Can Potbelly Sandwich Works receive payments from suppliers based on their dealings with Potbelly Sandwich Works franchisees?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
We and our affiliates have the right to receive payments from suppliers on account of their actual or prospective dealings with us, our affiliates, you, and other franchisees and to use all amounts received without restriction for any purposes we and our affiliates deem appropriate (unless we and our affiliates agree otherwise with the supplier). Supplier approval might be temporary until we evaluate the supplier in more detail. We may inspect a proposed supplier's facilities during and after the approval process to make sure the supplier meets our standards and, as noted above, charge you or the supplier a reasonable inspection fee. If it does not, we may revoke our approval by notifying the supplier and you in writing.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 28–34)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, Potbelly Sandwich Works and its affiliates have the right to receive payments from suppliers based on their dealings with Potbelly Sandwich Works, its affiliates, franchisees, and other franchisees. These payments can be used without restriction for any purposes Potbelly Sandwich Works and its affiliates deem appropriate, unless they agree otherwise with the supplier.
This means that Potbelly Sandwich Works can negotiate deals with suppliers where the suppliers provide payments to Potbelly Sandwich Works based on the volume or value of purchases made by franchisees. This is a fairly common practice in franchising, allowing the franchisor to offset costs associated with managing the supply chain and supporting the franchise system. However, it's important to note that Potbelly Sandwich Works has the right to use these funds for any purpose they deem appropriate, which may or may not directly benefit the franchisees.
Prospective franchisees should be aware of this arrangement, as it could potentially influence which suppliers are approved or designated by Potbelly Sandwich Works. While the FDD states that supplier approval might be temporary until a more detailed evaluation, and that Potbelly Sandwich Works may inspect supplier facilities, the willingness of a supplier to pay fees to Potbelly Sandwich Works or its affiliates could be a factor in the approval process. Franchisees should inquire about how these supplier payments are used and whether they result in any direct benefits, such as lower costs or improved services.