Who is the Potbelly Sandwich Works Franchise Agreement binding upon, besides Potbelly Sandwich Works and the franchisee?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
Your officers, directors, Operator, General Managers, and key-holding supervisory employees must sign reasonable noncompetition covenants appropriate for their positions to protect Confidential Information and the competitiveness of Potbelly Shops. We have the right to review and pre-approve the forms of non-competition covenants you use and to be a third-party beneficiary of those covenants with independent enforcement rights. You must send us copies upon request. Under no circumstances will we control the forms or terms of employment agreements you use with Shop employees or otherwise be responsible for your labor relations or employment practices. To give effect to your obligations in this Section 7, you acknowledge that neither you, any of your direct or indirect owners, nor any of such owners' spouses will seek to violate this Section 7 directly or through any other person (as defined in Subsection 17.L.) with whom you or any of the other restricted parties are acting in concert or participating in connection with the prohibited activities. We may enforce this Section 7 by taking action against you, the other restricted parties, and all other persons with whom you are acting in concert or participating in connection with the prohibited activities.
Source: Item 22 — CONTRACTS (FDD page 79)
What This Means (2025 FDD)
According to the 2025 Potbelly Sandwich Works Franchise Disclosure Document, the Franchise Agreement has implications beyond just Potbelly Sandwich Works and the franchisee. Specifically, the non-competition covenants extend to the franchisee's officers, directors, Operator, General Managers, and key-holding supervisory employees. These individuals must sign noncompetition agreements to protect Potbelly's confidential information and competitive edge. Potbelly Sandwich Works retains the right to review and approve these non-competition agreements and is considered a third-party beneficiary with independent enforcement rights.
Furthermore, the agreement extends to the franchisee's direct or indirect owners, as well as their spouses. These parties are restricted from having controlling or non-controlling interests in a Competitive Business, performing services for a Competitive Business, diverting business or customers to a Competitive Business, or engaging in activities that could harm the goodwill of Potbelly's Marks and Franchise System. A Competitive Business is defined as any fast-casual restaurant deriving more than 20% of its revenue from specific types of sandwiches or frozen confection items, or any business franchising or licensing others to operate such a business.
Potbelly Sandwich Works can take action against the franchisee, the restricted parties (owners and their spouses), and any other persons acting in concert with them to enforce these non-competition terms. This broad reach ensures that all parties with a significant connection to the franchisee are bound by the agreement's terms, preventing potential conflicts of interest and protecting the Potbelly Sandwich Works brand and system.