Does Potbelly Sandwich Works have the right to pre-approve the transfer of a non-controlling ownership interest?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
fer satisfying all of this Subsection's requirements. We have the right to pre-approve the transfer of a non-controlling ownership interest in you or your owners (determined as of the date on which the proposed transfer will occur) other than to an Operator. We expect to approve such a transfer if the proposed transferee and its direct and indirect owners (if the transferee is an Entity) are of good character and meet our then applicable standards for Potbelly Shop franchisees (including no ownership interest in or performance of services for a Competitive Business), the new owner signs our Guaranty and Assumption of Obligations, and you pay us a transfer fee of Five Hundred Dollars ($500), which is due when you request transfer approval and is nonrefundable whether or not the transfer actually occurs. If the new owner of the non-controlling ownership interest (i) fails for any reason to sign the Guaranty and Assumption of Obligations, or (ii) would violate the Guaranty and Assumption of Obligations immediately upon its signing because of certain activities in which the new owner then engages or has engaged, or (iii) has engaged in any dishonest, unethical, immoral, or similar conduct as a result of which his or her association with you and the Shop could, in our reasonable opinion, have a material adverse effect on the goodwill associated with the Marks, the proposed transfer to the new owner may not take place despite
Source: Item 22 — CONTRACTS (FDD page 79)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, Potbelly Sandwich Works retains the right to pre-approve the transfer of a non-controlling ownership interest in a franchise. This applies to the franchisee or the franchisee's owners, with an exception for transfers to an Operator.
For Potbelly Sandwich Works to approve such a transfer, the proposed transferee and their owners must meet the brand's standards for franchisees. This includes demonstrating good character and not having an ownership interest in, or performing services for, a Competitive Business. The new owner is also required to sign Potbelly Sandwich Works's Guaranty and Assumption of Obligations.
Additionally, the franchisee must pay Potbelly Sandwich Works a $500 transfer fee when requesting transfer approval. This fee is nonrefundable, regardless of whether the transfer is ultimately completed. Potbelly Sandwich Works can deny the transfer if the new owner doesn't sign the Guaranty and Assumption of Obligations, would violate it upon signing, or has engaged in conduct that could negatively impact the goodwill associated with Potbelly Sandwich Works's brand.