise Disclosure Document, the Shop Development Area Agreement (SDAA) establishes the relationship between Potbelly Franchising, LLC, as the Franchisor, and the Developer. This agreement outlines the terms and conditions under which the Developer is granted the right to develop multiple Potbelly Sandwich Works locations within a specific geographic area. The SDAA ensures that the Developer adheres to Potbelly Sandwich Works' standards and protects the brand's goodwill and the integrity of its Branded System.
The SDAA explicitly states that Potbelly Sandwich Works and the Developer are independent contractors. This means that neither party is considered an agent, partner, joint venturer, or employee of the other. The Developer is responsible for identifying themselves as the owner of the development rights in all dealings with customers, lessors, contractors, suppliers, and public officials. This independent contractor status is a common arrangement in franchising, allowing the franchisee (Developer) to operate with a degree of autonomy while adhering to the franchisor's established system and standards.
Potbelly Sandwich Works retains certain rights and control to ensure brand consistency and quality. The agreement includes a covenant of good faith, which, under applicable law, means that Potbelly Sandwich Works can make decisions that may affect the Developer's interests, provided these decisions are consistent with the explicit rights and obligations outlined in the SDAA and are not made in bad faith. This clause highlights the importance of understanding the full scope of the agreement and the potential for Potbelly Sandwich Works' decisions to impact the Developer's operations. Prospective developers should carefully review the SDAA and seek legal counsel to fully understand their rights and obligations under the agreement.