How is the Purchase Price for Potbelly Sandwich Works determined from the Closing Amount?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
after the Effective Time.
Section 2.05 Consideration.
(a) On the terms and subject to the conditions of this Agreement, and in consideration of the sale, transfer, conveyance and assignment of the Assets, at the Closing, Purchaser shall pay to Seller the following amounts: (i) [] Dollars ($[]) for the Assets (exclusive of the Special Items, and Inventory that are separately listed below); (ii) [] Dollars ($[]) as the estimated value of the Special Items; (iii) [] Dollars ($[]) as the estimated value of the Inventory; and (iv) a Development Fee (as defined in the
Development Agreement) of [] Dollars ($[]). The total of the amounts listed in (i), (ii), (iii) and (iv) is [] Dollars ($[]) (collectively, the "Closing Amount"). The Closing Amount, as adjusted in accordance with Section 3.03(a), shall constitute the "Purchase Price". The Closing Amount sh
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, the Purchase Price is derived from the Closing Amount, with adjustments made according to Section 3.03(a) of the Asset Purchase Agreement. The Closing Amount is the sum of several components: the value of the assets excluding special items and inventory, the estimated value of special items, the estimated value of the inventory, and the Development Fee as defined in the Development Agreement. All these individual amounts are listed in Section 2.05(a) of the agreement. The franchisee will pay the Closing Amount in cash to Potbelly Sandwich Works at the closing.
For a prospective Potbelly Sandwich Works franchisee, understanding how the Purchase Price is determined is crucial for financial planning. The initial Closing Amount is an estimate, particularly concerning the value of special items and inventory. These values are subject to change following the closing, as detailed in Section 3.03(b), which means the final Purchase Price could differ from the initial Closing Amount. This adjustment mechanism ensures that the franchisee only pays for the actual value of the assets acquired.
It's important for the franchisee to pay close attention to the physical inventory and cash count conducted before the Effective Time, as this directly impacts the valuation of inventory and cash bank amounts. Any discrepancies or disagreements regarding these valuations should be addressed promptly to avoid potential disputes later on. The franchisee should also be aware of the Allocation Schedule, which allocates the Purchase Price for tax purposes and must be prepared in accordance with Section 1060 of the Internal Revenue Code. The franchisee has the right to object to this schedule within thirty days of receiving it, and any disputes are to be resolved through good-faith negotiations with Potbelly Sandwich Works.