Under what conditions can Potbelly Sandwich Works terminate the franchise agreement?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
within thirty (30) days following the order's entry;
(25) you or any of your owners fail to comply with Section 19 of this Agreement, or your or any of your owners' assets, property, or interests are blocked under any law, ordinance, or regulation relating to terrorist activities;
(26) your Shop does not receive our minimum required passing grade on the Annual Shop Review during three (3) consecutive fiscal years, or during any five (5) fiscal years (whether or not consecutive), of the Term;
(27) you (or any of your owners) fail to comply with any other provision of this Agreement or any System Standard and do not correct the failure within thirty (30) days after we deliver to you written notice of the failure; or
(28) we have sent a notice of termination under any other franchise agreement for a Potbelly Shop between you (or any of your affiliates) and us, regardless of the reason for such termination.
C. OUR ALTERNATE REMEDIES UPON YOUR DEFAULT.
In addition to, and without limiting, our other rights and remedies under this Agreement, any other agreement or applicable law, upon the occurrence of any event giving rise to our right to terminate this Agreement under the preceding Subsection B, we may instead elect, at our sole option and upon delivering you written notice, to take any or all of the following actions without terminating this Agreement:
- (1) temporarily remove information concerning the Shop from any website or extranet operated for the network Potbelly Shops, and/or restrict your or the Shop's participation in other programs or benefits offered on or through any such website or extranet;
- (2) require you to engage a third party accounting firm we approve to conform to the bookkeeping, accounting, reporting and recordkeeping system requirements and formats we prescribe;
- (3) require you to pay us Five Hundred Dollars ($500) for each day the condition giving rise to our right to terminate continues to exist to help offset our increased administrative expenses associated with your failure to comply with the terms of this Agreement;
- (4) suspend your and the Shop's right to participate in any advertising, marketing, promotional, or public relations programs that we or the Brand Fund provide, authorize, or administer; or
- (5) assume, or appoint a third party to assume, management of the
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 has the right to terminate the franchise agreement under several specific conditions. These include if a franchisee or their owners fail to comply with Section 19 of the agreement, or if their assets are blocked due to laws related to terrorist activities. Additionally, Potbelly Sandwich Works can terminate the agreement if a shop fails to achieve the minimum required passing grade on the Annual Shop Review for three consecutive fiscal years, or during any five fiscal years, regardless of whether they are consecutive.
Potbelly Sandwich Works can also terminate the agreement if a franchisee (or any of their owners) fails to comply with any other provision of the agreement or any System Standard and does not correct the failure within 30 days after receiving written notice. Furthermore, a notice of termination under any other franchise agreement for a Potbelly Shop between the franchisee (or any affiliates) and Potbelly Sandwich Works, regardless of the reason for termination, can also lead to termination of the agreement.
These termination rights are in addition to any other rights and remedies Potbelly Sandwich Works may have under the agreement or applicable law. However, instead of terminating the agreement, Potbelly Sandwich Works may choose to take alternative actions such as temporarily removing shop information from websites, requiring the franchisee to engage a third-party accounting firm, requiring the franchisee to pay $500 for each day the condition giving rise to the right to terminate continues to exist, suspending participation in advertising programs, or assuming management of the shop.