What is the standard initial franchise fee for a Potbelly Sandwich Works franchise?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 5: INITIAL FEES]
Item 5 INITIAL FEES
Initial Fees
You must pay us a $40,000 initial franchise fee in full when you sign the Franchise Agreement, although we may reduce the initial franchise fee if you qualify for our incentive program described below. Except as described below, the initial franchise fee is not refundable and is uniform as to all franchisees purchasing a franchise for a Potbelly Shop. During our 2024 fiscal year, we received initial franchise fees ranging from $10,000 to $40,000 and successor franchise fees ranging from $5,000 to $10,000.
Initial franchise fees paid under Franchise Agreements are fully earned when paid and generally are not refundable. However, if you cannot secure and we do not accept your Shop's site within 180 days after you sign the Franchise Agreement, we and you have the right to terminate the Franchise Agreement.
Asset Transfer Fee
If you are signing a Franchise Agreement because you are purchasing an existing Potbelly Shop from us or our affiliate, then you must pay us a $5,000 asset transfer fee on or before you close on the purchase of the Potbelly Shop's assets. This fee is fully earned by us as of the effective date of the Franchise Agreement. During our 2024 fiscal year, we did not receive any asset transfer fees from franchisees.
If you sign an Asset Purchase Agreement because you are purchasing an existing Potbelly Shop from us or our affiliate, you will pay the purchase price for the acquired assets at the time and in the manner specified in the Asset Purchase Agreement. The purchase price will vary based on a variety of factors, including the assets purchased, the location of the Shop, and other factors. The purchase price will be negotiated for each Shop that you purchase from us or our affiliates.
Sublease Security Deposit
[Item 5: INITIAL FEES]
Sublease Security Deposit
In certain limited circumstances, we or our affiliate may agree to sublease the premises of your Shop to you. If we agree to sublease the premises of the Shop to you, we may require you to pay us a refundable security deposit before you open or begin to operate the Shop. The amount of the security deposit will depend on the monthly rent payable for the premises (which varies significantly based on geographic location, size, local rental rates, businesses in the area, site profile, and other factors) and the location of the premises, which we estimate will be between $1,900 and $45,000. During our 2024 fiscal year, we did not receive any security deposits from franchisees.
Development Fee
We charge a development fee for you to obtain the right to open multiple Potbelly Shops in a pre-determined area in a specific amount of time under the SDAA. You must pay the development fee in a lump sum when you sign the SDAA. The development fee is non-refundable and fully earned by us as of the effective date of the SDAA. The development fee due when you sign the SDAA equals $40,000 (the initial franchise fee payable for the first Potbelly Shop) plus an additional $20,000 for each additional Shop granted under the SDAA. Except as described below, you must pay our then current initial franchise fee for each Shop to be developed less the $20,000 already paid per the SDAA development fee for each additional Shop. This is due when you sign the Franchise Agreement for each Shop. We and you will determine the number of Shops you must develop and the dates by which you must develop them before signing the SDAA. During our 2024 fiscal year, we received development fees ranging from $40,000 to $320,000.
Except as described below, no portion of the development fee is refundable under any circumstances.
50/50 Incentive Program
[Item 5: INITIAL FEES]
50/50 Incentive Program
As noted above and in Item 6, we charge an initial franchise fee of $40,000 and a royalty fee of 6% of weekly Total Revenue (as defined in Item 6) for each Franchise Agreement. However, we currently offer the following incentives for existing franchisees currently operating under an SDAA and new franchisees who enter into an SDAA with us during the calendar years 2025 and 2026 (the "50/50 Incentive Program"):
For any Potbelly Shop you open early or on time in the calendar years 2025 and 2026 under the SDAA, we will reduce your initial franchise fee for that Potbelly Shop by 50% making the initial franchise fee due for that Shop $20,000. If you are signing a Franchise Agreement for your 1 st Potbelly Shop to be opened under the SDAA and you previously paid us the full initial franchise fee for the first Potbelly Shop when you signed the SDAA, and you have now qualified for the 50/50 Incentive Program, then we will refund to you $20,000 of the initial franchise fee you paid
us for your 1st Potbelly Shop. The initial franchise fee for each remaining Potbelly Shop you do not open early or on time in the calendar years 2025 and 2026 under the SDAA or you open after 2026 will be our then-current initial franchise fee (currently, $40,000). The 50/50 Incentive Program also temporarily reduces the royalties payable under the Franchise Agreement and we describe those reductions in Item 6. If at any time during the 50/50 Incentive Program, you are in default under any Franchise Agreement or SDAA, then we may immediately terminate the discounts afforded to you under the 50/50 Incentive Program. In such circumstances, we may require you to pay us the amount discounted on the initial franchise fee and royalties under the 50/50 Incentive Program before the termination of the 50/50 Incentive Program.
