Does Potbelly Sandwich Works have any restrictions on assigning its contract?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
| PROVISION | SECTION IN FRANCHISE OR OTHER AGREEMENT | SUMMARY | |
|---|---|---|---|
| No transfers allowed except to wholly-owned affiliate where conditions include entity paperwork and documentation of interests and signing joinder of liability | |||
| n. | Franchisor's right of first refusal to acquire franchisee's business | 12.G. of Franchise Agreement; not applicable to SDAA | We may match any offer for Shop or ownership interest in you or entity that controls you |
| o. | Franchisor's option to purchase franchisee's business | 15.E. of Franchise Agreement; not applicable to SDAA | We may buy Shop's assets at fair market value, and/or receive assignment or sublease of Shop's site, after Franchise Agreement is terminated or expires (without renewal) |
| p. | Death or disability of franchisee | 12.E. of Franchise Agreement; not applicable to SDAA | Assignment of Managing Owner's interest in you to approved party within 9 months after death or disability; we may manage Shop if qualified management not in place |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 58–65)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, there are indeed restrictions on a franchisee's ability to assign their franchise agreement. The FDD states that transfers are generally not allowed, except to a wholly-owned affiliate. This means a franchisee can only transfer the agreement to a company they entirely own, provided they meet certain conditions. These conditions include submitting the necessary entity paperwork, documenting the interests involved, and ensuring the affiliate signs a joinder of liability, which makes them jointly responsible for the obligations under the franchise agreement.
Potbelly Sandwich Works also retains a right of first refusal, allowing them to match any offer a franchisee receives for their shop or ownership interest. This gives Potbelly Sandwich Works the option to acquire the franchise business themselves, preventing it from being transferred to an outside party without their consent. Additionally, Potbelly Sandwich Works has the option to purchase the franchise's assets at fair market value or receive an assignment or sublease of the shop's site if the Franchise Agreement is terminated or expires without renewal.
In the event of the death or disability of the franchisee, the FDD specifies that the managing owner's interest can be assigned to an approved party within nine months. However, if qualified management is not in place, Potbelly Sandwich Works reserves the right to manage the shop themselves. These provisions ensure that Potbelly Sandwich Works maintains control over who operates its franchises and can step in to ensure continuity and brand standards are upheld, even in unforeseen circumstances. These restrictions are typical in franchising, as franchisors want to control who joins their system and protect their brand.