Is the Potbelly Sandwich Works SDAA binding on the successors and assigns of both parties?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
7. ASSIGNMENT.
- 7.01 Assignment By Franchisor.
We may change our ownership or form and/or assign this SDAA or any interest therein and any other agreement to a third party without restriction or notice to you.
After our assignment of this SDAA to a third party who expressly assumes this SDAA's obligations, we no longer will have any performance or other obligations under this SDAA.
That assignment will constitute a release and novation with respect to this SDAA, and the new owner-assignee will be liable to you as if it had been an original party to this SDAA.
Specifically, and without limiting the foregoing, you agree that we may sell our assets (including this SDAA), the Marks, or the Branded System to a third party; offer our ownership interests privately or publicly; merge, acquire other business entities, or be acquired by another business entity; and/or undertake a refinancing, recapitalization, leveraged buyout, or other economic or financial restructuring.
- 7.02 No Assignment By Developer.
You and your Owners acknowledge that we are granting you development rights under this SDAA based on our perception of your and your Owners' individual and collective character, skill, business acumen, financial capability and ability to develop (and to operate under franchise agreements) future Potbelly Shops according to our standards.
These rights are personal to you and your Owners.
Therefore, neither you nor your Owners may assign this SDAA, any of your ownership interests, any interest in the Development Business, any development rights to a Potbelly Shop, or any other right granted to Developer under this SDAA.
Any assignment by your or your Owners in violation of this Section 7 will be null, void and of no force or effect.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, the SDAA (Shop Development Agreement) is binding on the successors and assigns of the franchisor, but not the developer. Potbelly Sandwich Works has the right to transfer or assign the SDAA or any interest in it to a third party without needing to notify the developer. If Potbelly Sandwich Works assigns the SDAA to another party who then assumes the obligations, Potbelly Sandwich Works will no longer have any responsibilities under the SDAA. The new owner-assignee becomes liable to the developer as if they were an original party to the agreement. Potbelly Sandwich Works can sell assets, including the SDAA, trademarks, or the Branded System, or undergo various financial restructurings.
However, the developer (franchisee) and their owners cannot assign the SDAA, any ownership interests, any interest in the Development Business, any development rights to a Potbelly Shop, or any other right granted to the developer under the SDAA. This restriction is because Potbelly Sandwich Works grants development rights based on their assessment of the developer's and their owners' character, skills, business acumen, financial capability, and ability to develop and operate future Potbelly Shops according to their standards. These rights are personal to the developer and their owners. Any assignment attempted by the developer or their owners in violation of this section will be considered void.
This means that a prospective Potbelly Sandwich Works developer should be aware that while Potbelly Sandwich Works has considerable freedom to transfer its obligations and rights under the SDAA, the developer does not have the same flexibility. This lack of assignability could impact the developer's exit strategy or ability to transfer the business to another party. The developer should seek legal counsel to fully understand the implications of these assignment restrictions.