When is the Development Fee for a Potbelly Sandwich Works due under the SDAA?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
o right to renew or extend your rights under this SDAA.
- 2.02 Development Fee. In consideration of our execution of this SDAA, you agree to pay us a development fee equal to the sum of $40,000 for your first Potbelly Shop and $20,000 times the aggregate number of additional franchised Potbelly Shops which you are required to establish and operate pursuant to this SDAA (the "Development Fee"). The Development Fee is payable in full when you sign this SDAA and will be fully earned when paid. You recognize that we have incurred administrative and other expenses in relation to this SDAA, and that our development opportunities have been lost or curtailed as a result of the territorial rights granted to you in this SDAA. Therefore, we will not refund the Development Fee in whole or in part, under any circumstance.
The Development Fee will be applied against the initial franchise fee that will be payable under the franchise agreements for each of your Potbelly Shops (each, an "Initial Franchise Fee"). Each Initial Franchise Fee will be reduced by the amount of the Development Fee you paid for that Potbelly Shop, that is, by $40,000 for your first Potbelly Shop and by $20,000 for your second and subsequent Potbelly Shops. The Initial Franchise Fee against which the Development Fee will be credited will be our then-current Initial Franchise Fee for each Potbelly Shop opened under this SDAA. You will pay the remaining balance (if any) of the Initial Franchise Fee for each Potbelly Shop to be opened pursuant to this SDAA on the date
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, the Development Fee is due in full when you sign the SDAA (Shop Development Area Agreement). The Development Fee compensates Potbelly Sandwich Works for administrative expenses and lost development opportunities due to the territorial rights granted to the developer. The Development Fee is $40,000 for the first Potbelly Shop and $20,000 times the number of additional shops required to be established and operated under the SDAA.
This fee is non-refundable under any circumstance, which means that even if the agreement is terminated, the developer will likely not receive a refund of the Development Fee. However, the Development Fee will be applied against the initial franchise fee that will be payable under the franchise agreements for each of the Potbelly Shops. Specifically, the initial franchise fee will be reduced by $40,000 for the first shop and $20,000 for each subsequent shop.
The remaining balance of the initial franchise fee, if any, must be paid on the date the franchise agreement is signed for each Potbelly Shop. This arrangement is fairly typical in franchise development agreements, where an upfront fee secures the development rights, and that fee is then credited towards the franchise fees as each unit opens. Prospective franchisees should carefully consider their development plans and financial capabilities before signing the SDAA, as the Development Fee is non-refundable and represents a significant upfront investment.