What was the deferred income tax for Potbelly Sandwich Works in 2024?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
lance sheets are presented below:
| December 29, 2024 | December 31, 2023 | ||
|---|---|---|---|
| Deferred tax assets: | |||
| Net operating loss carryforwards | $ | 21,116 | $ 20,542 |
| Accrued liabilities | 1,494 | 2,625 | |
| Deferred revenue | 2,453 | 1,944 | |
| Stock-based compensation | 1,897 | 1,378 | |
| Property and equipment | 2,676 | 3,290 | |
| Operating lease liabilities | 39,308 | 43,799 | |
| Other | — | 226 | |
| Tax credits and other carryforwards | 3,191 | 2,794 | |
| Gross deferred tax assets | 72,135 | 76,598 | |
| Valuation allowance | (170) | (35,439) | |
| Net deferred tax assets | 71,965 | 41,159 | |
| Deferred tax liabilities: | |||
| Prepaids | (380) | (477) | |
| Right-of-use asset for operating leases | (35,949) | (39,179) | |
| Intangible assets | (1,380) | (1,377) | |
| Smallwares | (441) | (400) | |
| Total deferred tax liabilities | (38,150) | (41,433) | |
| Net deferred tax assets (lia |
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 37–49)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, the company's net deferred tax assets (liabilities) for the year ending December 29, 2024, amounted to $33,815 (in thousands). This figure represents the difference between deferred tax assets and deferred tax liabilities. In comparison, for the year ending December 31, 2023, Potbelly Sandwich Works had net deferred tax assets (liabilities) of $(274) (in thousands).
Deferred tax assets arise when taxable income is expected to be higher in the future, allowing the company to reduce future tax payments based on current deductions or credits. These assets include items such as net operating loss carryforwards ($21,116 in 2024 and $20,542 in 2023), accrued liabilities ($1,494 in 2024 and $2,625 in 2023), deferred revenue ($2,453 in 2024 and $1,944 in 2023), stock-based compensation ($1,897 in 2024 and $1,378 in 2023), property and equipment ($2,676 in 2024 and $3,290 in 2023), operating lease liabilities ($39,308 in 2024 and $43,799 in 2023), tax credits and other carryforwards ($3,191 in 2024 and $2,794 in 2023). A valuation allowance is applied against deferred tax assets to account for the possibility that some assets may not be realized. Potbelly Sandwich Works had a valuation allowance of $(170) in 2024 and $(35,439) in 2023.
Deferred tax liabilities, on the other hand, occur when taxable income is expected to be lower in the future. These liabilities include items such as prepaids ($(380) in 2024 and $(477) in 2023), right-of-use asset for operating leases ($(35,949) in 2024 and $(39,179) in 2023), intangible assets ($(1,380) in 2024 and $(1,377) in 2023), and smallwares ($(441) in 2024 and $(400) in 2023). Understanding these deferred tax components can help a franchisee assess the long-term financial health and tax strategies of Potbelly Sandwich Works.
The significant change in the net deferred tax position from a liability of $(274) in 2023 to an asset of $33,815 in 2024 indicates a substantial shift in Potbelly Sandwich Works's expected future taxable income and its ability to utilize deferred tax assets. This shift is further explained by the release of a valuation allowance for U.S. federal deferred tax assets and a significant portion of state deferred tax assets, resulting in an income tax benefit of $35.3 million during fiscal year 2024.