factual

Will Potbelly Sandwich Works unreasonably withhold approval of a transfer by a franchisee?

Potbelly_Sandwich_Works Franchise · 2025 FDD

Answer from 2025 FDD Document

he agreements attached to this disclosure document.

PROVISION SECTION IN FRANCHISE OR OTHER AGREEMENT SUMMARY
of 5 miles of any Potbelly Shop (whether franchised or affiliate or company-owned), whether in operation or under construction on the effective date of termination or expiration; or (c) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business
s. Modification of the agreement 17.J. of Franchise Agreement; 10.14 of SDAA No modifications generally except by written agreement signed by both parties, but we may change Operations Manual and System Standards
t. Integration/merger clause 17.N. of Franchise Agreement; 10.14 of SDAA Only the Franchise Agreement’s and SDAA’s terms are binding (subject to state law). Any representations or promises outside of the disclosure document and Franchise Agreement may not be enforceable
u. Dispute resolution by arbitration or mediation 17.F. of Franchise Agreement; 10.06 and of SDAA We and you generally must arbitrate all disputes at location near our principal business address at the time the arbitration demand is filed (it currently is in Chicago, Illinois)
v. Choice of forum 17.H. of Franchise Agreement; 10.07 of SDAA Subject to arbitration obligation, litigation generally must be in courts located closest to where we have our principal business address at the time the action is commenced (it currently is in Chicago, Illinois) (subject to applicable state law)
w. Choice of law 17.G. of Franchise Except for federal law, Illinois law
Agreement; 10.08 governs (subject to applicable
of SDAA state law)
PROVISION SECTION IN FRANCHISE OR OTHER AGREEMENT
d. Termination by franchisee 14.A. of Franchise Agreement; not applicable to SDAA
e. Termination by franchisor without cause Not Applicable
f. Termination by franchisor with cause 14.B. of Franchise Agreement and Sections 8.01, 8.02 and 8.04 of SDAA
g. "Cause" defined  curable defaults 14.B. of Franchise Agreement; Section 8.02 of SDAA
h. "Cause" defined  non curable defaults 14.B. of Franchise Agreement and 8 of SDAA
PROVISION AGREEMENT SUMMARY
----------- ------------------------------------- ---------------------------------------------------------------------------
failure to operate Shop actively;
unapproved transfers or surrenders
of control; material
misrepresentation or omission;
conviction of a felony; dishonest,
unethical, or immoral conduct that
could materially, adversely affect
Marks; unauthorized use or
disclosure of Operations Manual
or other confidential information;
you make an unauthorized
representation or warranty on our
behalf; loss of right to occupy
Shop site due to your lease
default; failure to pay taxes;
understating Total Revenue by
certain minimum amounts;
interfering with our right to
inspect or observe the Shop; Shop
fails 3 quality assurance audits
during 12-month period; your
Shop fails Annual Shop Review
during 3 consecutive fiscal years
or any 5 years (even if not
consecutive) of the franchise term;
repeated defaults (even if cured);
assignment for benefit of
creditors; violation of any anti
terrorism law; and we send notice
of termination under another
franchise agreement between you
(or an affiliate) and us
We may terminate SDAA for
insolvency; failure to meet
development schedule;
unauthorized transfer;
misrepresentations; conviction of
a felony; unauthorized disclosure
of confidential information; any
default by you under a franchise
PROVISION SECTION IN FRANCHISE OR OTHER AGREEMENT SUMMARY
agreement or any other agreement; adverse franchise legislation
i. Franchisee's obligations on termination/non-renewal 14.C. and 15 of Franchise Agreement; Section 9 of SDAA Obligations include paying outstanding amounts; complete de-identification and de-branding, including returning or disposing of certain branded items and altering Shop's appearance and configuration; discontinuing use of websites or social media associated with the Shop; assigning telephone and other numbers and email addresses to us (including under a Conditional Assignment of Telephone Number(s)); and returning confidential information (also see (o) and (r) below); we may control de-identification process if you do not voluntarily take required action; we may assume Shop's management while deciding whether to purchase Shop's assets On termination of the SDAA, you must comply with the covenant not to compete
j. Assignment of contract by franchisor 12.A. of Franchise Agreement and 7.01 of SDAA No restriction on our right to assign; we may assign without your approval
k. "Transfer" by franchisee  defined 12.B. of Franchise Agreement;

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 58–65)

What This Means (2025 FDD)

According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, the franchisor can terminate the Franchise Agreement or the Supplemental Development Area Agreement (SDAA) for unapproved transfers or surrenders of control. Specifically, Potbelly Sandwich Works can terminate the SDAA for unauthorized transfers.

Additionally, Potbelly Sandwich Works retains the right of first refusal to acquire a franchisee's business. This means Potbelly Sandwich Works has the option to match any offer made to a franchisee for their Shop or ownership interest. This right is detailed in Section 12.G of the Franchise Agreement but does not apply to the SDAA.

Furthermore, Potbelly Sandwich Works has the option to purchase a franchisee's business after the Franchise Agreement is terminated or expires without renewal. According to Section 15.E of the Franchise Agreement, Potbelly Sandwich Works may buy the Shop's assets at fair market value and/or receive an assignment or sublease of the Shop's site. This provision does not apply to the SDAA.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.
All Potbelly_Sandwich_Works 2025 FAQs Ask FDD Ninja