Large Area Developer Incentive Program
[Item 5: INITIAL FEES]
Large Area Developer Incentive Program
In addition to the 50/50 Incentive Program described above, we also offer a Large Area Developer Incentive Program to existing franchisees currently operating under an SDAA and to new franchisees who enter into an SDAA with us during the calendar year 2025 (the "LAD Incentive Program"). In order to qualify for the LAD Incentive Program, you must satisfy the following conditions: (i) for new franchisees, you must sign an SDAA during the calendar year 2025 containing a development schedule with a minimum of 15 new Potbelly Shops to be developed in a single defined area within 8 years from the date of the SDAA, (ii) for existing franchisees currently operating under an SDAA, you must not be in breach of the existing SDAA, including your development obligations, and your SDAA must contain a development schedule with a minimum of 15 new Potbelly Shops to be developed in a single defined area within 8 years from the date of the SDAA, and (iii) you (and your affiliates) must be in full compliance with all other agreements with us (and our affiliates). If you qualify for the LAD Incentive Program, then for any Potbelly Shop you open early before the required shop opening date under the development schedule in the SDAA, we will (1) reduce your initial franchise fee for that Potbelly Shop by 50% making the initial franchise fee due for that Shop $20,000, (2) temporarily reduce the Royalty percentage payable for that Potbelly Shop by 50% for the period that the Potbelly Shop is open and operating early until the required shop opening date under the development schedule in the SDAA, and (3) reduce your development fee under your SDAA by 50% (and for existing franchisees currently operating under an SDAA, the reduction will be for any new Potbelly Shops to be developed after your participation in the LAD Incentive Program). If at any time during the LAD Incentive Program, you (or your affiliate) are in default under any Franchise Agreement, SDAA, or any other agreement with us (or our affiliate), or no longer meet the LAD Incentive Program requirements, then we may immediately terminate the discounts afforded to you under the LAD Incentive Program and you will need to pay the full $40,000 initial franchise fee for all Potbelly Shops remaining to be opened under your SDAA and pay the entire 6% Royalty percentage for all of your Potbelly Shops opened under your SDAA.
Source: Item 5 — INITIAL FEES (FDD pages 14–17)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, the standard initial franchise fee is $40,000. This fee is payable in full when signing the Franchise Agreement. The FDD states that the initial franchise fee is generally non-refundable and is applied uniformly to all franchisees who are purchasing a franchise for a Potbelly Shop. However, the initial fee may be reduced if the franchisee qualifies for an incentive program.
Potbelly Sandwich Works offers a 50/50 Incentive Program for existing franchisees operating under a Store Development Area Agreement (SDAA) and new franchisees who enter into an SDAA with Potbelly Sandwich Works during the calendar years 2025 and 2026. Under this program, the initial franchise fee is reduced by 50% to $20,000 for any Potbelly Shop opened early or on time during those years. If a new franchisee signing a Franchise Agreement for their first Potbelly Shop under an SDAA has already paid the full initial franchise fee and qualifies for the 50/50 Incentive Program, Potbelly Sandwich Works will refund $20,000.
Potbelly Sandwich Works also offers a Large Area Developer Incentive Program to existing franchisees operating under an SDAA and new franchisees who enter into an SDAA with Potbelly Sandwich Works during the calendar year 2025. To qualify, new franchisees must sign an SDAA during 2025 with a development schedule of at least 15 new Potbelly Shops in a single defined area within 8 years. If qualified and a Potbelly Shop is opened early, the initial franchise fee is reduced by 50% to $20,000. If a franchisee defaults on any agreement, Potbelly Sandwich Works may terminate the discounts and require payment of the full $40,000 initial franchise fee for all remaining shops to be opened under the SDAA.