What is the Franchise System for Potbelly Sandwich Works?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) We and our affiliates have developed (and continue to develop and modify) a system for constructing, operating, identifying, and promoting Shops under the POTBELLY SANDWICH SHOP® trademark and related commercial symbols (collectively, the "Marks") that prepare and sell sandwiches, soups, salads, shakes, desserts, and other food and beverage products (collectively, the "Products"). We have developed a franchise opportunity for Shops that sell the Products, use the Marks, and use our and our affiliates' distinctive business formats, methods, procedures, signs, designs, layouts, standards, and specifications (collectively, the "Branded System"), all of which we and our affiliates may improve, further develop, and otherwise periodically modify. Shops preparing and selling the Products, operating under the Branded System, and using the POTBELLY SANDWICH SHOP® Mark as their primary trade identity are referred to collectively in this Agreement as "Potbelly Shops."
A Potbelly Shop's Products are prepared according to specific recipes, standards, and procedures and use high quality ingredients, including certain proprietary items (collectively, "Potbelly Trade Secret Products") and other ingredients (not constituting Potbelly Trade Secret Products) that are branded and/or packaged exclusively for Potbelly Shops (collectively, "Potbelly Branded Products"). (Potbelly Branded Products also are defined to include non-food products that are branded and/or packaged exclusively for Potbelly Shops.)
- (3) We grant franchises to operate a Potbelly Shop using the Intellectual Property and offering the Products and services we require and authorize (the "Franchise System").
We have the right to develop, operate, and change the Branded System and the Franchise System in any manner this Agreement does not specifically prohibit.
All ideas, concepts, techniques, and materials relating to a Potbelly Shop, whether or not protectable intellectual property and whether created by or for you or your owners or Shop employees, must be promptly disclosed to us and will be deemed to be our and our affiliates' sole and exclusive property, part of the Franchise System, and works made-for-hire for us and our affiliates.
You acknowledge that we have granted you the Franchise in consideration of and reliance upon both your agreement to deal exclusively with us in the sandwich preparation and frozen confection categories of the foodservice industry. You therefore agree that, during the Term, neither you, any of your direct or indirect owners, nor any of such owners' spouses will:
- (a) have any direct or indirect controlling interest as an owner whether of record, beneficial, or otherwise – in a Competitive Business (defined below), wherever located or operating;
The term "Competitive Business" means (i) any fast-casual restaurant that derives more than twenty percent (20%) of its revenue from the sale of (a) baked, oven-style, conveyor oven-style, or un-baked "sub-style" sandwiches, submarine, hoagie, Italian beef, or hero-type sandwiches, pita sandwiches, flatbread sandwiches, or cheese-steak sandwiches, or (b) smoothies, milkshakes, ice cream, and other frozen confection items, or (ii) any business granting franchises or licenses to others to operate the type of business specified in clause (i) (other than a Potbelly Shop operated under a franchise agreement with us). Competitive Business for purposes of this Agreement shall include, but not be limited to, Blimpie, Corner Bakery Café, Firehouse Subs, Jersey Mike's, Jimmy John's, McAlister's Deli, Panera Bread, Quizno's, Schlotzky's, Subway, Tropical Smoothie Café and Which Wich.
We have established a system website (1) to advertise, market, and promote Potbelly Shops and the Products (and/or the Potbelly Shop franchise opportunity), (2) through which to operate on-line product ordering and other fulfillment systems, and (3) for any other purposes we consider appropriate or necessary for Potbelly Shops, the Products or the Franchise System (the "System Website").
Subject to this Agreement's terms, we grant you a franchise (the "Franchise") to operate a Potbelly Shop (the "Shop") at the Site, and to use the Franchise System in its operation, for a ten (10) year term beginning on the earlier of the date the Shop opens for business ("Shop Opening Date") or three hundred sixty (360) days from the Effective Date of this Agreement (the "Term").
You agree to pay us a nonrecurring and, except as specifically provided in this Agreement, nonrefundable initial franchise fee of Twenty-Five Thousand Dollars ($25,000).
Source: Item 22 — CONTRACTS (FDD page 79)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, the Franchise System involves granting franchises to operate Potbelly Shops using the company's intellectual property to offer required and authorized products and services. This system includes the use of the POTBELLY SANDWICH SHOP® trademark, distinctive business formats, methods, procedures, signs, designs, layouts, standards, and specifications. These elements collectively form the 'Branded System,' which Potbelly Sandwich Works may modify over time. The shops prepare and sell sandwiches, soups, salads, shakes, desserts, and other food and beverage products. These products are made according to specific recipes, standards, and procedures, utilizing high-quality ingredients, including proprietary items and branded products exclusive to Potbelly Shops.
Potbelly Sandwich Works retains the right to modify the Branded System and the Franchise System as it deems appropriate, provided it does not violate the franchise agreement. This includes the right to offer and sell products through various distribution channels, such as the Internet, grocery stores, and food trucks. Franchisees must promptly disclose any ideas or materials related to the Potbelly Shop, which will be considered the sole property of Potbelly Sandwich Works and its affiliates. This encompasses all concepts, techniques, and materials, whether or not they are protectable intellectual property.
As part of the franchise agreement, franchisees must deal exclusively with Potbelly Sandwich Works in the sandwich preparation and frozen confection categories. Franchisees and their owners are restricted from having controlling interests in competitive businesses, defined as fast-casual restaurants deriving more than 20% of their revenue from specific types of sandwiches or frozen confections. This non-compete clause extends to various roles, including owners, directors, officers, and employees. Named competitive businesses include Blimpie, Corner Bakery Café, Firehouse Subs, Jersey Mike's, Jimmy John's, McAlister's Deli, Panera Bread, Quizno's, Schlotzky's, Subway, Tropical Smoothie Café and Which Wich.
Potbelly Sandwich Works also maintains a system website to advertise and promote Potbelly Shops and facilitate online ordering. The company owns all intellectual property rights related to the website and its content. Franchisees operate under a franchise agreement for a term of ten years, with the possibility of acquiring successor franchises if they meet specific compliance conditions. The initial franchise fee is $25,000. The Franchise System ensures that Potbelly Sandwich Works maintains control over its brand and standards while allowing franchisees to operate individual shops under a unified system.