How is interest calculated on overdue amounts for a Potbelly Sandwich Works franchise, and when does it apply?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of fee1 | Amount | Due Date | Remarks |
|---|---|---|---|
| Franchisee Advisory Council | Council Assessments | When levied | We have right to enforce payments, which may vary among councils; there currently are no councils. |
| Testing | Costs of Testing | When billed | This covers the costs of testing new products or inspecting new suppliers you propose; test costs depend on nature of products and supplier location. |
| Relocation | 20% of our then-current initial franchise fee | As incurred | You must pay us a relocation fee if you move to a new site and we are involved in the process. |
| Rent | Varies | Monthly | If we sublease the premises to you, you must pay rent directly to the landlord or to us, at our discretion. If you pay rent to us, we may charge an amount that is higher than the rent due under the underlying lease. |
| Public Offering | At least $10,000 plus out-of-pocket expenses | When billed | Due to review your offering materials if you seek to raise money through stock or similar offerings. |
| Operations Manual | $500 | When billed | Charge for replacement copy or access if your access to Operations Manual is lost or destroyed. |
| Column 1 | Column 2 | Column 3 | Column 4 |
| Type of fee1 | Amount | Due Date | Remarks |
| Audit | Cost of inspection or audit (amount of which depends on circumstances and extent of your non- compliance) | 15 days after billing | Due if you do not give us reports, supporting records, or other required information or understate required Royalties or other amounts by more than 2%. |
| Late Fee | $100 | May be auto debited from your account | Due for each late or dishonored payment. |
| Interest | Lesser of 1.5% per month or highest commercial contract interest rate law allows | May be auto debited from your account | Due on all overdue amounts more than 7 days late. |
| Non-Approved Shop Opening | $5,000 for each day your Shop operates without our approval | May be auto debited from your account | Due if you begin operating Shop before we give our approval. |
| Management Fee | Manager’s then-current daily salary plus direct expenses | As incurred | Due when we (or a third party) manage Shop after Managing Owner’s death or disability or after your default or abandonment. |
| Costs and Attorneys’ Fees | Will vary under circumstances and depend on nature of your non-compliance | As incurred | Due when we incur costs and expenses to enforce Franchise Agreement against you, whether or not we begin formal legal proceeding. |
| Indemnification | Will vary under circumstances and depend on nature of third- party claim | As incurred | You must reimburse us if we are held liable for claims from your Shop’s operation or incur costs to defend them (when we are not at fault). |
| Column 1 | Column 2 | Column 3 | Column 4 |
| Type of fee1 | Amount | Due Date | Remarks |
| Brand Damages | Will vary under circumstances | As incurred | Due only if you terminate the Franchise Agreement before it expires, in which case you must pay us for all damages, costs and expenses related to the early termination |
| Maintenance Cost Reimbursement | Out-of-pocket cost reimbursement and our then- current per-day fee | As incurred | You must reimburse our costs for correcting your Shop’s sub-standard appearance or condition. |
Source: Item 6 — OTHER FEES (FDD pages 17–24)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, interest may be charged on overdue amounts. Specifically, interest is applied to all overdue amounts that are more than 7 days late. The interest rate is the lesser of 1.5% per month or the highest commercial contract interest rate that the law allows.
This means that if a Potbelly Sandwich Works franchisee fails to make a payment on time, interest charges will begin to accrue after a 7-day grace period. The interest will be calculated monthly, and the rate will be capped at either 1.5% or the maximum rate permitted by applicable commercial contract law, whichever is lower. This is a fairly standard practice in franchising, as it incentivizes franchisees to make timely payments and compensates the franchisor for the time value of money and the administrative costs associated with collecting late payments.
Potbelly Sandwich Works may also automatically debit the franchisee's account for the interest owed. Franchisees should ensure they have sufficient funds in their Electronic Funds Transfer Account (EFTA) to cover any potential debits, including interest charges. Failing to do so could result in additional fees or penalties. Franchisees should maintain careful records of all payments made to Potbelly Sandwich Works and promptly address any discrepancies to avoid late fees and interest charges.