Can Potbelly Sandwich Works operate competing outlets near my franchise?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
de-identify the Shop's original site as we require.
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. You also do not have any type of non-exclusive territory. We (and any affiliates we periodically have) retain the right during the franchise term to engage in any and all activities that we (and they) desire, at any time or place, whether or not those activities compete with your Shop. Our unlimited rights include the right to (1) construct, develop, and operate, and grant to others the right to construct, develop, and operate, Potbelly Shops anywhere we want and on any terms and conditions we deem appropriate, (2) offer and sell Products and other items identified by the Marks or any other trademarks to any customers, wherever located or operating, and through any distribution channels (including the Internet, grocery, specialty, and other retail stores, food trucks, and other points of distribution), wherever located or operating, (3) construct, develop, and operate, and grant to others the right to construct, develop, and operate, any types of stores or other foodservice businesses under any trademarks anywhere we want and on any terms and conditions we deem appropriate, (4) acquire the assets or ownership interests of one or more businesses providing products and services the same as or similar to those provided at Potbelly Shops, and franchising, licensing or creating similar arrangements with respect to these businesses once acquired, wherever these businesses (or the franchisees or licensees of these businesses) are located or operating, (5) be acquired (whether through acquisition of assets, ownership interests or otherwise, regardless of the form of transaction), by a business providing products and services similar to those provided at Potbelly Shops, or by another business, and (6) engage in all other activities the Franchise Agreement does not expressly prohibit. We need not compensate you if
we engage in these activities. Continuation of your franchise does not depend on your achieving a certain sales volume, market penetration, or other contingency.
You have no options, rights of first refusal, or similar rights to acquire additional franchises. You may not conduct delivery or catering activities away from the Shop, or take customer orders "on-line," unless and until we require you to do so or notify you in writing that you may do so (although we have no obligation to allow these activities by a certain date or at all). If we require or allow these activities, you must comply with all our System Standards, including using only the delivery service provider(s) we specify in writing for your Shop and limiting the delivery services to any delivery area we specify to you in writing. Any delivery area we specify is not exclusive and we may engage, and/or allow other franchisees and third parties to engage, in any activities we desire within the delivery area without any restrictions (including allowing other Potbelly Shop franchisees and delivery service providers to provide delivery services in the delivery area). Any delivery area we specify is nothing more than the geographic boundaries in which you may deliver those products approved for delivery from the Shop, and no other rights are granted to you.
Although we have the right to do so (as described above), we and our affiliates have not established other franchises or company-owned outlets or another distribution channel selling or leasing similar products or services under a different trademark. Except as provided above regarding delivery and catering activities, there are no restrictions on where you may solicit or accept orders for Products. However, you have no right to use other distribution channels (for example, the Internet, catalog sales, or telemarketing) to make sales away from the Shop's site.
Shop Development Area Agreement
You may (if you qualify) develop and operate additional Potbelly Shops within a specific area (the "Area") as identified in the SDAA. We and you will identify the Area in the SDAA before signing it. The Area typically is a city, cities, county, counties, or other political subdivisions. We base the Area's size primarily on the number of Potbelly Shops you agree to develop, demographics, and site availability. We and you will negotiate the number of Shops you must develop, and the dates by which you must develop them, to keep your development rights. We and you then will complete the schedule in the SDAA before signing it.
While the SDAA is in effect, we (and our affiliates) will not, except as described below with Non-Traditional Venues, establish and operate or grant to others the right to establish and operate other Potbelly Shops having their physical locations within the Area. There are no other restrictions on us (or our affiliates) within the Area. We will accept the proposed locations of your additional Shops only if they meet our then-current standards for Shop sites. Because of our rights at the Non-Traditional Venues described below, you will not receive an exclusive territory under the SDAA. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
You (and your approved affiliates) may not under any circumstances, unless we otherwise approve, develop and operate Potbelly Shops at Non-Traditional Venues located in the Area. A "Non-Traditional Venue" means a hospital or medical center, airport, public or private school, university or college campus, airport terminal, train or bus station, convention center, exhibition hall, amusement park, fairground, sports arena, military base, state or national park, hotel, lodge,
country club, social club, resort, casino, theater, or food truck.
Source: Item 12 — TERRITORY (FDD pages 49–51)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, franchisees do not receive an exclusive territory. Potbelly Sandwich Works retains the right to operate or franchise other Potbelly Sandwich Works shops, or other foodservice businesses under different trademarks, that may compete with a franchisee's shop. This includes the right to sell products through any distribution channels, such as the internet, grocery stores, or food trucks. Potbelly Sandwich Works is not obligated to compensate franchisees if they engage in these activities. The continuation of a Potbelly Sandwich Works franchise does not depend on achieving a certain sales volume or market penetration.
If a franchisee qualifies, they may develop and operate additional Potbelly Sandwich Works shops within a specific area as identified in a Shop Development Area Agreement (SDAA). While the SDAA is in effect, Potbelly Sandwich Works will not establish or grant others the right to establish other Potbelly Sandwich Works shops within the Area, except for Non-Traditional Venues. A "Non-Traditional Venue" includes locations such as hospitals, airports, schools, amusement parks, and hotels. Potbelly Sandwich Works reserves exclusive rights with respect to all Non-Traditional Venues in the Area and may establish and operate, and franchise or license others to establish and operate, Potbelly Sandwich Works shops at Non-Traditional Venues located in the Area.
After the SDAA expires or is terminated, Potbelly Sandwich Works and its affiliates may engage in any activities they desire within and outside the Area without any restrictions, subject only to the franchisee's rights under franchise agreements then in effect. Furthermore, Potbelly Sandwich Works may temporarily or permanently reduce the size of the Area if the franchisee does not satisfy their development obligations under the Development Schedule, in which case the restrictions on Potbelly Sandwich Works or its affiliates will not apply in any geographic area removed from the preceding territorial boundaries.
This lack of territorial exclusivity is a significant factor for prospective franchisees to consider. It means that Potbelly Sandwich Works could open another location nearby, potentially impacting the franchisee's sales. This is a fairly common practice in the franchise industry, as franchisors seek to expand their brand presence. However, franchisees should carefully evaluate the potential for competition and its impact on their profitability before investing in a Potbelly Sandwich Works franchise.