Can Potbelly Sandwich Works use the Brand Fund for its general operating expenses?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
We will account for the Brand Fund separately from our other monies (although we have no obligation to keep Brand Fund contributions in a separate bank account) and not use the Brand Fund for any of our general operating expenses. However, we may use the Brand Fund to pay for expenses we incur in activities reasonably related to directing the Brand Fund and its programs, including, without limitation, conducting market research, public relations, creating, preparing, and producing advertising, promotion, CRM, graphic design, and marketing materials, collecting and accounting for Brand Fund contributions, and taxes we must pay on Brand Fund contributions we receive; reasonable salaries and benefits of personnel who manage and administer the Brand Fund; a management fee for us (or an affiliate); the Brand Fund's other administrative costs; travel expenses of personnel while they are on Brand Fund business; meeting costs; overhead relating to Brand Fund business; and franchisee conferences.
Source: Item 22 — CONTRACTS (FDD page 79)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, the Brand Fund is intended to maximize recognition, enhance system protection of the brand's marks, and increase patronage of Potbelly Shops. While Potbelly Sandwich Works aims to use the Brand Fund for marketing materials and activities benefiting all shops, there's no requirement to ensure expenditures in any area are proportionate to contributions from shops in that area. The Brand Fund will not be used primarily to solicit franchisees, though materials may reference the franchise program. Franchisees are currently required to contribute 3% of their shop's total revenue to the Brand Fund, and Potbelly Sandwich Works has the right to increase this contribution by up to an additional 1% with 90 days' notice. Potbelly-owned shops are not obligated to contribute to the Brand Fund.
Potbelly Sandwich Works states that it will account for the Brand Fund separately from its other monies, although it is not obligated to keep Brand Fund contributions in a separate bank account. Critically, Potbelly Sandwich Works states that it will not use the Brand Fund for any of its general operating expenses. However, Potbelly Sandwich Works may use the Brand Fund to cover expenses related to directing the fund and its programs. These expenses include market research, public relations, advertising, marketing materials, collecting Brand Fund contributions, taxes on contributions, salaries and benefits of personnel managing the fund, a management fee for Potbelly Sandwich Works or an affiliate, administrative costs, travel expenses, meeting costs, overhead, and franchisee conferences.
The Brand Fund is not considered an asset of Potbelly Sandwich Works, and contributions are to be used only for the purposes described in the FDD. Potbelly Sandwich Works does not owe any fiduciary obligation to franchisees for administering the Brand Fund. The Brand Fund may spend more or less than the total contributions in a given year, borrow funds to cover deficits, repay borrowed amounts, or invest any surplus for future use. Interest earned on Brand Fund contributions will be used to pay costs before using other assets of the fund. Unused contributions at the end of the fiscal year may be rolled over or returned to contributors in proportion to their contributions during the preceding fiscal year.