Under what circumstances might Potbelly Sandwich Works not grant a successor franchise?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
th your acquisition of the first successor franchise.
If you (and each of your owners) did not substantially comply with this Agreement during the Term or are not, both on the date you notify us in writing of your election to acquire a successor franchise and on the date on which the successor franchise term is scheduled to commence, in substantial compliance with this Agreement and all System Standards, you acknowledge that we need not grant you a successor franchise, whether or not we had, or chose to exercise, the right to terminate this Agreement during the Term under Subsection 14.B.
B. GRANT OF A SUCCESSOR FRANCHISE.
You agree to give us written notice of your election to acquire a successor franchise no more than two hundred seventy (270) days and no less than one hundred eighty (180) days before this Agreement is scheduled to expire. We will give you written notice of our decision ("Our Notice"):
- (1) to grant you a successor franchise;
- (2) to grant you a successor franchise on the condition that you correct existing deficiencies of the Shop or in your operation of the Shop; or
- (3) not to grant you a successor franchise based on our determination that you and your owners have not substantially complied with this Agreement during the Term or
were not in substantial compliance with this Agreement and all System Standards on the date you gave us written notice of your election to acquire a successor franchise.
We will not unreasonably withhold or delay our consent to a successor franchise if the conditions specified in this Section 13 have been satisfied. If applicable, Our Notice will:
- (a) describe the remodeling, expansion, improvements and/or modifications required to bring the Shop into compliance with then applicable System Standards for new Potbelly Shops; and
- (b) state the actions you must take to correct operating deficiencies and the time period in which you must correct those deficiencies.
If we elect not to grant you a successor franchise, Our Notice will describe the reasons for our decision. If we elect to grant you a successor franchise, your right to acquire a successor franchise is subject to your material compliance with this Agreement through the date of its expiration, in addition to your compliance with the obligations described in Our Notice.
If Our Notice states that you must cure certain deficiencies of the Shop or its operation as a condition to a successor franchise, we will give you written notice of our decision not to grant you a successor franchise, based upon your failure to cure those deficiencies. If you fail to notify us of your election to acquire a successor franchise within the prescribed time period, we need not grant you a successor franchise.
C. AGREEMENTS/RELEASES.
If you satisfy all of the other conditions for a successor franchise (whether this relates, if applicable, to the first or second successor franchise), you and your owners must sign the forms of franchise agreement and any related documents we then customarily use to grant franchises for Potbelly Shops (modified as necessary to reflect that it is for a successor franchise), any and all of the provisions of which, including the Royalty and Brand Fund contribution, may differ materially from any and all of those contained in this Agreement and, if applicable, the franchise agreement you sign in connection with your acquisition of the first successor franchise. You and your owners further agree to sign our then-current form of general release of any and all claims against us and our owners, affiliates, officers, directors, employees, agents, successors, and assigns (except for our indemnification obligations under Subsection 16.D. below). We will consider your or your owners' failure to sign these agreements and releases and deliver them to us for acceptance and countersigning (together with the successor franchise fee) within the timeframe we specify to be your election not to acquire a successor franchise.
14. TERMINATION OF AGREEMENT.
A. BY YOU.
Source: Item 22 — CONTRACTS (FDD page 79)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, there are several circumstances under which they may choose not to grant a successor franchise. Potbelly Sandwich Works need not grant a successor franchise if the franchisee (and each of their owners) did not substantially comply with the existing Franchise Agreement during its term. This determination is made both on the date the franchisee notifies Potbelly Sandwich Works in writing of their election to acquire a successor franchise and on the date the successor franchise term is scheduled to commence.
Potbelly Sandwich Works may evaluate substantial compliance by considering the grades the shop received on Annual Shop Reviews during the term. Specifically, if a Potbelly Sandwich Works shop does not receive the minimum required passing grade on the Annual Shop Review during three consecutive fiscal years, or during any five fiscal years (whether or not consecutive) of the term, this is considered a failure to substantially comply with the agreement. In this case, Potbelly Sandwich Works is not obligated to grant a successor franchise.
Additionally, Potbelly Sandwich Works need not grant a successor franchise if the franchisee fails to notify them of their election to acquire a successor franchise within the prescribed time period. The franchisee must provide written notice of their election to acquire a successor franchise no more than 270 days and no less than 180 days before the existing agreement is scheduled to expire. If the franchisee satisfies all other conditions for a successor franchise, they and their owners must sign Potbelly Sandwich Works's then-current forms of franchise agreement and related documents, as well as a general release of claims against Potbelly Sandwich Works. Failure to sign these agreements and deliver them within the specified timeframe will be considered an election not to acquire a successor franchise.
Furthermore, Potbelly Sandwich Works need not grant a successor franchise if the franchisee cannot maintain possession of the site and therefore needs to secure a substitute site for the shop. If Potbelly Sandwich Works elects not to grant a successor franchise, they will provide written notice describing the reasons for their decision. Conversely, if they elect to grant a successor franchise, the franchisee's right to acquire it is subject to their material compliance with the agreement through the date of its expiration, in addition to compliance with any obligations described in Potbelly Sandwich Works's notice.