Will purchases from Potbelly Sandwich Works and its affiliates generally be at prices exceeding their costs?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
We and our affiliates may receive revenues from required purchases and leases of products and services by franchisees. Any purchases from us and our affiliates, whether required or voluntary, generally will be at prices exceeding our costs so that we can make a profit (plus applicable taxes and shipping charges) (specific pricing depends on the particular item/service involved). Payments also may be collected by approved suppliers or distribution centers on behalf of the system and paid to us. Our intention is to use revenues collected from franchisee and company-owned Potbelly Shop purchases of products and services to offset expenses we incur in administering system-wide programs such as people, guest and operations programs, promotional and price management tools, supply chain programs, brand protection (including quality assurance and food safety) programs and research and development. However, we may earn a profit from franchisees' required purchases and leases of products and services.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 28–34)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, purchases from Potbelly Sandwich Works and its affiliates, whether required or voluntary, will generally be at prices exceeding their costs. This allows Potbelly Sandwich Works to make a profit, in addition to applicable taxes and shipping charges, with specific pricing dependent on the item or service involved. Payments may also be collected by approved suppliers or distribution centers on behalf of the system and then paid to Potbelly Sandwich Works.
The intention of Potbelly Sandwich Works is to use the revenues collected from both franchisee and company-owned Potbelly Shop purchases of products and services to offset expenses incurred in administering system-wide programs. These programs include people, guest, and operations programs, promotional and price management tools, supply chain programs, brand protection programs (including quality assurance and food safety), and research and development. However, the document states that Potbelly Sandwich Works may still earn a profit from franchisees' required purchases and leases of products and services.
This arrangement is common in franchising, where franchisors often derive revenue from required purchases. Prospective franchisees should carefully evaluate the pricing of required products and services to determine the potential impact on their shop's profitability. Understanding the specific pricing and the reasons behind required purchases is crucial for assessing the overall financial viability of a Potbelly Sandwich Works franchise.