What is the purpose of the addendum to the Potbelly Sandwich Works Franchise Disclosure Document?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
RANCHISING, LLC MULTI-STATE FRANCHISE DISCLOSURE DOCUMENT
The following are additional disclosures for the Franchise Disclosure Document of Potbelly Franchising, LLC required by various state franchise laws. Each provision of these additional disclosures will not apply unless, with respect to that provision, the jurisdictional requirements of the applicable state franchise registration and disclosure law are met independently without reference to these additional disclosures.
CALIFORNIA
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- THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
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- BEFORE THE FRANCHISOR CAN ASK YOU TO MATERIALLY MODIFY YOUR EXISTING FRANCHISE AGREEMENT, SECTION 31125 OF THE CALIFORNIA CORPORATIONS CODE REQUIRES THE FRANCHISOR TO FILE A MATERIAL MODIFICATION APPLICATION WITH THE DEPARTMENT THAT INCLUDES A DISCLOSURE DOCUMENT SHOWING THE EXISTING TERMS AND THE PROPOSED NEW TERMS OF YOUR FRANCHISE AGREEMENT. ONCE THE APPLICATION IS REGISTERED, THE FRANCHISOR MUST PROVIDE YOU WITH THAT DISCLOSURE DOCUMENT WITH AN EXPLANATION THAT THE CHANGES ARE VOLUNTARY.
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- OUR WEBSITE, www.potbelly.com, HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF FINANCIAL PROTECTION AND INNOVATION. ANY COMPLAINTS CONCERNING THE CONTENT OF THE WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF FINANCIAL PROTECTION AND INNOVATION AT www.dfpi.ca.gov.
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- Item 3 of the Franchise Disclosure Document is amended to provide that neither the franchisor, nor any person in Item 2 of the Franchise Disclosure Document, is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 78a et seq., suspending or expelling such person from membership in that association or exchange.
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- The following sentence is added to the "Remarks" column of the line-item titled "Interest" in Item 6 of the Franchise Disclosure Document: The highest interest rate allowed under California law is 10% annually.
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- The following sentence is added at the end of Item 15 of the Franchise Disclosure Document: We generally do not require a spouse to sign a personal guaranty if he or she has no ownership interest in the franchise.
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- The following paragraphs are added at the end of Item 17 of the Franchise Disclosure Document:
California Business and Professions Code Sections 20000 through 20043 provide rights to franchisees and developers concerning termination, transfer, or nonrenewal of a franchise. If the Franchise Agreement or Shop Development Area Agreement contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement and Shop Development Area Agreement provide for termination upon insolvency. This provision might not be enforceable under federal bankruptcy law (11 U.S.C.A. Secs. 101 et seq.). You must sign a release if you renew or transfer your franchise. The California Corporations Code voids a waiver of your rights under the Franchise Investment Law (California Corporations Code 31000 through 31516). Business and Professions Code 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code 20000 through 20043).
The Franchise Agreement contains a covenant not to compete that extends beyond the termination of the franchise. This provision might not be enforceable under California law.
The Franchise Agreement and the Shop Development Agreement require application of the laws of the State of Illinois. This provision may not be enforceable under California law.
The Franchise Agreement and Shop Development Area Agreement require binding arbitration at a suitable location that is within ten (10) miles of where we have our principal business address at the time the arbitration demand is filed. You will be required to travel to that location and pay the expenses you incur in any such arbitration proceeding (it is currently in Chicago, Illinois).
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to the 2025 Potbelly Sandwich Works Franchise Disclosure Document, the addendum contains additional disclosures required by various state franchise laws. These disclosures supplement the main FDD and apply only if the jurisdictional requirements of the specific state's franchise laws are met. This ensures that Potbelly Sandwich Works complies with state-specific regulations, providing franchisees with the necessary information based on where they are opening their franchise.
For example, the addendum includes specific provisions for California, such as the requirement to provide copies of all proposed agreements related to the sale of the franchise along with the disclosure document. It also addresses modifications to existing franchise agreements, website compliance, and amendments to specific items within the FDD, like Item 3 (regarding orders of national securities associations), Item 6 (regarding interest rates, capped at 10% annually in California), and Item 15 (regarding spousal guarantees). These stipulations ensure that Potbelly Sandwich Works adheres to California's franchise investment laws.
Similarly, the addendum includes modifications for Washington, acknowledging the Washington Franchise Investment Protection Act. This includes the statement that RCW 19.100.180 may supersede provisions in the franchise agreement, especially concerning termination and renewal. It also specifies that arbitration or mediation sites for franchises purchased in Washington will be located in Washington or a mutually agreed-upon location. These state-specific addenda are crucial for Potbelly Sandwich Works to maintain legal compliance and transparency in its franchising operations across different states.