When is the development fee due to Potbelly Sandwich Works when signing the SDAA?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
We charge a development fee for you to obtain the right to open multiple Potbelly Shops in a pre-determined area in a specific amount of time under the SDAA. You must pay the development fee in a lump sum when you sign the SDAA. The development fee is non-refundable and fully earned by us as of the effective date of the SDAA. The development fee due when you sign the SDAA equals $40,000 (the initial franchise fee payable for the first Potbelly Shop) plus an additional $20,000 for each additional Shop granted under the SDAA. Except as described below, you must pay our then current initial franchise fee for each Shop to be developed less the $20,000 already paid per the SDAA development fee for each additional Shop. This is due when you sign the Franchise Agreement for each Shop. We and you will determine the number of Shops you must develop and the dates by which you must develop them before signing the SDAA. During our 2024 fiscal year, we received development fees ranging from $40,000 to $320,000.
Except as described below, no portion of the development fee is refundable under any circumstances.
Source: Item 5 — INITIAL FEES (FDD pages 14–17)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, a development fee is required when signing a Shop Development Area Agreement (SDAA). The development fee must be paid in a lump sum when the SDAA is signed. This fee grants the franchisee the right to open multiple Potbelly Sandwich Works shops within a specific area over a defined period. The franchisor considers the development fee fully earned upon the SDAA's effective date and is generally non-refundable.
The development fee is calculated as $40,000 (the initial franchise fee for the first shop) plus an additional $20,000 for each additional shop to be developed under the SDAA. For example, if a franchisee plans to open three Potbelly Sandwich Works locations, the development fee would be $40,000 + (2 * $20,000) = $80,000. The FDD states that during the 2024 fiscal year, Potbelly Sandwich Works received development fees ranging from $40,000 to $320,000, indicating the development of between 1 and 15 additional shops under various SDAAs.
It's important to note that while the development fee covers the right to develop multiple locations, the franchisee will also need to pay the then-current initial franchise fee for each shop, less the $20,000 already paid per shop as part of the SDAA development fee. This remaining balance of the initial franchise fee is due when the franchisee signs the individual Franchise Agreement for each shop. Potbelly Sandwich Works and the franchisee will agree on the number of shops to be developed and the development schedule before signing the SDAA.
Potbelly Sandwich Works offers incentive programs, such as the 50/50 Incentive Program and the Large Area Developer Incentive Program, which may affect the initial franchise fee. These programs can reduce the initial franchise fee by 50% under certain conditions, such as opening shops early or on time within specified calendar years or committing to a large development schedule. However, these incentives may be terminated if the franchisee defaults on any agreements with Potbelly Sandwich Works.