What rights does the purchaser have under the Development Agreement with Potbelly Sandwich Works?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
you sign the franchise agreement for the Potbelly Shop.
2.03 Development Rights. During the Term, and provided you and your Affiliates are in compliance with this SDAA and all other agreements with us or any of our Affiliates (including franchise agreements signed pursuant to this SDAA), then we will:
(a) grant to you, in accordance with Section 3, at least that cumulative number of franchises for Potbelly Shops set forth in Exhibit B, all of which are to be located within the geographical area described in Exhibit A (the "Development Area" or "Area"); and
(b) neither operate (directly or through an Affiliate), nor grant any third party the right to operate, any Potbelly Shop located within the Development Area, except for:
(1) Potbelly Shops you will develop pursuant to this SDAA for which you or your Affiliate will sign future franchise agreements for each such location;
(2) Potbelly Shops already open (or under commitment to open) as of the Effective Date;
(3) Potbelly Shops or other restaurants using any part or all of the Branded System and/or Marks at "Non-Traditional Venues" within the Development Area, such as hospitals or medical centers, airports, public or private schools, universities or college campuses, airport terminals, train or bus stations, convention centers, exhibition halls, amusement parks, fairgrounds, sports arenas, military bases, state or national parks, hotels, lodges, country clubs, social clubs, resorts, casinos, theaters, food trucks, or any other similar site or venue that generates customer flow that is independent from the general customer traffic flow of the surrounding area (collectively, "Non-Traditional Venues");
(4) restaurants that we purchase (or as to which we purchase the rights as franchisor) that are part of another franchise system or chain, regardless of whether such restaurants are converted to operate using any of the Marks and/or any or all of the Branded System or whether such restaurants operate under other trademarks, service marks or trade dress and/or use other operating systems; or
(5) restaurants operated, licensed, or franchised by another business in the Development Area that may acquire us or our Affiliates (whether through acquisition of assets, ownership interests, or otherwise, regardless of the form of transaction) and may provide products and services similar to those provided by Potbelly Shops, including the operation, licensing, or franchising of Competitive Businesses, in the Development Area.
2.04 Development Obligations. You agree to exert your best efforts to fully develop the market potential for Potbelly Shops in the Development Area. Without limiting the foregoing, you agree to open and operate in the Development Area, in accordance with and pursuant to franchise agreements you or your Affiliates will sign, the incremental and total cumulative number of Potbelly Shops set forth in Exhibit B by the corresponding dates and timelines set forth therein (collectively, Exhibit B is referred to as the "Development Schedule").
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to the 2025 Potbelly Sandwich Works Franchise Disclosure Document, a franchisee entering into a Store Development Agreement (SDAA) gains specific development rights within a defined area. Potbelly Sandwich Works agrees to grant the franchisee at least the cumulative number of franchises for Potbelly Shops as outlined in Exhibit B of the SDAA, provided the franchisee complies with the SDAA and all other agreements with Potbelly Sandwich Works. These shops must be located within the geographical area specified in Exhibit A, referred to as the "Development Area".
Potbelly Sandwich Works also commits not to operate or grant any third party the right to operate a Potbelly Shop within the Development Area during the term of the SDAA. However, there are exceptions to this exclusivity. Potbelly Sandwich Works retains the right to operate or franchise shops in Non-Traditional Venues such as hospitals, airports, schools, and other similar locations that have customer traffic independent of the surrounding area. Additionally, Potbelly Sandwich Works can operate or franchise existing restaurants they purchase, even if those restaurants use the Potbelly Sandwich Works branded system or operate under different trademarks. The franchisee acknowledges that Potbelly Sandwich Works retains all rights to the Marks and Branded Systems outside the express provisions of the SDAA concerning the Development Area.
The franchisee's rights under the SDAA are subject to termination without any opportunity to cure if the franchisee does not strictly comply with the development obligations outlined in the development schedule. Potbelly Sandwich Works reserves the right to enforce the SDAA strictly. The franchisee also has no right to renew or extend their rights under the SDAA, with the term starting on the Effective Date and expiring on the date set forth in Exhibit A.